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Commons Chamber

Volume 634: debated on Monday 4 July 1966

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House Of Commons

Monday, 4th July, 1966

The House met at half-past Two o'clock

Prayers

[Mr. SPEAKER in the Chair]

Private Business

United Kingdom Oil Pipelines Bill

Read a Second time and referred to the Examiners of Petitions for Private Bills.

Oral Answers Toquestions

Ministry Of Health

Artificial Kidney Machines (Home Use)

1.

asked the Minister of Health, in view of the fact that an artificial kidney machine for home use is now in production, what arrangements he will make for these machines to be available at key hospitals for training in self-use.

The provision of suitable equipment is only one of the problems associated with home dialysis. All of them are being evaluated in pilot studies, pending the results of which it would be unwise to encourage the extension of home treatment.

Does the Minister realise that there are quite a number of cases in which the smaller machine, which if of comparatively small cost, can be used? Will he look into the matter with the object of ensuring that the knowledge of this machine is held in the right places?

This machine is being evaluated, but the problems include the need for completely reliable and safe equipment, the need to train the patient and a relative in the operation of the equipment, the psychological stresses which may occur in the patient and his family and a number of others. They are being considered by my Department.

Married Women Doctors

5.

asked the Minister of Health what new proposals he now has to enable married women doctors to return to work in view of the recent survey which indicates that many wish to do so, providing that suitable arrangements are made for those with young children.

I would refer my hon. Friend to my reply to my hon. Friend the Member for Harrow, East (Mr. Roebuck) on 23rd June.

I thank my right hon. Friend for the interest which he is obviously taking in this problem. Would he not agree that the provisions for married women to return to the hospital service and many other jobs and professions are inadequate, particularly for women with young children? Will he therefore press on with this work and undertake to have discussions with my right hon. Friend the Secretary of State for Education and Science to see if more can be done in this respect?

I am anxious to do anything I can to encourage married women doctors to return to work in the National Health Service, and particularly in hospitals. We understand that about one half of married women doctors already work full time, that about one-third work part time and that about one-fifth are not working. It is this one-fifth we are anxious to see back in the Service.

Is it not a fact that the survey revealed that at least 1,000 women doctors who were not working professionally would like to do so and that another 1,000 who were working only part time would like to do more work? In view of the acute shortage of doctors, would the right hon. Gentleman say what positive steps he is taking to make use of these hard-earned and much-needed skills?

I enumerated in my Answer to my hon. Friend the Member for Harrow, East (Mr. Roebuck) a number of the steps which I am taking in this matter. The hon. Gentleman may be interested to know that only about one-quarter of those who are not working gave the lack of suitable work as their sole reason for not working. To answer the other point raised by my hon. Friend, certainly the hospitals can provide for the children of staff where they consider this to be worth while, and that might help married women doctors with children.

Would my right hon. Friend pay particular attention to the problem of maintaining the superannuation rights of married women doctors who have had service in the National Health Service, since I understand that at present they must work for one week every 12 months to maintain these rights?

I think that my hon. Friend is right when he says that they are required to work for a short period every 12 months to preserve their rights. I am certainly prepared to look into this matter.

Family Planning Advice

6.

asked the Minister of Health how many local authorities have extended their family planning advice as a result of his recent circular urging them to do so.

This information is not yet available, but I propose to call for reports in due course.

Will my right hon. Friend bear in mind that large numbers of women wish to choose the kind of contraceptive method which they wish to use? Will he instruct local authority clinics to make it possible for women to choose a particular method without reference to either their husbands or to the requirements of the Medical Defence Union?

I do not think that it is for me to instruct the local authority clinics in the way they make their arrangements. I sent the circular out as recently as 17th February and I have it in mind to call for reports by about next September. Perhaps my hon. Friend will put down a Question after I have received those reports.

21.

asked the Minister of Health if he will give guidance to general practitioners on the interpretation of their terms of service with regard to refusals to give family planning advice or to issue National Health Service prescriptions for the contraceptive pill when there is a medical need for family planning.

I think it is better to leave it to general practitioners to decide what advice and treatment to give in the light of their obligation under their terms of service to provide all proper and necessary treatment for their patients.

Will the right hon. Gentleman state clearly whether or not a National Health Service doctor who refuses to issue a prescription for the pill on conscientious grounds would or would not be regarded as in breach of his terms of service? Further, would the right hon. Gentleman arrange for the patients of such doctors to be able to receive these prescriptions from other National Health Service doctors without having to transfer from their own doctor's list?

No, Sir; I am sure that such doctor would not be in breach of his terms of service. But a doctor who does not wish to prescribe these contraceptives or appliances may himself refer the patient to another doctor or a clinic, and any patient who is dissatisfied with her doctor's general attitude towards family planning is free to transfer herself to another doctor.

Would not the right hon. Gentlman consider requesting doctors to provide the names and addresses of other doctors who are willing to give such advice if they themselves refuse it on grounds of conscience or bias, or is it not possible that they should automatically hand to the patient the address of the nearest family planning clinic?

I am not sure that it would be appropriate for me to do this. I should have thought that any woman going to a doctor for this advice and failing to get it would know how she could get it from another doctor or a family planning clinic. I will consider what has been said, but I think that these things are best left to the profession itself.

Drug Addiction (Advisory Committee)

8.

asked the Minister of Health if he is aware that drug addiction is largely a secret addiction; and what steps he is taking to ensure that the members of the advisory committee which he is about to appoint are neither addicts nor partial to the addiction.

Members of this Committee will be carefully chosen after appropriate consultations.

Really! Does not my right hon. Friend realise that unless he publicly demonstrates that the members of this committee are free from this secret vice, their work will be ludicrous, futile and held up to public ridicule? What steps is my right hon. Friend taking in this case to investigate their possible addiction to this secret vice?

If my hon. and learned Friend is right—that it is a secret vice—then it would be difficult to give him the proof for which he asks. However, neither my right hon. Friend the Home Secretary nor I have any reason to suppose that in this country so high a degree of secrecy as he suggests attaches to drug addiction.

Can my right hon. Friend give the reasons for the extremely long delay that occurred in appointing the members of this important advisory committee in view of the social and medical problems involved in drug addiction?

I assure my hon. Friend that the reasons were solely concerned with the necessity to engage in proper and full consultations. As I told the House, I am aware of the urgency of this matter and I hope to make a statement before the House rises for the Summer Recess.

Children (Deafness)

16.

asked the Minister of Health if he is satisfied that general practitioners possess the necessary experience to detect efficiently deafness among children; and what action he is taking to ensure that all children who suffer in this way are identified as early as possible.

A general practitioner suspecting deafness would normally refer the child to an audiology clinic for full investigation. The importance of early detection and diagnosis of deafness in young children was emphasised in circulars sent to all local health and education authorities in 1961 and in March this year.

Is my right hon. Friend aware that the period of training of specialised teachers of deaf children is much longer than that received by general practitioners? Is he aware that experience in the King's Lynn area shows that the incidence of deafness may be far greater than suspected, and will he consult his right hon. Friend the Secretary of State for Education and Science on setting up a proper sample survey throughout the country to assess the need?

I will consider anything that my hon. Friend suggests. I agree that most general practitioners probably do not feel that they have had enough experience themselves in this field to make the final diagnosis, and that treatment, including the provision of any necessary hearing aid, is a matter for the specialist in otology.

Dentists (Disposable Syringes)

19.

asked the Minister of Health whether he will now arrange for dentists to be provided with disposable needles and syringes through the National Health Service.

I am considering, and will be discussing with representatives of the dental profession, whether this is the best means of meeting the need for sterility of equipment used in dental practice.

In the meantime, will the Minister bear in mind that it is really an absurd anomaly for doctors to be able to get their needles and syringes through the National Health Service while dentists cannot? Will he please try to put an end to this absurd anomaly?

It is not an absurd anomaly. After all, the position obtained in both professions until very recently—certainly until after this Government took office—and I do not want to make any changes until I have finished the consultations I am having with the profession about the rather wider question of sterility, which includes this.

Is the Minister saying that expenditure on all this sort of equipment, which will make for a better dental service, is not included in the practice expenses element laid down in the new dental regulations which are being laid before Parliament? If he is saying that, can he give an assurance that this is a matter that he will certainly discuss with the profession at the very earliest possible opportunity?

No, Sir. I am not saying anything of the kind. The precise opposite is the case. The cost of the syringes is part of the practice expenses which are remunerated in full to the profession as a whole.

Ambulances (Emergency Cases)

20.

asked the Minister of Health if he will review the instructions given to ambulance authorities regarding the collection of emergency cases which do not arise from accidents but from illness in circumstances where a casualty's doctor is not available to certify the course of the illness.

My right hon. Friend has given no instructions on this matter, which is primarily one for ambulance authorities themselves; but he proposes to ask all authorities to review their present practice in such cases.

Is my hon. Friend aware of a very sad case in my constituency, where an ambulance was sent for by a patient who was too ill by the time it arrived to be able to give the name of the doctor and the ambulance men then refused to take him away to hospital because they had no proper authority to do so? While not blaming the ambulance men, may I ask whether my hon. Friend would agree that this is a rather ridiculous situation, and that it should be possible in other situations besides road accidents for people to be taken to hospital without a doctor's certificate?

I am afraid that I am not in a position to comment entirely on the incident to which my hon. Friend refers, of which I have prior knowledge, but I think that we should recognise that where someone has a sudden illness at home it is necessary to get a doctor to the patient, because even the very act of removing the patient may have serious consequences. As I have indicated in my reply, my right hon. Friend is endeavouring to see that there are clear and precise instructions to ambulance controls so that every possible assistance can be given to patients and relatives.

Would not my hon. Friend agree that, whatever the circumstances involved in the case at Reading, the general level of help, first-aid and emergency treatment offered by ambulance men is often of the very highest order; and that there should be no question of any reflection on their integrity or ability?

I can assure my hon. Friend that I have no intention of reflecting on anyone, as to their ability or otherwise. I have admiration, as has my hon. Friend, for the ambulance staffs.

Ophthalmic Opticians (Fees)

22.

asked the Minister of Health how the fees now received by ophthalmic opticians under the National Health Service compare with those received by them when the Service was introduced in 1948, both in monetary and in real value.

As the reply consists of a table of figures I will, with permission, circulate it in the OFFICIAL REPORT.

While I am grateful to the Minister for that reply, may I ask him whether he considers that the rise in remuneration has been commensurate with the rise in the cost of living and the rise in remuneration of other branches of the medical profession?

SUPPLEMENTARY OPHTHALMIC SERVICES
SIGHT-TESTING AND DISPENSING FEES OF OPHTHALMIC OPTICIANS

1948 fees

Current equivalent value of Column (i)*

Current fees operative from 1st September, 1964

(i)(ii)(iii)
s.d.s.d.s.d.

Sight-testing

(a) By an ophthalmic optician who does not dispense glasses at all or who does not consider it necessary to prescribe glasses following a sight-test156268190
(b) By an ophthalmic optician in all other circumstances170

National Health service frames or other reglazed frames

Private frames

s.d.s.d.

Dispensirg

(a) General (single vision lenses)250200
(b) General (bi-focal lenses)330290
(c) One lens to applicant's own frame250430130N.A.
(d) For each additional pair of glasses where more than one pair prescribed10686
* i.e. Column (1) revalued to give the same purchasing power in the last quarter of 1965, on the basis of the Consumer Price Index.

Mentally And Physicallyhandicapped (Training Staff)

24.

asked the Minister of Health whether he will improve pay and conditions of service for

As my hon. Friend no doubt knows, the level of fees is a matter for the Optical Whitley Council. An inquiry into the level of practice expenses is being carried out at this moment as a preliminary to reviewing the fees.

Is it not a fact that in real terms ophthalmic opticians are receiving smaller fees than they did in 1948? Is not one of the consequences of this that the National Health Service content of the ophthalmic service is being subsidised by private fees received by ophthalmic opticians?

I think it is a fact that in real terms the fees are lower, for reasons which are well known to my hon. Friend and to the House. However, perhaps I might tell my hon. Friend that the response of opticians to the inquiry which I mentioned in a previous supplementary answer has been very disappointing. This perhaps suggests that not all opticians regard a revision of fees as a matter of urgency.

The figures are as follows:

those directly concerned with the training of the mentally and physically handicapped, in view of the considerable contribution which modern methods of training can make.

The pay and conditions of service of these staff are matters for the various negotiating bodies for local authority and hospital staffs.

Would the Minister, whose long-term interest in the mentally handicapped is widely recognised, agree that there is a special case here for priority in view of the success achieved in the last few years in bringing a number of these mentally and physically handicapped people into useful employment?

This category is broken down into three or four. Some of these persons are working in hospitals and some in other fields. I understand that there has been a substantial increase over the last 12 months. At the present time consideration is being given to a scheme for other workers. While one could argue that this might be a special case, the matter is under consideration anyway.

Does the hon. Gentleman agree that some of the most worth-while and most dramatic advances are being made in this field at the present time; and, because of the humanitarian and economic value of the work, is it not essential to do everything we can to attract people of the highest calibre into the profession? Will the hon. Gentleman look at the matter very carefully?

I agree with the hon. Lady on all counts. Some wonderful work is being done. We should certainly like to attract, so far as is humanly possible, all the staff that we require in this field.

Prescriptions (Charges)

27.

asked the Minister of Health what annual sum is represented by 50 per cent. of the proceeds of a shilling charge for each National Health Service prescription.

In England and Wales, at present levels of prescribing, just over £6½ million.

Can the right hon. Gentleman say whether his Parliamentary Secretary on his visit to my constituency and the King George Hospital there the other day made any assessment of the need for extra beds in the hospital, and how much they were likely to cost?

I have not discussed this problem with my hon. Friend, but if the hon. Gentleman requires an answer perhaps he will put that Question on the Order Paper rather than the one which he has done.

Disabled Persons (Vehicles)

29.

asked the Minister of Health whether he will reconsider his previous decisions and provide suitably converted small cars for disabled drivers instead of the single-seater vehicles at present provided.

I would refer my hon. Friend to my reply to the hon. Members for Liverpool, Garston (Mr. Fortescue) and Suttton and Cheam (Mr. Sharples) on 27th June.

Is my hon. Friend aware that many of us on both sides of the House were hoping for a change and will maintain that attitude? Bearing in mind my hon. Friend's Written Answer to me on 29th June, it would appear that the annual average cost of this change would be a mere £5 million a year for the first eight years and that this would completely transform and enhance the usefulness of these vehicles to the disabled.

My hon. Friend will recollect that, in previous Answers, I have clearly indicated that a review is taking place and that we are as concerned about relieving distress and suffering as anyone else in the House. I also pointed out that it would be done as quickly as possible.

Would it not be better nationally to aim at replacing all these single-seater vehicles with mini-cars?

That may well be so and, indeed, this question is part of the review taking place. While I would not make promises about this, the House should recognise that, if we took such a course, there would be a substantially increased number of applications and that it would cost a lot of money.

My hon. Friend has said that the cost would be relatively small. If hon. Members on both sides are in favour, if my hon. Friend is in favour and if the cost is relatively small, what is holding it up?

Immigrants (Medical Examination)

30.

asked the Minister of Health if he is satisfied that all Commonwealth and other immigrants undergo efficient health checks on arrival in Great Britain; and if he will make a statement.

Certain categories of immigrants are not medically examined on entry to this country, particularly entitled dependants from the Commonwealth who cannot be required to submit themselves for medical examination; but with these exceptions, all Commonwealth citizens and aliens coming here for settlement are normally referred for examination by a medical inspector.

Does not the right hon. Gentleman appreciate that many local medical officers have shown their concern and think that all immigrants should undergo a check in view of the fact that fatal diseases have been imported in this way?

I am sure that the hon. Gentleman would not want to exaggerate the hazard. I assure him that I shall continue to do all I can to improve health safeguards within the limits of my powers. But, as I have explained, there is no power to require dependants to submit themselves for examination.

Would it not be better for all concerned if more effective arrangements could be made for medical examination of these people at the point of embarkation rather than leaving it until they arrive here.

Does not my right hon. Friend agree that most of the incidence of diseases such as T.B. arises in the immigrant population after arrival here? Does not this point to the fact that they need better health care than they have been able to obtain in their countries of origin?

Yes, Sir. My hon. Friend makes an important point in relation to this question.

General Practitioners (Lists)

31.

asked the Minister of Health what procedure is followed to remove a patient's name from his general practitioner's list when the patient leaves the United Kingdom permanently.

Information about emigrants is collected from various sources including those emigrating. On the basis of this information doctors are notified by executive councils of the removal of the names.

May I take it from that reply that there is no set procedure, that it is purely haphazard and that the names of a large number of people who left years ago are still on doctors' lists at considerable cost to the Exchequer?

I do not think that it is a large number. Under the old pool system there was no cost to the Exchequer. The hon. Gentleman might be interested to know that, in 1965, the names of 202,000 persons leaving the country were removed from doctors' lists. I am seeing whether we can do even more to ensure that information gets to the executive councils.

41.

asked the Minister of Health how frequently doctors' registers of patients are checked to ensure that they do not contain the names of patients who have removed and to ensure accuracy of payment; and if he will make a statement.

The principal method for maintaining accuracy of doctors' lists is the system for notification of changes used by executive councils in conjunction with the National Health Service Central Register, which is designed to avoid duplicate entries as far as possible.

Does the right hon. Gentleman realise that there are many duplicate entries? Can he give an estimate of how many people are on the registers of more than one doctor and what that is costing the country?

There has always been what is called a degree of inflation of lists. At the moment the total of lists is 101·36 per cent. of the population. Under the pool system, this did not cost the taxpayer or the Exchequer one penny. Because of the new system which has been introduced with the new general practitioners' contract, it is all the more necessary that we reduce this inflation as much as possible. But the fact was known to the Review Body when it advised on remuneration.

Fluoridation (Young Children)

32.

asked the Minister of Health what steps he will take to ensure that young children are not denied the benefits which derive from fluoridation.

The primary responsibility for securing the benefits of fluoridation for young children and others rests with the local health authorities, but I am doing all I can to encourage and help them.

Does not my right hon. Friend agree that, since many local authorities have deep-seated and, in their view, well-founded objections to the principle of fluoridation of public water supplies, it is time that the Ministry took another look at this vexed question? In particular, can he give an assurance that alternative methods will be explored to see that young children are not denied a very valuable preventive against dental caries?

These matters have been, and are still being, considered but on present advice I am satisfied there is no other method which is as safe and effective as the fluoridation of water.

Will my right hon. Friend assure the House that he will use no method to impose on local authorities this system of poisoning water against which so many of them have declared their objection?

Chronic Kidney Disease(Portsmouth Area)

33.

asked the Minister of Health what facilities exist within the Portsmouth area for the treatment of chronic kidney disease; and how many people in the area are known to be in need of such treatment.

In addition to the ordinary medical services already available in the area, a renal unit for the investigation and treatment of kidney diseases was opened at Priorsdean Hospital, Portsmouth, in October, 1965, serving the Wessex Hospital Region as a whole. The Wessex Board also intends to build a unit at Priorsdean Hospital specifically for the treatment of chronic renal failure by intermittent dialysis. There is no reliable means of assessing how many people in the area are suffering from chronic kidney disease, nor what proportion of them would benefit from intermittent dialysis.

While welcoming this news about future policy for the Portsmouth area, may I ask my right hon. Friend whether he is aware that there is concern in the area about the speed with which the new unit can be introduced? There seems to be a difference of opinion between the local board and the Ministry.

If my hon. Friend likes to write to me or put down a Question, I will be glad to look into the possibility of such difficulties and see whether they might be removed.

Patient-Operated Selector Mechanism

35 and 36.

asked the Minister of Health (1) what his plans are for the research team responsible for the production in recent years of the patient-operated selector mechanism at Stoke Mandeville to carry on their research;

(2) whether he will make available the patient-operated selector mechanism to those who are paralysed through polio or road accidents in order that they may live a useful life at home and thereby free beds in hospitals.

My right hon. Friend is arranging to supply this mechanism to suitable patients under the National Health Service. He is ready to consider any proposals for further research in this field.

Is the hon. Gentleman aware that this nine-man team—whose product, for which there is considerable export demand, has virtually enabled useless bodies to become taxpayers—which leads the world in medical engineering, had to leave Stoke Mandeville last week because the grant from the Polio Research Fund has come to an end? What aid can the hon. Gentleman give the team, which is now financing itself?

When the hon. Gentleman looks at my reply tomorrow, he will find that we are ready to consider any proposal for further research. The leader of the learn has already been invited by officials of my Department to put forward proposals which will merit support from research funds under our control.

Is the hon. Gentleman aware that although one in three of the permanently disabled now in hospital could leave and go home, due in part to the developments mentioned by my hon. Friend, thus reducing pressure on hospital resources, they are unable to do so because of the absence of adequate help in the home? Does not that reinforce the argument, advanced from these benches last week, for a constant attendance allowance? Can the hon. Gentleman ask his right hon. Friend to discuss this matter with the Chancellor of the Exchequer?

If the hon. Gentleman wants an answer on those other issues, he must put down a Question. We have entered into a contract with the team mentioned in reply to the hon. Member for Liverpool, Wavertree (Mr. Tilney) for the production and maintenance of a number of units. We have offered to meet the team to discuss what research assistance we can give. I do not know what more we can do.

On a point of order. As the leader of the team was unaware last Friday night of what the hon. Gentleman has just said, I give notice that I shall raise the matter on the Adjournment at the earliest possible moment.

Student Radiographers (Grants)

37.

asked the Minister of Health whether, in assessing training grants for student radiographers, he will consider making special provision for those who of necessity live away from home.

No, Sir. It has been policy to provide schools in a large number of areas so that radiographers can train and work near their homes.

Is my hon. Friend aware that some student radiographers still cannot live at home and that there is considerable resentment among them that they are financially worse off than those living in the towns and great conurbations?

We have about 100 radiography schools. While I appreciate that there may be isolated examples of difficulty, the alternative to the present flat-rate grant would be grants similar to the university grants and based on parental contribution, so that even if we made this change it might not prove as advantageous as my hon. Friend believes.

Cervical Cancer Tests (Norwichand Norfolk)

38.

asked the Minister of Health what plans he has to start clinics in Norwich for the taking of cervical smears.

Discussions are taking place between the medical officer of health, the regional hospital board and the local medical committee about the extension of the present service. The Norfolk and Norwich Hospital hopes to be able to provide a full service within the next two months.

Is my hon. Friend aware that that Answer will give substantial satisfaction and that we hope that his plans are successful?

39.

asked the Minister of Health if he will estimate when there will be available sufficient technicians trained in the reading of cervical smears to support an adequate programme of clinics in Norwich and in Norfolk.

A screening service is already available at King's Lynn and sufficient technicians are expected to be available within the next two months to provide a similar service at Norwich.

Is my hon. Friend aware that that Answer does not relate to clinics in Norfolk where there is some feeling of concern about this matter, as private companies are now able to maintain services like this for their staff?

I am sorry, but I did not hear that. Will my hon. Friend repeat what he said?

Is my hon. Friend aware that his Answer related to Norwich, but that I am now concerned about Norfolk and that there is some concern in the county as a whole about the provision of these technicians? I have had letters about this matter. There is concern particularly as private companies seem able to maintain these services for their employees.

I agree that some private companies are able to maintain these services for their employees. The best thing I can do is to look into the whole matter and write to my hon. Friend.

Selective Employment Tax

40.

asked the Minister of Health what action he has taken resulting from the letter from the Chartered Society of Physiotherapists on the subject of the Selective Employment Tax.

Is that reply satisfactory? Is the hon. Gentleman win-his battle for the physiotherapists and the Royal College of Nursing with the Chancellor of the Exchequer? I should like to know now so that I can put the proper supplementary question.

Not knowing what the proper supplementary question which the hon. Lady wants to ask is, I cannot give the right supplementary answer.

43.

asked the Minister of Health what arrangements are being made to ensure the refunding to general medical practitioners of any taxation liable to be paid under the Selective Employment Tax.

As regards ancillary staff in respect of whom direct payments are to be made under the National Health Service, and trainee assistants, refund will be made as part of the payments for the staff concerned. As regards other staff employed for National Health Service purposes, the cost of the tax will be taken into account in future reviews of remuneration.

Hospitals

Hospital Service Building Workers(Incentive Bonus Schemes)

2.

asked the Minister of Health what progress has been made in the application of incentive bonus schemes to building workers employed in the hospital service; and if he will make a statement.

3.

asked the Minister of Health what recent developments there have been in the application of incentive bonus schemes to building workers employed in the hospital service; how long these schemes have been in preparation; and if he will make a statement.

4.

asked the Minister of Health what progress has been made in the application of incentive bonus schemes to building workers employed in the hospital service; and if he will make a statement.

14.

asked the Minister of Health what action has been taken in the application of incentive bonus schemes to building workers employed in the hospital service; how long such schemes have been under preparation; and if he will make a statement.

15.

asked the Minister of Health what progress has now been made in introducing incentive bonus schemes for building workers in the hospital service; how long these schemes have been in preparation; and if he will make a statement.

50.

asked the Minister of Health what progress has been made in the application of incentive bonus schemes to building operatives employed in the hospital service; and if he will make a statement.

The experimental scheme in the Royal Buckinghamshire Hospital Group came fully into operation in March. In February my right hon. Friend arranged for management consultants to carry out preparatory work to see whether two further experimental schemes could be introduced and this work is in progress.

Is my hon. Friend aware that there is considerable concern among building trade operatives on this matter?

Is my hon. Friend aware that it is felt that there has been excruciating delay and that we should like to see bonus schemes introduced and progress made at the earliest possible date?

We, too, would like to see progress at the earliest possible date. I can assure my hon. Friend that we are looking at this matter on the basis of trying to get the introduction of the right kind of scheme in the right places so that we can make progress.

Is my hon. Friend aware of the extensive delay in negotiations in the hospital service? Is he further aware of the extensive dissimilarity in wages earned in this section of employment between maintenance workers employed by hospital boards and those brought in by contractors? Will he try to speed up the introduction of incentive schemes to resolve this inequality?

I appreciate what my hon. Friend says, but he ought to be quite clear that there are some difficulties in introducing in hospitals the type of work study schemes which apply in other buildings. I can assure him that we are doing what we can to get the picture quite clear and to introduce such schemes where they are viable.

Is my hon. Friend aware that the delay in introducing incentive schemes of this kind is severely testing the loyalty of workers who could play an important rôle in the modernisation and building of our hospitals? Will he do something to speed up the introduction of these schemes.

There are a number of problems peculiar to hospitals and my hon. Friend will have to accept this. I keep having to repeat that we are conscious of this problem, that we want the highest productivity and that bonus schemes may give this to us, but we do not want to rush ahead with these proposals unless we feel that we shall get the right results.

Is my hon. Friend aware that the first item of correspondence on the negotiations dates from 1957? Is he aware that negotiations have dragged on under two Conservative Administrations and two Labour Administrations. Does he realise that the tolerance shown by these workers in these circumstances is deserving of public tribute?

I am always paying public tributes to people who work in the Health Service, but my hon. Friend must accept that I can accept responsibility only for the period of time during which my right hon. Friend has been in office. We have not delayed to the extent suggested in the supplementary question.

Is my hon. Friend aware that it appears that the prices and incomes policy is running at two levels in the Health Service? Why is there speed in one type of settlement in the Health Service, possibly justified, but not on the manual workers' side? Is he aware that it is only the loyalty of these workers to the Health Service which has prevented a serious strike in this industry?

I appreciate the loyalty of the workers in the Health Service. If my hon. Friend wants an answer to the main part of his question, he must put a Question down.

Is my hon. Friend aware that, while difficult, it is not impossible to institute bonus schemes for maintenance workers? Is he aware that this is now being done by all local authorities and surely, on the basis of what my hon. Friends have said, he must agree that it is high time that some positive and quick action was taken in this matter?

Of course it is not impossible. We have been in consultation with the trade unions about this matter, and, as I indicated in my original reply, we have appointed consultants to try to resolve the problem.

Order. I understand that the hon. Member wishes to raise a point of order, but he must not wave papers at the Chair.

On a point of order. Is it not unusual, Mr. Speaker, for my right hon. Friend the Minister not to reply when so many hon. Members on this side of the House are interested in the question concerning the incomes policy? Should not the Minister answer the question?

That is not a point of order for the Chair. The hon. Gentleman should, if he wishes, raise that matter at the end of Question Time. He should know that by now.

New Hospital, Macclesfield

7.

asked the Minister of Health when the first and second phases of the new hospital at Macclesfield will be started; and what is the date of completion.

The Hospital Building Programme (Cmnd. 3000) includes these phases of the new hospital at Macclesfield in the first list of schemes at present expected to start after 1969–70. Construction is likely to take two to three years for the first phase and three to four years for the second.

Is the Parliamentary Secretary aware that the postponement of at least three years has caused extreme dismay in Macclesfield and district? In looking at this matter, will he reconsider the whole problem, taking into account the fact that the Congleton War Memorial Hospital, which is of quite modern design, should be put on a permanent basis with the delayed new hospital at Macclesfield?

The regional hospital board is aware of the situation in Macclesfield and will take all these matters into account in defining its plans. These plans are fluid and flexible. If the occasion arose, or needs occurred which were greater than in other parts of the region, the plans could be changed.

In view of the unsatisfactory nature of the Parliamentary Secretary's reply, I beg to give notice that I will endeavour to raise this matter on the Adjournment at the earliest possible opportunity.

New Hospital, Redditch

9 and 10.

asked the Minister of Health (1) what detailed plans he has for new maternity accommodation in Redditch, in view of the enlarged size of the town; (2) what detailed plans he has for new hospital accommodation in Redditch, in view of the enlarged size of the town.

Detailed plans for the new hospital at Redditch, which will include new maternity accommodation, will be drawn up nearer the time when building is to start.

Is the Parliamentary Secretary aware that that Answer is highly unsatisfactory and that I understand that it will be something like 12 years before this hospital is in full use? Since for such a long time Redditch has been short of hospital accommodation, may I ask whether the hon. Gentleman considers that 32 beds are adequate for a town of this size? Does he not realise that in this area we are badly in need of maternity accommodation?

I appreciate that the hon. Gentleman wishes to do what he can to get hospital facilities for his constituents. I understand his indignation. However, he must recognise that arrangements are made to treat the Redditch population in this instance in other hospitals in the area. This is arranged by the regional hospital board, which has the task of assessing priorities.

In view of the highly unsatisfactory reply given by the Parliamentary Secretary, I beg to give notice that I will raise this matter on the Adjournment as soon as possible.

Maternity Beds, London Area

11.

asked the Minister of Health what is the percentage of babies born in hospitals and the average period of application necessary to obtain a maternity bed in hospitals in the London area.

53.

asked the Minister of Health what percentage of births take place in hospitals in the Greater London area; and how long is the average waiting period for a maternity bed.

For the first quarter of 1965, which is the latest period for which information is available, it is estimated that of babies born to mothers normally resident in Greater London, 78 per cent. were born in hospitals, including private nursing homes. The information asked for in the last part of the Question is not available.

As the birth rate is rising and as, therefore, the position is likely to get worse rather than better—and as I have been informed that in the London area only about 60 per cent. of mothers can obtain maternity beds—does the Parliamentary Secretary genuinely feel that this matter is being given a high enough priority in the Health Service?

I think the information which the hon. Gentleman has about the position in the Greater London area is slightly erroneous. We have given the figures for the whole of Greater London and the figure of 78 per cent. is, as the hon. Gentleman knows, much higher than that for many other regions. It is very difficult to say that this is inadequate, comparing it with the percentage in other regions.

Is my hon. Friend aware of the difficulties in Redbridge of obtaining maternity beds, and will he make the provision of maternity beds there a matter of urgency?

On the same basis of calculation, the position in Redbridge is virtually equivalent to that which exists in the rest of the country. I do not think, therefore, that I could give any promises to make improvements there.

Would my hon. Friend consider, if it does not already happen, extending to hospitals outside the inner London area the principle of the catchment area for maternity purposes, which has been so successfully introduced and implemented in the last few years?

Heart Resuscitation Facilities

12.

asked the Minister of Health what proportion of British hospitals has facilities for restarting the heart; and what proposals he has for increasing this equipment.

Many acute hospitals already have these facilities and the requirements for a more comprehensive service are at present being considered by my Standing Medical Advisory Committee.

As I am told that this equipment might save hundreds, perhaps thousands of lives every year, may I ask the right hon. Gentleman to do his very best to install it in as many hospitals as possible as quickly as possible? Can he indicate what the limiting factor is in going ahead with the programme?

It is not really so much a question of additional equipment as of organising the service in such a way as to make the best use of medical and nursing skills and equipment. I am treating it as a matter of urgency.

Hospitals (Privateconsulting Rooms)

17.

asked the Minister of Health what information he has about plans to build or use existing buildings for private consulting rooms within National Health Service hospitals; and what is his policy towards such schemes.

I am not aware of any proposals to provide private consulting rooms or any other accommodation within National Health Service hospitals exclusively for use for private out-patients, and I would not approve such proposals.

While I welcome my right hon. Friend's reply, I notice that he mentioned the word "exclusively". Is he aware that there would be particular anxiety on the part of many hon. Members on this side of the House were any private consultations to take place at National Health Service hospitals?

This has always been the case. Private out-patients who are treated in National Health Service hospitals generally make use of the normal out-patient accommodation at times when it is not being used for non-paying patients. This was agreed to at the outset of the National Health Service.

Will the right hon. Gentleman bear in mind that what is really needed is more surgical beds to deal with the results that are found in these consulting rooms, and will he do something urgently to deal with the chronic cases that are found in South Devon and West Devon, and overcome this acute problem there?

If the hon. Member has any particular problem in his area, perhaps he will put down a Question on the Order Paper.

Industrialised Building Methods

18.

asked the Minister of Health whether any hospital accommodation is currently being built by industrialised building methods; and whether he will encourage experiments with such methods by hospital boards.

Most current schemes use such methods, though to varying extents. As examples, seven major contractors are using their systems for maternity units. A system developed by the Oxford Hospital Board is being adopted overseas as well as here. My Department's development projects at Kingston, Walton and Greenwich are wholly industrialised. I welcome experimentation and have issued a great deal of technical guidance on this subject to hospital boards.

Can the Minister hold out any hope that these methods will reduce the tremendous length of time it now takes from the planning to the completion of major modern hospitals?

Yes, Sir. I have hopes that these methods will reduce the time taken in planning and construction—perhaps to a rather greater extent than they will reduce the cost.

Will my right hon. Friend inform us to what extent the information gained by this research and development is made available, or will be made available, to local health and welfare authorities for building projects they are planning?

I am not sure that techniques of hospital building by industrialised methods are necessarily appropriate to the type of much simpler building in which local health and welfare authorities are engaged.

Leeholme Hospital, Easington

23.

asked the Minister of Health what improvements have been made in accommodation and modern equipment at Leeholme Hospital in Easington.

In the period 1960–65 an X-ray department and nurse training accommodation were provided; improvements were made in the outpatients department; the hospital kitchens were modernised; and a new major X-ray set installed.

Is my right hon. Friend aware that I recently brought this matter to his attention? What has happened since? Is he aware that I am getting a little annoyed about the delay in effecting what possible improvements can be brought about in this place? Does my right hon. Friend understand that he cannot ask these geriatric patients to live in such squalid conditions? Will he instruct the regional hospital board to take action immediately, or else?

I am sure that the regional hospital board does not need instructions from me in this matter. Perhaps I can reassure my right hon. Friend by stating that there is no prospect of closing the hospital for at least 10 years, and probably 20 years or more, and, therefore, further expenditure on the hospital will undoubtedly be necessary, and this is accepted by the regional hospital board.

Health Centres

25.

asked the Minister of Health when he will publish a circular to local authorities and hospital authorities on the planning, designing and siting of health centres.

While thanking my right hon. Friend for that reply, might I express the hope that it will not be long before the circular is issued? Will he bear in mind in preparing the circular that it is important to establish genuine health centres? Will he bear in mind that there are some local authorities now preparing schemes which name them health centres but they are no more than surgery suites for local general practitioners attached to local health authority clinics? Will my right hon. Friend also bear in mind that there are sites attached to hospitals in certain localities which could well be used to bring the three wings of the National Health Service together under that circular?

I can assure my hon. Friend that I will take both of his points into account before the circular is finalised.

Human Tissue Act, 1961

26.

asked the Minister of Health if he will seek to amend the Human Tissue Act, 1961, in line with proposals agreed at a recent Ciba conference on Ethics in Medical Progress, details of which have been sent to him, so as to facilitate further progress in transplantation surgery.

I have not received details of the proceedings of this conference, but am aware of one proposal which was discussed. This I am examining.

Will my right hon. Friend bear in mind that this is a matter of considerable concern to surgeons engaged in this field, particularly in the case of kidney transplants from cadavers, where the operation has to be undertaken very quickly. and surgeons feel that they are considerably handicapped by the present Act?

Yes, Sir; I have heard of the discussions. I do not know to what extent the proposal was endorsed by the conference, nor do I know whether it would command wider acceptance. These are delicate matters which I think need further study.

Schizophrenia

28.

asked the Minister of Health what proportion of hospital beds is occupied by patients suffering from schizophrenia; what proportion of these patients are readmissions; what advice he has had from the Medical Research Council about the theory that the cause of schizophrenia is biochemical and that the cure is treatment by half-gramme doses of niacin; and what approaches he is making to drug manufacturers to encourage them to make niacin tablets available in this country in the requisite strength, as they are in Canada and the United States of America.

13·5 per cent. at the end of 1964; 70 per cent. of admissions for schizophrenia that year were readmissions; none; none.

Would the right hon. Gentleman give further thought to this matter and realise what an enormous impact this new discovery may have on the whole requirements of the National Health Service? Could he ask the Council to look into this and hold consultations with the drug manufacturers?

I am aware that there have been experiments by Hoffer and Osmond in the use of niacin, but I am advised that their results are unproved. I can assure the hon. Gentleman that the drug is available under the National Health Service, and I know of no difficulty about the strength of the tablet.

Would not my right hon. Friend agree that to put down the Question is irresponsible, that to suggest that there is a readily available cure for schizophrenia is not true and that the Question can only raise false hopes in the minds of close relatives of those who are suffering from this tragic disease?

I am sure that that was not the hon. Gentleman's motive. But these sort of conclusions are too readily adopted, I am afraid, by people who read claims in the Press and elsewhere on behalf of new drugs.

Is the right hon. Gentleman aware that my hon. Friend has touched upon a matter of very great importance? Bearing in mind that about half our hospital beds are occupied by mental patients and that about one-third of these are schizophrenics, and bearing also in mind that the Medical Research Council is devoting only about 10 per cent. of its budget to research in psychiatry, does the right hon. Gentleman think that this is adequate?

I seem to recall calling the attention of one of my predecssors to this matter many years ago when the proportion of the budget was very much smaller than it is today. But I can tell the hon. Gentleman that the Medical Research Council considers that the theory of a biochemical causation for some forms of schizophrenia offers a promising line of investigation, but there is no substantial evidence that niacin cures schizophrenia.

North Lincolnshire (New Hospital)

34.

asked the Minister of Health what reply he has sent to the Cleethorpes Borough Council's request for a new hospital to serve the people of North Lincolnshire; in view of the fact that this area will grow rapidly because of the off-shore findings of gas and oil, if he will give urgent priority to this hospital; and if he will make a statement.

I have sent the hon. Member a copy of my Department's reply to this request. It is for the Sheffield Regional Hospital Board to judge the priority which should be attached to this scheme. I know that they have in mind the prospective increase in population in North Lincolnshire.

While recognising that the hon. Gentleman cannot meet every demand in the country straight away, may I ask him to bear in mind that this area will be the gateway to Europe and will develop immensely? Will he, therefore, get a hospital built there quickly? Will he use his influence to get his former colleague to cross the Floor of the House and join us?

I appreciate the need of the Grimsby area, because the Grimsby Hospital is scheduled to cater for Cleethorpes and already deserves some degree of priority. But it must await completion of some of the schemes which the Sheffield Regional Hospital Board has in hand. We shall watch the position carefully. As the hon. Gentleman will appreciate, my right hon. Friend the Member for Grimsby (Mr. Crosland) has already been in touch with me.

Baguley Hospital, Manchester(Bed Lifts)

42.

asked the Minister of Health what representations were received concerning the installation of bed lifts at Baguley Hospital, Manchester; what consultations took place with the hospital's medical staff on this matter; and if he will make a statement.

Only those forwarded to me by my hon. Friend. The medical advisory committee, and the Baguley Hospital House Committee on which the medical staff are represented, were consulted and their views considered, and there was a special meeting between members and officers of the regional hospital board and the hospital management committee on 13th December, 1965, at which members of the medical staff expressed their views on the proposal.

Was not inconvenience, not to say pain, caused to seriously ill patients by the choice of stretcher lifts instead of bed lifts? Is my right hon. Friend fully satisfied that there was sufficient consultation with the senior medical staff?

Yes, Sir. I am satisfied that there was sufficient consultation. I accept that bed lifts would have been preferable and so does the regional hospital board. It was a matter of whether the hospital could afford to wait until bed lifts could be provided, and on balance it was thought that stretcher lifts immediately was the preferable alternative.

Loughborough General Hospital

44.

asked the Minister of Health why no major emergency surgery is now performed at the Loughborough General Hospital.

The Sheffield Regional Hospital Board is considering the views expressed to it by my hon. Friend and others concerned about this matter.

Will my hon. Friend make sure that this is treated as a matter of urgency, for it is causing grave discontent and a good deal of hardship in Loughborough and areas around it?

The regional hospital board will no doubt consider any representations made.

45.

asked the Minister of Health if he will take steps to appoint a resident surgical registrar at the Loughborough General Hospital.

My right hon. Friend has approved a proposal from the Sheffield Regional Hospital Board to permit of such an appointment.

Is my hon. Friend aware that that will cause considerable satisfaction to my constituents? I hope that he will ensure that the appointment is made as soon as possible.

Geriatric Beds, Essex

46.

asked the Minister of Health what year is used as a base for estimating the number of geriatric beds needed in Essex; and what he estimates is the number of present requirements.

The needs are estimated on a current basis. 1,830 beds are at present needed of which 1,480 have been provided.

Can the hon. Gentleman say why, with present requirements, he is cutting back the money available for day hospitals and old people's homes?

This was a Question about geriatric beds. The hon. Gentleman is now putting a different question.

Can the hon. Gentleman say how this shortage of geriatric beds compares with the position in other administrative counties?

Without notice, I would not be able to say how it compares with other administrative counties.

Is the hon. Gentleman aware that the present geriatric provision and provision for welfare homes—and of course the two are linked—are inadequate and have been cut by recent refusals of loan sanction by the Minister? Is not this disgraceful, considering that the population of Essex is increasing by 30,000 a year?

This Question deals with geriatric beds and the hon. Gentleman has a later Question about welfare provision. Before he gets too excited, I must say that he should not imagine that this lack of provision has arisen in the past 18 months.

If the hon. Gentleman cannot answer half the Question, can he answer the other half and say what he is to do about the shortage of geriatric beds?

If that supplementary question had been put, I would have answered it. The board plans to remedy the shortage of geriatric beds by the following provision: 10 additional beds at Tendring; 100 beds at Westcliffe; 60 beds in the redevelopment of Orsett Hospital and 56 beds in the new Basildon Hospital; and there are other provisions.

While the Essex Members will welcome the news which has now been given, may I ask whether the hon. Gentleman is aware that the Essex County Council has expressed very deep concern about the inadequacy of provisions for welfare homes? May I take this opportunity of asking the hon. Gentleman whether his right hon. Friend will receive a deputation of hon. Members from Essex constituencies, representing all parties?

The hon. Gentleman must not try to anticipate Questions that are on the Notice Paper. He is on the Front Bench and he ought to know that.

General Practitioners(Private Patients)

The following Question stood upon the Order Paper:

61.

To ask the Minister of Health whether he is aware of schemes under which some general practitioners are to make their services available in return for subscriptions and fees from their patients as an alternative to the National Health Service; whether he will ensure that no patients are deprived of free care under the National Health Service; and whether he will make a statement.

With your permission Mr. Speaker and that of the House, I will now reply to Question 61.

Yes, Sir; I have seen reports about several such schemes. I welcome the opportunity to make it quite clear that there is no necessity for any patient to join a private scheme of any kind in order to obtain proper medical care and that the normal National Health Service facilities will continue to be available for all without payment. I would deplore diversion of doctors' time to private patients which meant reduction in the time available for National Health Service patients.

Can the Minister say what service the subscribers will get that they cannot receive under the National Health Service? Will he further say whether the B.M.A. has given its official blessing to this proposal?

It is difficult to say what the patient would get. There should be no question of the private patient getting any better treatment because under the National Health Service a doctor is required to give his patient all proper and necessary treatment. Possibly the patient expects to get a little more of the doctor's time. The British Medical Association has given its blessing to one of these schemes, known as Independent Medical Services Ltd.

While we are all anxious that National Health Service patients should get the best possible treatment, is the Minister aware that many of us think it important that we have an adequate choice in this respect and that therefore many of these schemes are valuable?

The hon. Lady knows that I have made my view clear on a number of occasions. It is that a substantial increase in private practice would be to the disadvantage of the vast majority of people. The hon. Lady knows that medical manpower is limited and that if private patients claim disproportionately more of the doctor's time there will be less time for the National Health Service patient.

Would the Minister agree that there are very many family doctors who view these developments with considerable distaste? Would he further agree that if these developments continue he should seriously consider whether he ought to be able to require family doctors either to work within or outside of the National Health Service, rather than the mixed form of practice which these schemes seem to encourage?

I have seen no great enthusiasm for these schemes among the general public, nor among the medical profession. I will certainly watch the position very carefully in order to see whether further action is required.

Would the Minister agree that any increase in private practice, which I regret as much as he does, is in part a reflection of the inadequacies in the National Health Service at the moment?

I would not accept that. I do not accept a number of claims that are made. In one case it was said that this development would help curb the emigration of doctors. I do not believe that it will have the slightest effect upon it.

Is the Minister aware that he gave an unfair slant in the answer to my question? We need to make absolutely certain that there is a proper balance in the Service, but at the same time we want freedom to have this sort of choice within the Service as a whole.

I was talking about a substantial increase in private practice. It is accepted that private practice is permissible, and always has been, but I would deplore any great extension of it.

Could I ask the hon. Gentleman if he is aware that many people have to wait far too long for adequate service from the National Health Service? Will the right hon. Gentleman now meet the claims of these National Health Service patients for better and quicker treatment?

We are doing the best that we can, but if there are more private patients the National Health patients will have to wait a good deal longer.

Indonesia (Foreignsecretary's Visit)

The following Questions stood upon the Order Paper:

85.

To ask the Secretary of State for Foreign Affairs if he will make a statement on his recent visit to Jakarta, Indonesia.

15.

To ask the Secretary of State for Foreign Affairs if he will make a statement on his visit to Jakarta.

With your permission, Mr. Speaker, and that of the House, I will now answer Question No. 85 and Written Question No. 15 together.

Although my visit was short, thanks to the excellent arrangements made, it provided an opportunity to make personal contact with Mr. Malik and have a wide-ranging discussion. This covered three aspects of our relations: bilateral issues; future developments in South-East Asia; and, of course, progress towards the end of confrontation.

On bilateral questions, I discussed progress over the use of £1 million emergency aid. I also expressed appreciation for the payment by the Indonesian Government of £120,000 as an advance against compensation due to British interests arising out of the incidents of September, 1963. When the Umarjadi mission visits London in a week's time there will be further discussions about arrangements for a comprehensive settlement of these claims, and also of the more difficult questions raised by the sequestration of British and other estates and interests in December, 1964. Mr. Malik seemed fully aware of the importance of making progress on these issues.

I asked him about the restoration of the shipping link between our two countries. His approach to this question was encouraging and he assured me that it was already under consideration by his Government.

I also had an interesting discussion with him about how his Government saw the future development of relations between the countries of South-East Asia. While I do not want to go into details, I can say that I was pleased to find a wide measure of understanding between us.

I, of course, also spoke to him about the end of confrontation. As hon. Members know, this is being dealt with bilaterally between the Indonesian Government, and the Malaysian Government in consultation with its allies. But in view of the recent incidents in Sarawak, I did stress to Mr. Malik that all the progress we hoped to make in improving our relations must depend on the complete cessation of this sort of thing. He fully understood this, and I was glad to note that both he and Dr. Razak, whom I saw in Kuala Lumpur, seemed confident that the situation on the border would soon settle down.

I have one further item to report on this visit. As hon. Members will know, we have hitherto refused to give permits for the export of British engines that would allow a contract to be fulfilled by Fokker for the delivery of 20 Friendship aircraft for the use of the Indonesian national airline, Garuda. In view of the happier turn events have taken, I informed Mr. Malik that we were now prepared to give the necessary licences. This will allow delivery to commence in about a year to 18 months' time. However, I asked for a firm assurance that these aircraft would not be used for military purposes against ourselves or our allies, and this was given. I also made clear that if hostilities broke out again the export licences would be cancelled.

I do not wish to give the impression that this visit, which took place in a very cordial atmosphere, has solved all the problems between Indonesia and the United Kingdom. What it has done is to make a start, and we must follow up by maintaining regular contact, as well as by disposing of the various claims and difficulties which confrontation has left behind.

In conclusion, I would like to say this. Indonesia is a country with which we have no conflict of interest and indeed many interests in common. I am sure it is the hope of this House that our relations will not be disturbed again.

Was the right hon. Gentleman satisfied with the comments Mr. Malik made to him about recent incidents in Sarawak? Was he absolutely satisfied that these incidents would finish, particularly in view of the fact that incursions by members of the regular Indonesian army have taken place during the past four weeks?

I drew Mr. Malik's attention to that matter. I was satisfied with the answer which he gave to me, and this impression was further confirmed by my discussions with Mr. Razak in Kuala Lumpur. But I made it clear that if hostilities on the ground break out again, do not cease, this will impair good relations between us.

While welcoming the spirit of my right hon. Friend's statement, may we have an assurance that if there is further trouble in either Sarawak or Sabah, very close scrutiny will be made of who is causing the trouble before any action is taken?

I think it important to make sure what the facts are. What I said to Mr. Malik was based on solid evidence of what the facts had recently been.

May I first welcome the Secretary of State's visit to Jakarta, which indicates an improved relationship with Indonesia. In view of his statement the other day that we are not yet out of the wood on confrontation, is it his impression that the Indonesian authorities are seriously anxious to bring a complete halt to military activities? Can he give an assurance that as long as military activities continue in Sarawak and Sabah we shall continue to maintain troops in those areas?

The noble Lord will have noticed the statement of the Malaysian Government that when confrontation was ended they would not want our troops to be there, and nor should we. But, of course, the process of disengagement depends on what happens on the ground.

In reply to the earlier part of the noble Lord's supplementary question, I believe that the Indonesian Government want these incidents to stop and the whole business of confrontation brought to an end. I think that my phrase about our not yet being out of the wood was proper in view of the fact that the Bangkok agreement has not yet been ratified, although I hope and believe that it will be ratified shortly.

Would my right hon. Friend agree that one of the encouraging developments in South-East Asia with which Indonesia is connected is the possibility of a new partnership of the nations in that area, including Thailand, the Philippines, Malaysia and Singapore, which might take the whole area out of the cold war?

Yes. Some kind of association between these countries would certainly be in their interest and the general interest. It is, of course, a matter for them to decide, but we as a non-Asian but friendly nation would welcome developments of this sort.

Is the Secretary of State aware that the outcome of his visit and the prospects of ending the confrontation will be widely welcomed? May I ask him three questions? First, may we take it that the Indonesian Government have now no outstanding territorial claims against the Malaysian Government? Secondly, would he say a word about the next political initiative to be taken between those two countries? Thirdly, did he get any indication as to the efficacy of transmission by the Indonesians of political decisions to their own troops in the field? Does not the right hon. Gentleman feel that there has been some delay in transmitting political decisions to Indonesian troops in the field?

I think that there has been delay, but I hope that it will not continue. With regard to territorial claims, the hon. Gentleman will know that there has been agreement between the Malaysian and Indonesian Governments about determining the wishes of the inhabitants of these territories. That is a matter for them under the Bangkok agreement. I do not recall the hon. Gentleman's other point.

Would the right hon. Gentleman say what further talks are envisaged by the Malaysian and Indonesian Governments?

I think that they will want to have further discussions about certain details arising from the Bangkok agreement, but that is a matter for them. I should make it clear that it is not for us to negotiate the end of confrontation between these two countries. But we have an important interest, owing to the presence of our troops, in making sure that it really is ended.

In view of the continuing activity by regular Indonesian troops in Sarawak and Sabah, would the right hon. Gentleman tell the House what arrangements have been made to ensure that any aid given by this country is not used for the purchase of arms which might be used against British or Commonwealth troops?

I think that we can be quite sure of that. We are still discussing with the Indonesians on what the £1 million in aid will be spent. It certainly would not be spent in that manner.

When confrontation ends, how many of our troops is it proposed to bring home, and how soon? Will the Foreign Secretary give an undertaking that they will not be sent to Thailand for use in Vietnam?

There has been no request of any kind for us to send troops to Thailand. My hon. Friend should draw the other part of his supplementary question to the attention of my right hon. Friend the Secretary of State for Defence.

Fire, Auto And Marineinsurance Company

(by Private Notice) asked the Minister of Transport what action is proposed with regard to the position of those motorists who are insured with the Fire, Auto and Marine Insurance Company.

I am issuing a Press statement today confirming that motorists insured with this company should, in their own interests, take out fresh policies with other insurers immediately.

We are grateful to the right hon. Lady for that statement. In view of the fact that a great deal of personal disaster could occur to individuals who find themselves uninsured, would the right hon. Lady endeavour to ask the company to circulate an individual notice to each motorist informing him of the position? [Interruption.] The First Secretary of State suggests that nationalisation is the solution to this problem.

Secondly, would the right hon. Lady consult the President of the Board of Trade about bringing in urgent legislation to ensure that companies cannot operate as motor insurance companies with issued capital as little as £50,000? May I draw to her notice that five of my hon. Friends and I endeavoured to introduce a Private Member's Bill called the Insurance Companies (Share Capital) Bill, which sought to increase the amount from £50,000 to £250,000? As there are a number of companies operating with very small capital, would the Government give facilities for this Bill to be brought into operation?

On the first part of the hon. Gentleman's question, application for leave to petition for winding up is before the court this afternoon. In view of this, I am not sure that the company would be permitted to circularise its clients. Secondly, I am already considering with my right hon. Friend the President of the Board of Trade what further safeguards are needed to protect motorists against default by insurance companies.

Is my right hon. Friend aware that these motorists would not be in this unfortunate position if they were insured with the Co-op?

In view of the fact that by Statute companies of this kind have to file their accounts with the Board of Trade, surely some responsibility must rest upon the President of the Board of Trade. When were these accounts filed and what did they reveal?

My interest in the matter is to see that motorists are properly insured under the compulsory insurance requirements of the Road Traffic Act, 1960. The other points raised by the hon. Member are for my right hon. Friend the President of the Board of Trade.

My right hon. Friend said that she is giving further consideration to what can be done. Among these points, will she give serious consideration to the excellent interjection by the First Secretary of State? Is she aware that we on this side of the House would support her unanimously if she were to ask for extra time for the nationalisation of this industry?

Can the Minister tell the House whether the Motor Insurers' Bureau will meet any claims and, if so, which?

Under the agreement between the Motor Insurers' Bureau and the Minister of Transport in 1946, claims for death or personal injury to third parties as defined in the Road Traffic Act, 1960, will be met in full by the Bureau for accidents up to the date of the winding up order, because all those claims are still valid up to the winding-up order, though whether they can be met is a different matter. The Motor Insurers' Bureau under the agreement of 1946 will meet those claims for third party injury or death, though, of course, they have the right to recover any payments they make from the policy holder. But I believe that they will operate in the full spirit of that agreement as far as it goes.

Will the right hon. Lady make representations to her right hon. Friend the President of the Board of Trade to encourage insurance companies voluntarily to form an indemnity fund to prevent a recurrence of this sort of trouble?

The agreement between the Motor Insurers' Bureau and the Minister of Transport is a form of indemnity provision. Admittedly it covers only those items for which there is compulsory insurance. Whether it is possible to go any further than that is for the insurance companies to decide.

Business Of The House

The Lord President of the Council and Leader of the House of Commons
(Mr. Herbert Bowden)

Following the requests that the foreign affairs debate should be expedited, it has now been arranged for Thursday, 7th July and Monday, 11th July.

On the first day there will be a discussion on Vietnam. The second day, the Third Allotted Supply Day, will be general.

I wish to announce also an addition to the Business for Wednesday. It has been agreed that before entering on the two Bills—Building Control Bill and the Docks and Harbours Bill—already announced, there should be a short debate of, say, two hours, on the Motion in the name of the Leader of the Opposition relating to the Conduct of the Chairman of Ways and Means.

[ That this House regrets that the Chairman of Ways and Means, having selected for simultaneous discussion 16 Amendments numbered 34, 147, 29, 30, 31, 32, 33, 35, 37, 39, 40, 161, 175, 220, 361, and 73, of Clause 42 of the Finance Bill, failed to ensure adequate discussion of this Clause, which raises £1,100 million of taxation, by accepting a Motion for the Closure of Debate when a large number of Members still wished to speak during the sitting of Wednesday 29th June, thus infringing the rights of minorities.]

Is the right hon. Gentleman aware that the House will be glad that he has found it possible to arrange for a debate on Vietnam to take place this week? May I ask two questions? First, what is his intention as to the form of the debate? Secondly, it will not have escaped his notice that the day which he has chosen coincides with the visit of the French Prime Minister and Foreign Minister to this country, which will no doubt involve a number of members of the Government as well as Members from this side of the House. In those circumstances, will he give an assurance that the Prime Minister will be able to open the debate and to make a statement of Government policy and also to listen to the views expressed by hon. Members in the course of the debate?

The right hon. Gentleman will be aware that, in considering the day next week on which to debate Vietnam, we had very much in mind the visit of the French Prime Minister. That was one of the problems which had to be taken into consideration. The Prime Minister will be here at intervals during the debate. Whether he will be able to hear the whole debate it is not possible to say at this stage. The decision whether he should open or wind up the debate is a matter for the Government. The debate on Vietnam will take place on a Government Motion. On the second day it is an Opposition day, a Supply Day, and it is a matter for the Opposition.

Is the right hon. Gentleman aware that the debate on Vietnam will be widely welcomed in all quarters of the House? May we hope that this is the beginning of a state of affairs in which the proceedings of the House will be subordinated to the wishes of its Members?

I was not unaware that last Thursday the House courteously and calmly asked me to consider further a debate, and this I have done.

What is the point of having this debate before the Prime Minister goes to Washington? Surely it is not in the national interest to expose the Prime Minister to further humiliations?

The point of having this debate before my right hon. Friend the Prime Minister goes to Washington is that I was asked for a debate from both sides of the House.

In view of the very large number of hon. Members who wish to be heard in this debate, will my right hon. Friend consider arranging an additional hour?

I am quite prepared to consider it, but it does not often work out to the advantage of the House.

Will the debate on Thursday be on a Motion of confidence in Her Majesty's Government, and does the new Chief Whip propose to issue a three-line Whip for his supporters or otherwise?

In view of the resignation of the Minister of Technology and the split, now obvious, on the Government Front Bench as well as on the back benches, will the Leader of the House arrange for a debate so that we may discuss the White Paper which the right hon. Member for Nuneaton (Mr. Cousins) has sent' to the Prime Minister and hear a statement from him?

This question could perhaps more appropriately be addressed to me on the business exchanges on Thursday.

While fully supporting the suggestion of my right hon. Friend the Leader of the Opposition that the Prime Minister should open the debate, is it not necessary for a proper discussion of Vietnam that we should have a statement in good time from the Foreign Secretary about his visit to Canberra, which bears on the whole question, and in particular on our relations with Australia?

My right hon. Friend the Foreign Secretary will be engaged in the debate on one day if not on both days.

While we are glad that my right hon. Friend has acceded to the wish of the House and arranged this debate for Thursday, may I ask whether he will consider—as already requested—giving an extra hour in view of the importance of the subject and the great number of hon. Members who will undoubtedly want to take part in the debate?

Bills Presented

Education

Bill to enlarge the powers of the Secretary of State to make contributions, grants and loans in respect of aided schools and special agreement schools and to direct the local education authorities to pay the expenses of establishing or enlarging controlled schools; and to provide for loans for capital expenditure incurred for purposes of colleges of education by persons other than local education authorities, presented by Mr. Crosland; supported by Mr. Hughes, Mr. John Diamond, and Mr. Edward Redhead; read the First time; to be read a Second time Tomorrow and to be printed. [Bill 69.]

Prices And Incomes

Bill to establish a National Board for Prices and Incomes, and authorise the bringing into force of provisions requiring notice of price increases, pay increases and other matters, and for enforcing a temporary standstill in prices or charges or terms and conditions of employment; in connection with recommendations made by the said Board, to amend the Restrictive Trade Practices Act 1956; and for connected purposes, presented by Mr. Brown; supported by the Prime Minister, Mr. Herbert W. Bowden, the Chancellor of the Exchequer, Mr. Ross, Mr. Hughes, Mr. Douglas Jay, Mr. Gunter, Mr. Austen Albu and Mr. William Rodgers; read the First time; to be read a Second time Tomorrow and to be printed. [Bill 70.]

Orders Of The Day

Finance Bill

Considered in Committee [Progress, 30th June].

[Sir ERIC FLETCHER in the Chair]

The first new Clause selected is new Clause No. 23. Mr. Hale, Mrs. Butler, Mr. Hamilton, Mr. Macleod.

New Clause—(Retirement Pensionsnot To Be Assessed In Certaincases)

Any sum payable by way of retirement pension under the National Insurance Acts as amended shall not be included in the amount assessed for income tax liability unless the total assessable income from all sources of the taxpayer (excluding such retirement pension) exceeds in the case of a married man four hundred pounds a year or in the case of a single man or woman, or widow or widower, without other dependants exceeds two hundred and fifty pounds a year.—[ Mr. Iain Macleod.]

Brought up, and read the First time.

3.58 p.m.

(Enfield, West): I beg to move, That the Clause be read a Second time.

The Clause stands in my name and that of three hon. Members from the Government benches. I was somewhat suspicious at the close of play on Thursday to see that neither the hon. Member for Oldham, West (Mr. Hale) nor the hon. Lady the Member for Wood Green (Mrs. Joyce Butler) were in their places, and I rapidly added my name to theirs because I think that this is an admirable Clause which certainly should be considered by the Committee. Since then we have had the unexpected support of the hon. Member for Fife, West (Mr. William Hamilton). I draw to the Financial Secretary's attention the fact that although the Clause has only four sponsors it is most formidably supported. It is supported by the Opposition, and it is supported by the hon. Member for Fife, West—whom one might describe as the general of the remaining loyalists, a rapidly dwindling band on the Government benches. It is supported by a Co-operative Member and the hon. Mem- ber for Oldham, West, who is extremely convincing on each and every cause which he brings forward.

4.0 p.m.

Now I will start by saying a word about the cost, as I understand it. The Financial Secretary will be able to correct me, but the nearest estimate I have been able to find comes from a Written Answer he gave on 2nd November, 1965, to a Question from the hon. Member for Heywood and Royton (Mr. Barnett), who asked for

"an estimate of the cost of exempting retirement pensions from Income Tax where the pensioners' total income, including the pension. does not exceed £10 per week."

The Financial Secretary's Answer, which no doubt he will have in his file, was

"About £7 million in a full year …"

He went on to say:

"This cost would be nearly double if marginal relief were also given …"—[OFFICIAL REPORT, 2nd November, 1965; Vol. 718, c. 138.]

Of course, the two situations are not wholly comparable. One excludes and the other includes the retirement pension in the calculation for assessment. The Written Question by the hon. Member had put a total limit, including pension, of £10 a week or £520 a year, while this new Clause is more modest and suggests £400 a year, excluding such retirement pension, in the case of a married man, and £250 a year in the case of a single man or woman, or widow or widower.

(Heywood and Royton): It is not strictly more modest, because it would give allowances to unearned income as well as to earned income.

Yes, but I would have thought—we shall get the right figures from the Financial Secretary—that there is not very much between the two whichever way one does the sum, and I think there is a strong case on those grounds for acceding to this particular request.

There is, secondly, the argument in the second part of the Financial Secretary's Answer to which I have referred, about repercussions. This is an argument or an excuse which is always put forward on financial and other matters—the suggestion that one is opening a door which might have to be pushed a good deal wider before one can find a satisfactory answer. I would say, if that is worth doing, one could either ignore the repercussions and simply not meet them, or one should accept them; and that must bear very much on the Chancellor's assessment of his Budget judgment.

It is very relevant here, and will be in this the last day of the Committee stage, that, as my hon. Friend the Member for Finchley (Mrs. Thatcher) said in her speech on the Budget, this is a Budget which has been put forward without any social service proposal at all, and, as far as we know, this is the first Budget of which this can be said in, at least, the post-war years. The Financial Secretary tried to ride that one off by saying that there was, of course, the option mortgage scheme. Perhaps there is, but we have not seen it, and I do not know when, if ever, we are going to see it, and I do not think it can weigh in these particular scales.

This proposal, then, is a strictly limited one. I am not—I do not know about my co-sponsors: I have not had any discussions with them, I am afraid, on this Motion—but I am not particularly wedded to the amounts of £400 or £250 and would be quite prepared to consider an adjustment of these within the limits of what the Financial Secretary can afford for this particular proposal.

There is just one other point I wish to make for the new Clause. I think that in last year's Budget the allowance against tax in the case of National Insurance contribution was withdrawn in relation to the contribution towards the retirement pension, but before this it was the practice—I do not say there was no exception to it, because one always finds there is an exception to everything, but certainly it was the general rule—that either the contribution or the benefit was taxable but not as in this case both. Therefore, there seems to me, on the grounds both of merit and of logic, a very considerable case to be made out for this particular proposal.

I am somewhat surprised, if I may say so, that none of those who have put a new Clause like this on the Paper and have known that it was selected from the list which is provided for us—that none of those three hon. Members on the Government back benches—should have thought it worth while coming this after noon to move the new Clause, but we are glad to remedy that even at short notice—indeed, by an impromptu speech—from this side of the Committee, and if they will not support this new Clause, well then, we will, and we will adopt this new Clause as our own, and I hope that in due course we shall have a response from the Financial Secretary.

As my hon. Friends are not here to support their new Clause I would venture to do so. I have a great deal of sympathy for the Clause—or, at least, the principles in the Clause. As the right hon. Gentleman rightly said, the cost is not very great whichever way one looks at it. However, there are in the Clause certain point I should like briefly to mention which I do not like.

I think that in considering the question whether National Insurance pension should be taxable or not one could perhaps look at it very much like an annuity or pension policy purchased with annual instalments. An annuity is purchased, voluntarily of course, and National Insurance benefit is purchased, as it were, compulsorily, but that annuity, or a quite substantial part, is treated as a capital payment and a capital receipt and is, therefore, not taxable in the hands of the recipient, and I think that, in equity, it could well be argued that the National Insurance pension should equally be treated as non-taxable in the hands of the recipient. Therefore, I believe there is an arguable case on equity grounds, but the Clause as it stands really does create a great many anomalies, and I do not think it could really be left precisely as it is at the moment.

For example, all those without National Insurance pension at all would get no benefit from this relief which we would be giving to all National Insurance retirement pensioners, but there are still many old people without National Insurance retirement pensions and consequently this would be unfair to one section of taxpayers, by giving it solely to that other particular section of taxpayer. Not that one is not friendly disposed to that particular section, but, as I say, I believe it does create just one more anomaly.

Equally, I am not at all sure I would want to see the same amount of tax relief given to those over 65 for unearned income as we might consider giving to those over 65 in respect of earned income. I think the question of the amount of relief we give in this sphere has to be considered on a much wider basis. It cannot be taken in the simple context that this Clause would have us do.

The really major point of principle behind this Clause is whether or not we should be giving assistance to retirement pensioners to carry on working; in other words, whether as a nation we should encourage retirement pensioners to work, either in part-time or full-time employment. It could be argued that in many ways it is a tragedy that a person at the age of 65, having worked hard all his life, should feel it necessary to go on working, either full-time or part-time, because he has insufficient income to have a reasonably happy retirement in the last 10 or 20 years of his life.

But there are many people over 65 who want to go on working because they feel able and fitted to do so. It gives them a great deal of happiness, and they do not wish to retire. There are others who literally have to go on working because they cannot survive on the National Insurance retirement pension. I do not suppose that many of us here would like to try.

Then there is the question of national economy. Whether we like it or not, there are not many of us who would deny that, in our present economic situation and that likely in the foreseeable future, we need to give every possible encouragement to people over the age of 65 who wish to go on working. There is therefore a strong case for allowing the National Insurance pension to be tax-free to a certain degree, if only to the extent that it gives encouragement to people aged 65 and over to work an extra few hours or to work at all. In that sense, the cost to the Treasury of the Clause or something like it would be very small in comparison to the increased production from the use of the extra manpower which we so desperately need.

It is in that sort of spirit that I welcome the idea behind the Clause, and I hope that the Treasury will be able to accept something like it.

(Barry): The Committee will agree that it was commendable of the hon. Member for Heywood and Royton (Mr. Barnett) to step in at the last moment and declare his limited support for the principle of this valuable new Clause. On the other hand, my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) declared his support with a good deal more forcefulness and less equivocation. My right hon. Friend commented that it was remarkable that the Clause should have been tabled in the way that it was. It is surprising that, even if the hon. Gentlemen opposite who sponsored it were unable to be present, they did not find some hon. Member on their side to add his name to it and appear here today to argue the principle. I cannot understand why no hon. Member found it possible to do that.

The hon. Member for Heywood and Royton said that one of his objections to the Clause as it stands was that it would not help some of the people who are not in receipt of National Insurance pensions. He will be aware that we on this side have pressed the claims of most of those people for a long time, and that, only a few days ago, an Amendment in respect of most of those people was solidly resisted by the Government. So that is not a very formidable objection to the principle contained in the words of the Clause.

As my right hon. Friend pointed out, it would be of valuable help to a substantial number of people who, after all, are not in receipt of anything like a large income. By definition, those are the very people who, in retirement, cannot understand why they are paying Income Tax. I am sure that hon. Members on both sides have had people in that category coming to see them at their interviews, asking why they should be paying tax. I put it to the Financial Secretary that quite often the amount of tax involved is minimal, and to that extent the concession for large numbers of these people would be a very small one.

As my right hon. Friend pointed out, the Budget has no social service content at all. I would go further and say that a concession of this sort would be some thing for a group of people from whom promised benefits have long been with held. We were led to believe by propaganda that an income guarantee was likely to be one of the earliest steps taken in the last Parliament, but there has been no sign of it. Surely these people deserve some slight concession of this kind.

As has been indicated from both sides of the Committee, the cost would not be excessive. My right hon. Friend made it clear that we are not attached to the wording of the new Clause, and I hope that than removes the chief objection of the hon. Member for Heywood and Royton to it as it stands. We support the principle. I hope that the Financial Secretary can accept the principle, even if he cannot go so far as to accept the exact words of the new Clause.

4.15 p.m.

(Ashton-under-Lyne): We know that at present there are various forms of relief under which people in the category that we are discussing can claim. They get the retirement pension under the National Insurance scheme, which on its own is not assessed for Income Tax. They get the age relief whereby investment income is treated as earned income up to a certain limit. Also available to them is the small income relief whereby investment income is treated as earned income. Finally, there is the complete exemption for small incomes of under £12 a week in respect of married couples over the age of 65.

The right hon. Member for Enfield, West (Mr. Iain Macleod) said that in considering the Clause, we should ignore the repercussions or accept them. I am sure that he really did not mean that we should ignore them. I assume that he meant that we should accept them. One of the repercussions is that the Clause would blur the distinction between earned and unearned income. My hon. Friend the Member for Heywood and Royton (Mr. Barnett) mentioned the case of people over 65 whose decision whether to work or not would be governed by the extent of the relief which they got for unearned income.

One of the great problems of our time is that people over 65 are much more able and willing to work than in the past. Many progressive firms are going to considerable lengths to provide the sort of work which can be done by those who do not wish to retire after having acquired skills which are in great demand but for which their declining energies do not fit them in the same degree as in the past. Such firms are to be encouraged, and people should be encouraged to continue working and be able to earn and pay tax at some slight differential rate from those who decide to retire.

I am not saying that we should not assist them in the way that my hon. Friend mentioned, but any blurring of the distinction must be looked at with great care. If there is to be a distinction between earned and unearned income, this distinction will necessarily apply to a larger proportion of the population who desire to work after approaching the age of 65. It is because of that that the Clause should be looked at with some caution.

(Darwen): I am rather impressed by what the hon. Member for Ashton-under-Lyne (Mr. Sheldon) has just said. I take it to be his point that if this Clause were adopted and included in the Bill fewer people would work after 65 than would otherwise be the case because they would pay Income Tax on their wages, whereas if they drew their pension at 65 they would not. I hope that I have got the point which the hon. Gentleman was making. If I have not, perhaps he will correct me.

My point was that the distinction between earned and unearned income becomes blurred. This distinction is of some importance, and it is becoming of increasing importance as the number of people over 65 who are working increases relative to those who do not work. It is because the blurring of this distinction between earned and unearned income may occur when people are making this choice that this is rather dangerous.

I was hoping to support the hon. Gentleman in wondering whether, although the emotion and the feeling behind the Clause are admirable. it was, nevertheless, a rather blunt instrument as drafted, because it might mean that somebody faced with this choice at 65 might decide to accept the pension. Goodness knows there are a number of people of that age, and it is important to persuade them to choose to work. I am not sure that the inducements are sufficient under our present system of pension and taxation. I am afraid that this might mean that they will jump at the idea of accepting a pension at 65, because it is to be tax-free, or virtually tax-free, whereas if they go on working they will have to pay tax on their earnings.

I think that the hon. and learned Gentleman is under a misapprehension. He thinks that the pension is taxable, but if a married couple have no income other than a pension, naturally they do not pay tax on it. Therefore, I think the argument that because we make it tax free people will not go to work does not apply.

Because it is tax free anyhow? I follow that, and to that extent this Clause is irrelevant. If it is already tax free under the present rules, it is no good making it even more tax free by putting in a new Clause.

(Manchester, Cheetham): I have only just looked at the Clause, but it seems clear what my hon. Friend the Member for Heywood and Royton (Mr. Barnett) is aiming at, and it seems clear, too, what my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) who criticised it is aiming at.

The effect of the Clause will be that where there is income in addition to the retirement pension the retirement pension will be left out of account for taxation purposes, it being agreed that for practical purposes, where there is not an income the retirement pension is tax-free, not by law but by the practical consequence of the existing limits. The Clause will mean that what is tax-free because it does not come up to the taxable limits will remain tax-free when, either by reason of earnings or unearned income, that limit is exceeded.

I am obliged to the hon. Gentleman for putting it so succinctly. It would apply in the case of a man over 70, because under the present rules he would have his pension and be allowed to work. It would therefore be of immense assistance to him because he would get free of tax that part of his total income which was pensionable. It would be a great encouragement to those over 70 to go on working, but I am still of the mind that when those at 65—which is a far more serious matter because, this is where it bites—have to decide whether to forgo their pension, and therefore under this Clause forgo possible tax-free income, they might well say, "No. I have my interest on my savings. I have the possibility of working. I have my pension at present. I have to pay tax on my pension, because I have another source of unearned income. If the Clause goes through I shall not have to pay tax on my pension, but if I forgo my pension for five years and earn money instead of drawing my pension I will not get the same sort of relief as the Clause would provide me with if I drew my pension". Is that wrong?

A man of 65 can earn £5, draw his pension, and still get the benefit of this type of Clause.

There is that exception, but if a man of 65 earns more than £5, if he wants to take full-time employment, which is what we desire, then I think that this Clause as drafted might be a deterrent to him doing so in certain circumstances.

I thought that I ought to say that because it seems to me that the Financial Secretary's task is not to pick holes in this Clause—I think that that is fairly easy to do—but to explain why, in principle, and not in detail, it is now considered right that the Government should tax money not only when it comes back to the people who have contributed, but also when it is contributed in the sense that since the last Budget it is no longer an exception for tax purposes.

Hitherto since the last Budget the defence for taxing pensions has been that people got the relief when they paid their contributions over their working life. It was always said that the reason why the pension was taxable was that for 40 years people have been enabled—and sometimes it was a considerable advantage—to regard their contributions as expenses for tax purposes. Now they have to be paid out of spending money, and this means that the Treasury is getting it at both ends. This is a characteristic Treasury attitude. It is not Morton's fork, it is MacDermot's fork, and it is monstrous, since at the instance of the Treasury last year an immense amount of money was gathered by altering the rule. It was all done rather surreptitiously and nobody noticed it.

It is being noticed by the population now, although it was not noticed then, because people had even more dramatic new taxes to consider. As my hon. Friend the Member for Barry (Mr. Gower) pointed out, more and more in our interviews we are finding that people consider it intolerable to have to pay tax twice, as they put it, because this is really what it amounts to.

It is therefore incumbent on the Financial Secretary when he rejects this Clause, as I fear he looks as though he is going to, to give us some hope that he will produce a better Clause on the same lines, taking into account the little dangers that I have pointed out in the first instance, and perhaps giving the marginal relief. This is necessary because one cannot have all or nothing as the Clause as drafted gives when one gets up against the £400, or the other sum, as the case may be.

I think that the Financial Secretary ought to design his new Clause—I am paying him the compliment of thinking that he will put down a new one on Report—so that it gives encouragement to the continuation of working, and if necessary working full-time by those who would want to do so if it was made worth their while. I regard this as an important feature, apart from the mere justice of it. This could have most important economic consequences, and I think that the Financial Secretary should do something imaginative with this suggestion. If he merely puts up a bald refusal, he will disappoint us very much indeed.

4.30 p.m.

(Westhoughton): I fully understand the readiness and even enthusiasm with which the right hon. Member for Enfield, West (Mr. Iain Macleod) supports the new Clause. What I do not understand, since a question of principle is involved, is why hon. Members oppo- site were not so enthusiastic for this reform when they were holding the reins of Government.

Part of the case is that the situation has altered since last year. That is precisely what we are trying to put right. We cannot be held responsible for last year's Budget.

I am much obliged to the right hon. Gentleman for his intervention, because it strengthens my case. This question has previously been argued in the House and in Committee on previous Finance Bills, and it has always been resisted for good and sufficient Treasury reasons, as presented by Ministers who are now on the benches opposite. That is a matter of history. No amount of recrimination will help us in this debate. Since the Clause has now been moved we should be given some adequate answers why consideration cannot be given to the principle behind it, because there are many precedents which help in this direction.

I am familiar with the objections, but I am constantly pressed by my constituents to raise this matter, and I am now raising my voice in an impromptu manner in respect of the principle enshrined in the Clause. I am not sure that my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) was right in something he said, but I do not want to be argumentative.

When a retirement pensioner, for his own reasons or because he is under pressure owing to economic circumstances, returns to work after having reached the age of 65, he becomes a special case, which has a great bearing on the Clause. The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) referred to the £5 wages limit. It is true that the House, in its wisdom, has made regulations to provide that a pensioner may earn up to £5 a week without remission, or without its interfering with his retirement pension, which he is receiving as of right under the National Insurance scheme.

But people are constantly perplexed when they find that, having gone out to work and having earned £7 or £8 a week, although they have been given the £5 remission without interference with their pensions, when the matter comes to the attention of the tax officer their pensions are aggregated with their earnings and they have to suffer a reduction of pension in relation to the amount earned in part-time or full-time employment.

I know that my right hon. Friend the Minister without Portfolio does not agree with this, but I should like to give an example to show what I mean. A widower receiving only £4 a week in National Insurance may go to work because he cannot live on that sum alone, and can then earn £5 a week without having his pension interfered with. But if he earns more the tax officer quite rightly aggregates both earnings and pension, which was previously free of tax, and he pays on the overall amount. This question should be looked at more critically.

We have always acknowledged that war service pensions should be free of tax. That has been part of our fiscal legislation for many years. We should take cognisance of the fact that a National Insurance contributor is drawing his pension as of right in respect of contributions he has paid, and is not receiving his pension as a gift from the State. But since the relevant legislation has been altered, so as to remove the allowance on the contributions he has paid, while he is working he does not receive that allowance, and some concession ought to be made in respect of that.

My right hon. Friends know that under Finance Acts going back to 1921 all contributory pensions under industrial pension schemes or bipartisan pension schemes—which are becoming the common rule in industry—have carried full remission of tax in relation to contributions made both by employer and employee. Since we are no longer making an allowance of tax National Insurance contributions this is the appropriate time for the House to examine the question in principle, and to bear in mind that although only a relatively small sum is involved—I believe that it is about £7 million a year—this would be a valuable concession, which might have the effect of giving greater encouragement to fit people over 65 years of age to fill some of the vacant places that now exist in industry. It would give them greater encouragement if they felt that the basic pension, which was theirs of right under the State insurance scheme, was free of tax. I know that certain difficulties arise, but I should like to hear what the Minister has to say about it.

(Somerset, North): The hon. Member for Westhoughton (Mr. J. T. Price) has drawn attention to some of the anomalies which exist in our present tax law, but he was a little unfair to my hon. and right hon. Friends when he asked why we did not do something to put this right when we were in power. As my right hon. Friend the Member for Enfield, Wes'. (Mr. Iain Macleod) pointed out, this entirely new situation in respect of the retirement pension has arisen as a result of last year's Finance Bill. This is the main point of principle involved in the new Clause. I am not entirely wedded to its precise proposals, but it provides an opportunity for the Financial Secretary to tell us upon what principle we now tax retirement pensions.

Until last year's Finance Bill the principle was clear enough; a person had a tax limit in respect of contributions he made towards his retirement pension, and therefore the pension itself was taxed. So long as that situation existed, in the vast majority of cases that situation suited the people better, because the chances are that they were paying a higher rate of tax while they were earning and contributing towards their pensions than they did when they were retired and were drawing their pensions.

But last year, when the tax allowance for retirement pensions was abolished, the old standard argument in favour of taxing the pension was largely removed. I know that the abolition of this tax relief has been compensated for by the increase in the allowances. That was done, in a rough and ready way, last year. But if that argument is to be effective we must be sure that the new situation is taken account of in the personal allowances system, so that every time National Insurance contributions increase in future the allowances will automatically increase to compensate. That was broadly the position under the old arrangements, when we had a direct relief in respect of pension contributions. If the contribution went up, the relief went up at the same time.

Unless we can be assured that this position will obtain in future, the case for continuing to tax these pensions has gone. After all, the retirement pension is the only National Insurance benefit now subject to tax. The reason for that and why it has been so ever since the National Insurance scheme was introduced is that, for example, there is no tax relief on contributions for sickness, unemployment or industrial injuries benefit. There was no tax transaction in those cases. That was an entirely logical position.

The anomaly to which the new Clause draws attention is that the retirement pension is now the only benefit in the whole of our arrangements subject to tax. Whatever one may feel about the precise details of the Clause, there is an important point of principle here, with which I hope the Financial Secretary will be able to deal.

It might be helpful if I intervene partly in order to recall the Committee to the scope of the new Clause. The debate is developing into something very much wider: arguments are being addressed to the proposition that all retirement pensions should be free of tax. That is not what is proposed in the new Clause. What is proposed is a provision to help certain retirement pensioners, namely those with small incomes, to the effect that a pension should not be liable to tax unless the total income, excluding the pension, exceeds £400 for a married couple and £250 for a single person. That is its broad intention.

The starting point is, of course, that the whole Committee have great sympathy, if not with the principle of the Clause, certainly with the categories of people whom it is designed to benefit. I cannot advise the Committee to support the Clause for what I suggest is a very sound reason of principle. That is that it would undermine one of the first principles in tax law, that we base liability to tax upon capacity to pay and not upon the source of any income or part of the income, and that it is the level of the total income, from whatever source, which attracts the liability to tax.

If we began with accepting the principle that certain types of income should be exempted, we should be opening up a very wide field.

Perhaps I could continue a little further for the moment.

Many retirement pensioners do not pay tax already because their total income is not sufficient to bring them within the scope of liability. For example, a pension not exceeding £283 a year is covered by the two-ninths earned income relief and the single personal allowance of £220. For elderly people over 65, the effect of the special age exemption is to exempt from tax single persons of 65 or over whose total income does not exceed £390 and married couples, at least one of whom is 65 or over, whose total income does not exceed £625.

4.45 p.m.

The effect of the new Clause, if accepted, would be to introduce considerably higher Income Tax starting points for people receiving such pensions. A single pensioner could have a total income of £458 and if he deferred his retirement or decided upon a graduated pension, it would be higher than that. A married couple both receiving pensions could receive £738 and, if they both were entitled to a £4 a week pension, £816 per annum, and, in each case, more if there was a graduated element or extra pension for deferred retirement, without having to pay Income Tax at all.

This would produce a very sharp contrast between two sets of retired elderly people both of whom had exactly the same total income and were in exactly the same position, but one of whom would be entitled to much greater tax relief than the other. This is the basic objection in principle to what is proposed. I must congratulate the right hon. Member for Enfield, West (Mr. Iain Macleod) on having kept this new Clause alive by putting his name to it. I do not know whether my hon. Friends who originally had their names to it have thought better of it or wheher it was the discouraging effect of the right hon. Gentleman's name being added to their number which led them to stay away.

Be that as it may, we have had an interesting debate, raising important points. I will try to answer some of the arguments which have been adduced in support of the new Clause. First there was the argument—if accepted, as I pointed out, this is one which would mean exempting all National Insurance Pensions from tax—that, as the specific allowances for National Insurance contributions were withdrawn last year, therefore the pension ought to be made tax-free.

We debated this matter last year, when we discussed that withdrawal, but I would remind the Committee that the reason for the withdrawal of those specific allowances was that we took the view—it was certainly the view of my hon. Friends—that that would have resulted in an undue reduction in the net cost of the contributions to those with higher incomes. The effect of it would have been that the relief, the benefit of that allowance, was least to those who were most in need.

What my right hon. Friend did instead was to give a £20 increase in the single and married allowances as a broad compensation for the withdrawal of the special alllowance for National Insurance contributions. There is now, instead of the allowance in respect of the actual amount paid, what might be called an arbitrary figure substituted, but that does not alter the principle that an allowance is made. It was because of that liability that this additional allowance of £20 was made in the single and married allowances—

I will give way when I have completed this point.

My hon. Friend the Member for Heywood and Royton (Mr. Barnett) likened this situation to the position of a capital element in an annuity, but surely there is a clear distinction there. When a person buys an annuity for a capital sum, part of the repayment is regarded, rightly, as a return of his capital. Naturally, there is no liability for Income Tax on that and that part has to be deducted in arriving at what is the right amount of tax—

but that, surely, is in an entirely different category from a pension which results from individual contributions.

Perhaps I did not make myself clear. There is a different distinction between the purchasing of an annuity as such and the element of annual pension payments which are wholly a deduction for tax. When one receives an annuity in due course the greater part of it is tax-free, but, nevertheless, the annual payments are allowed as a deduction for tax in many cases.

This is the first time that I have understood that the £20 increase in the personal allowance last year was wholly in respect of the loss of the pension contribution allowance. My understanding was that it was a general increase in the allowance because of inflation, and the fact that everybody—[Interruption.] If I am wrong, I stand corrected. If I have it wrong, I should like greater authority on this than has been quoted already. I listened to the debates last year and it is quite new to me to be told this this afternoon.

I assure my hon. Friend the Member for Westhoughton (Mr. J. T. Price) that this is quite correct. I think that my right hon. Friend the Chancellor said it in his Budget speech, and the point was certainly made in the debates. I shall try to find the references and let my hon. Friend know.

That being the case, I would not accept the proposition implicit in the point which my hon. Friend the Member for Heywood and Royton (Mr. Barnett) made, that this is to be likened to a case where no tax allowance is given in respect of the payment. Also the return which is obtained by way of a National Insurance retirement pension for the amount of the contributions is very considerably more than one would get under a private pension scheme, and that is another relevant factor to take into account, but it is, of course—

Before the hon. and learned Gentleman leaves that point, would he say whether the £20 increased allowance last year was one which will be increased in future years, as National Insurance contributions are increased? If I follow his argument correctly, he is making the point that that was not a once-for-all allowance to deal with the last increase in the National Insurance contributions, but will be a continuing one which will be increased as contributions are increased in the future.

If the hon. Member for Somerset, North (Mr. Dean) succeeds in getting an answer to that question out of a Treasury Minister, he will have acquired greater Parliamentary skill, or the Treasury Minister will have lost a greater amount of skill, than one assumes.

(Wycombe): The point raised by my hon. Friend the Member for Somerset, North (Mr. Dean) is very important. Surely, the whole basis of the Financial Secretary's argument is that he is saying that the Government are giving tax relief to contributions but in another form, through an increase in the personal allowance? Unless the personal allowance has some relation to the insurance premiums that one is paying year by year, or to increases in them during the year, this point has no validity.

We shall have to agree to differ. I made the point, and my right hon. Friend the Chancellor made it last year, that the specific intention was to substitute for an allowance on the actual amount paid a round sum which it was considered—and certainly the majority of the Committee accepted this last year—met the broad justice of the case.

I was asked about the cost. I do not, and I have not, put my argument on cost. I am advised that the cost of this new Clause would be of the order of £1 million to £2 million a year, which is not great. The right hon. Member for Enfield, West (Mr. kin Macleod), in moving, correctly predicted that I would, of necessity, make the point that it would repercuss, and that if the principle were accepted it would have to have wider application than is proposed in the new Clause. An obvious example is that widows would clearly want to know why there was special tax exemption for retirement pensions and not for their pensions.

The objection is the much broader one which I have stated already, and if assistance is to be given through tax relief to elderly people I suggest that this is not the right way to do it.

I am thrilled that my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) put his name to this new Clause. I do not quite know on which side I shall be this afternoon. I cannot wait to see this proposal embodied in the new Conservative Manifesto. I have been arguing for very many years that National Insurance retirement pensions should be tax-free. It has been a particular bee in my bonnet, and I could hardly believe my eyes when I opened the Order Paper and saw that at last my party is committed to this very important matter.

In case the Government think that they have won this battle, I must immediately say—and I think that I should be fair to say—that the Financial Secretary could not accept this Clause as it stands without great consideration. I do not think that the Treasury team have given any consideration to anything in relation to the Finance Bill.

I am stunned that the Financial Secretary has not said that this is a matter which is being considered in the social services review. He must have forgotten. After all, here is a matter of paramount importance to those who are drawing retirement pensions. As I thought that we were waiting and waiting for all the intricate matters which were being examined by those who are carrying out the review, I was astonished to find that this aspect of the situation was not under consideration—or has the hon. and learned Gentleman forgotten that it is in his brief, because he had to bring it out so quickly? Perhaps he has.

I am in some little difficulty, because my hon. Friend the Member for Somerset, North (Mr. Dean) made a point, which the Financial Secretary underlined and which I had believed for many years under my own Government—that it was not right to give a taxation relief in respect of contributions when, thanks to the Conservative Government, so many people had been withdrawn from the groups who paid tax at all. We exempted many people, particularly married couples with children. One had to have a reasonable income before coming into the tax grades, and all of us were very grateful to the Conservative Government for that.

Nevertheless, I thought that it was fair to argue that people who were relieved from paying taxation, and who therefore did not have tax relief for contributions, were paying more for their retirement pensions in the long run than those who were getting taxation relief. I was never entirely satisfied with the argument that when one finally had one's retirement pension, one would be in a better position. I waited with great interest for relief of taxation on pensions in the last Finance Bill when the taxation relief on insurance contributions was withdrawn and the £20 personal allowance was substituted. I naturally thought, after all the promises from the Government during the General Election campaign, that this would be followed by relieving from taxation at any rate some section of the retirement pension when it was drawn.

Nothing happened in this Bill; there was not a single thing for any of the poorest section or the small fixed income group. This is one of the matters which I have argued with my own Government, and I got more out of them than anybody will ever get out of the present Government. I am astonished that all the quotations by the Financial Secretary about reliefs of one kind or another—age relief and low income relief—related to reliefs introduced into a Finance Bill by Mr. Peter Thorneycroft, arising out of representations by Conservative back-bench Members. He quoted all these as though they were contributions made by a Socialist Government. What a lot of tommy-twaddle.

I am delighted that the Conservative Party now believe that it would be possible to examine the question of relieving certain groups of people from paying tax on their National Insurance pensions. I look forward with the greatest possible pleasure and excitement to the day when we are back in power and can get on with this very important proposal. I hope that my right hon. Friend will call a Division on this Clause, because it is important to have on record the conversion of the Conservative Party to and the rejection by the Government of all the things which were said about this matter in the Election campaign. I am delighted about this and delighted that I shall have the opportunity to go into the Lobby in support of the new Clause.

5.0 p.m.

At the risk of mitigating, in however small a degree, the delight of the hon. Lady the Member for Tynemouth (Dame Irene Ward) at the conversion of her hon. Friends to this fiscal generosity, I must point out that the Clause was tabled by Labour Members and that it was only the other day that the right hon. Member for Enfield, West (Mr. Iain Macleod), for perfectly good reasons which I do not in the least criticise, added his name to the Clause, presumably to ensure that it was debated. Had my hon. Friends not put down the Clause I do not believe that there would have been any such discussion.

May I dispose of two arguments which have been advanced and which seem to me to be demonstrably bad. The first is: as the premiums are no longer exempt from tax, and as they no longer result in a reduction in the taxpayer's assessment, therefore the retirement pension should automatically be tax-free. This argument is not valid, for two reasons. The central excuse offered by the right hon. Member for Enfield, West for taking up one position two years ago, when the country was flourishing under the innumerable benefits of a Conservative Government and yet we could not afford this concession, and for taking at a different position today is this reason of taxation.

It is a bad argument. Even if we conceded the principle that the retirement pension was taxed because the payments made by the worker were relieved of tax or were an offset to his tax liability—which is by no means necessarily so—it would not justify the Chancellor in now exempting these pensions from tax assessment. The most elementary actuarial calculation shows that about 99 per cent. of the content of the pensions being paid in the year which we are discussing consists of premiums which have been allowed against the tax liability of those who paid them. We are dealing only with this year, and there is nothing to prevent the right hon. Gentleman from tabling a similar Amendment in later years. But his present argument falls completely to the ground if it represents that we are no longer giving tax relief to the payments and therefore must not tax the pension.

That argument may be valid in twenty years' time but it is not valid in the current year when the money out of which the payments are made comes from premiums which were paid when the relief was available to those who paid them. And that is the only argument which could possibly justify the right hon. Gentleman in going into the Lobby in support of the Clause.

Another bad argument was that advanced by the hon. Member for Somerset, North (Mr. Dean), who said that this is the only social security benefit which is taxed. That is not so. We tax family allowances. There is no reason why we should not tax retirement pensions if the justice of the case merits it.

Family allowances represent the only exception. Could the hon. Member name any other social security benefit which is taxed—I mean any benefit for which contribution is paid—within the National Insurance scheme or the Industrial Injuries scheme? I think he will find that there is none.

I should like notice of that question. I could not say off hand whether disability payments of various kinds and compensation equivalent payments are taxed. I think that industrial injury benefits are taxed.

I may be wrong about this. But when I produced a single and very considerable exemption that was enough to destroy the hon. Member's argument which had been based on the uniqueness of taxing this pension.

I think that my hon. Friend the Member for Heywood and Royton (Mr. Barnett) also makes a bad point when he attempts to equate the return of capital which goes to a person who buys an annuity with this retirement pension. The return of capital is tax-free precisely because it is capital being returned.

Does not my hon. Friend agree that the pension in the hands of the worker is largely the result of the capital of his work during his lifetime?

That sort of involved argument relates more to the theological than to the financial. My hon. Friend is attempting to equate two totally different things. I hope that he will not go on with that argument or it may discourage the revenue from the somewhat belated concession which is made about annuities. Where a man buys an annuity and uses his capital to do so, the Revenue recognises that many of the payments are in large part his own capital coming back to him and should not be taxed. What this has to do with taxing the earnings of a workman or anybody else entirely escapes me, although that may be due to my own obtuseness. I cannot see that it has any relation to the Clause.

What we have to bear in mind within the rules of order is that we cannot look at one concession away from the general theme of the Finance Bill as a whole.

The hon. Lady is free to do so, but I am suggesting that it is unwise to do so. We must bear in mind that if the Finance Bill has a beauty it lies in the whole and not in any individual part. I am not saying that it has any beauty; it is possible to hold more than one view on that point. But if the Finance Bill is justified, then it is justified as a whole and we cannot look at each of the individual potential concessions and accuse the Treasury of great hardness of heart if it refuses something. The Finance Bill has been part of modern economic theory over the last twenty years or so, whichever party has been in power.

If I may trespass on the quotation which is now almost the private property of the right hon. Member for Enfield, West, the face may be the face of Jacob but the hands are the hands of Esau. The face is the face of Jacob—that is to say, the Treasury experts, largely with first-class honours degrees, who write the extremely stimulating literature which from time to time encourages us in our efforts. But the hand is the hand of Esau—the rough, hoary hand of the Inland Revenue which remains in more or less the same attitude whichever Government is in power.

That explains why this sort of concession was never made by the Conservative Party. The right hon. Gentleman was asked why it had not been done before. I am bound to repeat what I said in the small hours the other night—that with the Conservative Party it is not power that corrupts but the absence of power that corrupts. When they are the Government they have a certain responsibility, but when they are in Opposition they tend to be frolicsome and excessively generous without regard to principle or coherence. In these debates, however interesting they are, and however ready we all are to reflect sentiment and good intentions, I do not think that the Treasury can be asked to regard any of these concessions away from the general economic climate. It is as if we must take into account every gesture of fiscal manipulation which the Chancellor makes in any Budget and have regard to every facet of it in Committee.

The hon. Gentleman has referred to the general economic climate and said that everything must be considered against that. Would he not consider that a concession of this kind should be viewed against the general background of the sort of Finance Bill that is under discussion? Is he aware that for many years Conservative Finance Acts followed the principle of reducing taxation and giving considerable concessions to large numbers of people, while we are dealing with this Bill against the background of very heavy increases in taxation?

Whatever can be said of Conservative economic policy, the hon. Gentleman must accept that its general consequences have been to put the country's economy into such a position that a Finance Bill such as this has been found necessary.

Without opposing this concession, one must bear in mind that the arguments advanced in favour of it—that a new situation has arisen, and so on—are without foundation. I have never been one to suppose that arguing from the point of view of humanitarian considerations is something exclusively for the Labour Party. I recognise that hon. Gentlemen opposite would like, in present circumstances to make this concession to old people. However, one must bear in mind the same general financial principles which caused the last Conservative Government to reject such a proposal and which, I accept, has made my right hon. Friend the Chancellor give a dusty answer on it now.

We have had an excellent, though somewhat surprising, debate. The hon. Member for Fife, West (Mr. William Hamilton) sent me a note, after I had spoken, saying that he could not be here. I understand that, although it is rather remarkable that those sponsoring the new Clause—and, to put it mildly, not all new Clauses have the privilege of being selected—should have regarded that privilege so lightly as to not have appeared before the Committee.

The hon. Member for Heywood and Royton (Mr. Barnett) asked if we should encourage retired pensioners to work and I agree with the answer he gave; yes, if they want to. That is something which, in this short debate, we would do well to bear in mind, as I am sure the right hon. Lady the Minister of Pensions and National Insurance would. When I said—and the hon. Member for Ashton-under-Lyne (Mr. Sheldon) took me up on this—that one could either accept or ignore the repercussions, I meant it like that. I suggest that the best thing is to accept them if one can and that one should not be hypnotised by the argument of repercussions. When the hon. Member for Heywood and Royton becomes a Minister he will find that the question of repercussions is always being put to him by the civil servants. I assure him that that question is never as formidable as it seems at first sight. I must mention, in passing, that back bench speeches such as those regularly made by the hon. Member for Manchester, Cheetham (Mr. Harold Lever) have never usually, either in this or previous Administrations, ranked as being good for one's prospects for promotion.

We have been told, somewhat to my surprise, about the repercussions in this case. I thought that the figure would be less than £7 million. I did not think that it would be as low as £1 million or £2 million, although the Financial Secretary said that if one accepted the repercussions, a widening of the argument, the amount would be more than I had thought. The true point was missed by the hon. Member for Westhoughton (Mr. J. T. Price) and even the hon. Member for Cheetham was somewhat incoherent about it, and it is not often that one can say that about the hon. Gentleman. The point is not what happened in 1964 but that the rules were changed in 1965. That is something for which the Conservative Party cannot be held responsible, because we opposed it last year. It is important to remember that the rules were changed for everybody. We are now asking that some of that change should be returned for a very few people, notably the poor.

5.15 p.m.

It is not easy to oppose this principle, although the Financial Secretary courteously did his best. He said that my hon. Friends and I had never concerned ourselves with the source of income from the tax point of view, although he knows that there are exceptions, such as the £15 from the Post Office Savings Bank. Thus, the principle about which he spoke is not one that has never been breached.

When the hon. and learned Gentleman says that compensation was given last year through allowances, he must also he prepared to answer the question asked by my hon. Friend the Member for Somerset, North (Mr. Dean); can we be sure that we will get comparable relief in future when there are increases in National Insurance contributions? The Financial Secretary dodged that one, as I would have done in his position, but we know that the answer is "No". That was a piece of once-for-all sugar given last year and it does not stand up as an argument for opposing the new Clause.

The Government should recall what was stated in the Millard Tucker Report of 1954, Cmd. 9063, paragraph 263 of which stated:

"The taxation treatment of retirement pensions and certain other periodic payments under the National Insurance Acts, and of the relative contributions, follows the principle of exempting the build-up and taxing the benefit".

Paragraph 264 stated:

"In these days of high taxation, however, when the amount of free income left to the taxpayer is so reduced as to make saving very difficult, we would not willingly recommend a reversal of the principle of exempting the build-up".

The answer to that is, "Nor would we". Of course it is true that there are flaws in the drafting of the new Clause. Indeed, there are gaping holes in it, as is often the case. Obviously its sponsors on the benches opposite did not have the advantage of the expert drafting which is available to us.

Is it not the case that the consequences of accepting the proposal would be that the beneficiaries under it would not be the victims of the withdrawal of the relief given in 1965?

The hon. Gentleman is much too experienced in Committee debates on financial matters not to know that when a proposed new Clause is incompetently drafted one can argue the principle of it at the appropriate stage, which is in Committee, and put the drafting right before Report. That is what I propose to my hon. Friends. This debate has had a good deal of sympathy from hon. Members on both sides, although I do not rely on that. Nor do I rely on the unbounded enthusiasm although I welcome it, on the part of my hon. Friend the Member for Tynemouth (Dame Irene Ward).

The simple point is that while the new Clause is, in its present form, entirely unsatisfactory, we will do our best to put that right in a new attempt at a new Clause on Report. That is normal Committee procedure. Indeed, it is one of the things which a Committee is designed to do, and I give notice of our intention. We believe that the principle, however faulty the drafting of the new Clause, is a just one, that the cost is cheap and that we must support that principle by dividing the Committee.

(Yeovil): I entirely agree with the remarks of my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), and I do not know why the Treasury has not been more forthcoming and has not itself promised a new version of the new Clause on Report. I would not be rising to speak had my right hon. Friend looked in his driving mirror before speaking, when he would have seen me on my feet. I rise merely to comment on some remarks made by the hon. Member for Manchester, Cheetham (Mr. Harold Lever), who, as my right hon. Friend pointed out, is courageous in speaking the way he does from the Government back benches, remembering that that is not something which is uniformly encouraged.

The hon. Member for Cheetham produced the extraordinary statement that a Finance Bill was capable of an integral beauty of its own. This is a view I wish to challenge. Finance Bills are ugly things. If I found myself in the position of the curate eating that horrible egg, I think that the most polite thing one could possibly say would be that it was good in parts—and that applies only to some Finance Bills and not to this one.

It is wholly improper for the hon. Member for Cheetham to suggest that this side has become irresponsible when dealing with a new Clause like this. The hon. Gentleman stings one into recollection of the silly ranks of his own party in opposition who allowed irresponsibility and enthusiasm to gallop away with them hand in hand for hour after hour as they pressed the then Conservative Government to accept the most impossible and optimistic Amendments. When the hon. Gentleman now makes that sort of accusation from the Government side my imagination just boggles at the thought of what would have been the reaction of his party on this side of the Committee had such a speech been made at that time. But, of course, compared with him we are mild and simple people, who do not react with quite the same vigour as

Division No. 88.]AYES[5.22 p.m.
Alison, Michael (Barkston Ash)Fletcher-Cooke, CharlesLancaster, Col. C. G.
Allason, James (Hemel Hempstead)Foster, Sir JohnLangford-Holt, Sir John
Awdry, DanielGilmour, Sir John (Fife, E.)Lewis, Kenneth (Rutland)
Balniel, LordGlover, Sir DouglasLloyd, Ian (P'tsm'th, Langstone)
Batsford, BrianGoodhart, PhilipLloyd, Rt. Hn. Selwyn (Wirral)
Beamish, Col. Sir TuftonGoodhew, VictorLoveys, W. H.
Bell, RonaldGower, RaymondMcAdden, Sir Stephen
Bennett, Dr. Reginald (Gos. & Fhm)Grant, AnthonyMacleod, Rt. Hn. Iain
Bessell, PeterGriffiths, Eldon (Bury St. Edmunds)Maddan, Martin
Biffen, JohnGrimond, Rt. Hn. J.Mawby, Ray
Biggs-Davison, JohnGurden, HaroldMaxwell-Hyslop, R. J.
Birch, Rt. Hn. NigelHall, John (Wycombe)Mills, Peter (Torrington)
Black, Sir CyrilHall-Davis, A. G. F.Mills, Stratton (Belfast, N.)
Body, RichardHarris, Frederic (Croydon, N.W.)Miscamphell, Norman
Boyle, Rt. Hn. Sir EdwardHarris, Reader (Heston)Mitchell, David (Basingstoke)
Braine, BernardHarrison, Brian (Maldon)Morrison, Charles (Devizes)
Brown, Sir Edward (Bath)Harvey, Sir Arthur VereMurton, Oscar
Bruce-Gardyne, J.Harvie Anderson, MissNabarro, Sir Gerald
Buck, Antony (Colchester)Hawkins, PaulNeave, Airey
Bullus, Sir EricHeald, Rt. Hn. Sir LionelNott, John
Chichester-Clark, R.Heath, Rt. Hn. EdwardPage, Graham (Crosby)
Clegg, WalterHeseltine, MichaelPage, John (Harrow, W.)
Cooke, RobertHiggins, Terence L.Pardoe, John
Cooper-Key, Sir NeillHiley, JosephPercival, Ian
Costain, A. P.Hirst, GeoffreyPeyton, John
Crawley, AidanHobson, Rt. Hn. Sir JohnPike, Miss Mervyn
Crowder, F. P.Hogg, Fit. Hn. QuintinPowell, Rt. Hn. J. Enoch
Dalkeith, Earl ofHolland, PhilipPym, Francis
Dance, JamesHooson, EmlynRenton, Rt. Hn. Sir David
Davidson, James (Aberdeenshire, W.)Hordern, PeterRidley, Hn. Nicholas
Dean, Paul (Somerset, N.)Hornby, RichardRoots, William
Digby, Simon WingfieldHunt, JohnRossi, Hugh (Hornsey)
Dodds-Parker, DouglasHutchison, Michael ClarkSharples, Richard
Drayson, G. B.Johnston, Russell (Inverness)Smith, John
Eden, Sir JohnKimball, MarcusSteel, David (Roxburgh)
Elliot, Capt. Walter (Carshalton)Kirk, PeterTaylor, Sir Charles (Eastbourne)
Elliott, R. W. (N'c'tle-upon-Tyne, N.)Kitson, TimothyTaylor, Edward M. (G'gow, Cathcart)
Errington, Sir EricKnight, Mrs. JillTaylor, Frank (Moss Side)

no doubt he and his colleagues would have done had that kind of speech been made by us in days gone by—

I was careful at the same time to affirm my belief in the sincerity of the feelings that actuate hon. and right hon. Members opposite in their support for this new Clause.

I have never been one to underrate the hon. Gentleman's skill. He always gives himself some very satisfactory safeguards against the more damaging of counterattacks. That point I concede at once.

I hope that the Financial Secretary will make some effort to produce a version of his own, because it seems to me that the Treasury Ministers are again guilty of taking an incredibly niggardly attitude. One cannot believe that this attitude would have been the same had they been faced this time, as they were last year, with the prospect of an early General Election.

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

The Committee divided: Ayes 132, Noes 208.

Temple, John M.Walker-Smith, Rt. Hn. Sir DerekWinstanley, Dr. M. P.
Thatcher, Mrs. MargaretWall, PatrickWorsley, Marcus
Thorpe, JeremyWard, Dame IreneWylie, N. R.
Turton, Rt. Hn. R. H.Weatherill, BernardYounger, Hn. George
Vickers, Dame JoanWhitelaw, William
Wainwright, Richard (Colne Valley)Wills, Sir Gerald (Bridgwater)TELLERS FOR THE AYES:
Walker, Peter (Worcester)Wilson, Geoffrey (Truro)Mr. Peter Blaker and
Mr. Reginald Eyre.

NOES
Allaun, Frank (Salford, E.)Ginsburg, DavidOgden, Eric
Archer, PeterGourlay, HarryO'Malley, Brian
Armstrong, ErnestGray, Dr. Hugh (Yarmouth)Orbach, Maurice
Atkins, Ronald (Preston, N.)Gregory, ArnoldOrme, Stanley
Atkinson, Norman (Tottenham)Grey, Charles (Durham)Oswald, Thomas
Bacon, Rt. Hn. AliceGriffiths, Will (Exchange)Owen, Will (Morpeth)
Baxter, WilliamHamilton, James (Bothwell)Page, Derek (King's Lynn)
Bence, CyrilHamilton, William (Fife, W.)Paget, R. T.
Bennett, James (G'gow, Bridgeton)Hamling, WilliamPalmer, Arthur
Bidwell, SydneyHannan, WilliamPannell, Rt. Hn. Charles
Bishop, E. S.Harper, JosephPark, Trevor
Blackburn, F.Harrison, Walter (Wakefield)Parker, John (Dagenham)
Blenkinsop, ArthurHazell, BertParkyn, Brian (Bedford)
Boardman, H.Helder, Eric S.Pearson, Arthur (Pontypridd)
Booth, AlbertHerbison, Rt. Hn. MargaretPentland, Norman
Boston, TerenceHooley, FrankPerry, Ernest G. (Battersea, S.)
Bowden, Rt. Hn. HerbertHoughton, Rt. Hn. DouglasPerry, George H. (Nottingham, S.)
Bradley, TomHowle, W.Price, Christopher (Perry Barr)
Brooks, EdwinHoy, JamesPrice, William (Rugby)
Broughton, Dr. A. D. D.Hughes, Hector (Aberdeen, N.)Pursey, Cmdr. Harry
Brown, Rt. Hn. George (Belper)Hunter, AdamRankin, John
Brown, Hugh D. (G'gow, Provan)Hynd, JohnRhodes, Geoffrey
Brown, Bob (N'c'tle-upon-Tyne, W)Irvine, A. J. (Edge Hill)Robertson, John (Paisley)
Brown, R. W. (Shoreditch & F'bury)Jackson, Colin (B'h'se & Spenb'gh)Robinson, W. O. J. (Walth'stow, E.)
Buchan, NormanJay, Rt. Hn. DouglasRodger, William (Stockton)
Butler, Herbert (Hackney, C.)Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)Roebuck, Roy
Butler, Mrs. Joyce (Wood Green)Jenkins, Hugh (Putney)Rose, Paul
Callaghan, Rt. Hn. JamesJenkins, Rt. Hn. Roy (Stechford)Ross, Rt. Hn. William
Carmichael, NeilJohnson, James (K'ston-on-Hull, W.)Rowland, Christopher (Meriden)
Castle, Rt. Hn. BarbaraJones, Rt. Hn. Sir Elwyn (W. Ham, S.)Ryan, John
Chapman, DonaldKerr, Mrs. Anne (R'ter & Chatham)Shaw, Arnold (Ilford, S.)
Coe, DenisKerr, Dr. David (W'worth, Central)Shinwell, Rt. Hn. E.
Coleman, DonaldKerr, Russell (Feltham)Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Conlan, BernardLeadbitter, TedShort, Mrs. Renée (W'hampton, N.E.)
Corbet, Mrs. FredaLee, Rt. Hn. Jennie (Cannock)Silkin, John (Deptford)
Craddock, George (Bradford, S.)Lee, John (Reading)Silverman, Julius (Aston)
Cullen, Mrs. AliceLestor, Miss JoanSilverman, Sydney (Nelson)
Dalyell, TamLever, Harold (Cheetham)Slater, Joseph
Davies, Dr. Ernest (Stretford)Lewis, Arthur (W. Ham, N.)Small, William
Davies, Harold (Leek)Lipton, MarcusSpriggs, Leslie
Davies, Robert (Cambridge)Lomas, KennethSteele, Thomas (Dunbartonshire, W.)
Delargy, HughLuard, EvanSwain, Thomas
Dempsey, JamesLyon, Alexander W. (York)Swingler, Stephen
Dewar, DonaldLyons, Edward (Bradford, E.)Symonds, J. B.
Diamond, Rt. Hn. JohnMcBride, NeilTaverns, Dick
Dickens, JamesMcCann, JohnTinn, James
Doig, PeterMacDermot, NiallTuck, Raphael
Driberg, TomMcKay, Mrs. MargaretUrwin, T. W.
Dunn, James A.Mackenzie, Gregor (Rutherglen)Wainwright, Edwin (Dearne Valley)
Dunnett, JackMackie, JohnWalden, Brian (All Saints)
Dunwoody, Mrs. Gwyneth (Exeter)Mackintosh, John P.Walker, Harold (Doncaster)
Dunwoody, Dr. John (F'th & C'b's)Maclennan, RobertWallace, George
Edwards, William (Merioneth)McNamara, J. KevinWatkins, David (Consett)
Ellis, JohnMacPherson, MalcolmWeitzman, David
English, MichaelManuel, ArchieWellbeloved, James
Ennals, DavidMarquand, DavidWells, William (Walsall, N.)
Evans, Ioan L. (Birm'h'm, Yardley)Marsh, Rt. Hn. RichardWhitaker, Ben
Fernyhough, E.Mason, RoyWilliams, Alan Lee (Hornchurch)
Fitch, Alan (Wigan)Mayhew, ChristopherWilliams, Clifford (Abertillery)
Fletcher, Raymond (Ilkeston)Mellish, RobertWilliams, Mrs. Shirley (Hitchin)
Fletcher, Ted (Darlington)Mendelson, J. J.Williams, W. T. (Warrington)
Floud, BernardMikardo, IanWilson, Rt. Hn. Harold (Huyton)
Foley, MauriceMilian, BruceWinnick, David
Forrester, JohnMitchell, R. C. (S'th'ampton, Test)Winterbottom, R. E.
Fowler, GerryMorgan, Elystan (Cardiganshire)Woodburn, Rt. Hn. A.
Fraser, John (Norwood)Morris, Alfred (Wythenshawe)Yates, Victor
Fraser, Rt. Hn. Tom (Hamilton)Moyle, Roland
Freeson, ReginaldWilley, Rt. Hn. FrederickTELLERS FOR THE NOES:
Gardner, A. J.Murray, AlbertMr. Charles R. Morris and
Garrett, W. E.Norwood, ChristopherMr. William Whitlock.
Garrow, AlexOakes, Gordon

New Clause—(Simplified Procedurefor Small Pension Schemes)

Where in the year 1966–67 or any subsequent year of assessment an employer pays a premium or other consideration under an annuity contract in circumstances where relief from tax would have been available to an employee of his under section 23 of the Finance Act 1956 in respect of the payment if the contract and the payment had been made by the employee then—

  • (a) sections 22, 23 and 24 of the Finance Act 1956 shall have effect as if the payment had been made by that employee under the annuity contract and as if the annuity contract had been made by the employee; and
  • (b) if that employee is chargeable to income tax under Case I of Schedule E in respect of the employment by reason of which the premium or other consideration was paid by his employer the sum so pain, if not otherwise chargeable to income tax as income of the employee, shall be deemed for all the purposes of the Income Tax Acts to be an emolument from that employment for the year of assessment in which the sum was paid.—[Mrs. Thatcher.]
  • Brought up, and read the First time.

    (Finchley): I beg to move, That the Clause be read a Second time.

    The purpose of the Clause is not, perhaps, apparent from the wording. I would like, therefore, to spend a moment explaining the purpose before I explain the mechanism by which that purpose can be put into effect. Its purpose is to help small employers to provide pension benefits for those who work for them. As the Financial Secretary will be aware, small employers cannot quite so easily provide those benefits as can larger employers. If an employer has a large number of people working for him, he can have a special superannuation scheme under Section 379 of the Income Tax Act, 1952. This gives the large employer certain taxation benefits and it gives the employee who works for the large employer a considerable number of taxation benefits under that Section.

    Broadly speaking, the benefits are these. The contributions made by the employee to the scheme are wholly deductible in calculating the employee's tax liability. Once those contributions have been made the fund which they go to swell is also exempt from tax on dividends and interest payments. The third feature of this scheme is that the pension benefit comes out in the form of income and is taxable when it emerges. There is, however, in general a principle of tax-free build-up both of contributions and of the fund and a taxable benefit as earned income under Schedule E. So much for the Section 379 schemes.

    Those who do not have enough work-people to provide for them in such pension schemes have to turn to another Section of the Income Tax Act, Section 388, and have to attempt to provide for them in that way. Under schemes under Section 388, however, the employee does not get full contribution relief. He gets only partial relief of the same amount as he would get under a life assurance scheme. Moreover, those contributions go to make a fund which is not exempt from Income Tax.

    The benefits, on the other hand, when they emerge, in so far as they emerge as income, will be taxable as income but up to one-quarter of them can be taken as capital. That is why there is not a tax-free build-up of these schemes. The difference between the two types of the schemes means, however, that it costs the small employer more to provide an equivalent pension benefit for his employee than it costs the employer who has a large number of people working for him. We on this side believe that it would be better if it cost an employer the same amount to provide a unit pension for his employee regardless of whether he employed a lot of people or a small number.

    Certain changes were made in the Finance Act last year. By virtue of Section 69 (7) of the 1965 Act, the Section 388 funds—those mostly used by small employers—were exempt from Income Tax. At the time when I was being tutored on these matters, those who know all about them told me that the Section 388 funds got the benefit of a gross accumulator. I did not quite understand what that meant at the time. It sounded so much like a nickname for the Chancellor of the Exchequer. I was then told hastily that the gross accumulator was a desirable thing to have, and I understood at once that it could not possibly apply to the Chancellor of the Exchequer.

    A gross accumulator really meant that the funds should be allowed to accumulate tax-free and that it was possible to claim back the tax on interest and dividends. This was one of the great benefits given, apparently unwittingly, by the Government last year. It is one of the benefits which, under this year's Finance Bill, tucked away in Schedule 4, paragraph 9, the Government are attempting to withdraw. This is another example of the Government not knowing what they were doing last year and bringing in a change this year which reverses what they did a year ago. How we know that they think they know what they are doing this year, we do not quite know. That may not sound clear, but the Government themselves are not clear on this matter. If they did not know what they were doing last year, I do not see how they should know what they are doing this year in withdrawing the relief. Nevertheless, they are attempting to withdraw this relief in Schedule 4, paragraph 9.

    It would be fair to say that the Government never intended to give this relief in respect of general annuity funds or any annuity funds whereby a large amount of the annuity can be taken out in capital form, because, on the whole, this relief is meant to apply only where the benefit comes out in income form. Therefore, one cannot, perhaps, object too hard that the Government are taking away half of the relief this year. It is, however, an unfortunate by-product of the withdrawal of this relief that relief should be withdrawn from Section 388 schemes which are used so much by small employers.

    There is a way of getting out of this dilemma. One accepts that in so far as employees under Section 388 schemes can withdraw part of their benefits in the form of capital, they should not, perhaps, have the tax-free exemption which the Section 379 schemes have. On the other hand, we hope that the Financial Secretary will agree that small employers should not be at a disadvantage taxwise in providing pensions for their employees. The solution which we propose to the dilemma is contained in the new Clause, which, I hope, by this stage is becoming clear.

    The solution which we are propounding relies by precedent on the 1956 scheme in the Finance Act of that year, when, the Financial Secretary will remember, for the first time special pension benefits were introduced, mainly for the self-employed but also for those who worked in non-pensionable employments. That scheme was known as the Millard Tucker scheme. It followed the Millard Tucker inquiry and it was embodied in the 1956 Act.

    The scheme there was founded upon exactly the same concepts as Section 379 schemes—that is to say, the self-employed and those in non-pensionable employment should be able to contribute to a scheme and get their contributions allowed for tax. The scheme to which they contributed should have its funds exempt from tax as far as dividend and interest payments were concerned. Once the benefits came out, they should come out in the form of income and should be taxable as such. The scheme was on all fours with Section 379 schemes but could not be used for small employers in so far as the small employer himself made contributions.

    The particular 1956 scheme related only to contributions made either by the self-employed or by the employee. It did not enable the employer to make the contributions and to get the complete benefits of the 1956 scheme. The solution we propose is designed to help the small employer to provide pensions on the same footing as the employer of a large number of people and is a modification of the 1956 scheme whereby the employer's contributions shall count themselves as if they were made by the employee.

    Without this new Clause, the small employer will have to pay more to provide the same pension benefit for his employees. The new Clause would provide a method whereby the small employer could get the benefits of tax-free accumulation in so far as he wished to provide income benefits for his employees. We think it important that as many people as possible should have extra pension benefit and that it is as well that they should have a source of income that is not wholly dependent upon Governments.

    Most of us on the back benches, whether on this side or that, have a healthy suspicion of Governments. On this side of the Committee what we think about the Government financially would be quite unspeakable, let alone unprintable in HANSARD. But it would be advisable for an employee to have a second pension benefit. So far as I can see, even though the Government want to provide half pay on retirement there is no hope of that coming for many years and in the meantime private employers could do the job without great cost to the Exchequer. We hope that the Government will look favourably at the new Clause to enable small employers to do for their workers exactly what the large employers have done for many years.

    I shall not attempt to repeat what my hon. Friend the Member for Finchley (Mrs. Thatcher) has said so lucidly and fairly, but one other point deserves mention. It is commendable to a degree when a large employer provides an effective pension scheme for his employees, but it is all the more commendable when a relatively small employer goes very often to great trouble to evolve a pension scheme for his employees. Whether he be trading as a company or as a partnership in a small family firm, it is not an easy thing for such an employer to do and it would be intolerable for him to be in a disadvantageous position as compared with large companies.

    I may be wrong but I have for a long time suspected, perhaps wrongly, that the Government are far too attached to large units. They are in favour of great economic units, State-owned or otherwise. Even when they have not nationalised organisations, they seem to have greater partiality for the large companies, perhaps because it is easier to nationalise them than smaller units.

    Perhaps economic conditions have often forced the Conservative Party in the past to appear to take up the same position but it would be a bad day for the country if we did not give maximum encouragement to small units of all kinds. These small units give valuable employment to millions. It would be intolerable if their position vis-à-vis industrial pension schemes were less advantageous than that of big companies and I hope that the Financial Secretary will consider that aspect as well as the point put by my hon. Friend.

    5.45 p.m.

    I am rather intrigued to guess what the unprintable thoughts of the hon. Lady the Member for Finchley (Mrs. Thatcher) about the Government are. But the thought that she has expressed surprised me. She said that the phrase "gross accumulator" made her think of my right hon. Friend the Chancellor of the Exchequer. I had always thought, judging by the criticism of hon. Members opposite, that he did not accumulate enough, that he scent too much, that national savings were dwindling, etc. I am glad that hon. Members are converted and now look upon my right hon. Friend as a gross accumulator. It is a title of which I am sure he will be proud.

    The hon. Lady said that the new Clause is moved to help small employers to provide pension benefits. I had assumed that that was, indeed, the purpose, although, in terms, it would not be limited to that and could be used by large employers as well. As she has made clear—she is always clear—the purpose is to make available to small employers the facilities which are available to the self-employed and to an employee for whom his employer has not made pension rights available under the Millard Tucker scheme.

    My short answer is that the small employer can avail himself of the facility now by the simple means of increasing the payment he makes to his employee by the amount that he would contribute to such a pension scheme under the new Clause and then requiring a contractual obligation from the employee to spend that additional amount in taking out a policy under the Millard Tucker scheme. Thus, the facility is available and can be used by a small employer in such a situation.

    Something on the lines of the new Clause has been urged upon us by the Life Offices' Association. When we pointed the means out to the Association, we learned that this did not quite meet what they were after. They were thinking particularly of the employer who wanted to provide for one or two of his employees—perhaps persons like foremen or managing clerks or others in responsible positions—and to retain some degree of control over the annuity contract in particular, to get back some of his outlay if the expected beneficiary left of his own volition or was dismissed.

    Hon. Members on both sides of the Committee—certainly on this side—would not regard a. change of job by such a beneficiary as a very terrible development, however. We do not want to devise provisions which will tie people, as it were, to the employment of a certain employer. The whole movement now is towards greater transferability of pension benefits. We would not view with favour a provision of that kind, nor, presumably, would the hon. Lady and those who support the new Clause, because that would not meet the point put to us by the Life Offices' Association either.

    All I would say, therefore, is that as it stands the Clause is not necessary. The provisions of the 1956 legislation are available and can be used in the way I have indicated by the employer of the kind whom the new Clause is designed to help, and we do not see any need for a Clause of this kind.

    That was not an entirely satisfactory reply, but I: want first to deal with the hon. and learned Gentleman's opening words. I would have thought that this Chancellor of the Exchequer was the grossest accumulator of debts that this country had ever known. Therefore, he remains a gross accumulator not only of debts but of the taxpayers' money each year in order to meet increasing Government expenditure.

    So far as the right icon Gentleman's interjection was in order. I would point out that the adverse balance in 1951 was within £2 million of what it was in 1964. However, you would stop me, Mr. Grant-Ferris, if I went further on that theme, as I can see from the way you are now thinking.

    If the employer can already use the provisions of the new Clause by a device

    Division No. 89.]AYES[5.53 p.m.
    Allason, James (Hemel Hempstead) Chichester-Clark, R.Fletcher-Cooke, Charles
    Awdry, DanielClegg, WalterFoster, Sir John
    Balniel, LordCooke, RobertGilmour, Sir John (Fife, E.)
    Batsford, BrianCooper-Key, Sir NeillGlover, Sir Douglas
    Beamish, Col. Sir TuftonCostain, A. P.Goodhart, Philip
    Bell, RonaldCrawley, AidanGoodhew, Victor
    Bennett, Dr. Reginald (Gos. & Fhm)Crowder, F. P.Cower, Raymond
    Biffen, JohnDalkeith, Earl ofGrant, Anthony
    Biggs-Davison, JohnDance, JamesGriffiths, Eldon (Bury St. Edmunds)
    Birch, Rt. Hn. NigelDean, Paul (Somerset, N.)Gurden, Harold
    Black, Sir CyrilDeedes, Rt. Hn. W. F. (Ashford)Hall, John (Wycombe)
    Blaker, PeterDigby, Simon WingfieldHall-Davis, A. C. F.
    Body, RichardDodds-Parker, DouglasHarris, Frederic (Croydon, N.W.)
    Boyle, Rt. Hn. Sir EdwardDoughty, CharlesHarris, Reader (Heston)
    Braille, BernardDrayson, G. B.Harrison, Brian (Maldon)
    Brown, Sir Edward (Bath)Eden, Sir JohnHarvey, Sir Arthur Vere
    Bruce-Gardyne, J.Elliot, Capt. Walter (Carshalton)Harvie Anderson, Miss
    Buck, Antony (Colchester)Elliott, R.W.(N'c'tle-upon-Tyne, N.)Hawkins, Paul
    Channon, H. P. G.Errington, Sir EricHeald, Rt. Hn. Sir Lionel

    —and I think that the Financial Secretary would agree that it would be by a device—I do not see why the hon. and learned Gentleman should object to making it more specific that the benefits of this piece of legislation should attach to employers. Not enough people are using this legislation and more of them would know about it and would use it and would benefit by it if it were made clearer than it now is.

    It is all very well to say that these employers could pay their employees a little more, but they might want to have a little more control over what they paid to their employees. They might pay an employee an extra £50 a year but not have enough control over where that £50 went. If an employer is to pay a certain extra amount, he may want to pay that amount in the certainty that it will +go towards providing the pension for which he is making provision.

    As the Financial Secretary has indicated that the cost would be negligible—indeed, there would be virtually no cost, because this is a relief which is being withdraw this year—I do not see any reason why we should not have something along the lines of the Clause and the 1956 legislation, and I ask the hon. and learned Gentleman to think about that. If he will give that undertaking, we will not have to press the matter to a Division, but if he does not, we shall have to divide the Committee.

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

    The Committee divided: Ayes 123, Noes 210.

    Heath, Rt. Hn. EdwardMacleod, Rt. Hn. IainRossi, Hugh (Hornsey)
    Heseltine, MichaelMaddan, MartinSharples, Richard
    Higgins, Terence L.Mawby, RaySmith, John
    Hiley, JosephMaxwell-Hyslop, R. J.Taylor, Sir Charles (Eastbourne)
    Hirst, GeoffreyMills, Peter (Torrington)Taylor, Edward M. (G'gow, Cathcart)
    Hobson, Rt. Hn. Sir JohnMills, Stratton (Belfast, N.)Taylor, Frank (Moss Side)
    Hogg, Rt. Hn. QuintinMiscampbell, NormanTemple, John M.
    Holland, PhilipMitchell, David (Basingstoke)Thatcher, Mrs. Margaret
    Hordem, PeterMorrison, Charles (Devizes)Turton, Rt. Hn. R. H.
    Homby, RichardMott-Radelyffe, Sir CharlesVickers, Dame Joan
    Hunt, JohnMurton, OscarWalker, Peter (Worcester)
    Hutchison, Michael ClarkNabarro, Sir GeraldWalker-Smith, Rt. Hn. Sir Derek
    Kimball, MarcusHeave, AireyWall, Patrick
    Kirk, PeterNott, JohnWard, Dame Irene
    Kitson, TimothyPage, Graham (Crosby)Whitelaw, William
    Knight, Mrs. JillPage, John (Harrow, W.)Wills, Sir Gerald (Bridgwater)
    Langford-Holt, Sir JohnPercival, IanWilson, Geoffrey (Truro)
    Lewis, Kenneth (Rutland)Peyton, JohnWorsley, Marcus
    Lloyd, Ian (P'tsm'th, Langstone)Pike, Miss MervynWylie, N.R.
    Lloyd, Rt. Hn. Selwyn (Wirral)Powell, Rt. Hn. J. EnochYounger, Hn. George
    Loveys, W. H.Renton, Rt. Hn. Sir David
    McAdden, Sir StephenRidley, Hn. NicholasTELLERS FOR THE AYES:
    Maclean, Sir FitzroyRoots, WilliamMr. Francis Pym and
    Mr. Reginald Eyre.

    NOES

    Archer, PeterEvans, Ioan L. (Birm'h'm, Yardley)MacDermot, Niall
    Atkins, Ronald (Preston, N.)Fernyhough, E.McKay, Mrs. Margaret
    Atkinson, Norman (Tottenham)Fletcher, Raymond (Ilkeston)Mackenzie, Gregor (Rutherglen)
    Bacon, Rt. Hn. AliceFletcher, Ted (Darlington)Mackie, John
    Baxter, WilliamFloud, BernardMackintosh, John P.
    Bence, CyrilFoley, MauriceMaclennan, Robert
    Bennett, James (G'gow, Bridgeton)Forrester, JohnMcNamara, J. Kevin
    Bessell, PeterFowler, GerryMacPherson, Malcolm
    Bidwell, SydneyFraser, John (Norwood)Manuel, Archie
    Bishop, E. S.Fraser, Rt. Hn. Tom (Hamilton)Marquand, David
    Blackburn, F.Freeson, ReginaldMarsh, Rt. Hn. Richard
    Blenkinsop, ArthurGardner, A. J.Mason, Roy
    Boardman, H.Garrett, W. E.Mayhew, Christopher
    Booth, AlbertGarrow, AlexMellish, Robert
    Boston, TerenceGinsburg, DavidMendelson, J. J.
    Bowden, Rt. Hn. HerbertGray, Dr. Hugh (Yarmouth)Mikardo, Ian
    Bradley, TomGregory, ArnoldMillan, Bruce
    Brooks, EdwinGrey, Charles (Durham)Mitchell, R. C. (S'th'pton, Test)
    Broughton, Dr. A. D. D.Grimond, Rt. Hn. J.Morgan, Elystan (Cardiganshire)
    Brown, Rt. Hn. George (Belper)Hamilton, William (Fife, W.)Morris, Alfred (Wythenshawe)
    Brown, Hugh D. (G'gow, Provan)Hamling, WilliamMorris, Charles R. (Openshaw)
    Brown, Bob (N'c'tle-upon-Tyne, W.)Hannan, WilliamMoyle, Roland
    Brown, R. W. (Shoreditch & F'bury)Harper, JosephMulley, Rt. Hn. Frederick
    Buchan, NormanHarrison, Walter (Wakefield)Norwood, Christopher
    Butler, Herbert (Hackney, C.)Hazell, BertOakes, Gordon
    Butler, Mrs. Joyce (Wood Green)Heffer, Eric S.Ogden, Eric
    Callaghan, Rt. Hn. JamesHerbison, Rt. Hn. MargaretO'Malley, Brian
    Carmichael, NeilHooley, FrankOrbach, Maurice
    Castle, Rt. Hn. BarbaraHooson, EmlynOrme, Stanley
    Chapman, DonaldHoughton, Rt. Hn. DouglasOswald, Thomas
    Coe, DenisHowie, W.Owen, Will (Morpeth)
    Coleman, DonaldHoy, JamesPage, Derek (King's Lynn)
    Conlan, BernardHughes, Hector (Aberdeen, N.)Paget, R. T.
    Corbet, Mrs. FredaHunter, AdamPalmer, Arthur
    Craddock, George (Bradford, S.)Hynd, JohnPannell, Rt. Hn. Charles
    Cullen, Mrs. AliceIrvine, A. J. (Edge Hill)Pardoe, John
    Dalyell, TamJackson, Colin (B'h'se & Spenb'gh)Park, Trevor
    Davidson, James (Aberdeenshire, W.)Jay, Rt. Hn. DouglasParker, John (Dagenham)
    Davies, Dr. Ernest (Stretford)Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)Parkyn, Brian (Bedford)
    Davies, Harold (Leek)Jenkins, Hugh (Putney)Pearson, Arthur (Pontypridd)
    Davies, Robert (Cambridge)Jenkins, Rt. Hn. Roy (Stechford)Pentland, Norman
    Delargy, HughJohnson, James (K'ston-on-Hull, W.)Perry, Ernest G. (Battersea, S.)
    Dempsey, JamesJohnston, Russell (Inverness)Perry, George H. (Nottingham, S.)
    Dewar, DonaldJones, Rt. Hn. Sir Elwyn (W. Ham, S.)Price, Christopher (Perry Barr)
    Diamond, Rt. Hn. JohnKerr, Mrs. Ann (R'ter & Chatham)Price, Thomas (Westhoughton)
    Dickens, JamesKerr, Dr. David (W'worth, Central)Price, William (Rugby)
    Doig, PeterKerr, Russell (Feltham)Pureey, Cmdr. Harry
    Driberg, TomLeadbitter, TedRankin, John
    Dunn, James A.Lestor, Miss JoanRhodes, Geoffrey
    Dunnett, JackLewis, Arthur (W. Ham, N.)Robertson, John (Paisley)
    Dunwoody, Mrs. Gwyneth (Exeter)Lipton, MarcusRobinson, W. O. J. (Walth'stow, E.)
    Dunwoody, Dr. John (F'th & C'b'e)Lomas, KennethRodgers, William (Stockton)
    Edwards, William (Merioneth)Luard, EvanRoebuck, Roy
    Ellis, JohnLyon, Alexander W. (York)Rose, Paul
    English, MichaelLyons, Edward (Bradford, E.)Ross, Rt. Hn. William
    Ennals, DavidMcBride, NeilRowland, Christopher (Meriden)
    Ensor, DavidMcCann, JohnRyan John

    Shaw, Arnold (Ilford, S.)Swingler, StephenWhitaker, Ben
    Shinwell, Rt. Hn. E.Taverne, DickWhitlock, William
    Short, Rt. Hn. Edward (N'c'tle-u-Tyne)Thorpe, JeremyWilliams, Alan Lee (Hornchurch)
    Short, Mrs. Renée (W'hampton, N.E.)Tinn, JamesWilliams, Clifford (Abertillery)
    Silkin, John (Deptford)Tuck, RaphaelWilliam, Mrs. Shirley (Hitchin)
    Silverman, Julius (Aston)Urwin, T. W.Williams, W. T. (Warrington)
    Silverman, Sydney (Nelson)Wainwright, Edwin (Dearne Valley)Winnick, David
    Slater, JosephWalden, Brian (All Saints)Winstanley, Dr. M. P.
    Small, WilliamWalker, Harold (Doncaster)Winterbottom, R. E.
    Snow, JulianWallace, GeorgeWoodburn, Rt. Hn. A.
    Spriggs, LeslieWatkins, David (Consett)Yates, Victor
    Steel, David (Roxburgh)Weitzman, David
    Steele, Thomas (Dunbartonshire, W.)Wellbeloved, JamesTELLERS FOR THE NOES:
    Swain, ThomasWells, William (Walsall, N.)Mr. Alan Fitch and
    Mr. Harry Gourlay.

    New Clause—(Incapacitated Wife Relief)

    The provisions of Section 17 of the Finance Act 1960 (entitlement to a deduction from the amount of income tax with which he is chargeable equal to tax at the standard rate on forty pounds shall apply to a married man with an incapacitated wife who has no young children and no daughter available to help him.—[ Mr. Hirst.]

    Brought up, and read the First time.

    (Shipley): I beg to move, That the Clause be read a Second time.

    This new Clause, as clearly indicated, deals with the question of relief for incapacitated wives. It has quite a number of implications, upon which my hon. Friends may wish to touch. I want to keep to one facet of it at this stage because, as the Chief Secretary will be aware, it is bound up with a Question which I tabled to the Treasury last February when I sought to ascertain what would be involved by such a Measure. I hope that I shall not get the argument which I know so well, that signature tune of the Treasury called "Purity of the Income Tax." To me it is as a red rag to a bull, and I hope that it will not be used again.

    A married man with an incapacitated wife receiving child allowance can claim an allowance of £40 under Section 17 of the Finance Act, 1960. A taxpayer, depending on the services of his daughter because of age or infirmity, can also claim an allowance of £40 under Section 217 of the Income Tax Act, 1952. I have been asked to see whether this can be extended, because a very important section has been left out. I was surprised when this was pointed out to me, and in consequence I tabled a Question on 24th February, 1966, for Written Answer. I asked what would be the cost of extending the £40 allowance to a married man to meet the additional expenses arising out of his wife's infirmity, where he is at present unable to claim because he has no young children and no young daughter available to help him.

    I have used that Question, as near as I could, as the substance of this new Clause. The answer which I received with great speed from the Treasury was to the effect that the cost could not be estimated but that it would be very small. That is exactly the answer that I had anticipated. I sincerely hope that because on this occasion I am making a speech somewhat shorter than I sometimes do, it will not be thought that I am any the less in earnest in my desire to see this little human amendment made to our tax laws. I trust that we shall get a satisfactory answer from the Treasury Bench.

    I wish to support this new Clause, and I too will be very brief. In the last debate the new Clause was rejected by the Financial Secretary because, he said, of repercussions. My hon. Friend the Member for Shipley (Mr. Hirst) has pointed out that this new Clause is to make a fair and just whole of tax allowances. I mean w-h-o-l-e, in case the Chief Secretary was thinking of a h-o-l-e in the Finance Bill. I cannot see that there could be any possible circumstance under which the Chief Secretary could refuse to accept this Clause. There are many anomalies in this area of taxation, which is in a way related to social services, although it comes within the compass of the Finance Bill.

    I suppose that it is due to the number of discussions and programmes about Parliamentary business on television that the public have become alerted to the injustices, anomalies and unfairnesses in our tax system. The Chief Secretary will know that quite recently we have seen the creation of a new and very important organisation called the Disablement Income Group. The incapacitated wife, named in this Clause, will form a very powerful part of this new group. I always believe in playing one Government Department off against another and I know that quite often things in which responsible Departments are interested and which they would like to have covered in Departmental legislation are stamped on by the Treasury. It is not very often that we have the opportunity to have a confrontation—this is a local confrontation and not a national confrontation—but perhaps we can get at the truth.

    I asked the Minister of Health the other day whether he had met representatives of the Disablement Income Group to discuss their problems or whether he had told the Treasury about their problems. The right hon. Gentleman said that he had not received a deputation, which was a pity, because I am all for Ministers hearing about things from the ground floor and not living in their ivory towers. However, he said that he had correspondence on the matter. Therefore, I presume—and I am sure that the right hon. Gentleman would do this because he is bound to be interested in this section of the community—that he put to the Chief Secretary the need to do something for these isolated and forgotten people. I believe that the Government are committed to doing something. I know that the pledge related to constant attendance allowance, but they do not seem to have made much progress on that. This would be an opportunity, through a tax concession, of fulfilling their election pledge up to a point.

    On 18th February, 1964, the Minister of Pensions and National Insurance wrote to one of my Scots colleagues, who had referred to a case of total disablement. It happened to concern a spinster, but exactly the same could apply to an incapacitated wife. The letter was quoted, to no avail, during discussions on the Finance Bill last year. It reads:
    "I wish to thank you for your letter in which you enclosed a copy of the letter which you had sent to the Chancellor of the Exchequer on 5th January, 1963."
    I hope that the Chief Secretary has a copy of this letter, because it is very important. It goes on:
    "In the Labour Party policy statement 'New Frontiers for Social Security' you will find we propose to give a constant attendance allowance to those who are chronically sick or disabled since we feel that this will be of considerable help".
    It certainly would. Reference to this case was first made on 5th January, 1963, when we were the Government. We did not get on with the case, as happens, because we are all human beings. If we do not win the battle at the beginning, we have to go on battling.

    Nothing was done about this matter in the last Finance Bill. Here we have another opportunity to do something about it. There does not seem to be the slightest chance of this pledge being implemented, but our proposal relates to a tax relief concession. Here is an opportunity for the Treasury to implement the pledge given by the Minister of Pensions and National Insurance to a Member of Parliament. I am sure that she will accept in good faith the pledge given in "New Frontiers for Social Security" as being reliable. It would be very embarrassing to her, knowing her character as I do, if the Chief Secretary were to refuse to implement a pledge given by a very distinguished member of his party to one of my Parliamentary colleagues.

    6.15 p.m.

    As my hon. Friend the Member for Shipley said, this is a very small proposal. As it is a very good thing sometimes to quote local cases, I should like to refer to a constituent, a ticket collector on the railways, who came to see me. The railwaymen have not been very well treated with regard to incomes or pensions. He had a wife who could not even lift a spoon to her lips. She could not switch on or off an electric light. She was absolutely crippled with arthritis. She lay in bed in her little house for years and years. Of course, the local authority had a responsibility. It sent a home help to the house, probably a subsidised home help on account of the husband's income. The health visitor went to the house. This woman lay all day by herself, although neighbours generously popped in to see her, sometimes with the light fading and not being able to turn on her little bedlamp to read.

    Cases of this kind can be brought forward in very large numbers. As I say, this seems to be the one section of the community which does not receive tax relief. I cannot believe that the Chief Secretary will turn down this Clause. I therefore have the greatest pleasure in supporting it. I look forward to it being accepted with alacrity, graciousness and pleasure.

    (Essex, South-East): I warmly support the new Clause. My hon. Friend the Member for Shipley (Mr. Hirst) said that it raised a narrow point, but it is a very important one. I am delighted that my hon. Friend tabled the Clause and that you, Sir Eric, in your wisdom, selected it for discussion. It concerns a matter which should excite our compassion. I do not know what the Chief Secretary will say, but if he is not able to say as much as his heart directs him, I hope that he will consider very carefully the weighty words which my hon. Friend used in a very moving speech, because the whole country is now alerted to the problems of the disabled as a result of devoted work done by hon. Members on both sides, and they expect to hear something fruitful from the Government.

    It is astonishing that relief of the kind proposed in the Clause is not already given. We make many claims for our much-vaunted Welfare State. Some of us have travelled all over the world taking interest in the way in which other countries look after the poor, the sick and the incapacitated. In general, we do not do too badly in this country, but there are certain small islands of neglect, and the group of people whom the Clause is designed to help is one of the most neglected islands of all. They have been described by Professor Titmuss, who is more a friend of hon. Members opposite than of my hon. Friends, as the most deprived group of all in our affluent society. There may be historical reasons for this, and this is not the moment to go into them. We are, however, agreed, on both sides, that it is high time that we began to get our priorities right.

    My hon. Friends speak from personal experience. I have been a Member of the House for sixteen years. I have always tried to take a keen interest in my constituency and I have known of such cases, although they are not many in number. There cannot be a member of the Committee who has not had his heart wrung, and there have not been moments when one has not wanted to weep, at the conditions in which some of our fellow citizens have to endure as a result of sheer misfortune, an accident or the contraction of a disease like polio or multiple sclerosis, which may lay a healthy and often most useful member of the community low and condemn them to a slow death, the process taking many years. One marvels at the extraordinary fortitude of the victims and the compassion and sense of duty and love of those who look after them. It is tremendously inspiring and very humbling to encounter. But we do nothing for them.

    It is true that there are boroughs and county areas where the local health and welfare authority has a first-rate home help service and a meals-on-wheels service provided by those wonderful ladies of the Women's Voluntary Service. Often a great deal of help can be given. But only those who know disability in their family circle or who work in this field can know the strain of having a badly or a totally incapacitated member of the family being cared for at home.

    I do not hesitate to quote a case which I brought to the attention of hon. Members on 17th June. This was the case of a Yorkshire housewife who had an incurable and paralysing disease, multiple sclerosis. She had had it for 17 years. The article, which appeared in the Daily Mail, said:
    "At first her husband went on National Assistance to look after her. They couldn't manage so he went back to work and she went reluctantly into hospital. She was breaking her heart. Her husband brought her home. But he could not afford the £3 a week home help, so she went back into hospital.
    Now, at the age of 45, with a lively mind, she is in a geriatric ward. Her nearest neighbour is 99 years old."
    The article goes on to say that she no longer reads, so that her only contact with life is conversation, and she gets that once a day for an hour when her husband visits her. He is quoted as saying:
    "She is praying to die. She cries nearly every night that she has no reason to live. She says if she could come back home to me she could go on living."
    The conclusion of the article is:
    "Imagine what a disability income could do for her."
    This is really an argument for a constant attendance allowance, which we are not discussing now. The Government may have good reasons for not introducing a constant attendance allowance at this time. We know, however, that one in three of our chronically sick and permanently disabled patients in hospital under the age of 60 could come out of hospital tomorrow and go home if there was somebody at home to look after them. We know that to be a fact.

    I have looked up the Ministry of Health hospital costing returns for 1964, which, I think, is the latest year for which figures are available. I see that on average, to keep one of these persons in hospital costs anything between—

    Order. I do not want to interrupt the hon. Member, but he should not on this new Clause pursue the subject of the constant attendance allowance.

    I entirely agree, Sir Eric. I will pass from that if I may be permitted to say one thing, because it is germane to my argument. The cost of keeping such persons in hospital ranges from between £15 to over £22 a week.

    We are not asking for anything as generous as that. All that my hon. Friend is asking is that in the case of the husband whose wife is in hospital but who could come home if adequate care was available, or in the case of the husband who is already trying to cope with a totally incapacitated wife at home while doing his job at the same time, some small portion of his income taken from him in Income Tax should be returned to him in order to ease the burden.

    The answer may well be that we ought to provide for all the totally incapacitated at home a reasonable constant attendance allowance; that might be the solution. My hon. Friend the Member for Tynemouth (Dame Irene Ward) said in her eloquent and moving speech that pledges have been made on this subject, but we are a long way from their fulfilment. As I say, this is not the time or the opportunity to discuss a constant attendance allowance. All that we are urging here is a simple act of generosity in returning to a man part of his own money to cope with a problem of a kind which, when one encounters it, tears one's heart.

    This is a subject on which I could speak at considerable length. My hon. Friend's proposal is not only timely and just, but it is completely in line with what is already done in respect of other infirmities. The Chief Secretary should have no difficulty in persuading his right hon. Friend the Chancellor of the Exchequer to accept the Clause. I know that the right hon. Gentleman is a man with a great heart. I hope that on this occasion he will listen to our arguments, accept them, and so do the right thing.

    (Renfrew: East): I am glad to have an opportunity once more to put in a plea for this very clear section of the community who are so deserving of help. Although this year's new Clause is framed slightly differently, the arguments which have been used against it before—namely, that this section of the community is hard to define—will doubtless be brought out again.

    Last year, the Chief Secretary's predecessor said that it was not possible either to define or to identify this section of the community. That was the main reason why no alleviation of this group of people could be given. I cannot see any difficulty in defining the section of the community which is dealt with in this Clause, because it asks that the Treasury should extend an accepted provision. The two conditions upon which it is to be extended are already known and defined. I hope, therefore, that the Chief Secretary will allow his heart to melt sufficiently to recognise that our proposal is at least a possible thing to do.

    There must be quite a number of us—I must say in justice, on both sides of the Committee—who are rather tired of being told that it cannot be done mainly for the two reasons that there can be no definition of this section of the community and that it is too difficult to identify the people concerned. Therefore, I look forward to hearing at least a variation of the argument from the right hon. Gentleman and not a repetition of what his predecessor and, I regret to say, other predecessors have produced formerly.

    Comparable categories are already dealt with, and these have been touched upon by my hon. Friends. Where the public conscience comes in in the argument, however, is that whereas for some years the blind and those with military disabilities have been recognised by the public as deserving of consideration, it is in very recent times, as my hon. Friend the Member for Tynemouth (Dame Irene Ward) has said, that largely through the activities of the Disablement Income Group the public conscience has slowly been aroused in this sphere. If people are going to argue, as some do, that it is not possible to identify the 50 per cent. disabled or the 75 per cent. disabled, do let us go so far as to agree that it is possible to identify the 100 per cent. disabled. Therefore, if we can extend this provision to those individual cases, to cover the 100 per cent. disabled, that would be something.

    6.30 p.m.

    Only a week or two ago, outside here, members of the Government and other went to meet the 100 per cent. disabled who came long distances to represent to us here their case and, more important still, the case of others like themselves throughout the country. We went out, many of us, to see them, and we were deeply impressed by those we met. Do not let It be said today that on that occasion we paid lip service and lip service only to those who seek our help.

    I do not want to refer to constituency cases, or, indeed, to the many cases which, I regret to say, have been on my files now for five years and more, but I should like just to refresh the right hon. Gentleman's memory of a case which I raised last year and in which hon. Members may think time to be an important factor. This is the case of a constituent of mine who for 21½ years now has been looking after his wholly incapacitated wife, who has been working at his own job at the same time, and has been doing all this with very little help. Yet he was able to write to me last year—as he was the year before that, and he was again this year—to say,

    "You will recall that it has been my privilege"—

    my privilege—

    "to do this for twenty years"

    —21½ now.

    So I would ask the right hon. Gentleman to consider the 100 per cent. disabled cases, which can be identified, and at least to extend the provision already in existence to cover that section of the community we know exists and we know to be fully deserving.

    (Gosport and Fareham): May I in a very few words express my support for this new Clause. It has been explained with great feeling and sincerity by my hon. Friends and I feel that there could be nobody in the country who could have any doubt of the need and of the worthiness of the cases referred to in the Clause. I certainly know the distress which there is in such cases. I can imagine no more devastating handicap, one which cannot possibly be met by the activities and resources of a husband in the ordinary way. He has to look after his totally disabled wife and yet carry on his daily work at the same time and pay the full tax on all his income. This seems to me to be a concatention of burdens which nobody should be called upon to bear in these days.

    I can remember from working in a mental hospital that one used to find there people who could not be regarded in any other way than that my hon. Friends have described, and because of those difficulties I can endorse the findings of my my hon. Friends. Mental hospital wards are often the places where totally disabled people are put through the sheer lack of any other way of helping them or making dispositions for them. From personal experience I can support this Clause, and admire the gallant efforts of the Disablement Income Group. I should like, therefore, to give the Clause my full support, and knowing that the Government have the skill to make the definition if they have the will to do so, and knowing that they know how little it would cost, I hope they will accept it.

    (Southend, East): I intervene, as always, for a very brief time in order to support my hon. Friend the Member for Shipley (Mr. Hirst) and my hon. Friend the Member for Tynemouth (Dame Irene Ward) in presenting this new Clause and the temperate way in which they have urged it upon us. Obviously, this is a matter which could arouse a great deal of emotion, yet they have put their case reasonably,and calmly, and I very much hope that the Treasury will look favourably upon it.

    My hon. Friend the Member for Tyne-mouth does not often make a mistake and puts her case extremely well, but, I hope she will forgive me if I say that on this occasion she made one little mistake—that was when she urged the Treasury to accept the new Clause because large numbers of people are affected by it. That is not an argument which impresses the Treasury, that large numbers of people are affected. If one were to say, "Only a few people are affected and it does not matter very much", one might perhaps persuade the Treasury to be more sympathetic, but as soon as my hon. Friend mentioned large numbers I saw the Treasury spokesman on the Government Front Bench look relieved, no longer worried, because he had got his answer: "We could not accept it because great sums of money are involved because so many people are affected." As my hon. Friend the Member for Shipley said, this is not the case, and I very much hope that the Treasury will give a sympathetic hearing to that.

    I also support what ray hon. Friend the Member for Essex, South-East (Mr. Braine) said, because we talk of the Welfare State in very glowing terms these days, and very rightly, and yet we find that there are people who still suffer hardships, and we ought not to miss the opportunity of giving them some assistance; we should not necessarily wait till we can help everybody, but, as opportunity offers, we should take that opportunity, as it comes along to help those suffering special hardship.

    I also support the new Clause for constituency reasons. It so happens that those who have incapacitated wives seek if they can to make up for the suffering which the incapacitated have to endure by giving them the opportunity of living in rather brighter surroundings than otherwise they might—if living in an industrial town or similar circumstances—and so we find very often that a man with an incapacitated wife will seek to live at the seaside, or, at any rate, in some pleasant surroundings, to make up for the sufferings of his incapacitated wife. Consequently in a constituency such as mine there are large numbers of people of this kind.

    It may be possible for a husband to get some assistance from his local authority through the provision of home helps and the like, but the practice is not uniform throughout the country. The provision of home helps and the methods of charging for them vary from place to place. And let us remember that not only does the husband not get tax relief, which we hope by this new Clause he will get; not only does he not get that, but he has to pay to the local authority, according to his income, for the provision of the home help, for which, as I understand it, he gets no tax relief at all. Seeing that we do not give him any tax relief on what he pays for the provision of the home help surely it is only reasonable that this modest new Clause should merit consideration.

    I do not think this Clause goes far enough. What about the wives with incapacitated husbands? There are lots of those about—and I am glad to see the Chief Secretary nods his head in agreement. This, then, ought to be considered. I very much hope that he will get up and say that he accepts both the principle of this new Clause and that it does not go far enough.

    Is my hon. Friend aware of the fact that in the case of the incapacitated husband the wife of that man may not earn just over £2 10s. a week, for if she does he then loses dependant's allowance for her? In such a case the State takes an extremely mean view.

    I am very grateful for my hon. Friend's support, and, naturally, I like to have it from him, because his constituency borders on mine and he ought to come to my assistance, as he has done on this occasion, as I seek to rush to his on this new Clause.

    The point I am making is that we should hear in mind that there are many wives who go out to work year after year and yet look after husbands who have become incapacitated by diseases of various kinds, and those wives ought also to be brought into consideration.

    I do not want to stand between the Committee and the opportunity to hear the Chief Secretary say that he recognises the force of the argument and that the Government are going to accept the new Clause—but redraft it, so as to ensure that not only husbands with incapacitated wives but wives with incapacitated husbands shall have the tax relief which is so urgently required.

    The House of Commons would be a poor place if we did not, on grounds of sympathy, seek to assist those whose lot is much worse than our own. Their case has been argued with great understanding and sympathy, and I should imagine that there must be very few of us who have not had direct experience of some individual who suffers from the sort of disability which the hon. Member for Shipley (Mr. Hirst) has in mind.

    I am in a little difficulty, Sir Eric. If I may say so, as I expected, you ruled that we are not considering in detail a particular pledge. It was not pledged that this form of Income Tax allowance would be in any Finance Bill in the present Parliament when the Government sought election. Whatever else was pledged refers to a different Minister and not to the Finance Bill. In view of that, may I concern myself with what is before the Committee, which is a proposal to give Income Tax relief in certain cases?

    I have been asked to give a variation of the argument in my reply, because it is understood by many hon. Members that it is a matter which has come up before. It is a very difficult thing to do. If I may quote from the debate on 9th June, 1964, when a similar Clause was under consideration, the then Treasury spokesman, the hon. Gentleman who was then Member for Halifax and is now Member for Farnham (Mr. Maurice Macmillan) said:
    "I must apologise … for repeating the arguments used previously on this subject from this Box. If I am answering the same argument as that put forward in previous years, it is difficult not to give the same answer."
    The hon. Member for Tynemouth (Dame Irene Ward) recalled that her arguments were those which had been put forward on many an occasion. I will do my best to state the position and to say why the Government cannot recommend acceptance of the Clause.

    The first main reason is that it does not necessarily touch on the real need. As has been pointed out, the assumption behind every speech has been that the person in difficulty has a large enough income that, after taking into account all the other allowances, there remains sufficient taxable income as to call for relief of the kind asked for. Of course, a person with that kind of income and that disability is infinitely better off than a person with a similar disability and no income. The proposal is to give help only to a particular section of people who have that kind of disability and, presumably, are put to extra expense on that account.

    The right hon. Gentleman is not being really accurate. There is a large section of the community affected by the provisions who are not, for example, eligible for home helps. The section of the community which the right hon. Gentleman is now citing as being likely to suffer were he to have granted the provisions of the new Clause are all eligible for home helps. That makes a world of difference.

    A home help is only one of the points which are relevant in considering the additional expense to which a taxpayer is put on the grounds of the incapacity mentioned in the new Clause. It is only one of them. [Interruption.] I do not know whether the hon. Member for Essex, South-East (Mr. Braine) wishes to make his speech over again.

    The right hon. Gentleman must not make such an assumption. There is all the world of difference between the theory that he is enunciating and the hard practice which families are enduring. We have in mind such cases as that of a totally incapacitated wife who can be kept alive only by the maintenance of some machinery, so that there is a need for someone to be with her all the time. All we ask for is that in that sort of case the husband gets some little financial assistance, which he does not get at present. Is it not high time that the right hon. Gentleman began to get his social priorities right?

    6.45 p.m.

    Is it not high time that the hon. Gentleman turned his attention to what he is saying and got his thoughts right? What he is pleading for is a relief on the grounds of disability which is limited to the better off section of the community. That is what he is asking for.

    No, I shall not give way. I shall endeavour to answer.

    [Interruption.] If hon. Members opposite would listen, I do not think that they would say that it was incorrect. It is as plain as a pikestaff that a tax relief cannot be given to people who are not paying tax.

    I cannot give way to five hon. Members at once. I will give way to the hon. Member for Southend, East (Sir S. McAdden).

    When discussing the Finance Bill and tax allowances, is it not inevitable that any Amendment can be of benefit only to people paying tax? If the right hon. Gentleman's point is a valid one, can he not say exactly the same thing about every Amendment?

    If the hon. Gentleman would listen to my argument as carefully and as sympathetically as I listened to his, he would understand what I was trying to say. It is because what hon. Members opposite are seeking by their Amendment cannot be met by an Amendment or a new Clause to the Finance Bill that we ought to look to the proper method of meeting the need. It is no use saying that, because the need cannot be properly met by a new Clause in a Finance Bill, it must be met improperly or inadequately by such a new Clause.

    The proper answer is that if what is being proposed is a bad proposal because it eliminates the more needy section of the population and deals with those who are better off—they would not have tax to pay otherwise—one ought to look for a satisfactory method. The satisfactory method is, if there is need, to deal with it positively through the social services and not in a partial and inadequate way through Income Tax relief. This is not the place to do it. It is because of that that every time it has been brought forward it has been given the same answer.

    I have read part of what was said by the then Economic Secretary to the Treasury in June, 1964, which was the last time that a similar point was discussed. He went on:
    "The reason I say that the Clause does not give relief to those who need it most is that it helps only the taxpayer and not those who are not within the Income Tax Code."—[OFFICIAL REPORT, 9th June, 1964; Vol. 696, c. 380.]
    That is what a Conservative Minister said at the time, and it is so obvious that it cannot avoid being repeated.

    The Committee seeks to alleviate a real difficulty in the wrong way. I am responsible for the Finance Bill, and I say that this is the wrong way of attempting to meet that kind of difficulty.

    The whole basis of the Socialist Government has always been that they are so much better than the Tories. Why, then, does the right hon. Gentleman adopt the arguments advanced by a Conservative Minister?

    Before the right hon. Gentleman deals with that intervention, may I take up the points about the persons who pay tax? We all meet these people in our constituencies, and invariably we find that the persons who do not pay tax get the most assistance. They are the people who can get home helps free of charge, whereas the people about whom we are talking are just above that income level. That is the whole point. They are above that level, and have to make do on inadequate means.

    The hon. Gentleman's argument is now getting a little clearer. What he is seeking to do is to suggest that those who are assessed on their income according to their ability to pay for a home help should get the home help at less than their ability to pay. I do not share that point of view. Nor do I share the point of view that the provision of home help, which is very much a part-time provision, is in any case a satisfactory solution in all these cases.

    The first reason why no Government is able to accept this method is that it deals with the problem in a very unjust way. It selects those who are better off to receive assistance, and denies it to those who are worse off because they do not pay Income Tax. This is the reason which has been put forward time and time again, and the last occasion on which it was put forward was by a Conservative Government only two years ago, in June, 1964.

    We then come to the question of cost about which I want to say something in amplification of the answer given to the hon. Member for Shipley. The Clause does not define disability, and disability can be of many grades. I am dealing with the point raised by the hon. Lady. I am trying to explain how, under certain circumstances, one can get a small cost. If we are dealing only with total incapacity in the way in which it is understood in the Income Tax Acts, the additional cost of the Clause will be small, but if we have a different definition—and it is not defined in the Clause—the cost will mount considerably.

    If, for example, we made it coincide with everybody who was over 65 on the ground that at a certain stage there is an amount of disability which is very difficult to disprove or to argue about and therefore we may as well accept a simple definition of that kind, the cost would increase to approximately £15 million. If we went on to include every incapacity, which could be a part-time incapacity as well as a permanent one, the cost would rise to over £50 million.

    The hon. Member for Southend, East is right. There is no justification for selecting one kind of disability as a reason for increasing the Income Tax allowance. There is no great justification for selecting the wife's incapacity as a reason for increasing that part of the personal allowance which is granted to a married couple, than there is for choosing the husband's incapacity for increasing that part of the allowance which is granted to a married couple. If every taxpayer's allowance was increased on the ground of incapacity, these figures would be infinitely greater.

    There is no reason to stop at husbands. No distinction is drawn between a child's allowance granted to parents in respect of a normal, healthy child, and a child's allowance granted to parents in respect of a child suffering from some disability or incapacity, as a result of which the parents are put to greater cost. None of these things is taken into account in our Income Tax code. The code is not the proper place for taking them into account. This has to be provided for by the social services, and a direct and positive effort should be made to provide them. That is the place to provide help, and certainly not here. This is the wrong way of achieving what I recognise is a desirable human eleemosynary object. This is the wrong way of doing it, and therefore—

    The right hon. Gentleman is insulting the intelligence of the Committee by mentioning these vast cost extensions. My Clause is based on the question which I put to the Treasury. The Treasury knew what I had in mind otherwise it would not have answered in the way that it did, which is more intelligent than what the right hon. Gentleman is doing now. The Treasury said that the cost would be small. It knew what I had in mind and the right hon. Gentleman should stop introducing these red herrings to try to justify a bad argument. He is not doing himself justice.

    I do not know what question the hon. Gentleman is putting. He is making another speech. It will be useful to remember that in the event of the hon. Gentleman attempting to intervene again.

    My hon. Friend is entitled to make more than one speech during the Committee stage.

    Afterwards, not as an intervention. I am dealing with the Clause, and the hon. Gentleman has not defined incapacity. I am telling him how the definition of the incapacity might affect the cost.

    The hon. Gentleman can speak again in his usual insulting way. I am merely telling the Committee that the cost could be anything from a small one, making an assumption about total incapacity, to a cost of over £50 million for dealing with all incapacity relating to one spouse only. One cannot say that there is a greater argument for one spouse than for the other, and in those circumstances I cannot recommend the acceptance of the Clause.

    The Chief Secretary has given us the familiar arguments on this point. He says, first, that we are dealing with people who, by definition, because they are paying Income Tax, are not in as much need as those who are not paying it. The right hon. Gentleman has failed to recognise that in many cases those who do not pay Income Tax are getting substantial assistance because of an incapacitated member of the family. They are probably getting National Assistance or other benefits from the State. The chances are that in many cases they have the assistance of a home help, free of charge. In addition, they benefit from the Meals on Wheels and other services which they get free of charge. I am not saying that more cannot be done for this section of the community, but from the way in which the Chief Secretary spoke one would think that the Clause was dealing with rich people who can afford to provide these additional services for themselves.

    The right hon. Gentleman must know from his constituency experience, as we all do, that the vast majority of the cases referred to in the Clause concern people who do not pay very much tax. They are in the tax bracket, but they are the people who are finding that there very little cash assistance is available for them. In my constituency there are many people who, because their wives are incapacitated, and because they are retired and living on small fixed incomes, are finding it more and more difficult to meet the extra costs of living.

    What we are drawing attention to here is not so much the fact that there is incapacity—and I shall come to the difficulty of definition—but that because of a wife's incapacity there is inevitably an increase in the normal living expenses over and above those of a normal family, and that this fact in itself should be taken into account in our tax system.

    This is a question of locking in the social service cash benefits with the tax relief system. If we accept the right hon. Gentleman's argument that all these cases should be dealt with through the social services, we will find a bottleneck in home help provided by local authorities, where there is already a shortage. In many cases a person's health will break down entirely, and he will have to go into hospital.

    7.0 p.m.

    Yes—at an expense far and away greater. The estimated cost of a place in a hospital or a local authority home is from £400 to £600 a year, and much of this additional expense will fall on the Exchequer, and therefore on the taxpayer, unless in this way we can lock in the social service cash benefits and services with the tax relief system, as my hon. Friend is suggesting.

    I hoped that my hon. Friend would refer to the other tragic category which includes the totally incapacitated wife who is in hospital precisely because her husband, who is earning, cannot afford to keep her at home. That is the other side of the coin.

    I am coming to that point. I have dealt with retired people on modest fixed incomes, but there is the other case to which my hon. Friend has just referred, and to which my hon. Friend the Member for Tynemouth (Dame Irene Ward) also mentioned—the case of the young man with an incapacitated wife. Here again, such a man has the difficult choice either of leaving his wife completely alone all day or getting someone to come into the house to help. In many instances such a man cannot obtain home help from his local authority. It may well say, rightly, "We are short of home helps. We must concentrate on the old people first, because that is where the need is greatest. You are earning, and therefore you must provide your own and pay for it." In many cases it is right for a local authority to take that view. But if such a man succeeds in getting someone to come in to help his wife while he is at work we ought to recognise this additional necessary expense in our taxation system. If we do we shall find that in the long run the expenditure incurred by our State services will decrease.

    The second argument is the difficulty of definition. I agree that it is not easy to differentiate and to decide where to draw the line. That is why I suggest that the criterion is not so much the fact of disability but the fact that additional expense is involved. In any event, to some extent the Government have succeeded in finding a satisfactory definition of disability in their Selective Employment Payments Bill. Clause 6 of that Bill provides a refund for certain households. including a household
    "which includes a person in need of such assistance … by reason of being infirm, sick, or otherwise incapacitated for any reason …".
    In other words, the Government have answered their own argument. They have succeeded in defining "incapacity" for tax purposes.

    The Chief Secretary shakes his head, but that is what it is. It is a refund of tax according to the definition of "incapacity". I agree that the decision in that case is to be made by a Supplementary Benefits Commission, but the argument can be applied equally to tax relief in this case. Does the Chief Secretary wish to intervene?

    I merely wanted to point out that we shall come to that point on the appropriate Clause of the appropriate Bill.

    But this is a very relevant point. One of his arguments why we should reject the new Clause is the difficulty of defining "incapacity". I am merely pointing out that the Government have done so in another Bill. The argument ere would seem to be on all fours with the argument here. I hope that the Chief Secretary will be able to satisfy us on that point.

    The Chief Secretary seems to have forgotten that a similar Amendment was discussed last year. Whereas on this occasion the right hon. Gentleman gave the impression that no new thinking had been done about this matter, and that he was sorry that he had to put over all the old arguments, the Financial Secretary, in replying to similar debates on similar Amendments last year, said:
    "I want to make clear that it is our earnest anxiety to examine these matters to see what reliefs, if any, we can carve out of the proposals which have been made which will be really practicable and workable".—[OFFICIAL REPORT, 23rd June, 1965; Vol. 714, c. 1877.]
    I hope that the Chief Secretary will tell us what progress has been made since then. It appears that the Government have found no practical or workable solution. In another part of the right hon. Gentleman's speech, however, he gave the impression that no consideration had been given to this matter since the Financial Secretary made his pledge just over 12 months ago.

    During the debates on the Financial Bills this year and last year we have grown to admire the stonewalling ability of the Chief Secretary and the Financial Secretary. They are a pretty good team at that operation. One of the great qualities of the Chief Secretary is that he conveys as much conviction when his heart is not in a job as he does when it is. Tonight, however, he spoke as though his heart was not in the job and I am sorry to say that he did not carry a great deal of conviction.

    His first reason for not acceding to the principle of the new Clause was a remarkable one. He told us in some detail that the Government had given no pledge at the time of the last General Election. That is hardly a valid argument. We do not want a pledge in order to carry out a good action of this kind. We are better off without a pledge. I do not think that that is really a serious argument.

    Does not my hon. Friend agree that the mere fact that this was not promised at the last election makes it much more likely that it will be carried out?

    It could be said that should it be carried out it will be all the more meritorious. I submit that the right hon. Gentleman's second argument, citing the Treasury refusal under the Conservative Administration of 1964, has no force. It is natural for a Government who are refusing an appeal by any group of Members to cite a refusal by their predecessors, but surely this great forward looking Administration—an Administration which was about to sweep the decks clean and bring in a new dynamic era—should be doing something else than going back for two years to find precedents for a refusal. That is not worthy of the Chief Secretary.

    In the least worthy part of his speech the right hon. Gentleman said that this concession could not be granted because it would not give a commensurate benefit, and that persons who did not have an adequate income would not derive any benefit. As my hon. Friend the Member for Southend, East (Sir S. McAdden) said. that is an absurd doctrine. It means that no adequate concession can ever be made to people who pay some Income Tax. This is as bad as "MacDermot's Law", which is saying a great deal—

    Perhaps I can help my hon. Friend and remind him that "MacDermot's Law" says that the higher the tax one pays the higher the tax one should have to pay in future and so on, ad infinitum.

    Perhaps it would be out of order to elaborate on the doctrine known as "MacDermot's Law", but my hon. Friend the Member for Wycombe (Mr. John Hall) has given in a nutshell some of its evil qualities.

    Having given us the doctrine of "no pledge", having harked back to the refusal of two years ago and having also made the objection that this was not a satisfactory new Clause because it was based on a tax allowance, the right hon. Gentlemen went on to the questions of definition and cost. He has not, however, even replied to suggestions that he should take the simple definition of total incapacity. Here, surely, the question of definition would not arise and the cost would be minimal. Therefore, his objection on the basis of definition comes down to the fact that he does not want to make any concession—

    Surely a definition in this case is possible as it is where the industrially injured and war injured are concerned. There is very clear machinery there to ascertain the facts.

    I was about to ask, why cannot the Government, if they have the will to put the new Clause into operation, set up some system of tribunal? Why cannot the applicants be examined as they are in comparable cases? Is this beyond the ingenuity or wit of the Government? It is a confession that they have not the will to do it.

    Perhaps I was wrong in suggesting that the question of the tax element in this was the least worthy part of the Government's case. The final one was perhaps even less worthy. In terms, the Chief Secretary suggested that he could not consider this concession for an incapacitated wife unless there were also a concession for an incapacitated husband. I would certainly support a concession for an incapacitated husband, but we are considering a new Clause dealing with an incapacitated wife. It is no good reason for refusal of this to say, "We are not considering a Clause based upon the other very deserving cases, too."

    The right hon. Gentleman must look at this again. His answer conveyed no conviction. I am sure that he will reconsider what he has said, even after a little thought.

    (Croydon, North-West): I have listened carefully to every speech on this very important and moving subject, on which I have often spoken myself over the years. I strongly join forces in support of all that has been said by my hon. Friends and I think that we owe a debt of gratitude to my hon. Friend the Member for Shipley (Mr. Hirst) for having put down the new Clause. I am glad that it was selected.

    As my hon. Friend said, he confined his approach to a very limited request, but the Chief Secretary broadened the issue considerably, which all of us appreciated. I am sorry to join my hon. Friend in his stricture of the Chief Secretary, but I think that my hon. Friend the Member for Barry (Mr. Gower) was quite right when he commented adversely on what the Chief Secretary said. I would also remind the Committee of the disturbing fact that there have been hardly more than two or three hon. Members present on the other side of the Committee, and not a single one has yet stood to support this very worthy cause.

    I was deeply disturbed that the Chief Secretary should take the line that, because a person pays tax, he should, in effect, not get relief. This is an extraordinary approach. In my constituency of Croydon, there is a very fine hospital—Queen's Hospital—which I will be visiting tomorrow. It is difficult to get a bed in Queen's Hospital and there is always a tremendous demand for them. They cater particularly for incapacitated people of this kind.

    7.15 p.m.

    All of us, who deal with the many daily problems of our constituents, come across many coming cases. We, as Members of Parliament, should do our utmost, surely, to try to encourage such people to have attention at home. This is essential, not only from the personal, moving and humane point of view, but also, if one wants to be so crude, because of the charge on public funds.

    If the concession were limited even at this stage to the new Clause of my hon. Friend the Member for Shipley, it is agreed that the concession would be very small. Over the years, we have had a good deal of respect for the Chief Secretary, particularly when he was on this side of the Committee. He used to argue these things very forcibly himself—[An HON. MEMBER: "Much better than now."]—much better than now. He showed great ability and knowledge of accountancy and similar matters.

    I was bitterly disappointed tonight that, after the excellent speeches from this side, the Chief Secretary should get up and, in effect, use yet another Treasury brief. We all know that the Treasury is tremendously hard-hearted, tragically, but surely this is one occasion when he could 'put that brief aside. Very effective speeches have been made from this side, particularly by my hon. Friend the Member for Tynemouth (Dame Irene Ward), who made a moving speech. Surely the right hon. Gentleman could have said that this was something which the Government could concede. Surely he could give such a concession.

    If there are failures in the new Clause or if it does not go far enough, let the Government put the matter right in future. But because it does not do all the things which every hon. Member wants done is no reason for not giving the limited concessions which my hon. Friend has requested. I find the answers of the Chief Secretary very disturbing. I sincerely hope that, on reflection, he will feel that the argument has been strongly made from this side. He did not say, "It has been a very good argument and we shall do something about it in the near future". He did not give a word of encouragement.

    It was the old Treasury argument pulled out again, to give nothing away and then: to say that it must not be given because these are influential people who have plenty of money, because they

    have the impertinence to pay Income Tax —[ Interruption.] This is what the right hon. Gentleman said. He said that because they are paying Income Tax, we should give no concession. What awful people they must be, to pay for all the nonsense which the Government gets up to, by paying Income Tax. As my hon. Friend the Member for Southend, East (Sir S. McAdden) asked strongly, what concession can we get on the Finance Bill unless it is by saving of Income Tax? This is such an obvious point that I should have thought that it would have struck the Chief Secretary—

    Would my hon. Friend not agree that we now have"Diamond's Law", namely, "If you pay Income Tax, you must never get a tax concession."?

    I am afraid that it looks that way.

    However, I am being serious when I say that I listened to the whole of this moving debate. Each one of us knows case after case of this kind. My own experience goes back well over 18 years. We try to encourage people to be looked after at home, and to give them all the assistance that we can. This is surely a small concession to ask of the Treasury, and, even if it cost £20 million or £30 million, we chucked enough money away on free prescriptions, which are being abused like mad now.

    At this late stage, will the Chief Secretary say whether he will reconsider this matter? Will he not admit that what he said to the Committee tonight was sheer nonsense? I do not know whether you heard the remarks of the Chief Secretary, Sir Barnett, but I assure you that they were nonsense, and when he looks at the report in HANSARD tomorrow I think that he will blush about his statement, because it was most unfortunate.

    (Melton): The whole Committee is agreed that the Chief Secretary has given not only a most disappointing answer but also a sour twist to the conventional arguments on the new Clause. The Chief Secretary argued this sort of case very eloquently when in opposition, and I can only think that his attitude and the element of sourness, which we all disliked, came from the fact that in his heart he wants to accept the Clause, and in his mind he knew that his arguments were bad and could not stand up to debate. He was talking about real need, and he said that the people whom we were discussing were not in real need.

    I do not mind any irresponsible statement being made by hon. Members on the back benches opposite, but I did not say that. I made it perfectly clear that the people in the greater need were the people, by definition, who had less income.

    I wrote the words down, but I shall not argue with the right hon. Gentleman over greater need or real need. These people, I would argue, are in real need, and this sort of need is not comparative or proportionate. It is very difficult to balance one type of need against another.

    We all have constituency cases, and I have a particularly poignant one of a young wife whose husband was getting on very well in his profession and was destined, we thought, to go to the top of the tree. Because she was stricken down and incapacitated his earning capacity has been reduced and his promotion prospects have been diminished, because he has to work near home. He feels that it is important to go home every lunchtime to see his wife. Here is real need and hardship of a kind that is very difficult to assess in financial terms. It is for that type of person, and for the compassionate and emotional reasons that weigh so hardly in these circumstances, that we should look very carefully at this sort of case.

    We are talking about a husband who is alone—without a daughter, without help to look after his wife. Such a husband, looking after an incapacitated wife—usually totally incapacitated—has many burdens, other than financial. These circumstances cost him considerably more money. He has to come home very often at midday from his work, and he has to try to keep a standard of help in the home above anything that he would otherwise have undertaken. He has to face all sorts of difficulties and strains, but the greatest of these is that his wife believes that she is holding her husband back and is a financial drain on him. This very often builds up emotional strain that leads to greater illness.

    We ask for very small relief in this matter, for minimal help. I do not argue that the granting of the Income Tax allowance would make all the difference, but it would make a great psychological difference in these cases. It would mean that the wife would not feel that she was such a real burden on the husband, because he would be getting some relief for the extra expenditure and the extra burden that he was carrying.

    I know from my own experience, and from my constituency cases, that these circumstances often fall into three well-defined categories. The first is that to which I have already referred, where, because of his wife's incapacity, a husband is held back, since he has to spend more time at home and is unable to earn more money and pay more taxes—with all the difficulties that result from that.

    Then there are the people who, because of the advances of science and medical engineering, are able to stay at home because they have mechanical aids that help them to come to terms with their incapacity. We welcome these things, which are among the most tremendous boons of modern civilisation. But they often entail a greater financial burden on the family where they are being used.

    These people do not like their cases to be quoted, so I shall not particularise. In one case, because of the development of modern devices, the wife can now be at home and this has put a great financial burden on the family. It has almost brought financial ruin to the husband, because, having the wife at home, he has to have all the different household requirements that result from this. It is not just a question of the help in the house but the extra laundry, the extra fires, and the extra accommodation that is entailed. The wife knows that she is being an added burden just because she is enabled to take a greater part in life as a whole. The Clause would have a tremendous psychological effect in enabling her to stay at home.

    The third and most important category is those people who have to go into hospitals and homes because their margins of income are so narrow. We are not now talking about wealthy people. On the whole, they are people living on very small incomes, people whose margins are very slight. Any increase in expenditure, such as indirect taxation or household expenditure, any minimal increase in taxation puts the whole family and its life at risk. I know of a very tragic case—and we must all know of them—where the wife has gone into hospital, because she is no longer in a position to sustain the whole burden—with all that this costs the country at this time. I do not think that the Chief Secretary can argue this question on financial grounds alone, because by giving this small concession he can in his own heart, and in his own reason, know that he can save great burdens that otherwise would fall on the State.

    The excuse that I found most difficult to stomach was that it was difficult to get the definition. My hon. Friend said quite rightly that Clause 6 of the Selective Employment Payments Bill talks about disability. We all know the difficulties of definition here, and one of the main reasons for pressing for this to be on the Statute Book is that until we need to produce a definition we never shall have one. We shall always be making excuses. My hon. Friend the Member for Renfrew, East (Miss Harvie Anderson) said that we could go for 100 per cent. incapacity. This is a good first step, and I hope that the right hon. Gentleman will say that the Government would go this far and further.

    The Government spokesman said in debate last year that the Government were examining the whole question. I hoped that the examination would have included steps to try to find a definition. I know the difficulties, but have the Government really looked at this? What form has the examination taken? Has is been an examination as to the cost? Has it been an examination as to the definition? Has it been an examination as to the extent of the problem, or how we could reduce the problem as a preliminary first step? We all accept that this is a very broad problem, and that one can go further and further finding more and more hardship cases, but this is no reason why we should not take this very small step forward. Unless we take it we shall never begin to meet the problem.

    We have had no explanation from the right hon. Gentleman and no reply to the very reasoned arguments of my hon. Friends. In those circumstances we should press the Clause to a Division because this is a subject on which we feel very strongly.

    7.30 p.m.

    We have had a full discussion, and I realise that there is no hope of changing the right hon. Gentleman's mind today. On the other hand, I must tell him seriously that I am shocked by the answer which he gave. When hon. Members take the trouble to put down a Question to the Treasury, with the sense of responsibility which I have tried to show in this matter, in order to ascertain the cost, then the right hon. Gentleman should treat the matter seriously. Had the answer been that the cost was £20 million or £10 million, I should have deferred this proposal, out of deference to the Government's policy; I do not accept their policy but I acknowledge their point of view. But the answer which I was given was that the cost "cannot be estimated but it would be small". I know from experience what it means when the Treasury says "small". By heavens, it must be small.

    I used precisely the same words as I had put in my Question. I have put down Clauses before and more often than not I have got into difficulties. But I have taken part in debates on 18 Finance Bills and I have learned a lot in 15 years. Previously I have put down Questions and I have afterwards tabled a new Clause on the principle involved without using the same words—and I have had the sort of speech from the Treasury Box that we had today. I thought, "This will not happen this time. I will use precisely the same words". But it did happen.

    This is astonishing from a gentleman with the intelligence of the right hon. Gentleman. He knows me well enough. He did not need advice from the Treasury team on this matter. He should have known that I was wise to this and that I had put down the same wording in the Clause as had been in the Question. For the right hon. Gentleman to trail his coat through the Committee, intentionally misinterpreting the purpose of the Clause in order to try to aggravate everybody with an argument that this would cost a great deal of money, is nonsense. I had taken the specific trouble, which I should have thought the Treasury would have welcomed, to get the position clear—and yet I have had this argument from the Treasury. This is the sort of thing which angers the Committee and prolongs Finance Bill debates, and it will not

    Division No. 90.]AYES[7.32 p.m.
    Alison, Michael (Barkston Ash)Hall-Davis, A. G. F.Mitchell, David (Basingstoke)
    Awdry, DanielHarris, Frederic (Croydon, N.W.)More, Jasper
    Balniel, LordHarris, Reader (Heston)Morrison, Charles (Devizes)
    Bateford, BrianHarrison, Brian (Maldon)Mott-Radclyffe, Sir Charles
    Bell, RonaldHarrison, Col. Sir Harwood (Eye)Murton, Oscar
    Bennett, Dr. Reginald (Gos. & Fhm)Harvey, Sir Arthur VeraNabarro, Sir Gerald
    Biffen, JohnHarvie Anderson, MissHeave, Airey
    Black, Sir CyrilHeald, Rt. Hn. Sir LionelNott, John
    Blaker, PeterHeath, Rt. Hn. EdwardOsborn, John (Hallam)
    Body, RichardHeseltine, MichaelPage, Graham (Crosby)
    Boyle, Rt. Hn. Sir EdwardHiggins, Terence L.Percival, Ian
    Brains, BernardHiley, JosephPike, Miss Mervyn
    Brown, Sir Edward (Bath)Hirst, GeoffreyPowell, Rt. Hn. J. Enoch
    Bulk's, Sir EricHobson, Rt. Hn. Sir JohnPrior, J. M. L.
    Chichester-Clark, R.Holland, PhilipPym, Francis
    Clegg, WalterHordern, PeterRees-Davies, W. R.
    Cooke, RobertHornby, RichardRenton, Rt. Hn. Sir David
    Costain, A. P.Hunt, JohnRidley, Hn. Nicholas
    Crowder, F. P.Hutchison, Michael ClarkRoots, William
    Dalkeith, Earl ofKerby, Capt. HenryRossi, Hugh (Hornsey)
    Dance, JamesKirk, PeterSharples, Richard
    Dean, Paul (Somerset, N.)Kitson, TimothyTaylor, Sir Charles (Eastbourne)
    Deedes, Rt. Hn. W. F. (Ashford)Knight, Mrs. JillTaylor, Edward M.(G'gow, Cathcart)
    Digby, Simon WingfieldLambton, ViscountThatcher, Mrs. Margaret
    Dodds-Parker, DouglasLancaster, Col. C. G.Turton, Rt. Hn. R. H.
    Drayson, G. B.Langford-Holt, Sir JohnVickers, Dame Joan
    Eden, Sir JohnLewis, Kenneth (Rutland)Walker-Smith, Rt. Hn. Sir Derek
    Elliot, Capt. Walter (Carshalton)Lloyd, Rt. Hn. Selwyn (Wirral)Ward, Dame Irene
    Errington, Sir EricLoveys, W. H.Weatherill, Bernard
    Eyre, ReginaldMcAdden, Sir StephenWhitelaw, William
    Fletcher-Cooke, CharlesMaclean, Sir FitzroyWills, Sir Gerald (Bridgwater)
    Fraser, Rt. Hn. Hugh (St'fford & Stone)Macleod, Rt. Hn. IainWilson, Geoffrey (Truro)
    Gilmour, Sir John (Fife, E.)Maddan, MartinWylie, N. R.
    Glover, Sir DouglasMawby, RayYounger, Hn. George
    Coodhart, PhilipMaxwell-Hyslop, R. J.
    Gower, RaymondMills, Peter (Torrington)TELLERS FOR THE AYES:
    Gresham Cooke, R.Mills, Stratton (Belfast, N.)Mr. R. W. Elliott and
    Hall, John (Wycombe)Miscampbell, NormanMr. Anthony Grant.

    NOES

    Anderson, DonaldCoe, DenisFletcher, Ted (Darlington)
    Archer, PeterColeman, DonaldFloud, Bernard
    Armstrong, ErnestConlan, BernardFoley, Maurice
    Atkins, Ronald (Preston, N.)Corbet, Mrs. FredaFoot, Sir Dingle (Ipswich)
    Atkinson, Norman (Tottenham)Cullen, Mrs. AliceFord, Ben
    Bacon, Rt. Hn. AliceDalyell, TamForrester, John
    Bagier, Gordon A, T.Davidson, James (Aberdeenshire, W.)Fowler, Gerry
    Baxter, WilliamDavies, Dr. Ernest (Stretford)Fraser, John (Norwood)
    Bellenger, Rt. Hn. F. J.Davies, Harold (Leek)Fraser, Rt. Hn. Tom (Hamilton)
    Bence, CyrilDavies, Robert (Cambridge)Freeson, Reginald
    Bennett, James (G'gow, Bridgeton)Delargy, HughGardner, A. J.
    Bessell, PeterDempsey, JamesGarrett, W. E.
    Bidwell, SydneyDewar, DonaldGarrow, Alex
    Bishop, E. S.Diamond, Rt. Hn. JohnGinsburg, David
    Booth, AlbertDickens, JamesGourlay, Harry
    Boston, TerenceDoig, PeterGray, Dr. Hugh (Yarmouth)
    Bowden, Rt. Hn. HerbertDriberg, TomGregory, Arnold
    Bradley, TomDunn, James A.Grey, Charles (Durham)
    Brooks, EdwinDunnett, JackHamilton, James (Bothwell)
    Broughton, Dr. A. D. D.Dunwoody, Mrs. Gwyneth (Exeter)Harper, Joseph
    Brown, Bob (N'c'tle-upon-Tyne, W)Dunwoody, Dr. John (F'th & C'b'e)Harrison, Walter (Wakefield)
    Brown, R. W. (Shoreditch & F'bury)Edwards, William (Merioneth)Hazell, Bert
    Buchan, NormanEllis, JohnHeffer, Eric S.
    Butler, Herbert (Hackney, C.)English, MichaelHerbison, Rt. Hn. Margaret
    Butler, Mrs. Joyce (Wood Green)Ensor, DavidHooley, Frank
    Callaghan, Rt. Hn. JamesEvans, Ioan L. (Birm'h'm, Yardley)Hooson, Emlyn
    Carmichael, NeilFitch, Alan (Wigan)Houghton, Rt. Hn. Douglas
    Castle, Rt. Hn, BarbaraFletcher, Raymond (Ilkeston)Howie, W.

    be missed by the general public, who will regret deeply the tone, nature and effect of the Treasury reply.

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

    The Committee divided: Ayes 110, Noes 190.

    Hughes, Hector (Aberdeen, N.)Murray, AlbertSilverman, Syrney (Nelson)
    Hunter, AdamNorwood, ChristopherSlater, Joseph
    Hynd, JohnOakes, GordonSmall, William
    Jay, Rt. Hn. DouglasOgden, EricSnow, Julian
    Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)O'Malley, BrianSpriggs, Leslie
    Johnson, James (K'stonoon-Hull, W.)Orbach, MauriceSteel, David (Roxburgh)
    Johnston, Russell (Inverness)Oswald, ThomasSteele, Thomas (Dunbartonshire, W.)
    Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)Owen, Will (Morpeth)Swain, Thomas
    Kerr, Dr. David (W'worth, Central)Page, Derek (King's Lynn)Swingler, Stephen
    Kerr, Russell (Feltham)Paget, R. T.Symonds, J. B.
    Leadhitter, TedPalmer, ArthurTinn, James
    Lee, John (Reading)Pannell, Rt. Hn. CharlesTuck, Raphael
    Lestor, Miss JoanPardoe, JohnUrwin, T. W.
    Lewis, Arthur (W. Ham, N.)Parker, John (Dagenham)Varley, Eric G.
    Lomas, KennethParkyn, Brian (Bedford)Wainwright, Edwin (Dearne Valley)
    Lyon, Alexander W. (York)Pearson, Arthur (Pontypridd)Wainwright, Richard (Colne Valley)
    Lyons, Edward (Bradford, E.)Pentland, NormanWalden, Brian (All Saints)
    McCann, JohnPerry, Ernest G. (Battersea, S.)Walker, Harold (Doncaster)
    MacDermot NiallPerry, George H. (Nottingham, S.)Wallace, George
    Macdonald, A. H.Price, Christopher (Perry Barr)Watkins, David (Consett)
    McKay, Mrs. MargaretPrice, William (Rugby)Weitzman, David
    Mackenzie, Gregor (Rutherglen)Pursey, Cmdr. HarryWellbeloved, James
    Mackintosh, John P.Rankin, JohnWells, William (Walsall, N.)
    Maclennan, RobertRhodes, GeoffreyWhitaker, Ben
    McNamara, J. KevinRoberts, Albert (Norrnanton)Williams, Alan Lee (Hornchurch)
    MacPherson, MalcolmRobertson, John (Paisley)Williams, Clifford (Abertillery)
    Manuel, ArchieRobinson, W. O. J. (Walth'stow, E.)Williams, Mrs. Shirley (Hitchin)
    Marquand, DavidRodgers, William (Stockton)Williams, W. T. (Warrington)
    Mason, RoyRoebuck, RoyWinnick, David
    Maxwell, RobertRose, PaulWinstanley, Dr. M. P.
    Mayhew, ChristopherRoss, Rt. Hn. WilliamWoodburn, Rt. Hn. A.
    Milian, BruceRowland, Christopher (Meriden)Yates, Victor
    Mitchell, R. C. (S'th'pton, Test)Shaw, Arnold (Ilford, S.)
    Morgan, Elystan (Cardiganshire)Shinwell, Rt. Hn. E.TELLERS FOR THE NOES:
    Morris, Alfred (Wythenshawe)Short Rt. Hn. Edward (N'c'tle-u-Tyne)Mr. William Whitlock and
    Morris, Charles R. (Openshaw)Short, Mrs. Renée (W'hampton, N.E.)Mr. Neil McBride.
    Mulley, Rt. Hn, FrederickSilkin, John (Deptford)

    New Clause—(Fees For Assistance Incompleting Tax Returns Complyingwith Notices)

  • (1) Any expense not exceeding £40 which is incurred by an individual in respect of professional assistance in or incidental to preparing his return of income and statement of capital gains and claim for allowances in any year of assessment shall be deducted from or set off against his income for that year.
  • (2) A deduction as provided in subsection (1) shall also be allowed in respect of professional assistance in complying with notices under the Income Tax Acts, and any enactment relating to the Capital Gains Tax: Provided that, if such notice in respect of information relating to the liability of some person other than the person on whom the notice is served, the deduction shall operate in respect of the income for the next following year of assessment of the person on whom the notice is served.
  • (3) For the purposes of this section—
  • (a) "professional assistance" means assistance provided by a solicitor, a member of an incorporated society of accountants, a bank, a stockbroker or a member of such professional body as the Commissioners of Inland Revenue shall certify as qualifying under this section; and
  • (b) "individual" shall include the trustees and personal representatives of an individual.
  • (4) This section shall not apply in computing the total income of any individual for the purposes of surtax.—[Mr. Biffen.]
  • Brouqht up, and read the First time.

    (Oswestry): I beg to move, That the Clause be read a Second time.

    The debate which has just concluded, on new Clause No. 30, was concerned with a subject which has been before Parliament on a number of occasions. I think I am correct in saying that this is the first time that a new Clause dealing with
    "Fees for assistance in completing tax returns complying with notices"
    has been before hon. Members. I hope that if I follow the adage that brevity will encourage charity, a short speech from me will encourage a forthcoming answer from the Treasury.

    I imagine that such a new Clause comes before the Committee this year because of last year's Budget, which considerably complicated the matter of tax returns, particularly in relation to the Capital Gains Tax. The purpose of the new Clause is to allow private individuals to have allowed against their tax assessments up to £40 for the preparation of their tax returns by professionally competent bodies.

    My arguments in support of the new Clause are based on three propositions; the first is equity, the second is economy and the third, a wider proposition, is that it would encourage a greater spread of ownership and savings. My argument on equity is really concerned with the fact that business accounts already have the facility which my hon. Friends and I seek to extend to private individuals. I understand that the facility which is granted for the preparation of business accounts is granted by custom rather than by statute. Nevertheless, the equity of the argument is that a private individual should enjoy this facility in addition to business organisations from I.C.I. down to the smallest firm.

    My second argument, that of economy, is more difficult to establish. It seems, however, incontrovertible that the tax system has become incredibly complex. This is particularly so since last year. Indeed, the protest from the Inland Revenue Staff Association gives more eloquent testimony to my argument than any other source I could quote.

    7.45 p.m.

    I believe that there is not only danger in the escalating cost of administration, but that there is a serious likelihood of a breakdown or dislocation in our whole tax collecting system. It is to meet these impending difficulties that the new Clause is directed. There is, therefore, a genuine argument of economy because the cost of tax collection could be considerably mitigated if the new Clause were accepted. Undoubtedly the consequence of accepting it would be to lead to the encouragement of the use of professional services in presenting and computing tax liability.

    My third proposition is that the new Clause would encourage a wider spread of share ownership. This is a perfectly legitimate point. I was interested to note in the Economist of 2nd July an article entitled "Shareholders", from which I will give two brief quotations. The article stated:

    "The concentration of the investment habit in the professional and managerial classes … is high. A survey carried out last year by the Acton Trust among manual workers uncovered little prejudice against investment, but did find widespread ignorance and little interest."

    Later, the article went on:

    "So Britain has a long way to go to catch up America in spreading the net of shareholding. Looking at the proportions of shareholders in each country Britain seems to be thirteen years behind. Will it ever catch up? There are a lot of factors working against it."

    One further factor which is now working against it is the incredible complexity of organising one's tax returns once one ventures into the realm of share ownership. I believe, therefore, that on that third ground also the case for the new Clause stands.

    I promised the Chief Secretary that I would be brief. I have kept my promise and I hope that he will not disappoint my expectation.

    I am delighted to be able to support the hon. Member for Oswestry (Mr. Biffen) in the principle of his argument, although I could not accept the new Clause as drafted or the way it would work in practice. I must, first, declare my keen personal interest in this matter, being a practising accountant.

    I was disturbed to hear the hon. Gentleman say that he was hoping brevity would encourage charity. I hope that it will never be thought that the new Clause is intended in any way as a form of charity to my profession. Indeed, I doubt if many accountants would be happy with the Clause as drafted, and I hope to show why.

    Most, if not all, accountants—certainly those I know—are already working to capacity, most of them beyond it. Acceptance of this Clause would therefore mean that something else would have to be delayed. If accountants were to be involved in a great deal of extra work in the completion of small personal Income Tax returns, the preparation of accounts or something else would have to be delayed. At the present time, inspectors of taxes, presumably by instruction, are very much quicker in demanding not only Income Tax returns but balance sheets and accounts and, when these are not submitted, the inspectors are listing them for hearing by General Commissioners very much earlier than was the case in the past. Fresh instructions would therefore have to be issued if this new Clause, or anything like it, were to to be accepted.

    The other reason for my belief that many accountants would not be happy about it is the difficulty of charging a reasonable fee. Preparation of the small Income Tax return is not terribly profitable work by comparison with other work in the profession, because in the time it takes to complete the Income Tax return an accountant can, for example, complete a complicated tax computation, make final adjustments of balance sheets, interview clients, and so on, which would certainly be very much more profitable.

    I certainly do not make use of that fact as an argument for not accepting the Clause, but if it were not possible to charge a remuneration reasonable to the accountant what would happen would be that the very small types of returns would be handled by junior staff. The accountant's office would, in effect, be a sort of post office through which these matters would pass. I am sure that is not what the hon. Gentleman has in mind.

    I therefore think that, in practice, the greatest benefit from the type of Clause the hon. Member has in mind would be to those who need to have completed the largest and most complicated Income Tax returns. The fact is that small and complicated returns are often the most difficult and take the longest time. One gets the man who has, say, £1,000 worth of shares and who likes a very wide spread. That greatly increases the difficulty of the computation of capital gains. I only recently had that type of case to deal with. In such circumstances, the computation of capital gains is very complicated and it is extremely difficult, if not impossible, to charge a fee commensurate with the time involved in the computation.

    As I say, I have no objection to the principle behind the Clause. My main reason for supporting it is the point of equity mentioned first by the hon. Member. It seems to me that here we are getting back to what we debated the other day—the question of equity between those paying under Schedule D and under Schedule E. Accountancy charges for the completion of Income Tax returns under Schedule D are generally allowed by the inspectors, presumably because the word "necessary" is not included in the Schedule D wording, although I myself would have thought that even taking the "wholly and exclusively" argument to its logical conclusion there is a case for disallowing part of the accountancy charges. In the case of the Schedule D return. There is a concession here and I certainly do not complain about it. In the same way as there is in the many other cases I referred to the other day.

    What I am concerned about is the inequity existing between those millions of taxpayers on Pay-As-You-Earn who cannot have advice as an allowable charge and the others under Schedule D who can get such advice. If we could devise a system whereby those taxed under Pay-As-You-Earn could have an allowance made in respect of aid for completing their returns I would be delighted, because there must be many ordinary average employees who pay more tax today than they should pay just because the are not claiming some of the allowances to which they are entitled. That is undoubtedly true.

    At the same time, I do not believe that the 20 million taxpayers on Pay-As-You-Earn will immediately rush to accountants on being told that for every E or guinea they pay in fees they will get up to a maximum of 8s. 3d. in the £ allowed them. It would not work that way. The bulk of people paying under Pay-As-You-Earn will still not get advice because they will still not seek it. If I thought that there was some way of their getting that advice I would be delighted but, as I say, I do not think that it would work that way. That is why if one is giving real help to small taxpayers, I should prefer the type of Clause I moved the other day whereby we could give those on Pay-As-You-Earn immediate and direct relief, for tools, books, and so on. However the principle behind the Clause has equity on its side. I certainly think that there is a case for making a charge for assistance in computing capital gains an allowable expense, because it would be very difficult to dispute the logical case, and this is a normal Revenue argument, that a charge in order to be allowable must be directly concerned with earning the money on which tax is to be paid. This is specifically the case where the person is earning capital gains, because any charge for computing the liability is very relevant to him in his earning of those gains. Even if we cannot accept the Clause, and I do not think that we can as it stands, there is a case for giving relief in relation to the assistance given in the computation of capital gains.

    I do not know about the cost of the Clause, but I do not think that it would be very great, as I do not believe that many people would apply for the relief. Nevertheless, I hope that if we cannot accept the Clause this time, the Treasury will bear in mind the whole principle of trying to bring some equity to those on Pay-As-You-Earn who are not getting adequate advice and many of whom are at the present time paying more tax than they should be paying.

    (Harrow, Central): I am very pleased to support the new Clause; and particularly to follow the hon. Member for Heywood and Royton (Mr. Barnett). I am sure that the Chief Secretary will take note of the fact that even if, in this case, we do not have his hon. Friend's vote we at least have his spirit, and will appreciate that on both sides of the Committee there is considerable sympathy with the spirit behind this Clause.

    The hon. Gentleman is an accountant and I am a solicitor. I noticed the other day that my accountant had a notice on his desk to the effect that the new taxation was causing serious danger to the health of accountants. I must say that the hon. Gentleman looks extremely well, but it seems to me that the health and temper of everybody, professional and lay, are being strained by the complexity of the new tax Clauses. The hon. Member made the point very well that it is very unfair that the large company, probably employing highly skilled professional staff, should be able to claim a tax allowance for that assistance whereas those who really need professional assistance in the preparation of their small tax returns cannot so claim. It is the large firms that usually go to accountants to do the work, and the small individual who usually goes to the solicitor because he cannot afford to pay the accountant's fees.

    There is equity in this Clause, and perhaps I might cite a recent instance that occurred in my own firm. One of my partners was consulted by a taxpayer, who produced an Income Tax return form for the year 1966–67. One must never forget that the honest taxpayer is in danger of very great penalties if he does not obey instructions, and this return demanded that the taxpayer should enter particulars of all assets acquired during the year on which a chargeable gain would accrue if the assets were realised. It said nothing about the £1,000 limit on chattels or what sort of assets were included. The ratepayer was worried about it.

    We communicated with the inspector of taxes. Considerable correspondence culminated in the Inland Revenue having to put out a statement publicly—it was published in many professional journals—setting out what was to be included in Question No. 22 of the form and what was not. This took place after considerable correspondence and after our client and probably many others had had to consult solicitors or accountants for advice. Obviously, a fee would have to be charged and that could not be allowed against their tax. Had they been a large industrial organisation, they could have charged the fee against their tax. This is extremely unfair.

    8.0 p.m.

    I want to follow what was said by my hon. Friend the Member for Oswestry about the need to encourage wider share ownership. I am pleased that he referred to the Acton Trust. I was a member of the Executive Committee of the Wider Share Ownership Council which commissioned the Acton Trust to carry out a survey. My hon. Friend is right that it revealed very considerable ignorance about shares and the way in which one can acquire capital gains. But the Trust also revealed that there was a very great desire among even humble people to learn more about shares and to acquire a wider share ownership. We should encourage these people.

    I know that the Chief Secretary understands this and sympathises, but he must realise that the Finance Act, 1965, is one of the greatest impediments to the spread of share ownership. One small but important aspect is the investment club movement. The right hon. Gentleman will know what sympathy I have with that and how I have attempted to ease its path through the jungle of Capital Gains Tax legislation. These are worthy people who desire to spread share ownership throughout the community. The Capital Gains Tax has put an impossible impediment in the path of their growth, so much so that many of them are ceasing business and, more important, losing a great deal of the enthusiasm which they had.

    If the Clause were passed, or if the Government made a concession on it, it would enable the investment club movement, as well as many ordinary individuals who desire to acquire shares, to offset some of the expenditure made on professional advice, if they can afford to do that. From these points of view—that of fairness and equity and that of a desire to encourage the spread of share ownership throughout the country by responsible people—I hope that the Chief Secretary will indicate sympathy with the object and a small concession.

    (Belfast, North): There seems to be mounting evidence that the Treasury has not yet fully appreciated the tremendous burden which the Capital Gains Tax will place on ordinary people in completing their Income Tax returns. This Clause, which I strongly support, makes the point very well. The hon. Member for Heywood and Royton (Mr. Barnett) mentioned the pressure from the Inland Revenue for people return their tax forms and to return company accounts. From conversations with accountants, I suspect that a great many personal tax returns have been held up because of complications in computing Capital Gains Tax returns. I should be obliged if the Chief Secretary could give us figures, approximate though they might be, of the number of personal tax returns which have been received to date by the Inland Revenue compared with last year, although I appreciate that this may be too difficult to do without notice.

    If it is known that one takes an interest in tax matters, when one goes round one's constituency people continually ask for advice. I have had three very simple cases put to me recently. In one case an individual holding ordinary shares had a free bonus issue of preference shares. He sold the preference shares. He wanted to know how he applied Capital Gains Tax rules to that situation. Another individual had received a rights issue, and he sold it without taking it up; there was a small amount of capital gains on that account, and his problem was how it was to be calculated. Another man owned a few houses, and each had a tenant in occupation; he got vacant possession of one of the houses, which he sold, and problems about calculating the Capital Gains Tax that arose. Those are not of course immensely difficult problems to Members of this Committee.

    I do not wish the Chief Secretary to reply to the examples that I have given. I gave advice as best I could to the individuals as to how to calculate their Capital Gains Tax. But the important point is that I fear that they do not fully understand the situation because we talk in an entirely different language compared with a person who has not sat through the long debates on the Finance Bill. Such people as I referred to do not spend all their time coping with tax problems. They have a small amount of wealth, and they are not able to grasp the very complicated principles involved in the tax. It is laughable to tell them that it is all in the 146 pages of the booklet on the Capital Gains Tax prepared by the Inland Revenue. I suspect that the bulk of ordinary people holding shares will be forced to go to accountants to deal with their Capital Gains Tax problems. The accountants may charge a big fee for that because it is very difficult and time-consuming work.

    In a Parliamentary Question on 10th May I referred the right hon. Gentleman to paragraph 6 of the Income Tax return, which states that assets acquired during the year had to be returned in a tax return. Schedule 10 of the Finance Act, 1965, says in paragraph 6(1) that the Inland Revenue:
    "may require particulars of any assets acquired by the person on whom the notice was served".
    No one going through the debates last year got the impression that that would be included automatically in every tax form sent out. It was thought that the Inland Revenue was taking power perhaps for the purposes of an investigation where it was suspicious. If one accepts the Capital Gains Tax, one must accept the need for such a power, but it was not thought that it would be automatic in every single case. I feel that there was some deception last year because that was not specifically brought to the attention of the Committee. This is just one more thing to make more difficult the return of Capital Gains Tax each year.

    In a Parliamentary Question on 17th May I asked the Chief Secretary whether it would be satisfactory for individuals to make a full statement of their potential Capital Gains Tax liability during the year, perhaps sending in all their contracts, or, if they had sold a house, giving details of it, providing full information, and then for the Inland Revenue in turn to calculate what the chargeable gain on that individual would be. But no. The Chief Secretary replied:
    "Individuals have to calculate their capital gains or losses and enter them in their Income Tax returns."—[OFFICIAL REPORT, 17th May, 1966; Vol. 728, c. 1100.]
    We have been in correspondence about this and I think that it is nonsense.

    There should be a scheme to prevent the necessity for this new Clause, whereby individuals of moderate means would be able to tell their inspector of taxes what assets they had sold during the year and there would thereby be a free accountancy aid scheme for capital gains tax payers. [An HON. MEMBER: "It would not be free in the end"] I accept that it would not be entirely free. But taxpayers should be able to discuss this matter with their inspector, perhaps submitting a schedule of all their dealings in the year from which he could calculate the tax. The wealthy person need not do such a thing. He can engage an accountant who will in any case charge him a hefty fee for other work.

    I hope that the Chief Secretary will consider whether some more flexible system could not be evolved to avoid the necessity for thousands of people to be thrown into the arms of chartered accountants.

    (Bournemouth, West): I am glad to have the opportunity of supporting the new Clause and to congratulate my hon. Friend the Member for Oswestry (Mr. Biffen) on tabling it. He undertook to be brief and I thought that he was very moderate. I do not know whether this was because he had good cause to be optimistic or whether there had been collusion. I hope that there has been collusion and that the Chief Secretary will depart from his customary stoney manner in this Committee and come forward with some modest little benefit or assistance in this connection.

    I support the new Clause because I am in the unhappy position of being in this regard an ordinary individual. Even though I have sat through long stages of this Committee, I do not suppose for a moment that I could possibly master all or even a few of the complexities of the provisions of the Capital Gains Tax. A friend brought to my notice an example which he had worked out and it was the subject of a reference made earlier in our proceedings by my hon. Friend the Member for Wycombe (Mr. John Hall) on 22nd June in column 808 of HANSARD.

    My hon. Friend drew attention to a perfectly normal series of transactions over 10 years involving not very large sums of money and including a legacy or a rights issue and normal sale of shares but at no time involving a sum greater than £2,000. The accountant—who is an expert—covered six foolscap sheets of working and at the end of the operation he concluded that the total sum on which tax was liable to be paid was about £317. The result took an enormous amount of time to work out.

    That accountant took the trouble to try to explain the transaction to a professional assembly. With the assistance they had of his prepared foolscap sheets and his demonstrations on a blackboard, it took him 1¼ hours to explain to this expert audience how he had arrived at his conclusion. This sort of thing is not good enough because it denies to the individual citizen one of his basic rights—the right to ensure that he shall be dealt with fairly and justly in taxation. He cannot be sure under the present position.

    8.15 p.m.

    The Government have made life so incredibly complex for all of us that they have a duty to support a Clause of this nature. This Clause is extremely modest in its requirements and tries to get some form of assistance for those who will most need it and most deserve the help asked for. It is an appalling reflection on the present situation that we have to put forward a new Clause like this and to say that life is becoming so hideously complicated for the ordinary citizen that in order to do his simple duty as a citizen the completion of an Income Tax return form he should get the benefit of professional assistance and be allowed to offset the charges of doing so.

    This is an appalling reflection upon the complexity of modern life, much of it foisted on us by the present Government. I am not at all surprised because I have never thought that Socialists would make good capitalists. I have never thought that they were the right or likely people to make a success of capitalism. They are emotionally and philosophically unsuited to the task and the Administration has shown this clearly, for at every stage in their Budgets they have made life for all of us much more difficult, more complicated and unnecessarily confused. This is an admirable Clause which would make some slight improvement to an otherwise thoroughly rotten Bill.

    (Horsham): I congratulate my hon. Friend the Member for Oswestry (Mr. Biffen) on the new Clause and I am glad that it has the support of the hon. Member for Heywood and Royton (Mr. Barnett), who at least gave it his philosophical if not his practical support. No doubt the Chief Secretary will also give it his support, not only philosophical but practical as well. He told us last year that the extra taxes—Corporation Tax and Capital Gains Tax—were simplicity themselves. The Committee will agree that the experience we have heard from our constituents throughout the country has been that it is not so much the weight of the taxes themselves which is so intolerable—that is bad enough—but the physical problem of dealing with the complexities which has caused so much disturbance in professional circles. This is generally admitted on all sides.

    As a private individual it is difficult enough dealing with the complicated tax form, which has been made more complicated by the new taxes produced by the Government. One feels rather more reluctant, however—I am sorry to say this to the hon. Member for Heywood and Royton—to approach one's accountant who one knows is very busy dealing with the complexities of Corporation Tax, and now the Selective Employment Tax, about which he must engage himself with the companies he is advising. As a private individual one feels a very small minnow in a very large pond and is reluctant to approach one's accountant and tries to struggle with the form oneself.

    Let us consider the wretched accountant. He has difficulty not only with the affairs of the companies whose interests he is there to advance but in getting through to the Inland Revenue. I do not want to exaggerate the position, because I do not want to suggest that there will be a Poujadist movement among taxpayers. Nevertheless, something of the kind appears to have happened in the Inland Revenue.

    I remind the Committee of the annual conference at Scarborough in May of the Inland Revenue Staff Federation. There was a resolution from London North branch deploring the lack of service given to the public as a result of pressure of work and staff shortages. That was as nothing compared with a resolution from Cardiff branch, which revealed a sad situation. Cardiff was alarmed at the possibility of a complete breakdown in morale. I am sure that morale did not actually break down, but on 23rd May a stiff note was sent to the Treasury and there was a ban on work on the Capital Gains Tax by 6,000 Income Tax officers who claimed £100 special allowance to cover the work involved out of the office in learning details of the new tax. I am happy to say that that little fracas was settled very quickly indeed, for rather obvious reasons, and four days later the ban was called off on the understanding that they would settle for £50 which was to be forthcoming at the end of July. That was a rapid settlement by any standards, and certainly by the standards to which we are accustomed to these days, but it was compensation for having to master the underlying theory.

    This was a productivity agreement if ever there was one, because what they originally asked was simply an allowance for learning the details of the new tax, and now they were being told that under this productivity agreement they would have to go a good deal further than that and master the underlying theory. Anyone concerned with mastering the underlying theory of the Capital Gains Tax would have to go a good deal further back than even Mr. Kaldor. They would have to have a knowledge of Marx and various other Communist and Socialist philosophers and other people with whom our tax officials do not normally have to deal. Therefore, considering the physical problem of dealing with the tax, I am sure that the request for £40 relief for the taxpayer is a model of moderation.

    The poor wretched taxpayer has to do his best on the printed document which he gets from the Inland Revenue. Fortunately, he is not asked to master the underlying theory, but I have no doubt that eventually there will be another section in this wretched form in which there will be a question to discover whether he has understood the underlying theory. The form which is large and now excessively complicated is very puzzling to someone like myself who is reluctant to approach his accountant, knowing that he is busy with his work. If the hon. Member for Heywood and Royton would like to take on my account, I would be delighted if he could relieve me of some of my problems.

    Perhaps the Chief Secretary can reply to a specific question. On page 3 of the form there is a section "Chargeable Assets Acquired". In a section of about half an inch, one is expected to put down the dates of the acquisition and the cost or the acquisition's value. Very helpfully, the Revenue authorities have included a yellow form which is an explanatory memorandum. Section K of this yellow form says:
    "You must also give details … of chargeable assets acquired in the year whether they were obtained by purchase, exchange, gift or by inheritance under a will or intestacy."
    I presume—I do not know and I am seeking information—that the intention is that if one has happened to come into possession of a chargeable asset, a chattel, which may possibly appreciate in value to more than £1,000, one should give details on the form. I imagine that that is what is required—I cannot put any other construction on that passage—and yet the physical difficulties of providing the information are enormous.

    For instance, if one were to buy a picture for £200 this year, how is one to know whether it will appreciate in value to more than £1,000 in the future? It could easily do so, but is that the kind of thing which one has to put on the form? If one is left a few books by a relative and one goes through them and sells one in a few years' time for more than £1,000, how is one to determine what the value of the book was when it come into one's possession? Those are the sorts of questions which fill the recipient of the form with complete dismay and I do not know what the purpose of this section is. It may be to provide a sort of Domesday Book of the accumulated wealth of the country. Certainly if the Inland Revenue or the Government are serious in requiring this information a great deal of information will be given, and the Revenue may be swamped by the total.

    The accountants themselves will be very heavily burdened by this extra pressure of work and are simply bound to put up their fees. They will be able to do nothing else with the natural market pressure of the law of supply and demand, but with the additional effect on firms of accountants of the Selective Employment Tax, they are very likely to put up their charges. It is difficult to think of a reason for them not to do so, for they have a patriotic reason for raising their charges to meet the Selective Employment Tax which would otherwise not be successful in carrying out the Chancellor's intention of having disinflationary effects. The private individual will therefore be faced with increases in accountants' fees and for that reason alone the Government should agree to the Clause.

    I hope that the Chief Secretary will try to enlighten us about some of the meaning of this extraordinary form which must be baffling millions of people and that he will take into account the considerable pressure which these demands are making and will allow the concession to go through.

    (Aldershot): I want to add a few words to the debate from a less ambitious point of view than that already expressed. I am one of those who believe that Income Tax inspectors are extremely helpful and kindly to some of us who make our individual returns. For example, I know that in dealing with motor car depreciation and Dominion Income Tax, without the very kindly help which is given by the inspector of taxes to me to make my return after I have discussed the matter with him, my returns would probably be very wrong.

    It is not always realised that the inspectors offer considerable help. I know that not only from my own experience, but from that of my constituents. However, sad to say, there are frequently many errors when a constituent is not wise enough to get some sort of advice from the inspector who is ready to give it, or from someone employed to give such advice.

    8.30 p.m.

    We are facing a situation in which, as a result of the Capital Gains Tax, there are almost unlimited complications. There is the yellow book, about which we have heard, which has 165 pages, and is an extremely complicated document. If it happened that people did as I have previously done—and do not intend to do in the future—that is to submit a return on chargeable gains—I am sorry, I am not in the joke with the Chief Secretary. I do not think that I am getting the right hon. Gentleman's attention.

    I can assure the hon. Gentleman that I have listened to every word. If I may say so, some of the arguments are very familiar, but I am listening most carefully.

    I thought that I had been guilty of unconscious humour. I take it that the object of a return of chargeable gains is to find out who has given or sold something which may be in the nature of a gain to the person making the return. I understand that it is not what he has received by way of chargeable gain which matters, but the person who has sold or given something which may be a gain, and for which he would be liable to make a return.

    What I am suggesting is that if one wants, as I presume one does, good returns. properly dealt with, one must have people with correct technical knowledge to deal with such affairs, otherwise the works will be clogged up. If one does not have such experienced people and the taxpayer does not make use of accountants, then there is the likelihood that the system will be choked up as a result of people making what they believe to be proper and adequate returns but which are really, meaningless in relation to their tax liability.

    I heard the other day of someone who had shares in a company which was taken over. The takeover bid involved debenture, preference, and ordinary shares. I am uncertain as to how this is going to be worked out; the probability 13 that if it is not dealt with in the first instance there will be a great waste of time. For all of these reasons I should like the Chief Secretary to consider this, not necessarily from the point of view of the taxpayer, for whom conditions are hard enough, but from the point of view of his own hard-working staff.

    (Rutland and Stamford): I will follow the lead set by my hon. Friends and keep my speech short. This is the first time that I have listened to a debate in this Chamber and felt my heart bleeding for accountants. After having listened to the hon. Gentleman the Member for Heywood and Royton (Mr. Barnett) I have come to the conclusion that the Chief Secretary must be glad that he has changed his occupation in recent years. I also felt that the burden of work for accountants was a stricture upon the Treasury for the complication of the tax structure, and this seemed to make the case for the new Clause. I am sure that the £40 which would be allowed against the taxpayer would be received from the accountants by way of increased tax and Surtax payments which would undoubtedly arise through the increased work which they would receive.

    Having been away from all-night sittings for a short while I feel in a benevolent mood towards the Treasury. One of the things which has most pleased me since I entered this House was an occasion when I went into my constituency, a year or two ago in order to answer constituents' questions. As nobody asked me any questions—a Conservative Government were in power at the time so that that was perfectly understandable—I took the initiative and asked some questions of various people. I asked one individual whether he had any complaints and he said, "Yes, I am paying too much Income Tax." I said that I was, too, and that we all were. Again, as it was a Conservative Government, I wrote to the Conservative Chancellor of the Exchequer. He looked into the matter. Without having to go to an accountant, this man got a rebate of £36 and a deduction of tax of 6s. a week.

    This just shows that mistakes can be made and that the small man, in these days of complicated tax matters, requires assistance. He does not get the same assistance as the director of a company or a man engaged in a partnership. Directors of companies and partners get advice, and more likely than not they get it free. They do not have to employ accountants privately because their companies have accountancy departments. They simply go to the accountants and say, "I am in trouble with my tax return. Can you help me?"

    The man imposed on most of all is the man who has had advice for most of his working life and who has retired. He has a mixed income—a retirement pension and a private income perhaps from buying and selling stocks and shares which involves him in Capital Gains Tax. This is a complication which requires him to continue to seek the advice which he has always had, but probably for the first time he finds that he is no longer allowed the fee.

    The Chief Secretary should consider the new Clause amenably. If he does not accept it, he should at least offer a compromise so that the small man is given the help which he requires.

    The hon. Member for Oswestry (Mr. Biffen) said that he hoped that brevity would encourage charity. I assure him that it encourages a charitable attitude of mind and a charitable response. As he may know, the persuasiveness of any speech is in inverse ratio to its length. I wish to answer the three clear, short arguments which he addressed to the Committee.

    The first ground on which he moved the new Clause was equity. He said that business accounts were drawn up on the basis that the fees paid to the accountant for calculating business profits and losses and the tax computation were allowable, although he was good enough to recognise that this was by custom rather than by statute; therefore, should not the same apply to the individual? The hon. Gentleman is very nearly on a good point, but not quite. It is not the case in law, and it is not the case universally in practice, that no distinction is made between the charges made by professional accountants for computing the business accounts and for computing the business tax liability. Certainly statute provides no such relief.

    It is, however, obvious that if a firm of accountants is engaged in both the auditing and accountancy work and the tax work on behalf of a company, it is almost impossible to segregate the hours of work and so arrive at the appropriate charges for doing each kind of task. Because of the difficulty of sorting it out, I recognise that, in practice, the part of the fee which the professional adviser charges which would relate to the tax work is often allowed as a deduction because it is included in the larger fee charged for preparing the accounts, which is a properly chargeable item. But I assure the hon. Member for Oswestry that, first, this is not a statutory provision, and, secondly, it is by no means a universal practice.

    I go further and say that whenever a business has been involved in an obvious long and complicated tax appeal on an assessment—it may have become public knowledge, for example—and where, obviously, a good deal of the work involved by the accountants has been in respect of that tax appeal, an appropriate figure, by agreement by the taxpayer through his accountant and the Revenue, is written back; an appropriate proportion of the accountancy or other professional charges is disallowed as being in respect of the tax work and not in respect of the computation of the profits of the business.

    Therefore, even on the ground on which the hon. Member was nearest to establishing his case—on the ground of equity—first, it is not the case in law; secondly, it is not universally the case in practice; and thirdly, where it is the case in practice, it is only because of the administrative impossibility of segregating out. There would be an endless argument about which clerk spent how much of a certain day doing which job and it would be impossible to segregate it out. That, therefore, is my answer on the hon. Member's first main point.

    On the second point, the hon. Member drew attention to the question of economy. He said that the tax work is now complex. The hon. Member for Aldershot (Sir E. Errington) came to my assistance by saying that it always has been complex. He pointed out that there were problems with regard to car depreciation in which he found it difficult to work out the tax allowance, and he would go and have a word, very wisely, with the inspector of taxes, who would be only too glad to help him.

    The hon. Member said that there were problems of Dominion Income Tax relief. Every practitioner knows that there are few problems more complicated than Dominion Income Tax relief, which floors nearly everybody. That is an old situation. The hon. Member for Aldershot was quite right in saying that in these two respects, which he gave purely as examples, tax always has been complex. It was always difficult—now, he says, impossible—for the layman to be sure that he was getting the right answer in computing figures which had to be included in his Income Tax return.

    The hon. Member for Oswestry drew attention to the difficulties of coping with the Capital Gains Tax and these have been repeated by many hon. Members. I admit that with a new tax one has extra difficulty. Extra work is involved in starting the tax and getting it going. My own firm belief is that once we have got over the first few years of Capital Gains Tax and the figures are simply put on a renewal basis year after year—whatever new has to be added—it will be found that the volume of additional work is not great, and the complexity will be much reduced as soon as one is accustomed to the work. Here is both the difficulty of a new tax to which we are not accustomed, and the problem of starting to provide information which may not be needed for many years ahead.

    As everybody knows, with the Capital Gains Tax the real difficulties are in finding out past history, what happened to particular shares which changed their form and had various rights issues, bonus issues, and so on. The only way of preventing such trouble arising in the future is to have a full return now so that all the information is available, and life will be a good deal easier in the future.

    One recognises that with a new tax, new in type and new in the sense that it requires a good deal of information in its first year, there is inevitably a certain amount of additional work. It is on Capital Gains Tax that all the difficulty has arisen both for the Inland Revenue and for the accountancy profession; and it has led to complaints made by hon. Members and voiced in today's debate. It is not the case with Corporation Tax; there are no complaints about Corporation Tax. I assure the hon. Gentleman that the accountancy profession knows full well that Corporation Tax is no more difficult than coping with the taxes whose place it has taken.

    8.45 p.m.

    Would the right hon. Gentleman be good enough to deal with the particular point of Capital Gains Tax relating to chattels and whether one is obliged to return on the form a chattel which may potentially have grown in value to over £1,000?

    I hope I may be forgiven if I seem to be taking on more than my job at this Box and acting as though I were in the Chair; but I would say that this new Clause deals with the allowability of professional charges. Whether the form was long or short, whether it included one tax or two taxes or 10 taxes, the position would be precisely the same. This is not the occasion to go into a long and detailed dissertation on what is in a particular form or what is not in a particular form. The answer is that this matter has been dealt with. I would attempt to deal with it if it had not previously been dealt with, but, as it is, I hope the hon. Member will excuse me for not going wide of the questions which the hon. Member who moved the Second Reading of the new Clause addressed to me with such brevity and point. If I may, therefore, I will turn to the arguments he put to me.

    The right hon. Gentleman did say the difficulty arose in regard to the Capital Gains Tax. Of course, that is so. He also said that Corporation Tax did not provide a difficulty. I hope the Chief Secretary realises that Capital Gains Tax applies to individuals who have not the facilities which he has just been adumbrating.

    I appreciate that point. I was dealing with a different point, as to whether or not this Clause sprang from problems arising out of additional taxes of all kinds or whether it was solely due to Capital Gains Tax. It is mainly due to Capital Gains Tax, and that problem, I am suggesting, is a temporary problem. Therefore, there is not so much need to have regard to it as would otherwise be the case.

    I want to come particularly to Capital Gains Tax and to my hon. Friend the Member for Heywood and Royton (Mr. Barnett), who said he would support the principle of allowability of charges arising out of a gain, because, he was saying, if one is taxed on the gain then the gain is such a figure as remains after allowing for the cost of evaluating the gain. Of course, he is quite right, and that is why appropriate charges are allowable. I refer my hon. Friend to paragraph 4(2) of Schedule 6 of last year's Finance Act, where he will see that fees relating to valuations or apportionment required by the computation rules in relation to Capital Gains Tax are in fact allowed.

    Perhaps I did not make the matter sufficiently clear. I am aware, of course, of the fact that a charge is allowable in that case under that Act. What I was really saying—I thought I had made the point—was that the actual computation of the tax was equally relevant to the whole question of earnings gained.

    In that case I cannot go as far as that with my hon. Friend. I agree that it is absolutely the case, and I would share his view, that valuation required by the rules to ascertain the correct figure of a gain is a proper charge in arriving at the gain because the gain is only realised net of this cost. I do not think the duty of making the return of one's income is in the same category.

    I hope, therefore, that I have satisfied the hon. Gentleman the Member for Oswestry that, on the basis of equity, this is only a question of practice and of limited practice; and that on the question of economy the complexity is of short term; and, for Capital Gains Tax, valuation costs are in fact allowed in appropriate circumstances.

    As far as I can make out, the computation of the gain is not included in this booklet. Before it is re-issued, would the right hon. Gentleman look at it and perhaps put in something in a prominent place to advise taxpayers?

    I hope I shall be forgiven if I do not comment on the second part of the hon. Gentleman's intervention. I will look into his first point.

    The hon. Member for Oswestry raised the question of wider share ownership and gave figures for the United States. He said that we were 13 years behind them. Presumably the hon. Gentleman cited the United States experience in support of his argument, but, far from being 13 years behind the United States, we are over 50 years behind them in introducing our Capital Gains Tax.

    It is the Capital Gains Tax which has caused the complexity, and the United States have had a capital gains tax for over 50 years. Every taxpayer has had to make a return of all his income, including short and long-term capital gains, for over 50 years in the United States. I cannot accept that that is one of the reasons why share ownership is limited. I agree that it is limited, and some recent figures which I saw in the Economist a short time ago indicated that the proportion of the population who hold equity shares is something like 4 per cent. Surely the hon. Gentleman must agree, a fortiori, that, as they have had it much longer in America, their share ownership is much more widespread.

    Surely the right hon. Gentleman appreciates that the way in which the American capital gains tax bears upon the individual shareholder is entirely different from the position here. It bears no similarity. Every small shareholder here is affected.

    I listened carefully to the argument of the hon. Member for Oswestry, and he related it exactly to the Amendment. That deals with the allow-ability of charges in computing the figure. His argument was that, because it is being made more complex by adding Capital Gains Tax, there is inadequately wide share ownership. On the contrary, in America they have had to make returns for capital gains tax over the past 50 years and more, and they have an even wider share ownership.

    The short answer is that on his three grounds, the hon. Gentleman does not make his case. But the overwhelming point is the one to which the Royal Commission on the Taxation of Profits and Income drew attention, and that is the real argument of principle to which, in his speech, the hon. Gentleman did not turn his mind. I cannot do better than refer the Committee to what the Royal Commission said in paragraphs 927 to 929 in Chapter 30 of its Final Report. In particular, in paragraph 928 it said:
    "… there is no general principle that would require a taxpayer's taxable income to he affected by the fact that he may have incurred some expense in performing his general duty of making a proper return."
    That was the view of the Royal Commission; it has been the view of all Governments since; and it is the view of the present Government. It is a duty laid upon the taxpayer, and any expense that he incurs in doing that is one of the things on which he spends his own taxed income.

    The question of principle remains whatever it was. We accept it. We accept what the Royal Commission had to say. In the three grounds which the hon. Member put forward, he did not show anything which would upset that case or the general principle. I am sorry, but I cannot recommend the Clause to the Committee.

    (Windsor): I had no intention of intervening in the debate on this Clause—still less have I any intention of prolonging the discussion for more than a couple of minutes—had it not been for the Chief Secretary's reply, I wonder whether the right hon. Gentleman would be kind enough to look at page 170 of the Finance Act, 1965, at the Sixth Schedule. It deals with the method of computation of capital gains, to which reference has been made by my hon. Friend. About halfway down the page there is the following paragraph: "… a chargeable gain is E (0) T/P+T

    + E(1)T/P(1) + E(2) T/P(2) + T"

    and then rather euphemistically, it says, "and so on."

    More years ago than I care to remember, when I was at school my mathematics master invited me to give the right answer to what seemed to me to be an extremely complicated multiplication formula on the blackboard. I had no idea what the answer was, but I made a guess and said, "I think, Sir, that the answer is to divide the bottom line by 6", to which he replied, "If that is what you think, come up here and I will divide your bottom line by 8".

    If the right hon. Gentleman is seriously telling the Committee that any ordinary individual can interpret this incredibly complicated algebra formula without the advice, which will be expensive, of highly skilled accountants, then he ought to suffer the same fate as I did many years ago.

    (Worthing): I cannot help but feel that my hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe) would have been well advised to have consulted an accountant at an early age.

    I think that we must take issue with the Chief Secretary on the answers which he gave in reply to this excellent debate, because the point made by my hon. Friend the Member for Windsor and by my hon. Friend the Member for Horsham (Mr. Hordern) is very relevant. If it is the case that in the computation of capital gains the algebraic formula to be used is of the complexity which my hon. Friend has mentioned, or if it is to raise bigger problems of the kind to which reference has been made, surely it is advantageous that technical advice should be made available to our constituents? Indeed, I support my hon. Friend the Member for Oswestry (Mr. Biffen) in saying that the Government should bear part of the cost.

    We cannot accept the arguments put forward by the Chief Secretary that discussion of these complexities is not very relevant. It is because of the greatly increased complexity of the taxation system that we feel that our constituents should be given some advantage of the kind suggested here. The Chief Secretary said that this was something which would be all right in a few years. At least there will be some case for giving relief in those few years, but, while the matter may become somewhat simpler over the years, because the amount of capital which a person has may build up into what my hon. Friend described as a kind of Domesday Book of capital, many of these problems will remain complex.

    I think that this becomes clear if one examines some of the documents which have been sent to shareholders by individual firms. I have one here. It runs to two pages of foolscap and the calculations given to shareholders are based on a set of eight assumptions. They proceed to give a series of illustrations of the ways in which capital gains could be computed on alternative bases. This involves complicated arithmetic. It is a mass of fractions, expressed in numerical terms of the kind to which my hon. Friend was just referring. It deals with fractions like twelve-thirty-sixths and twelve-fifteenths. I would have thought that since even the Chief Secretary earlier on had some trouble with the rather simpler fraction of eleven-twelfths he might be moved to agree that our constituents, who have to struggle to complete their tax forms in a way which gives an honest appraisal of their position, ought to have this tax concession.

    9.0 p.m.

    It is a very modest request. It is not a £40 limit, as some of my hon. Friends have suggested, but merely the right to write off against tax the sum of £40. We would have thought that the fact the people could write this amount off against tax if they consulted professional accountants would be of considerable advantage to the Inland Revenue authorities, since the preparation of the returns would be carried out in a proper manner, thereby correspondingly reducing the burden upon those authorities. It is surely not unreasonable in those circumstances to ask that part of the cost, at least, should be written off against tax.

    I take issue with the argument put forward by the Chief Secretary in regard to equity. Am I wrong in thinking that if a person is engaged in a trade or profession he is allowed to write off his accountants' fees against tax? If so, is there not some case for extending this concession into a wider field, on the lines that we suggest? I do not wish to delay the Committee, but I must point out that we feel that this is an excellent proposal and one which the Committee ought to approve.

    Division No. 91.]AYES[9.5 p.m.
    Alison, Michael (Barksten Ash)Awdry, DanielBell, Ronald
    Allason, James (Hemel Hempstead)Balniel, LordBennett, Dr. Reginald (Gos. & Fhm)
    Astor, JohnBatsford, BrianBiffen, John

    In conclusion, I want to take up three points made by the hon. Member for Heywood and Royton (Mr. Barnett). Although it is suggested that those arguments were against the new Clause, they all supported the points put forward by my hon. Friend. The hon. Member said, first, that accountants were already working to capacity and that if the Amendment were accepted it would place an even greater burden upon them. If there is a need for an accountant's services, this proposal is likely to increase the number of people going in for accountancy, and this will create the situation that we want. On the other hand, if we do not encourage this situation to develop accountants will increase their prices.

    Further, the hon. Member spelt out at great length the difficulty experienced by an accountant in preparing even quite a small return for an individual client. If it is difficult for a qualified accountant, who is an expert in this field, it is surely fact more difficult for individual constituents. We have only to look at the complexity of the form and the explanatory notes to realise how many of our constituents—some of them with only a few shares— would have great difficulty in meeting the legal obligations which the House has placed upon them.

    If more of the cost of this kind of preparation can be placed upon the Exchequer rather than upon individual constituents we shall get somewhat closer to the real social cost of administering the tax. If a system of cost accounting is applicable to the Victoria Line it is equally applicable in taxation.

    If the Chief Secretary will give us an assurance that he will reconsider this very modest proposal we shall be prepared to listen to what he has to say—otherwise I must advise my hon. and right hon. Friends to vote for the new Clause.

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

    The Committee divided: Ayes 115, Noes 189.

    Black, Sir CyrilHarrison, Brian (Maldon)Mitchell, David (Basingstoke)
    Blaker, PeterHarrison, Col. Sir Harwood (Eye)More, Jasper
    Body, RichardHarvie Anderson, MissMorrison, Charles (Devizes)
    Boyle, Rt. Hn. Sir EdwardHeald, Rt. Hn. Sir LionelMott-Radclyffe, Sir Charles
    Braine, BernardHeath, Rt. Hn. EdwardMurton, Oscar
    Brown, Sir Edward (Bath)Heseltine, MichaelNabarro, Sir Gerald
    Bruce-Gardyne, J.Higgins, Terence L.Neave, Airey
    Bullus, Sir EricHiley, JosephNott, John
    Carlisle, MarkHill, J. E. B.Osborn, John (Hallam)
    Chichester-Clark, R.Hirst, GeoffreyPage, Graham (Crosby)
    Clegg, WallerHobson, Rt. Hn. Sir JohnPercival, Ian
    Cooke, RobertHolland, PhilipPike, Miss Mervyn
    Costain, A. P.Hordern, PeterPrior, J. M. L.
    Crawley, AidanHornby, RichardPym, Francis
    Crowder, F. P.Howell, David (Guildford)Ramsden, Rt. Hn. James
    Dalkeith, Earl ofHunt, JohnRees-Davies, W. R.
    Dance, JamesHutchison, Michael ClarkRenton, Rt. Hn. Sir David
    Dean, Paul (Somerset, N.)Kaberry, Sir DonaldRidley, Hn. Nicholas
    Deedes, Rt. Hn. W. F. (Ashford)Kerby, Capt. HenryRoots, William
    Dighy, Simon WingfieldKimball, MarcusRossi, Hugh (Hornsey)
    Dodds-Parker, DouglasKirk, PeterSharples, Richard
    Eden, Sir JohnKitson, TimothyTaylor, Sir Charles (Eastbourne.)
    Elliott. R. W.(N'c'tle-upon-Tyne, N.)Knight, Mrs. JillThatcher, Mrs. Margaret
    Errington, Sir EricLambton, ViscountTurton, Rt. Hn. R. H.
    Eyre, ReginaldLancaster, Col. C. G.Vickers, Dame Joan
    Fletcher-Cooke, CharlesLangford-Holt, Sir JohnWalker-Smith, Rt. Hn. Sir Derek
    Foster, Sir JohnLewis, Kenneth (Rutland)Ward, Dame Irene
    Fraser, Rt. Hn. Hugh (St'fford & Stone)Loveys, W. H.Weatherill, Bernard
    Gilmour, Sir John (Fife, E.)McAdden, Sir StephenWhitelaw, William
    Glover, Sir DouglasMaclean, Sir FitzroyWills, Sir Gerald (Bridgwater)
    Gower, RaymondMacleod, Rt. Hn. IainWilson, Geoffrey (Truro)
    Gresham Cooke, R.Maddan, MartinWylie, N. R.
    Gurden, HaroldMawby, Ray
    Hall, John (Wycombe)Maxwell-Hyslop, R. J.TELLERS FOR THE AYES:
    Hall-Davis, A. G. F.Mills, Peter (Torrington)Mr. George Younger and
    Harris, Frederic (Croydon, N.W.)Mills, Stratton (Belfast, N.)Mr. Anthony Grant.
    Harris, Reader (Heston)Miscampbell, Norman

    NOES

    Anderson, DonaldDriberg, TomJones, Rt. Hn. Sir Elwyn (W. Ham, S.)
    Archer, PeterDunn, James A.Kenyon, Clifford
    Armstrong, ErnestDunnett, JackKerr, Dr. David (W'worth, Central)
    Atkins, Ronald (Preston, N.)Dunwoody, Mrs. Cwyneth (Exeter)Kerr, Russell (Feltham)
    Atkinson, Norman (Tottenham)Dunwoody, Dr. John (F'th & C'b'e)Leadbitter, Ted
    Bacon, Rt. Hn. AliceEdwards, William (Merioneth)Lee, John (Reading)
    Bagler, Gordon A. T.Ellis, JohnLester, Miss Joan
    Baxter, WilliamEnglish, MichaelLewis, Arthur (W. Ham, N.)
    Bellenger, Rt. Hn. F. J.Ensor, DavidLomas, Kenneth
    Bence, CyrilEvans, Ioan L. (Birm'h'm, Yardley)Lyon, Alexander W. (York)
    Bennett, James (G'gow, Bridgeton)Fitch, Alan (Wigan)Lyons, Edward (Bradford, E.)
    Bessell, PeterFletcher, Raymond (Ilkeston)McBride, Neil
    Bidwell, SydneyFletcher, Ted (Darlington)McCann, John
    Bishop, E. S.Floud, BernardMacDermot, Niall
    Blackburn, F.Foley, MauriceMacdonald, A. H.
    Booth, AlbertFoot, Sir Dingle (Ipswich)McKay, Mrs. Margaret
    Boston, TerenceFord, BenMackenzie, Gregor (Rutherglen)
    Bowden, Rt. Hn. HerbertForrester, JohnMackie, John
    Bradley, TomFowler, GerryMackintosh, John P.
    Brooks, EdwinFraser, John (Norwood)Maclennan, Robert
    Broughton Dr. A. D. D.Fraser, Rt. Hn. Tom (Hamilton)McMillan, Tom (Glasgow, C.)
    Brown, Bob (N'c'tle-upon-Tyne, W.)Gardner, A. J.McNamara, J. Kevin
    Brown, R. W. (Shoreditch & F'bury)Garrett, W. E.Manuel, Archie
    Buchan, NormanGarrow, AlexMarquand, David
    Butler, Herbert (Hackney, C.)Ginsburg, DavidMason, Roy
    Butler, Mrs. Joyce (Wood Green)Gourlay, HarryMayhew, Christopher
    Callaghan, Rt. Hn. JamesGray, -Dr. Hugh (Yarmouth)Milian, Bruce
    Carmichael, NeilGregory, ArnoldMitchell, R. C. (S'th'pton, Test)
    Coe, DenisGrey, Charles (Durham)Morgan, Elystan (Cardiganshire)
    Coleman, DonaldHamilton, James (Bothwell)Morris, Alfred (Wythenshawe)
    Conlon, BernardHarrison, Walter (Wakefield)Morris, Charles R. (Openshaw)
    Corbet, Mrs. FredaHazell, BertMulley, Rt. Hn. Frederick
    Cullen, Mrs. AliceHeffer, Eric S.Murray, Albert
    Dalyell, TamHerbison, Rt. Hn. MargaretNorwood, Christopher
    Davidson, James (Aberdeenshire, W.)Hooley, FrankOakes, Gordon
    Davies, Dr. Ernest (Stretford)Hooson, EmlynOgden, Eric
    Davies, Harold (Leek)Houghton, Rt. Hn. DouglasO'Malley, Brian
    Davies, Robert (Cambridge)Howie, W.Orbach, Maurice
    Delargy, HughHunter, AdamOswald, Thomas
    Dempsey, JamesHynd, JohnOwen, Will (Morpeth)
    Dewar, DonaldJay, Rt. Hn. DouglasPage, Derek (King's Lynn)
    Diamond, Rt. Hn. JohnJeger, Mrs. Lena (H'b'n & St. P'cras, S.)Palmer, Arthur
    Dickens, JamesJohnson, James (K'ston-on-Hull, W.)Pannell, Rt. Hn. Charles
    Doig, PeterJohnston, Russell (Inverness)Pardoe, John

    Parker, John (Dagenham)Shaw, Arnold (Ilford, S.)Walden, Brian (All Saints)
    Parkyn, Brian (Bedford)Short, Rt. Hn. Edward (N'ctle-u-Tyne)Walker, Harold (Doncaster)
    Pearson, Arthur (Pontypridd)Short, Mrs. Renée (W'hampton, N.E.)Wallace, George
    Pentland, NormanSilkin, John (Deptford)Watkins, David (Consett)
    Perry, Ernest G. (Battersea, S.)Silkin, S. C. (Dulwich)Weitzman, David
    Perry, George H. (Nottingham, S.)Slater, JosephWellbeloved, James
    Price, Christopher (Perry Barr)Small, WilliamWells, William (Walsall, N.)
    Price, William (Rugby)Snow, JulianWhitaker, Ben
    Purley, Cmdr. HarrySpriggs, LeslieWilliams, Alan Lee (Hornchurch)
    Rankin, JohnSteel, David (Roxburgh)Williams, Clifford (Abertillery)
    Rhodes, GeoffreySteele, Thomas (Dunbartonshire, W.)Williams, Mrs. Shirley (Hitchin)
    Richard, IvorSwain, ThomasWilliams, W. T. (Warrington)
    Roberts, Albert (Normanton)Swingler, StephenWilson, William (Coventry, S.)
    Robertson, John (Paisley)Symonds, J. B.Winnick, David
    Robinson, W. O. J. (Walth'stow, E.)Tinn, JamesWinstanley, Dr. M. P.
    Roebuck, RoyTuck, RaphaelWoodburn, Rt. Hn. A.
    Rose, PaulUrwin, T. W.Yates, Victor
    Ross, Rt. Hn. WilliamVarley, Eric G.
    Rowland, Christopher (Meriden)Wainwright, Edwin (Deame Valley)TELLERS FOR THE NOES:
    Ryan, JohnWainwright, Richard (Colne Valley)Mr. Joseph Harper and
    Mr. William Whitlock.

    New Clause—(Relief And Marginal Relief For Persons Over 65 With Small Incomes)

    (1) In section 13 of the Finance Act 1957 (relief for persons over 65 with small incomes) as amended by section 10(6) of the Finance Act 1965, for the references to £390 and £625 (the income limits for exemption) there shall be substituted references to £420 and £675.

    (2) For section 13(1)( b) of the Finance Act 1957, as amended, there shall be substituted:

    "(b) shall be entitled, if he is not exempt under the foregoing provision by reason only of his total income for the year exceeding four hundred and twenty-five pounds or six hundred and seventy-five pounds as the case may be, and the excess is less than one hundred pounds, to have the income tax payable in respect of his total income reduced, where necessary, to an amount equal to one-quarter of the excess, and where the excess is £100 but less than £200 to an amount equal to half that excess."—[Mr. Turton.]

    Brought up, and read the First time.

    (Thirsk and Malton): I beg to move, That the Clause be read a Second time.

    I think that it will be for the convenience of the Committee if with new Clause No. 41 we take new Clause No. 15 (Age relief on small incomes) and new Clause No. 16 (Old age relief).

    When my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) was adopting the baby which was abandoned by its Socialist sponsors—new Clause 23—the Financial Secretary disdained it and turned it aside, saying that as tax should be made on capacity to pay and not on source of income that Clause was not the right way to do it. New Clause 41 would abate tax on capacity to pay and therefore, in my submission, it is the right way to do it.

    9.15 p.m.

    New Clause 41 deals with the "Peter Thomeycroft" relief for old people. It was granted for the first time in 1957 and it had three provisions. First, if one were over 65 and one's income was not more than £250, one had complete relief. Secondly, for a married person with an income of not more than £400, there was complete relief. Thirdly, there was a marginal provision for the band over £50 in which the tax was to be not more than half the excess of that band. I am trying in the Clause to bring the first two provisions up to date and to alter the system of marginal reliefs in the third. These are two quite distinct points and I will treat them quite separately.

    The last time the figures of the Peter Thorneycroft relief were altered was when the Chancellor announced on 11th November, 1964, that he would alter them. He then said that in view of the general rise in the cost of living he felt that there was a need for these figures to be increased.

    If we look at what has happened since the date of his announcement we find that the Retail Prices Index has risen by 9 points, which is 8·3 per cent., and in food alone there has been a rise of 10 points. If we apply those increases to the figures fixed by the Chancellor following his announcement—£390 and £625—we find that they justify an increase of £32 for the single person and £52 for the married couple to cover the extra cost of living. In my new Clause I have suggested rises of £30 and £50. That is the first limb of my argument—that if the Chancellor was right when he made his announcement on 11th November, then to meet the rise in the cost of living we should now increase these figures by £30 for a single person and £50 for a married couple.

    I turn to my second limb of my argument on what the figure should be. The Government have passed the Pensions (Increase) Act, 1965. As a result, a number of people living on retirement pensions, together with public service pensions of small amounts, have been moved into the tax bracket who previously were exempt from tax. I am sure that if the Financial Secretary agrees that it was right, because of the rise in the cost of living to grant the pension increases, it is wrong that people previously exempt from tax should be brought within the scope of the tax by reason of that pension increase. I will deal with this even more when I come to my later argument about the method of marginal relief.

    One must look at taxpayers with a certain degree of relativity. Originally when exemption was granted to married couples receiving less than £8 a week, the average earnings in this country were about £12 a week. Now we have the position in which, with average industrial earnings at £21 a week, it is wrong that people whose annual total incomes are between £425 and £675 should be paying a good deal of tax.

    Three points should be stressed. First, the cost of living has risen a great deal and we should, therefore, adjust the tax this year. Secondly, the Pensions (Increase) Act has brought within the tax provisions many people, both married and single, who previously were exempted from paying tax. Thirdly, we must approach this whole matter with a degree of relativity. If there are higher average earnings, those who are earning much below the average should not be paying tax.

    That is the first part of my argument, although I add this further consideration. I have never previously known a Finance Bill which has not contained any social service provisions at all and which does not have any provisions dealing with old people. To have such a Bill which does not deal with the elderly is one thing, but to have a Bill which does not contain any social service provisions is quite startling. Another alarming factor is that when I have previously been in Committee on Finance Bills, social service matters have been argued by hon.

    Members on both sides of the Committee. When my hon. and right hon. Friends were in Government my hon. Friend the Member for Tynemouth (Dame Irene Ward) often attacked the Government from the back benches. When discussing this Bill there have been a few hon. Gentlemen on the back benches opposite for discussions about accountancy and so on, but when we have been discussing the problems of the old people, hon. Gentlemen opposite have been absent and silent. I hope that as this Parliament develops hon. Gentlemen opposite, who clamour for crowded morning sittings, will at least attend our deliberations on the problems of the elderly.

    In dealing with the second part of the new Clause, I submit that the present way of dealing with marginal reliefs does not work justly. In other words, if a person is just not exempt, then he is paying much too much tax, representing too large a slice of his income. I will illustrate this by referring to a Question which I put to the Chancellor of the Exchequer on 23rd May, when I asked the right hon. Gentleman:

    "… what Income Tax liability a married person over 65 years of age incurs when his unearned income is increased from £625 to £650 per annum …"

    I also asked in that Question similar questions regarding increases from £705 to £730, £900 to £925 and £1,400 to £1,425. The Financial Secretary replied:

    "If the married couple have no other income the extra tax payable would not exceed £11 5s. 0d. in each of the first two cases and £13 15s. 0d. in each of the others."—[OFFICIAL REPORT, 23rd May, 1966; Vol. 729, c. 33–41.]

    In other words, old people are paying tax at the rate of 9s. in the £ in the first two cases and 11s. in the £ in the second two cases. I cannot believe that the Committee can be satisfied with that arrangement, and I am glad to see the Financial Secretary speaking to the right hon. Lady the Minister of Pensions and National Insurance on the Front Bench opposite because I know that she has a heart.

    To show exactly how this works out I should like to quote from a letter from an Army pensioner, a constituent of mine, who was in the Records Office at York for a short time and so has two sources of public service pension. He writes:

    "I received 11s. 9d. increase on my Army pension and 5s. on my Civil Service pension, making a total income now of £13 10s. Previous to this increase of 16s. 9d. per week I was paying about 5s. per week on £12 13s."

    This information comes from someone who is in the marginal area. He goes on:

    "… after waiting since 1962 for an increase in pension of 16s. 9d. a week I lose I Is. 9d. of it in tax."

    We are getting this failure of marginal relief in the case of people who were exempt but are no longer exempt, and who now, on that increase, whether it be of 5s. or 11s. 9d., have to pay tax at the rate of at least 9s. in the £ and in one area of tax at a rate of 11s. in the £. I believe that to be wrong. It has a very deterrent effect. On an earlier new Clause, we had the question of whether old people, who at the moment are exempt from tax, should work. Though previously exempt, directly they start working they pay out at the rate of 9s. in the £ on the extra they get from their work. That is a deterrent on their working. I certainly find that old people can never understand how this marginal relief works.

    I suggest in the new Clause that whereas now the band of marginal relief is £160 it should, for the purpose of simplicity, be £200. I suggest that on the first £100 in the band, the tax charged should not be more than a quarter of the excess; in other words, instead of the old persons paying 9s. in the £ on the excess they would only pay 4s. 6d. in the £. In the further band of £100 the figure would, as now, be 9s. in the £ on the excess. I ask the Financial Secretary to think very closely about this question of marginal relief, because I believe that any form of marginal relief should have a shading of the bands so that as a person enters the tax field he does not suffer the present savage cut of the full 9s. in the £, which is more than the standard rate.

    The Financial Secretary will correct me if I am wrong, but I believe that the cost of the new Clause would be about £5 million in the present year and about £8 million in a full year. I suggest that instead of thinking of paying to employers in manufacturing industry about £130 million as a result of the Selective Employment Tax Bill, this Committee would do better first to see that the old people are properly looked after by this suggested tax remission; and that we should cut back that amount in respect of Selective Employment Tax rather than see the old people go without.

    I believe that at the present time—and I am sure that the right hon. Lady the Minister of Pensions and National Insurance will agree, although she was cruel and unkind to us last Friday—there is a tremendous problem in respect of old people with small fixed incomes. These are people who served Britain well, and are now pensioners drawing not only their retirement pension but another small pension, whether it be a railway superannuation payment or a pension for war service. I beg the Government, who have been singularly adament about all the other new Clauses, to look at this one with sympathy.

    9.30 p.m.

    (Dorset, West): I make no apology for detaining the Committee for a few moments on the subject, on which I have spoken frequently in previous Finance Bill debates. Although we have made progress with age exemption, it seems to me that we are creeping forward very slowly.

    We are living in an age of inflation for which both sides of the House must bear some responsibility. The first victims of inflation are inevitably the elderly. Once retired, they have to sit and watch their costs going up, and usually their incomes are fixed and so do not rise proportionately. The calculations which they made on retirement go very quickly awry. They see their costs in relation to food, rent and transport—I particularly mention the problem of my own constituents in regard to rural transport, the buses being very infrequent and becoming increasingly expensive—rising, and life becomes difficult for them.

    It is one of the fundamental precepts of the Treasury that pensions are earned according to the actual earnings when the individuals were in work. That bears very hardly on these people. Many of them gained their pensions at salary or wage rates which were very low compared with the rates today. I have many sad examples in my post-bag of people living in reduced circumstances. They may have spent a little too much on the house which they have chosen to live in, but it is difficult to change it when they see how much the cost of living is going up.

    I believe that the time has come when we should be more generous about these age exemptions. I believe that the case rests not on the amount that the cost of living has gone up in a particular year but on our general attitude to the problem. It is time we recognised that the old people on fixed incomes are some of the most deserving types in the community, even if they are not the most vocal. I hope that we can creep forward once again, if only by extending the limit by £50 a year, but I believe that the time will come when we must take a bigger step forward in this direction.

    I strongly support the proposal by my right hon. Friend the Member for Thirsk and Malton (Mr. Turton). As my right hon. Friend said, the principle of age relief was introduced originally nine years ago and was modified about three years ago. All along hon. Members on both sides have felt that we should edge forward with relief of this kind whenever we could. In an affluent society like ours, we ought to be prepared to be generous to the elderly.

    I go further. I think that in our taxation arrangements and our social service policies we should give conscious preference all the time to the weaker elements in society—in this case, the financially weaker, those whose savings have lost a good deal of their value since they left work and who find as a consequence that much of their efforts have gone for nought. No section of the community is harder hit by inflation than the elderly and those living on small fixed incomes.

    I see the right hon. Lady the Minister of Pensions and National Insurance on the Treasury Bench. Earlier this year, one of her Joint Parliamentary Secretaries admitted in the House that one-quarter of the generous increase granted in the State retirement pension last year had been eroded by the rise in prices. Whatever the reason, it is a fact that prices have been tending to rise in the last 20 months faster than they had done for a long time. The people we are seeking to help have no organised bodies, no champions to represent them. I do not wish to be unkind, certainly to those hon. Members opposite listening to the debate, but lack of sympathy among the party opposite for this cause is evidenced by their almost complete absence.

    The resignation of the right hon. Member for Nuneaton (Mr. Cousins) has focussed attention, in a way which perhaps no other event could, upon the difficulties the Government are encountering in their prices and incomes policy and because of inflation generally. One of those difficulties has been that too many groups in the country have been taking too much out of the kitty. Almost every wage award granted has been above the norm. This modest proposal is an attempt to see that the old people who have no one to champion their cause get a fair crack of the whip. In an earlier debate today there was much talk of "MacDermot's Law". When the Chief Secretary replied, someone said that "Diamond's Law" was clearly that Socialism is no longer the language of priorities. We are beginning to feel that this is true.

    I hope that it is not true. I hope that the presence of the right hon. Lady here is evidence of the pressure she is trying to bring upon the Treasury. We know where her heart lies and what she would like to do. But she is not in the Cabinet. Indeed, it is a weakness of the present Government that neither she nor the Minister of Health are members of the Cabinet. I hope that the right hon. Lady's presence means that there is a determined attempt on her part to soften the heart of the Financial Secretary. My right hon. Friend the Member for Thirsk and Malton put forward a powerful and compelling argument and one that is quite unanswerable either on economic grounds or on grounds of social justice. I hope that the hon. and learned Gentleman will not disappoint us.

    (Folkestone and Hythe): I rise to support my right hon. Friend the Member for Thirsk and Mal-ton (Mr. Turton). Those of us who have the honour to represent constituencies which have a large number of elderly people well know the difficulties they are up against.

    On a point of Order, Mr. Grant-Ferris. May I draw your attention to the fact that, on this important matter, you are having difficulty in selecting hon. Members to speak, being restricted to hon. Members on this side of the Committee? This is because there are so few hon. Members opposite and none of them wants to speak on this Clause. We should not really discuss this Clause with fewer than 40 Members present in the Chamber.

    Further to that point of order, Mr. Grant-Ferris. May I draw your attention to the fact that fewer than 40 Members are present?

    Notice taken that 40 Members were not present;

    Committee counted, and, 40 Members being present

    On a point or order. May I ask for your guidance, Mr. Grant-Ferris? When I avail myself of the opportunities which are perfectly permissible in this Chamber and draw attention to the fact that fewer than 40 Members are present, why should you deprecate it?

    I am very sorry. I did not quite hear what the hon. Gentleman said and I thought that he said something rather different. If I had realised that he was calling for a count, he would have been within his constitutional rights to do so and I should have called it at once.

    I was saying—[interruption.]—I was saying—[HON. MEMBERS "Goodbye."]—I suppose that hon. Members opposite are now leaving the Chamber not only because I am speaking, but because they would be ashamed to stay in the Chamber and hear the arguments from this side of the Committee, advanced for the benefit of the elderly, and then to have to go into the Division Lobby when the bell rings.

    Is my hon. Friend aware that when we were discussing an allowance for incapacitated wives, only two hon. Members were present on the Government side?

    During the course of this Finance Bill, we have had a great deal of sympathy from the Government Front Bench, but very little action. We have had back benchers opposite roaring their opposition like bulls, but stamping through the Division Lobbies like butterflies.

    The new Clause gives the Government an opportunity to turn what has been a mingy Budget into something which gives some social benefit to those who need it most. My hon. Friends have pointed out that the Minister of Pensions is herself present on the Front Bench. We know from correspondence with her of the care and sympathy which she gives to the many cases which we put to her. Only this weekend, constituents came to see me who had never expected not to be able to live a respectably comfortable life on their retirement pension, but who have found that the cost of living has risen so much that they are now suffering from financial embarrassments. It is wrong that that should happen.

    This modest Clause is an opportunity for the Government to rectify some earlier mistakes. My argument is brief because it is sincere, and I very much hope that hon. Members opposite will come to our assistance if the Government do not give way.

    I am sure that every hon. Member on either side of the House can produce evidence from his own constituency experience of the sort of case for whom hon. Members are pleading in this short debate. I know from my own experience that these difficulties are increasing and that more people are expressing deep concern about the trend of rising costs and prices which they are having to try to meet. Anybody who has any dealings with elderly people knows how much greater is their worry and concern, particularly when they have extremely limited means, when they find their resources diminishing and the value being eroded by inflation. I find it very difficult to help them and I think that every hon. Member is in much the same position.

    One of the most difficult questions which I have to answer is, "Why should my small pension be taxed?". I am sure that all hon. Members know the formal answer, but it is difficult to explain it to the pensioner. It is difficult to get the message across and it is not a particularly palatable or happy message at that.

    9.45 p.m.

    What we are asking for on this occasion is that those who are at the lower income end of the community, who have the smallest amount of money coming in regularly, and of whose income a substantial proportion is inevitably made up in the form of retirement pension, shall have some relief given them. This relief must take account of the trend of inflation and of the rising earnings among those younger and more active than themselves. This point was made very forcibly by my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) in moving the new Clause.

    The disparity between the pensioners' income and the earnings of those actively employed in industry is extremely great and contributes to the general unhappiness and concern among pensioners. It is inevitable, struggling as they do, trying to make both ends meet, to find the wherewithal for the bare necessities of life, that they should note the tendency of those employed in industry to contract out of the consequences of inflation, which in many instances those engaged in industry are responsible for creating and stimulating.

    We see this to a great extent because we are living in the midst or by inflationary trend, and because we hear almost daily of wage claims being granted and further claims being demanded. Here, at the lower end of the income scale, is a group of people who are not able to fight their way free from this ghastly, vicious circle in which they are the innocent victims. This is something which concerns all of us. Regrettably it is run-of-the-mill in our constituency affairs. We are dealing with these people all the time. For Heaven's sake let us stop preaching to them and do something positive to help.

    This is all we are asking—a little bit. It is not much. In this Finance Bill there is accruing to the Revenue hundreds of millions of pounds in taxation. All that we are asking is for a small portion of it to be set aside to bring a slight measure of relief to these people, and to bring them a little peace of mind. I do not for a moment believe that the small amount of revenue which will be lost is anything which will cause a great deal of concern. My right hon. Friend the Member for Thirsk and Malton pointed out the many ways in which this money could be recovered. The anxiety and the heartache caused by inflation and rising prices, and by the fact that even pension increases are being taxed out of existence, are out of all proportion to the amount of money accruing to the Revenue. I would strongly urge acceptance of this new Clause upon the Government.

    I ask the Financial Secretary, when he replies, to lay aside the Treasury brief and to deal with one simple proposition which seems to me to underlie the very powerful introduction of the new Clause by my right lion. Friend the Member for Thirsk and Malton (Mr. Turton). Does he, or does he not, agree that the effect of inflation should be reflected in relief from taxation just as much as it is reflected in the increased incomes which are permissible even under the Government's prices and incomes policy'?

    We lose sight, when dealing with problems of inflation, of this sort of thing. As my right hon. Friend clearly explained, over the years there has been growing recognition of the justice of increasing these reliefs. But we do not seem to appreciate that inflation affects them in exactly the same way in which it affects everyone else. I hope that we may have, for once, a reasoned argument in reply and not the stereotyped answer already typed out.

    (Harrogate): I wish to reinforce the plea made on behalf of this group of people by my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) by bringing to the notice of the Financial Secretary two examples which came to my notice during the last election. I say in parenthesis that one's experience at succeeding elections in talking to different householders—I suppose that this is particularly true in a constituency like mine in which many retired people live—brings home to one how this group of people are undoubtedly the hardest hit by the failure of successive Governments—I make no party point about this—to control the rate of inflation and to mitigate the extent to which small fixed incomes are eroded by rising prices.

    The first example illustrates how these people are hit whatever happens and whichever party is in power. In the borough of Harrogate there used to be a system whereby rates could be paid in half yearly instalments. If people paid their rates promptly on receipt of the demand notice they received a discount, which is valuable to people who are forced to count the shillings. Recently the system was changed. Now, in order to get the discount, people have to pay the rates in one lump. It is true that they have the option to pay by weekly instalments, but if they do that they do not derive the advantage of the discount.

    My borough is not notable for the inefficiency of its administration; quite the reverse. Therefore, I inquired why it was necessary to introduce this system. I was told that, because of the extra volume of administrative work laid on the rating staff by applications under the Rating Act, this simplification of the method of collection had to be introduced. Be that as it may, this seems to be an illustration of the fact that whatever happens this class of people suffer and there is very little, it seems, which can be done to help them.

    My second illustration is a personal case which is probably not untypical but it is particularly illustrative of the fact that the people about whom we are talking are not plutocrats by any means. they are people with very slender resources often due to the fact that they have been left by their husbands in circumstances which took into account a standard of life no longer within their grasp. The case which I have in mind is of the widow of a distinguished civil servant who played a notable part in the defence of Malta during the Second World War and who subsequently served in the Cabinet office. That is a by no means isolated example but it brings home to one the kind of people who are suffering from the circumstances which my hon. Friends have described.

    The reason why I make these two points is that by accepting a new Clause of this kind the Government would be doing one of the few possible things within their capability to help these people. There are not many ways in which to help this relatively restricted group, who have just so much income that they cannot fall back on National Assistance and who have so little capital that they are not able to ease their circumstances by prudent investment. They are a comparatively small class. Acceptance of this sort of proposal seems to me to be about the only way in which they could be helped. I hope very much that the Financial Secretary will sympathetically consider the new Clause.

    We all know that the right hon. Lady the Minister of Pensions and National Insurance, who has been present throughout this debate, has deep sympathy with the needs of the elderly, as she has shown repeatedly in her correspondence with, I am sure, all hon. Members, on both sides. I know that if the right hon. Lady had her way, she would like to repeat annually what she was able to do a year ago and increase the retirement pension for everyone. That, however, would cost a lot of money. The global cost of that and associated National Health Service benefits last year was something like £300 million, an enormous amount.

    In the context of the new Clause, however, which was so clearly proposed by my right hon. Friend the Member for Thirsk and Malton (Mr. Turton), the Minister and her colleagues have a means of giving valuable assistance to a considerable number of people. My right hon. Friend the Member for Harrogate (Mr. Ramsden) said that they were a relatively small section, but, nevertheless, a considerable number of people are in the category of the old.

    Another point about this group of people is that they are by definition persons with small resources, and yet they are thrifty. By golly, this country needs thrift as never before. If ever the country needed the quality of thrift, as well as the quality of hard work, which is more often referred to, it needs it today. These persons have been thrifty, but in their retirement and their older years they find that the hard-won results of their modest thrift are being eroded.

    The right hon. Lady was able, just over a year ago, to introduce an increase which was not inconsiderable, but yet in real terms, for each pensioner, was not by any means too large, and yet 25 per cent. of that has already been eroded simply through the increased cost or living. This has happened before—I am not making a party issue of it—and it has happened during the last 12 months. Of the increase granted by the Government a year ago, one-quarter of it for these and other retirement pensioners has already gone.

    Is my hon. Friend aware that that was the position in February? That was when the Parliamentary Secretary gave the House that information. Since then, prices have continued to rise and the erosion has continued.

    If we had up-to-date figures, we could probably say that about one-third of the value of the increase has been eroded by the mere effluxion of about 12 months.

    In the modest terms of my right hon. Friend's Clause, we are asking for a concession in the terms of a Budget which has imposed enormously large new taxation and which includes, with an associated Bill, proposals for the distribution, rightly or wrongly—it would be out of order to debate that issue now—of very large sums, much larger than those to which we are referring.

    10.0 p.m.

    All we are asking for is this modest figure. It has merit because it is based on the increase in the cost of living not only since last year but—which is much more important—since the time when the last proposals were brought before us for age relief of this kind. As my right hon. Friend has pointed out, there has been a considerable change since that date. The Committee accepted the principle of age relief then. Neither side of the Committee has criticised it since. Neither side of the Committee has tried to do away with it. So, presumably, both sides of the Committee support the principle of age relief in this sphere.

    We say that, on the basis of the changes in the cost of living since that age relief was framed, this new Clause stands on its own merits. We say that, as a result of the introduction last year of the Pensions (Increase) Measure, which, as my right hon. Friend indicated, has brought many of these people into the tax bracket, there has been erosion of the benefits which were surely intended for them; it was intended they should have a larger benefit than in fact they are enjoying. Finally, the very difference of those benefits in the face of average earnings further puts into broad relief their problem.

    Let us pass this Clause. I do hope that the Financial Secretary who has so often said, "No" will, in principle, say "Yes" this time. Let us help the thrifty of yesterday, and give hope to the thrifty of today and tomorrow.

    I am delighted to support this new Clause so ably proposed by my right hon. Friend the Member for Thirsk and Malton (Mr. Turton). I understand that we are also discussing new Clause No. 15 and new Clause No. 16 which have their own very important angles.

    How relieved I think the whole Committee—both sides of it—must be that when the Financial Secretary replies to the debate his arguments will not at any rate be able to contain the phrase"It is difficult to define the categories "because they are very clearly defined and have been defined for a very long time.

    The hon. and learned Gentleman, I am sure, will himself be delighted that he really cannot even say, "Why did not the Conservative Government do it during the 13 years they were in power?" because it was Mr. Peter Thorneycroft who first initiated this kind of tax relief. I would say to the hon. and learned Gentleman that I never mind when he chips at us, but I am bound to say that the Socialist Government seem always to be so rigid; they always seem to think the Conservative Government were rigid. Here, however, was an entirely new arrangement for those living on small fixed incomes and it was introduced by a Conservative Chancellor of the Exchequer, and built upon, and improved, by successive Governments. So we have not got to bother about the definition of categories; we have not got to bother about the allegation that the Conservative Party did nothing during the 13 years it was in power: we have only got to discuss the merits of these new Clauses.

    My right hon. Friend the Member for Thirsk and Malton said very clearly and with great force and wisdom that it has always been difficult to find a way of helping those living on small fixed incomes who do not attract National Assistance. It has been very worrying. Our postbags are full of letters on the subject. These people are the least complaining of all sections of the community. They have always made tremendous efforts in support of the country and they have done wonderful work. For the most part, their letters do not raise any complaint about the affluent society in which we live today. What they say is that their future is filled with anxiety. Many of them have to dispose of their savings in an effort to meet their obligations, and they find it very difficult to see how they are to manage in the future. They are more anxious and apprehensive about that than the fact that they are living in an affluent society. There is very little opportunity of finding a way to help them not to keep pace, because that would be impossible, but to ensure that their future is not overclouded by the fear that to the end of their lives they will not be able to provide even a reasonable standard of living for themselves.

    I do not know whether the Financial Secretary has ever considered, for instance, the terrific burden imposed on these people by the increase in telephone rental charges. Many of them live in isolated parts of the country. They are old and they cannot afford to travel to see their friends and relatives. In the past, they have always enjoyed having telephone conversations. Now, with the increased rentals and the increased cost of what I call human conversations rather than business ones, under the new system they are unable to talk to friends and relatives over the telephone.

    I have had people tell me that they cannot even afford to have library books sent to them because of increased postal charges. I know that the library systems in all the county and rural areas have developed in a miraculous way and that a great deal of the difficulty about books has been relieved. But that does not apply everywhere. One can imagine the anxiety of old people when they feel that they have to give up their library subscriptions because of the increase in postal charges. Everyone knows that the cost of parcels is phenomenal. All the little things which people enjoy when they reach the age of 65 seem to become more and more expensive, even to those living on small fixed incomes.

    In their younger days, a great many people in this category subscribed towards gilt-edged securities. The phenomenal drop in the value of undated War Loan means that people who have to realise their savings in order to maintain their standard of life are getting only about half the money which the War Loan was worth when they responded to the call of the nation to subscribe to it. We all know that it is impossible to do anything about the fall in the value of gilt-edged securities. The result is that this section of the community is slowly being strangled by this affluent society.

    I think that it was my hon. Friend the Member for Essex, South-East (Mr. Braine) who said that these people had nobody to put the case for them, but that is not really true. Some of us have argued their cause with both Conservative and Socialist Governments, but I feel that, because these people are not in any great organisation, their position has not been appreciated. I simply cannot believe that anybody who has had any contact with them—and I know that the right hon. Lady has had plenty of contact, because occasionally we gossip—does not appreciate their plight.

    The Treasury in its ivory tower has not the remotest idea of what goes on among these people, and I hope that my male colleagues in the Committee will forgive me if I say that these old people find it a little easier to talk to a woman than to a man. Men are very good at arguing a case, and I admire them for this, but widows do not like to disclose their poverty and their anxiety to a man. They would much rather talk to a woman, because we know a little more about their problems.

    I think that we have given the Financial Secretary an extremely easy wicket to bat on. I do not think that he has ever had an easier one. I hope that he will at least choose the marginal relief side of the new Clause. He could also, of course, increase the amount of money which is free of tax. I hope very much that the appearance of the right hon. Lady means that she will bring pressure to bear, if pressure is needed, to persuade the Treasury that this is an absolute must for acceptance by the Government.

    (Isle of Thanet): One thing which I am sure is recognised by the Committee is that whether my hon. Friend the Member for Tyne mouth (Dame Irene Ward) gets acceptance from the Front Bench opposite or not, she commands the attention of the Committee when she speaks on this subject. My hon. Friend talks from the heart. She not only has considerable experience of the position of widows, but she commands the attention of men, and this is quite something. She speaks with profound conviction on these matters, and we ought to pay a good deal of attention to what she says.

    I rise to speak because when I first came into this House, which was more than 10 years ago, the first thing that I had to deal with in 1955 was this issue. I then suggested that we should introduce a Measure which would give what was then called unearned income relief to women over 60 and men over 65. My ally back in those days was my hon. Friend the Member for Tynemouth who, if I may say so, was my leader in that regard. She was even then a fighter in this matter, and had been for some years.

    10.15 p.m.

    As always happens, it took a few years before the Government of the day acted and it is well to remember how the Opposition reacted. In 1955 they reacted on the basis that to give relief to old people over 60 or 65 meant that it was being given to all those who had not earned it. That is the history of the matter.

    It took us some years to persuade them that those who were retired no longer earned money and that it was therefore fair enough to treat those with unearned income as if they had earned it. In 1957 this provision was first brought into effect. It began with a sum of £250 for an unmarried person, and year by year it was raised on the basis that those who were living on small fixed incomes were very much worse off than those living in the prosperous society in the days of Tory rule.

    As the years went by the sum was increased, and the new Clause seeks to raise it still further, from £390 to £420 for an unmarried person and from £625 to £675 for a married couple, with the shading to which persons are entitled in respect of Income Tax. This year the increase is only £30 for the unmarried and £50 for the married.

    Leaving out of account the argument about the fall in the value of money or the rise in the cost of living, I turn to a point to which nobody has yet addressed himself. During last week I was addressing the Committee on the question of the Selective Employment Tax. If persons have made a certain amount of money by working part-time during the summer and we charge their employers with the Selective Employment Tax we shall drive these people out of their employment. This is what I have found to be the case over the weekend.

    Many of these people will no longer be able to carry on their present work, which has enabled them to earn money for their retirement. They will be deprived of that opportunity, and at the same time will have nothing to take into account for Income Tax relief. Not only is there a good case for all the arguments which have been adduced, but there is a good case for saying that those who are retired today ought to receive further Income Tax relief in the form of an addition to the unearned income relief. Therefore, if we were to raise the one rate by £30 and also to raise by £50 the married relief, which is free of Income Tax, we would not only give direct assistance to those who have retired—married and unmarried—but would give them a quid quo pro which would be a genuine advantage against their loss under the present Government proposals to compel them, if they are employed, to pay the Selective Employment Tax which the Government has just introduced.

    All these matters are inter-related. The position today of those women who are over 60 and those men who are over 65 turns first of all on the Income Tax which they have to pay, secondly, upon the question of whether they will qualify for National Assistance and, thirdly, upon whether they can be employed and, if so, on how much money they are likely to earn part-time. That, in turn, depends on the new tax which the Government are introducing, which says that they shall pay just as much tax as a man earning £50 a week.

    Until the Government will listen to reason about the Selective Employment Tax, they must otherwise make some compensation now upon this tax. I care not which it is. If they do not make it upon this, they must make it upon the other. I hope that the Government will recognise that the best way of dealing with this matter at the moment is to make a concession here. I hope that the Financial Secretary will deal with the situation from 1957 to the present time. I think I am right in saying that there have been either four or five increases since the original acceptance of the principle that it was proper to treat this as earned and not unearned income for the elderly.

    It has always been recognised that we make a change every year provided that the inflation rate and the conditions of the old people deserve it. The Conservative Party promised that, however much there was a rise in the cost of living or, what was far more important in those days, however much there was a rise in prosperity and production—which there was every one of those years—they would give to the old people, by way of offset, a significant addition in this way, with which the new Clause deals.

    The Government cannot claim, as we could claim, that there was a rise in production and prosperity this year, but they can use the argument that there has been a significant rise in the cost of living and in taxation. These two things are just as important to the old people as being able to get the entitlement arising from an increase in productivity or prosperity. If the cost of their way of life is put up, we should compensate them by lower taxes. Let the younger generation pay for the future. The old people should not have to suffer at their stage of life for what is the Government's and the country's fault. It is partly the country's fault for not putting up production, and partly the Government's for the measures which they have introduced.

    Whichever it may be, let us see that the old people do not suffer and that they get a continuing benefit. Relief on £30, which is not the same as £30, in the one case and £50 in the other is reasonable in all the circumstances. I hope that, in this matter, upon which the Labour Government has shown no great partisan-ship—I give them full credit for that—since they accepted the principle in 1957, they will take the view that they can make a concession which will, to some degree, offset the damage, at least to some people, which would otherwise be caused by the other tax measures which the Government have produced in this Budget.

    I shall be brief, because the case has been very well argued and I agree with all that has been said by my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies). The Chair has been gracious enough to select new Clauses Nos. 15 and 16, which are in my name and that of several of my hon. Friends. I particularly support my right hon. Friend the Member for Thirsk and Malton (Mr. Turton), whose proposition is the main point of our discussion. I accept that the two Clauses which I have put down go a little wider, but they have been discussed well and ably here tonight and they should strike some cord of conscience in the minds of right hon. and hon. Gentlemen opposite.

    I am grateful to see the right hon. Lady the Minister of Pensions and National Insurance here tonight. All too often in the nine days of our debates on the Bill, the greater part of which the Financial Secretary knows only too well I have attended, we have lacked rather a lot the support of Government Departments associated with the Amendments. In contradistinction to this, I pay my respects to the right hon. Lady for attending. I know from past experience what a sincere interest she takes in matters of social welfare and I remember our discussions in the past.

    I can remember joining arms once or twice with right hon. and hon. Members opposite in matters arising on Amendments on social welfare. There were some that I could not join, but I recall the persuasiveness of the arguments which they put up when they sat on these benches. They should have some care to their conscience in this matter because they now face precisely the kind of arguments to which we had to listen from them—only in a more aggravated form, because the horrible bug of inflation is eating into the retired people of whom we have been speaking tonight.

    All of us have come across this problem in our constituency work, no matter which side of the committee we sit on—and I am sorry that more hon. Members are not taking part in the debate, particularly hon. Members opposite. The problem of inflation in regard to retired people is saddening, and we owe something to them. They cannot do anything about it themselves; they cannot go out and increase their earnings. In a material sense they are dependent upon us. Either we have to hold prices and kill inflation—nothing that Government policy is doing at the moment appears to fit that bill and I do not appear to be alone in that thought—or we must do something to help them.

    The only way that we can do that for these groups of people is through the tax instrument. It has always been extremely difficult to get at some people. If they do not pay any tax we must depend on the full-fledged social services. Many people have tried in one way or another to safeguard themselves for the future so that they should not be a charge on the State. They pride themselves on this, and great honour is due to them. But the tide is getting too deep—it is too vast. They cannot compete; there is nothing that they can do.

    We all have such people in our constituencies, although some areas have a particularly large number of retired people, as my right hon. Friend the Member for Harrogate (Mr. Ramsden), whom I live near, knows only too well. Other constituencies of that character also have a great number of them, but we all have them and they are very much on our minds.

    The Bill does absolutely nothing for them. The Government gave way on a technical Amendment of mine, which I do not suppose many people will understand if I repeat tonight, and, backgammon was removed from the highest rate of gambling tax. But nothing was done for the social services. How can right hon. and hon. Gentlemen opposite square that with their conscience? They cannot argue the economic situation, because at this stage, after the best part of two years, they hold a very great responsibility for it.

    For ten months the cost of living has been rising month by month, and there is every sign that the rise will continue. The new Clauses are designed to meet this problem. I do not wish to hold the Government to any of the figures which I have given in the new Clause. It may be argued that they go too far. But one has to put down something to allow a discussion in a Clause which one hopes that the Chair will select. Nothing has been more devastating than the Chief Secretary's abuse of that fact and his argument on the literal proposals of the Clause when they have been put down simply to permit discussion. Fortunately my respect for the Financial Secretary is much greater than for the Chief Secretary. We are seeking to give an opportunity, for which I am sure the nation is waiting, so that the Government may show that they have consciences and that they are prepared to meet the House and the country on this matter.

    10.30 p.m.

    The right hon. Member for Thirsk and Malton (Mr. Turton) began by claiming that if the Government wish to help people through tax relief, this is the right way to do it. I entirely agree with him. This form rather than that suggested in an earlier Clause would be the right approach, as my right hon. Friend showed last year, when it was by raising the limit for age exemption that he gave assistance.

    We are discussing two points—the age exemption and the age relief in respect of investment income. The latter arises on new Clause 16: new Clauses 41 and 15 deal with the age exemption. The case has been made primarily on the increase in the cost of living which has taken place. The right hon. Member in his new Clause limited the increase specifically to the amount which would be required to make good the increases in the cost of living which have taken place. The other new Clause would go rather further.

    The right hon. and learned Member for Chertsey (Sir L. Heald) asked me whether the Government accepted that the effect of inflation ought to be reflected in relief from taxation. Provided that he is not asking me to say that every year automatically there must be an increase, I will agree with that proposition. This is a factor, probably the principal factor, which must be taken into account particularly when considering this type of relief. We all know that cost of living increases bear, broadly speaking, more heavily upon the elderly than upon other classes of the community.

    The right hon. Member for Thirsk and Malton supported this case with a further argument that because of the Pensions (Increase) Act some people have been moved into the tax-paying band and that it was wrong to bring people into the category of taxpayer by pension increases. That is a somewhat novel doctrine. I do not think that it was followed by his own Government after the 1959 Pensions (Increase) Act. It was three years before there was an increase in the age exemption limit after that Act. But I can see the force of the argument, particularly in relation to the second part of the argument, dealing with marginal relief, and I will come to that at the end of my speech. He also adduced an argument based on the fact that average industrial earnings have risen, as they have, during the past year. That is, as it were, a more extreme way of putting his argument based on the cost of living. I say at once that if this was a year in which my right hon. Friend felt able to grant reliefs from taxation, particularly to the elderly, this is the type of proposal he would have made.

    My right hon. Friend has been criticised because there are no social services provisions in the Bill, but I hope that the Committee will remember to consider the whole programme of legislation. If hon. Members are fair they will recognise that an enormous amount has been done by the present Government for the elderly since they came to office, and that they are continuing to do so in legislation that is now before Parliament.

    Hon. Members have paid generous tributes to my right hon. Friend the Minister of Pensions and National Insurance for her presence throughout this discussion and for the great concern which she has shown, and feels, for the elderly. One hon. Gentleman opposite commented adversely that my right hon. Friend is not in the Cabinet. I assure the hon. Gentleman, speaking as a Treasury Minister, that the elderly have not suffered and do not suffer in the slightest from her not being a member of the Cabinet. I could almost say that we in the Treasury might be grateful if some of our colleagues who are in the Cabinet were not as successful as she is in obtaining public funds for the work of her Department. The Committee will not need reminding of the magnitude of her initial success in achieving a substantial increase in the retirement pension, which was one of the first acts of this Government when we took office in 1964. There have been many other Measures since.

    The hon. Member for Dorset, West (Mr. Wingfield Digby) referred to the difficulties of the cost of transport, particularly for the elderly; rural transport and so on. I remind him that one of the first acts of the present Government was to introduce a Measure to empower local authorities to introduce concessionary fares for the aged, some of which is very much appreciated in my constituency and many others. I could list many provisions which have greatly helped the elderly, including the Rent Act, the abolition of prescription charges, and matters now before Parliament such as the rate rebate scheme, something which will help people generally, but particularly those we are discussing.

    Since the hon. and learned Gentleman has raised this point, is he aware that it has come to my knowledge, for the first time, that those who are given a war pension must have the whole of their income treated against the rent rebate in respect of rent rebate schemes, and that this is one of the ways in which one must recognise how wrong it is to suggest that there is any great advantage to such people from the scheme?

    That is an extravagant comment for the hon. Gentleman to make. I repeat that a great many of the people who are precisely in this category, to whom the age exemption applies, will benefit greatly in a most practical way from rate rebate scheme. There are other Measures which will benefit those within these income limits, such as my right hon. Friend's Social Security Bill.

    With respect, how can the hon. and learned Gentleman really make a valid point of that when the maximum increase which any of these people will get under the rate rebate scheme is in the neighbourhood of a 5d. rate, when rates have already increased by 25 per cent. since the Labour Party came to power?

    I do make the point, because they will get the relief. They also get the benefit of being able to pay their rates by instalments, which is also a great relief to them.

    To turn to the terms of the Clauses themselves, I think that the hon. Member for Shipley (Mr. Hirst) was conscious of a drafting error in one of his Amendments, because it ignores the last two increases that have taken place. I think from a remark he made that he realised that.

    I quite agree. I was informed, it would seem incorrectly, that one had to amend by reference to the original Act.

    The hon. Member for the Isle of Thanet (Mr. Rees-Davies) asked me to remind the Committee of the history of this relief. It was introduced in 1957. There was an increase in 1958. There was then a gap until 1962, after which there has been an increase each year, including the increase in last year's Budget. That is the history of the increases there have been. So this form of relief has been dealt with quite favourably in comparison with others in recent years. There are, of course, also the marginal relief provisions. Clearly, as I have indicated, if this were a year in which my right hon. Friend was able to grant reliefs, this relief is one which would have a strong claim for review.

    I was asked about the cost of the new Clause proposed by the right hon. Member for Thirsk and Mallon. This would be, as he says, about £5 million this year and £8½ million in a full year. That would be the cost of raising the age exemption limit. It is not possible to estimate the cost of the marginal relief proposals owing to the sudden jump involved, with which I shall deal a little later, if I may. The cost of the new Clause in the name of the hon. Member for Shipley would be £13 million this year and £22 million in a full year.

    I turn now to the marginal relief provisions. The present provisions are that where it is to the taxpayer's advantage his tax bill is nine-twentieths of the amount by which his total income exceeds the exemption limit, instead of what it would be under the normal rules. The point at which marginal relief ceases to be advantageous varies from case to case, depending on the particular income, but it cannot be higher than £459 for the single person or £782 for a married couple.

    These marginal relief provisions are sometimes criticised, as they were today by the right hon. Gentleman, on the grounds that the marginal fraction of nine-twentieths is too high and produces a heavy impact, as it were, of tax on that first band when a person ceases to enjoy the full exemption and comes into the marginal relief band. I am afraid this this is an inevitable consequence of a provision which is intended to be an exemption for small incomes—and this is, of course, the nature of the relief.

    Unless one wishes to extend it up the scale very considerably so that, in effect, it ceases to be a small income relief then, inevitably, one has marginal relief provisions that will taper off, as it were, the benefits, and taper them off fairly rapidly. It follows that the marginal fraction must be above what would be normally the taxpayer's rate of tax at that level of income if it is to achieve its tapering object. Equally, unless the tapering is to be extended very far, it must exceed that marginal rate quite substantially. That is the explanation for the nine-twentieths figure.

    The right hon. Gentleman pointed out that it might mean—I forget the exact figures, but I take his point—that someone coming into the marginal band through additional income—say £25—would pay a substantial rate of tax on that £25. So he would, but what one has to look at is not just the marginal rate on that £25 but the rate of tax on the whole of the income. It is a very low rate of tax. Naturally when he begins to pay tax, although it is calculated on the marginal band, what he is doing is paying a very low tax on the whole of his income, and that is the right way to look at it. This is inevitable in tapering provisions.

    10.45 p.m.

    I am afraid that not only a similar but a worse result would flow from the remedy which the right hon. Member for Thirsk and Malton has proposed in the second part of his new Clause, because it would involve a sudden jump in tax where the excess of income over the exemption limit is just over £100. The right hon. Member proposes to reduce the liability to one quarter of the excess of the total income over the new limit, provided that the excess is not more than £100, or half the excess if it is more than £100 and less than £200. That would mean that if the excess of the income over the exemption limit is £100 the liability to tax would be a maximum of £25. But if the excess is £101, his income having gone up by £1, then the liability would be £50 10s.—half the excess. A jump of that kind would, I think, be far more unacceptable than the increase which is involved in the present marginal relief provisions.

    Does not an exactly similar jump occur as in the figures given by the Financial Secretary when one gets over the £160 margin. I am suggesting that one should grade this into three bands. In the first band people would be paying a rate not exceeding 4s. 6d. in the £, in the second 9s. in the £, and then it is quite true that when one got over that there would be a big jump, but that is inescapable in any system of marginal relief. Where I am trying to help the old person is where he is just over. At the moment there is this very large increase of 9s. in the £ on the excess. That is a deterrent to working and also a disappointment to anyone getting an increase under the Pensions (Increase) Act.

    I will certainly be glad to look at what the right hon. Gentleman has been saying to see whether there is any way in which one can soften the first stages, but I imagine one could only achieve that object either by extending the marginal relief into higher brackets or by increasing the steps at a later stage of the marginal relief. Certainly, for the reason I have given, I do not think the right hon. Gentleman has succeeded in finding the right answer, because in the middle of his marginal relief there would be this very sudden jump from £25 to £50 10s. in tax liability, as a result of an increase in income.

    As far as new Clause 16 is concerned, this is old age relief and the Clause proposes to raise from £900 to £1,200 the income limit for age relief. This is the relief which gives the equivalent of the two-ninths earned income relief on investment income to taxpayers over 65 whose income does not exceed the prescribed limit. The intention of it, as the hon. Member for Isle of Thanet said, is to equate the tax liability of a taxpayer who in retirement has to live on a modest income from the investment of his savings with that of a retired taxpayer who lives on a pension which qualifies for earned income relief. Again there are marginal relief provisions and the precise point at which this ceases to give benefit varies from case to case, but they can in some cases extend up to a total income—where it is all from investments—of £1,500.

    If the limit were raised in the manner suggested in the new Clause, the marginal relief would finally disappear at slightly over £2,000. Again, I do not wish to say anything to detract from what hon. Members have said about the effect of cost of living increases on the elderly, but I do not think that this is a relief which my right hon. Friend could increase this year. The cost of doing it would be £1¼ million in the present year and £3 million in a full year.

    We are all grateful to my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) for moving the new Clause and adducing so much evidence in favour of it. We ought to be clear what he is asking for. It is not any extra relief for the aged. It is for relief in order to keep them in the same position as they were in last year, so that they shall not continually be worsted by the rise in incomes which has been going on relative to the rise in productivity. It is strange that in a year when incomes have risen faster than ever before, the Government are not willing to ensure that the old folk are not put in a worse position than they were in at the beginning of the year.

    Throughout the Finance Bill debates the Financial Secretary has had one refrain on his lips when asked about tax reliefs—"Never on weekdays." What would have happened if the Committee had sat on Sundays I do not know, but we have had no reliefs on weekdays from him. This is the last opportunity for some social service provision to be inserted in the Bill in Committee, and I would have hoped that the Financial Secretary would have taken it and given some encouragement to the Committee. We know what has happened. He has the unenviable job of a No. 2 at the Despatch Box, and I know how unenviable a job it can be. His brief is marked "Resist". The arguments are set out there, and he has to give those arguments. Fortunately, it is not part of his job to believe in those arguments; otherwise he could not carry on, particularly on a new Clause like this one. Surely no hon. Member—and no Minister—can willingly go into the Lobby tonight and insist that those aged over 65 on under £8 a week should be compelled to make a contribution to the salaries of Members, which have been increased vastly, and to the salaries of Ministers, which have been increased vastly. But that is what the hon. and learned Gentleman is saying they must do.

    As the Financial Secretary pointed out, this was what we called the "Peter Thorneycroft" relief, introduced by a Conservative Government and increased many times by a Conservative Government and increased once by the last Labour Government. It was increased many times to show the kind of priority that we give to those aged over 65.

    Let us look a little more closely at who they are. I call them the hardship groups. They are above the National Assistance level. We cannot give them any more direct subsidy from the State because they are just above the limits which we deem necessary for them to get extra subsidy. They are people who made proper provision for their own retirement during their working lives. During their working lives they had to bring up their children without family allowances, sometimes they had to pay for their education and they often had to pay for their own medical services. They are now asked to subsidise the children of people on average earnings of £21 a week, who have family allowances, a National Health Service and free education. They are people who seemed to have done everything for themselves and done it right. They are not the small fixed income groups. They are the small dwindling income groups, and those incomes will be dwindling further if the Financial Secretary does not give some measure of relief tonight.

    The new Clause is modest. It will not be lost on the Financial Secretary that, whenever there has been an expensive new Clause or Amendment before the Committee, we have refrained from voting upon it because we recognise that it could not be given this year. But this new Clause would cost a very small amount—chicken feed. We have offered him £133 million and suggested that the Government should not pay the 7s. 6d. premium to manufacturers. Why does not he take that offer and accept this new Clause?

    We should be very pleased if the hon. and learned Gentleman did, but if he does not we shall show our feelings in the Lobby. I hope that this time some hon. Members opposite will come with us. I cannot recall a Finance Bill during which so little has been said by Government back benchers.

    How can my hon. Friend expect hon. Members opposite to join us in the Lobby when hardly any of them have been here to listen to the arguments?

    Hope springs eternal although I have little faith. We were told to expect great things from this intake of Labour M.Ps. We were told that they were the most highly educated there had ever been. I do not know how

    Division No. 92.]AYES[10.58 p.m.
    Alison, Michael (Barkston Ash)Griffiths, Eldon (Bury St. Edmunds)Mills, Peter (Torrington)
    Allason, James (Hemel Hempstead)Gurden HaroldMiscampbell, Norman
    Atkins, Humphrey (M't'n & M'd'n)Hall, John (Wycombe)Mitchell, David (Basingstoke)
    Awdrey, DanielHall-Davis, A. G. F.Morrison, Charles (Devizes)
    Balniel, LordHarris Frederic (Croydon N.W.)Mott-Radclyffe, Sir Charles
    Batsford, BrianHarris, Reader (Heston)Murton, Oscar
    Beamish, Col. Sir TuftonHarrison, Brian (Malden)Nabarro, Sir Gerald
    Bell, RonaldHarrison, Col. Sir Harwood (Eye)Heave, Airey
    Bennett, Dr. Reginald (Gos. & Fhm)Harvey, Sir Arthur VereNicholls, Sir Harmar
    Bessell, PeterHarvie Anderson, MISSNott, John
    Black, Sir CyrilHawkins, PaulOsborn, John (Hallam)
    Body, RichardHeald, Rt. Hn. Sir LionelPage, Graham (Crosby)
    Boyle, Rt. Hn. Sir EdwardHeseltine, MichaelPardoe, John
    Brains, BernardHiggins, Terence L.Percival, Ian
    Brewis, JohnHill, J. E. B.Pike, Miss Mervyn
    Brown, Sir Edward (Bath)Hirst, GeoffreyPrior, J. M. L.
    Bruce-Gardyne, J.Hobson, Rt. Hn. Sir JohnRamsden, Rt. Hn. James
    Bullus, Sir EricHolland, PhilipRenton, Rt. Hn. Sir David
    Carlisle, MarkHooson, EmlynRoots, William
    Clark, HenryHordern, PeterRossi, Hugh (Homsey)
    Clegg, WalterHornby, RichardSharples, Richard
    Cooke, RobertHowell, David (Guildford)Smith, John
    Costain, A. P.Hunt, JohnSteel, David (Roxburgh)
    Crawley, AidanHutchison, Michael ClarkTaylor, Sir Charles (Eastbourne)
    Crowder, F. P.Johnston, Russell (Inverness)Taylor, Frank (Moss Side)
    Dalkeith, Earl ofKaherry, Sir DonaldThatcher, Mrs. Margaret
    Dance, JamesKimball, MarcusTurton, Rt. Hn. R. H.
    Davidson, James (Aberdeenshire, W.)Kirk, PeterWainwright, Richard (Colne Valley)
    Dean, Paul (Somerset, N.)Kitson, TimothyWalker, Peter (Worcester)
    Deedes, Rt. Hn. W. F. (Ashford)Knight, Mrs. JillWalker-Smith, Rt. Hn. Sir Derek
    Digby, Simon WingfieldLambton, ViscountWard, Dame Irene
    Dodds-Parker, DouglasLancaster, Col. C. G.Weatherill, Bernard
    Eden, Sir JohnLangford-Holt, Sir JohnWhitelaw, William
    Errington, Sir EricLewis, Kenneth (Rutland)Wilson, Geoffrey (Truro)
    Fletcher-Cooke, CharlesLoveys, W. H.Winstanley, Dr. M. P.
    Foster, Sir JohnMcAdden, Sir StephenWorsley, Marcus
    Fraser, Rt. Hn. Hugh (St'fford & Stone)Maclean, Sir FitzroyWylie, N. R.
    Glover, Sir DouglasMacleod, Rt. Hn. IainYounger, Hn. George
    Gower, RaymondMaddan, Martin
    Grant, AnthonyMawby, RayTELLERS FOR THE AYES:
    Gresham Cooke, R.Maxwell-Hyslop, R. J.Mr. Francis Pym and
    Mr. Jasper More.

    highly educated they are, none of them can hold a candle to my hon. Friend the Member for Tynemouth (Dame Irene Ward) when it comes to trying to help the old. Whether on these benches or opposite, whether against this Government or against a Conservative Government, she would be in the Lobby seeking increased relief for the aged. Hon. Members opposite should follow her example.

    We are glad that the right hon. Lady the Minister of Pensions and National Insurance has sat throughout this debate. Until she came in, no woman M.P. from the party opposite had attended any of the discussions on the new Clauses dealing with social security today and I am glad she remedied that. I hope that my right hon. and hon. Friends will vigorously go into the Lobby in support of this new Clause.

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

    The Committee divided: Ayes 120. Noes 178.

    NOES

    Anderson, DonaldFraser, Rt. Hn. Tom (Hamilton)Ogden, Eric
    Archer, PeterGardner, A. J.O'Malley, Brian
    Armstrong, ErnestGarrow, AlexOrbach, Maurice
    Atkins, Ronald (Preston, N.)Ginsburg, DavidOrme, Stanley
    Atkinson, Norman (Tottenham)Gourlay, HarryOswald, Thomas
    Bagler, Gordon A. T.Gray, Dr. Hugh (Yarmouth)Owen, Will (Morpeth)
    Baxter, WilliamGregory, ArnoldPage, Derek (King's Lynn)
    Bence, CyrilGrey, Charles (Durham)Paget, R. T.
    Bennett, James (G'gow, Bridgeton)Hamilton, James (Bothwell)Palmer, Arthur
    Bidwell, SydneyHamilton, William (Fife, W.)Parker, John (Dagenham)
    Binns, JohnHamling, WilliamParkyn, Brian (Bedford)
    Bishop, E. S.Hannan, WilliamPerry, Ernest G. (Battersea, S.)
    Blackburn, F.Harper, JosephPerry, George H. (Nottingham, S.)
    Boardman, H.Hazell, BertPrice, Christopher (Perry Barr)
    Booth, AlbertHeffer, Eric S.Price, William (Rugby)
    Boston, TerenceHerbison, Rt. Hn. MargaretRhodes, Geoffrey
    Bowden, Rt. Hn. HerbertHooley, FrankRichard, Ivor
    Bradley, TomHoughton, Rt. Hn. DouglasRoberts, Albert (Normanton)
    Brooks, EdwinHowie, W.Robertson, John (Paisley)
    Broughton, Dr. A. D. D.Hunter, AdamRobinson, W. O. J. (Walth'stow, E.)
    Brown, Hugh D. (G'gow, Provan)Hynd, JohnRoebuck, Roy
    Brown, Bob (N'c'tle-upon-Tyne, W.)Jay, Rt. Hn. DouglasRose, Paul
    Brown, R. W. (Shoreditch & F'bury)Jeger, Mrs. Lena (H'b'n & St. P'cras, S.)Ross, Rt. Hn. William
    Buchan, NormanJenkins, Hugh (Putney)Rowland, Christopher (Meriden)
    Butler, Herbert (Hackney, C.)Johnson, James (K'ston-on-Hull, W.)Ryan, John
    Butler, Mrs. Joyce (Wood Green)Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)Shaw, Arnold (Ilford, S.)
    Callaghan, Rt. Hn. JamesKenyon, CliffordShort, Rt. Hn. Edward (N'c'tle-u-Tyne)
    Carmichael, NeilKerr, Dr. David (W'worth, Central)Short, Mrs. Renée (W'hampton, N.E.)
    Coe, DenisKerr, Russell (Feltham)Silkin, John (Deptford)
    Coleman, DonaldLeadbitter, TedSilkin, S. C. (Dulwich)
    Conlan, BernardLee, John (Reading)Silverman, Julius (Aston)
    Cullen, Mrs. AliceLestor, Miss JoanSmall, William
    Dalyell, TamLomas, KennethSteele, Thomas (Dunbartonshire, W.)
    Davies, Dr. Ernest (Stretford)Lyon, Alexander W. (York)Summerskill, Hn. Dr. Shirley
    Davies, Harold (Leek)Lyons, Edward (Bradford, E.)Swingler, Stephen
    Davies, Robert (Cambridge)McBride, NellTinn, James
    Delargy, HughMcCann, JohnUrwin, T. W.
    Dempsey, JamesMacDermot, NiallVarley, Eric G.
    Dewar, DonaldMacdonald, A. H.Wainwright, Edwin (Dearne Valley)
    Diamond, Rt. Hn. JohnMcKay, Mrs. MargaretWalden, Brian (All Saints)
    Dickens, JamesMackenzie, Gregor (Rutherglen)Walker, Harold (Doncaster)
    Doig, PeterMackie, JohnWallace, George
    Driberg, TomMackintosh, John P.Watkins, David (Consett)
    Dunn, James A.Maclennan, RobertWeitzman, David
    Dunnett, JackMcMillan, Tom (Glasgow, C.)Wellbeloved, James
    Dunwoody, Mrs. Gwyneth (Exeter)McNamara, J. KevinWells, William (Walsall, N.)
    Dunwoody, Dr. John (F'th & C'b'e)Manuel, ArchieWhitaker, Ben
    Edwards, William (Merioneth)Marsh, Rt. Hn. RichardWhitlock, William
    Ellis, JohnMayhew, ChristopherWilliams, Alan Lee (Hornchurch)
    English, MichaelMikardo, IanWilliams, Clifford (Abertillery)
    Ensor, DavidMilian, BruceWilliams, Mrs. Shirley (Hitchin)
    Evans, Ioan L. (Birm'h'm, Yardley)Mitchell, R. C. (S'th'pton, Test)Williams, W. T. (Warrington)
    Fletcher, Raymond (Ilkeston)Molley, WilliamWilson, William (Coventry, S.)
    Fletcher, Tod (Darlington)Morgan, Elystan (Cardiganshire)Winnick, David
    Floud, BernardMorris, Alfred (Wythenshawe)Woodburn, Rt. Hn. A.
    Foley, MauriceMorris, Charles R. (Openshaw)Yates, Victor
    Foot, Sir Dingle (Ipswich)Moyle, Roland
    Ford, BenMulley, Rt. Hn. FrederickTELLERS FOR THE NOES:
    Forrester, JohnMurray, AlbertMr. Walter Harrison and
    Fowler, GerryNorwood, ChristopherMr. Alan Fitch.
    Fraser, John (Norwood)Oakes, Gordon

    New Clause—(Estate Duty Allowance(Costs Of Valuation))

    In determining the value of an estate for the purposes of estate duty allowance shall be made for the incidental costs of valuation for the said purpose payable out of the estate, being fees, commission or remuneration paid for the professional services of any surveyor. or auctioneer, or accountant, or agent, or legal adviser.—[ Sir C. Mott-Radclyffe.]

    Brought up, and read the First time.

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

    I can explain this new Clause briefly. I have no wish to detain the Committee for a moment longer than necessary. For a long time it has been thought unfair that all the costs of valuation in respect of estate duty should not be an allowable deduction against the total sum payable in respect of Estate Duty. The Government conceded this point, in my view wisely, last year, within certain limits, in respect of Capital Gains Tax.

    This new Clause and the following one, which goes a little wider, but which has not been selected, follows very closely paragraph 4(2) of the Sixth Schedule to the Finance Act, 1965, and I hope to commend it to the Committee on that basis alone. If the argument that the costs of valuation should be a deductible charge against Capital Gains Tax is valid then it is surely doubly valid in relation to Estate Duty, for the simple reason that no liability can be incurred in respect of Capital Gains Tax unless some capital gain has been made, whereas with Estate Duty the incidence of death is entirely fortuitous and capricious and can happen to anyone at any time.

    One could give many examples of how unfairly the discrimination between what is a deductible charge against capital gains on the one hand and what is not a deductible charge against Estate Duty on the other may work out.

    I propose to give only two examples. They are from the agricultural industry, because I think, with all due modesty, that I understand the economics of the agriculture industry at least as well as the Chancellor appeared to understand them last week. Take the case of the owner-occupier of a 500-acre farm, whose whole capital is virtually locked up in the holding, and he has almost no outside capital. Suppose that when he dies the probate valuation of the farm, at £200 an acre, amounts to a total of £100,000. Taking into account the rebate on agricultural land, if my calculation is correct the duty payable would be slightly short of £25,000.

    Therefore, the owner-occupier's executors—perhaps his widow, his son or whoever is left the farm—must sell either the whole farm to realise the Estate Duty and move elsewhere, or, if they can, they must sell part of the farm to pay the Estate Duty and retain the remainder of it. Either way round, there has to be a valuation and there must be a sale.

    Let us suppose, for the sake of argument, that they decide to sell 100 acres, if they can, or one-fifth of the acreage. That would realise roughly £20,000. I calculate that by the time the executors have incurred all the costs in relation to the valuation and winding-up the estate and have sold successfully 100 acres of a 500-acre farm to defray the bulk of the cost of the Estate Duty, they would incur, in terms of solicitors' fees, auctioneers' fees, advertising the land for sale, the fees of agents if they were called in, accountants' fees and all the rest, a sum in excess of £1,200, which is not deductible against Estate Duty. That would be a heavy burden.

    Let me take an almost converse example of a small family farm of, say, between 100 and 150 acres on which there is already a biggish overdraft. The farmer dies, and by reason of the overdraft being offset and the fact that the farm is small and marginal, no Estate Duty is payable. Nevertheless, the executors still have to incur all the costs of valuing the whole of the holding to prove that they are not liable for Estate Duty.

    This is nonsense. It is neither right nor fair. It makes no logic to discriminate in giving the benefit in relation to the Capital Gains Tax and not for Estate Duty. One could multiply these examples many times with all sorts of variations between agricultural and urban property. Whichever way round one does it, the same unfairness results. I am merely asking the Government to be logical and to give in respect of Estate Duty the same concession as they allow in the case of Capital Gains Tax.

    11.15 p.m.

    (Norfolk, South): I should like to support my hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe). I think that refusal to allow costs of valuation on sale in the case of Estate Duty has long been thought to be unfair. It has now become positively anomalous. I would have thought the case needed no further argument, but lest the Chancellor should be minded to refuse I should like to stress that.

    It may be that the words we have chosen may not quite meet the case.

    For my part, if he would accept in principle what we urge I should be quite happy to wait for a Government Amendment at a later stage of the Bill, because this does reach a very long way low down the scale. My hon. Friend has referred to the agricultural situation, but, of course, this affects all estates of real property, and as Estate Duty begins at £4,000 at 1 per cent. it could mean there is a sum of some £40-odd falling upon the quite small estate of real property, which would need to be valued and sold in the case of a house and so on, and the costs of that transaction might well be a quite substantial sum, if they were not allowed against the charge of even a small amount of duty. In these small estates, for the ultimate beneficiaries, a modest amount of £40 or £50 or £100 is still a significant figure.

    Therefore, I hope that the ambit of the new Clause will be seen as intended to include small cases as well as some of the substantial and serious cases of the large farms. I hope, therefore, that it will be accepted.

    I am sure that at this late hour of the night the Committee would wish me to answer the debate shortly, while giving the relevant arguments. There are two very powerful arguments, one of principle, the other of practice.

    In terms of principle, a duty of this kind is not one against which it is appropriate to allow the valuation and similar costs involved. I can illustrate this most simply by adducing an even stronger argument in support of the case of the hon. Member for Windsor (Sir C. Mott-Radclyffe) than he himself adduced. There was a time when legacy duty was payable. Legacy duty was one of the duties arising as a result of a death. For legacy duty costs of the kind he is talking about were allowable. For Estate Duty they were not allowed. I am drawing attention to this to distinguish between these two kinds of duty. The legacy duty was one which was concerned with the amount the legatee, the successor, received, and he received such amount as was left to him less the costs of ascertaining it. That was what he got. Similarly for Capital Gains Tax. That is a duty which is levied on the gain, on the net gain to the person making it. Therefore, the valuation costs of ascertaining that gain are a proper deduction against the gain. With Estate Duty one is dealing with an entirely different kind of duty, a duty which relates, as it were, to a fixed state of affairs, the date of death of the testator or person concerned. A duty on death.

    One takes note of what were the assets at that time in order to arrive at what was their value at that time. One is not concerned with who succeeds, with what happens to the estate afterwards, how it is administered, or anything of that kind. One is merely concerned with ascertaining the value of the assets at that time. That is the principle.

    In terms of practice, it would be right to say that practically every estate for which Estate Duty is payable has to incur some kind of probate deduction. It would be a reasonable statement to say that the costs are a limited proportion of the assets of the estate, and therefore that affects the rate of Estate Duty. It would be, therefore, right to say that if one wanted to collect the same amount of Estate Duty and to allow as a deduction from that Estate Duty the costs of valuation and similar costs referred to in the new Clause one would have simply to put up the rate of Estate Duty. So, in theory, one has a principle here which is quite clearly distinguishable; in practice, it would make very little difference. There would be certain cases when it would matter, but in practice it would make very little difference.

    I am bound to say that, as has happened on every previous occasion when the proposal has been considered, and as happened on 18th June, 1964, which was the most recent occasion, the Government of the day have said more or less the same as I am saying now.

    I am sorry, but I cannot possibly recommend the Committee to accept the Clause.

    My hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe) must be complimented for raising the point, ably supported as he was by my hon. Friend the Member for Norfolk, South (Mr. J. E. B. Hill). This point has been a cri de cocur for many years, as the Chief Secretary well knows. He said that had he been on this side of the Committee he could have made a better case for the point that we are arguing. I would not suggest that he could have done it better than my hon. Friends; I am using the Chief Secretary's own words.

    It is a striking fact that, no matter which party is on the benches opposite, the Treasury Ministers seem to have this rigid attitude towards what is, after all, a very modest request. Anyone with an academic interest in the techniques of brain-washing must watch with the greatest interest the way in which the Treasury works on its Front Bench spokesmen. No matter how fiery their orations from this side, once they are on the Treasury Front Bench and open their briefs to see the remark "Resist", resist they do regardless of their innermost convictions. I am sorry that the Chief Secretary did not stand by the viewpoint he professed to hold when on this side and give a more sympathetic reception to the new Clause.

    Under the present system, when the executors of an estate have to bear the cost of valuing the estate and the cost of realising assets to pay the duty levied on it, it is rather like being told to dig one's own grave before one is shot. The Treasury says, "Tax will be imposed on that estate if it is seen to be liable for Estate Duty, and you must pay the cost of valuing it to enable us to assess the tax." It is an incredible attitude of mind, even though it has been in operation for a long time.

    The Government went some part of the way towards recognising the justice of this in the Capital Gains Tax, although the Chief Secretary has tried to make a difference between what he describes as a tax on a gain and a tax on an estate, which we call Estate Duty. I fail to see the exact difference, because, as I tried to argue at some length during the debates on Amendments to the Capital Gains Tax Clauses, Capital Gains Tax is a tax on capital, which is what Estate Duty is, in effect. I cannot see why the allowances which are made in Schedule 6, paragraph 4(1) and (2), which enable certain expenses, including expenses of valuation, to be offset against the gain, should not apply in the present case.

    The point has given rise to astonishment. Many people find, when they come to settle the affairs of an estate, that they are not able to offset the costs of valuation against the estate. It seems such an elementary fact of justice that it surprises many people. We know that ignorance of the law is no excuse, but it is interesting to note that ever some learned judges appear ignorant of the law in this respect. In the recent Chatsworth case Lord Justice Danckwerts said:

    Division No. 93.]AYES[11.27 p.m.
    Alison, Michael (Barkston Ash)Balniel, LordBiggs-Davison, John
    Allason, James (Hemel Hempstead)Batsford, BrianBlack, Sir Cyril
    Astor, JohnBeamish, Col. Sir TuftonBody, Richard
    Atkins, Humphrey (M't'n & M'd'n)Bell, RonaldBoyle, Rt. Hn. Sir Edward
    Awdry, DanielBennett, Dr. Reginald (Gos. & Fhm)Braine, Bernard

    "There is one other subject on which I should like to add a word or two. It is rather startling that no deduction is possible apparently under the statute (and that seems to be the case) for the necessary expenses which any sale of land particularly must involve. That seems to me to be a hardship on estates…."

    It seems curious that a learned judge should be ignorant of this fact, but it is not curious that he should regard it as a hardship on the estate.

    I think that the Committee will agree that the Chief Secretary's reply is typical of the replies that we have had throughout the whole of these long debates on the Committee stage of this Bill. The right hon. Gentleman has the ability to put a case with force and aggressiveness, and even when he gives way he does so more aggressively than anybody else in the Committee. I think it is time that the Chief Secretary—and indeed every Member of the Treasury Bench—used his own initiative and his own intelligence in looking at this problem and did not always take the view of the Treasury officials and the brief given to him.

    The right hon. Gentleman knows as well as I do that there is a good deal of force and justice in this Clause. He knows as well as I do that if he were on this side of the Committee he would be urging this with all the eloquence at his command on whoever was on the Treasury Bench. The right hon. Gentleman knows, too, that in resisting this he is carrying out the duty laid on him by his brief. This is not good enough. Time and again we have faced this obstructionism from the benches opposite. Unanswerable arguments from this side of the Committee have been met by these stonewalling tactics. This is wasting the time of the Committee. This is wasting the time of the House. It is making a mockery of attempts to put forward logical and reasoned arguments, and therefore I suggest to my right hon. and hon. Friends that we should divide on this Clause.

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

    The Committee divided: Ayes 106. Noes 177.

    Brewis, JohnHawkins, PaulMurton, Oscar
    Brown, Sir Edward (Bath)Heald, Rt. Hn. Sir LionelNicholls, Sir Harmer
    Bruce-Gardyne, J.Heseltine, MichaelNott, John
    Bullus, Sir EricHiggins, Terence L.Osborn, John (Hallam)
    Carlisle, MarkHirst, GeoffreyPage, Graham (Crosby)
    Clark, HenryHobson, Rt. Hn. Sir JohnPercival, Ian
    Clegg, WalterHolland, PhilipPike, Mies Mervyn
    Cooke, RobertHordern, PeterPrior, J. M. L.
    Crawley, AidanHornby, RichardRamsden, Rt. Hn. James
    Dalkeith, Earl ofHowell, David (Guildford)Renton, Rt. Hn. Sir David
    Dance, JamesHunt, JohnRidley, Hn. Nicholas
    Dean, Paul (Somerset, N.)Hutchison, Michael ClarkRossi, Hugh (Hornsey)
    Deedes, Rt. Hn. W. F. (Ashford)Kaberry, Sir DonaldSharples, Richard
    Digby, Simon WingfieldKimball, MarcusSmith, John
    Dodds-Parker, DouglasKirk, PeterTaylor, Sir Charles (Eastbourne)
    Eden, Sir JohnKitson, TimothyTaylor, Frank (Moss Side)
    Fletcher-Cooke, CharlesKnight, Mrs. JillThatcher, Mrs. Margaret
    Foster, Sir JohnLambton, ViscountTurton, Rt. Hn. R. H.
    Fraser, Rt. Hn. Hugh (St'fford & Stone)Langford-Holt, Sir JohnWalker, Peter (Worcester)
    Glover, Sir DouglasLewis, Kenneth (Rutland)Walker-Smith, Rt. Hn. Sir Derek
    Gower, RaymondLoveys, W. H.Ward, Dame Irene
    Grant, AnthonyMcAdden, Sir StephenWeatherill, Bernard
    Gresham Cooke, R.Maclean, Sir FitzroyWhitelaw, William
    Griffiths, Eldon (Bury St. Edmunds)Macleod, Rt. Hn. IainWilson, Geoffrey (Truro)
    Gurden, HaroldMaddan, MartinWorsley, Marcus
    Hall, John (Wycombe)Mawby, RayWylie, N. R.
    Hall-Davis, A. G. F.Maxwell-Hyslop, R. J.Younger, Hn. George
    Harris, Frederick (Croydon, N.W.)Mills, Peter (Torrington)
    Harrison, Brian (Maldon)Miscampbell, NormanTELLERS FOR THE AYES:
    Harrison, Col. Sir Harwood (Eye)Mitchell, David (Basingstoke)Mr. Francis Pym and
    Harvey, Sir Arthur VereMorrison, Charles (Devizes)Mr. Jasper More.
    Harvie Anderson, MissMott-Radclyffe, Sir Charles

    NOES

    Andersen, DonaldFletcher, Raymond (Ilkeston)Macdonald, A. H.
    Archer, PeterFletcher, Ted (Darlington)McKay, Mrs. Margaret
    Armstrong, ErnestFloud, BernardMackenzie, Gregor (Rutherglen)
    Atkinson, Norman (Tottenham)Foley, MauriceMackie, John
    Bagier, Gordon A. T.Ford, BenMackintosh, John P.
    Baxter, WilliamForrester, JohnMaclennan, Robert
    Bence, CyrilFowler, GerryMcMillan, Tom (Glasgow, C.)
    Bennett, James (G'gow, Bridgeton)Fraser, John (Norwood)McNamara, J. Kevin
    Bessell, PeterFraser, Rt. Hn. Tom (Hamilton)Manuel, Archie
    Bidwell, SydneyGardner, A. J.Mayhew, Christopher
    Binns, JohnGarrett, W. E.Mikardo, Ian
    Bishop, E. S.Garrow, AlexMilian, Bruce
    Blackburn, F.Ginsburg, DavidMitchell, R. C. (S'th'pton, Test)
    Boardman, H.Gourlay, HarryMolloy, William
    Booth, AlbertGray, Dr. Hugh (Yarmouth)Morgan, Elystan (Cardiganshire)
    Boston, TerenceGregory, ArnoldMorris, Alfred (Wythenshawe)
    Bradley, TomGrey, Charles (Durham)Moyle, Roland
    Brooks, EdwinHamilton, James (Bothwell)Mulley, Rt. Hn. Frederick
    Brown, Hugh D. (G'gow, Provan)Hamilton, William (Fife, W.)Murray, Albert
    Brown, Bob (N'c'tle-upon-Tyne, W)Hamling, WilliamNorwood, Christopher
    Brown, R. W. (Shoreditch & F'bury)Hannan, WilliamOakes, Gordon
    Buchan, NormanHarper, JosephOgden, Eric
    Butler, Herbert (Hackney, C.)Harrison, Walter (Wakefield)O'Malley, Brian
    Butler, Mrs. Joyce (Wood Green)Hazell, BertOrbach, Maurice
    Callaghan, Rt. Hn. JamesHeffer, Eric S.Orme, Stanley
    Carmichael, NeilHerbison, Rt. Hn. MargaretOswald, Thomas
    Coe, DenisHooley, FrankPage, Derek (King's Lynn)
    Coleman, DonaldHooson, EmlynPaget, R. T.
    Cullen, Mrs. AliceHoughton, Rt. Hn. DouglasPalmer, Arthur
    Dalyell, TamHowie, W.Pardoe, John
    Davidson, James (Aberdeenshire, W.)Hunter, AdamPark, Trevor
    Davies, Dr. Ernest (Stretford)Hynd, JohnParker, John (Dagenham)
    Davies, Harold (Leek)Jackson, Colin (B'h'se & Spenb'gh)Parkyn, Brian (Bedford)
    Davies, Robert (Cambridge)Jay, Rt. Hn. DouglasPerry, Ernest G. (Battersea, S.)
    Delargy, HughJeger, Mrs. Lena (H'b'n & St. P'cras, S.)Perry, George H. (Nottingham, S.)
    Dempsey, JamesJenkins, Hugh (Putney)Price, Christopher (Perry Barr)
    Dewar, DonaldJohnson, James (K'ston-on-Hull, W.)Price, William (Rugby)
    Diamond, Rt. Hn. JohnJohnston, Russell (Inverness)Rhodes, Geoffrey
    Dickens, JamesKenyon, CliffordRichard, Ivor
    Doig, PeterKerr, Dr. David (W'worth, Central)Roberts, Albert (Normanton)
    Dunn, James A.Leadbitter, TedRobertson, John (Paisley)
    Dunnett, JackLee, John (Reading)Robinson, W. O. J. (Walth'stow, E.)
    Dunwoody, Mrs. Gwyneth (Exeter)Lestor, Miss JoanRoebuck, Roy
    Dunwoody, Dr. John (F'hm & C'b'e)Lomas, KennethRose, Paul
    Edwards, William (Merioneth)Lyon, Alexander W. (York)Ross, Rt. Hn. William
    Ellis, JohnLyons, Edward (Bradford, E.)Rowland, Christopher (Meriden)
    English, MichaelMcBride, NeilRyan, John
    Ensor, DavidMcCann, JohnShaw, Arnold (Ilford, S.)
    Evans, Ioan (Birm'h'm, Yardley)MacDermot, NiallShort, Mrs. Renée (W'hampton, N.E.)

    Silkin, John (Deptford)Wainwright, Edwin (Dearne Valley)Williams, Alan Lee (Hornchurch)
    Silkin, S. C. (Dulwich)Wainwright, Richard (Colne Valley)Williams, Clifford (Abertillery)
    Silverman, Julius (Aston)Walden, Brian (All Saints)Williams, Mrs. Shirley (Hitchin)
    Small, WilliamWalker, Harold (Doncaster)Williams, W. T. (Warrington)
    Steel, David (Roxburgh)Wallace, GeorgeWinnick, David
    Steele, Thomas (Dunbartonshire, W.)Watkins, David (Consett)Winstanley, Dr. M. P.
    Summerskill, Hn. Dr. ShirleyWeitzman, DavidWoodburn, Rt. Hn. A.
    Swingler, StephenWellbeloved, JamesYates, Victor
    Tinn, JamesWells, William (Walsall, N.)
    Urwin, T. W.Whitaker, BenTELLERS FOR THE NOES:
    Varley, Eric G.Whitlock, WilliamMr. Alan Fitch and
    Mr. Charles R. Morris.

    New Clause—(Stamp Duty On Foreign Bearer Bonds)

    In Schedule 1 to the Stamp Act 1891, there shall be added to the exemptions under the heading "Bearer Instrument" the following further exemption:—

    "4. Overseas bearer instruments issued after the day of 1966 by or on behalf of any foreign state or government, or any foreign municipal body, or any company which is neither resident in the United Kingdom nor controlled directly or indirectly by a company which is so resident".—[ Mr. Nott.]

    Brought up, and read the First time.

    I think that it would be for the convenience of the Committee if with new Clause No. 49 we discussed new Clause No. 50 (Exemptions relating to stamp duty on foreign bearer bonds):

    In Schedule 1 to the Stamp Act 1891, there shall be added to the exemptions under the heading "Bearer Instrument" the following further exemption:—
    "4. Overseas bearer instruments issued after the day of 1966 by or on behalf of any foreign state or government, or any foreign municipal body, or any company which is not resident in the United Kingdom".

    New Clause No. 49 seeks to exempt from 2 per cent. Stamp Duty overseas bearer bonds issued by nonresident borrowers which are not controlled by a United Kingdom company. As an example, it would exempt from 2 per cent. Stamp Duty overseas bearer bonds issued by, say, General Motors, or Australia, or Austria, or the City of Oslo when their loans were handled by the City of London.

    New Clause No. 50 seeks to exempt from the same 2 per cent. Stamp Duty overseas bearer bonds issued by borrowers even if they are so controlled by a United Kingdom company. This Clause would apply, as an example, to an international loan handled by the City of London for, say, the overseas subsidiary of I.C.I., or Unilever or Beecham.

    There are three important principles lurking behind this somewhat technical Amendment. First, there is the general need to reform those Stamp Duty laws which yield little or no revenue, and yet which inhibit the free working of markets. I do not think that this is a particularly controversial objective.

    Secondly, there is the need to assist those United Kingdom companies that wish to follow the Chancellor's request and finance their overseas capital expenditure by borrowing locally abroad, or on international markets. This is an objective of which the Chancellor himself, in his Budget statement, has expressed himself to be in favour.

    Thirdly, there is the need to remove those Stamp Duty anomalies which yield practically no revenue and yet at the same time restrict the ability of London to compete with other financial centres, such as New York and Zurich, in the handling of international loans and thereby the earning of foreign exchange by the sale of its services.

    I need hardly add that none of these activities, nor the acceptance of either of these Clauses, would involve the loss of any foreign exchange. Indeed, there would be precisely the opposite effect of helping our invisible balance of payments.

    In this connection, the previous Governor of the Bank of England has estimated the net foreign exchange income of the City of London from the sale of its services to amount to the equivalent of about £200 million, and these vast earnings, which come into our invisible balance of payments, are not easily made. They require considerable competition and effort.

    To continue to earn this foreign exchange, the City needs a proper appreciation of the problems that stand in the way of the earning of further "invisibles" for our balance of payments. Since the summer of 1964, the City has handled the issue of some 500 million dollars' worth of international loans, on which it has earned 1½ per cent. in the form of commissions, legal expenses, accountancy fees, advertising revenues and all the other services that it provides.

    In addition, as a result of its prominent rôle in this business, it has also earned about another quarter of 1 per cent. on issues handled from New York and other financial centres. I want to stress again that it has earned, with no loss of foreign exchange, 1½ per cent. on about half a billion dollars' worth of loans handled by London, and a further quarter of 1 per cent. on another half a billion dollars' worth of loans which originated from other financial centres.

    In spite of the fact that all this net foreign exchange income has been earned in this country, one of the many obstacles which the City has faced in developing this market has been the 2 per cent. ad valorem stamp duty on overseas bearer bonds. To make this business competitive the City has been forced, with the full knowledge of the Treasury and the Bank of England, to arrange for all overseas bearer bonds to be delivered in Luxembourg where no Stamp Duty is incurred. Thus, with no gain to the Revenue whatever, London, in order to compete with New York and Zurich—because this is a competitive business, just as the sale of our exports is a competitive business—has been forced into what might be described as a rather unseemly device and has been involved in having to make rather undignified explanations to would-be foreign borrowers, whether it be the Republic of Austria or Australia or any other country. This sort of anomaly is used by our competitors in this business—and competition increases every day—as another example of London's failing ability to act as a leading international capital centre.

    Another unfortunate aspect of this 2 per cent. Stamp Duty is that it prevents the London Stock Exchange from playing a predominant rôle in the marketing of international loans. In the days when London was the great exporter of capital in the world, dealers regarded it as the true market place of the world, and just as London has become over the last few years one of the leading market places for Euro-dollar deposits, and we have earned considerable foreign exchange income from that, so it could become a much greater earner of foreign exchange if the Stock Exchange were enabled, by the abolition of this Stamp Duty, to play its full part as an international capital market.

    The reason why it cannot do so at present is that the jobbers in London find the complications and delays of having to keep bonds in Luxembourg, and not in this country, so great that by necessity they hold few bonds on their books. This involves a very wide dealing margin, making it very expensive to deal in bonds in London, and it restricts the quantity of bonds and amount in which they can deal.

    What is required is the abolition of this Stamp Duty on issues in this very restricted category—it is extremely restricted—and a nominal duty on the transfer because in this way the London market could begin to play its full part. The Inland Revenue would at least gain a nominal return—and I understand that at the moment it gains practically nothing—and the business which the City of London is trying to handle and which is earning this country considerable foreign exchange could be expanded with no risk whatever to sterling.

    Lastly, in connection with Clause 50. it is surely equally in the interests of this country that bearer bonds issued by the overseas subsidiaries of companies, such as I.C.I. or Beecham or Unilever—United Kingdom companies which might be trying to follow the Chancellor's directions to finance their overseas capital expenditure by borrowing locally abroad—should also be dealt in in London, again with no risk to our balance of payments, again with no loss of stamp revenue and again with an enhanced opportunity of earning more foreign exchange for this country.

    11.45 p.m.

    Considering the arguments which the Chief Secretary may adduce, I suggest that it cannot be contended that it would be wrong to exempt overseas bearer bonds from this Stamp Duty and not exempt United Kingdom bonds, because United Kingdom investors prefer registered stock and such stock bears only 2s. 6d. per cent. Stamp Duty. Thus, there is no comparability between overseas bearer bonds and registered stock. In the one case overseas investors require the evidence of debt in bearer form while, in the other, registered stock is the common and desired evidence of such debt.

    The Chief Secretary will be aware that a Clause of this nature has been discussed on several occasions with the Treasury and the Inland Revenue. Several of my hon. Friends and I had understood that general approval had been given to the principle of this suggested change. However, somewhat to the astonishment of the City, such a change was not included in this year's Finance Bill and we are, therefore, interested to know why it was left out.

    A simple change embodying such a worthwhile principle should not go by default year by year. If we cannot reform our Stamp Duty Acts completely—remembering that they certainly need reforming—we should at least do our best to bring them up to date and apply them flexibly. Since this is, I understand, the last new Clause to be discussed in this Committee, I hope that the Chief Secretary will be flexible and constructive on this point, which would involve no change of attitude or policy on the part of the Government.

    I have tried to think of any social, economic, political or fiscal argument why the Clause should be rejected. Frankly, I cannot think of one. I repeat that the revenue from this Stamp Duty is negligible, that it restricts the activities of the City in increasing its earnings of foreign exchange, that it prevents the London Stock Exchange from increasing its commissions on foreign business and that this change would in no way be discriminatory against any section of the community.

    (Cities of London and Westminster): I support the new Clause. As my hon. Friend the Member for St. Ives (Mr. Nott) pointed out, it would not only increase our earnings of foreign exchange but it would also improve the machinery of the market. We are considering an historical anomaly which dates from the time when the advantages of bearer instruments were immeasurably greater than they are today—from a time when the advantages of handling foreign business in this way were much greater—and it was, therefore, right that such an instrument should pay a higher rate of Stamp Duty.

    But there is also a social argument for removing this duty, which is that it simply condemns people to needless clerical drudgery and slavery, in particular in having to go through the motions to avoid the tax altogether by doing this business through a foreign country.

    Like so many sensible Opposition suggestions, the new Clause is supported by my constituent, the hon. Member for Manchester, Cheetham (Mr. Harold Lever), who last year in this Committee put forward an extremely sensible Amendment, which was rejected, concerning the definition of investment trusts. On that occasion the hon. Gentleman's proposal was supported by my hon. Friends, but was rejected, and I hope that on this occasion he will be rewarded by the Treasury accepting the Clause.

    There is another reason why the Clause should be accepted. It is a proposal in which the public will take no interest whatever. It has no publicity value and, therefore, the Government could adopt it without in any way appearing to spoil their record of total rejection.

    Fourthly, I feel that it would be nice if we could end our long discussion in this Committee on something other than a discord. I should like to feel that nothing separated me from my constituent opposite except, possibly, the Floor of the House. In order to help this process of ending on a happy note, we have offered the Government what they so seldom nowadays offer to us, namely a choice. If they cannot go the whole hog and accept new Clause No. 50, I hope that they will fall back, in an end-of-term spirit, on New Clause No. 49.

    I wish very briefly to support this new Clause for the reasons so cogently and unprovocatively enunciated by the hon. Member for St. Ives (Mr. Nott) and by my own Member of Parliament, the hon. Member for the Cities of London and Westminster (Mr. John Smith). It must be rare in this Committee that a Member can be so directly supported on the Floor of the House by his own constituent. In this case, as this is a purely non-party and non-political issue, I am very happy to give that support.

    The hon. Member for the Cities of London and Westminster (Mr. John Smith) misdirected his persuasive advocacy by urging the Chief Secretary to be flexible and constructive. As it is my task to reply to the debate, I can assure the hon. Member that I will remain faithful to my reputation of being inflexible and neutral.

    The arguments put forward in support of these Amendments are that they would facilitate the working of the market in London; that they would improve its facilities compared with those of other centres, and would increase our foreign exchange earnings. For reasons I shall give, I am somewhat doubtful whether they would achieve the last of those objects. I do not dispute that it would be a facility for those engaged in this market but, listening to the arguments, one would think that in some way the London market was at a gross disadvantage compared with other centres in the matter of issuing and dealing in foreign bearer securities.

    That is not the case. In fact, in important respects our market is at a considerable advantage compared with other markets. Most other European centres have a duty which they impose on the issue of and dealings in these securities, but have it in such a form that it cannot be avoided where the transactions are between foreign residents or nationals and where the security is not delivered within the country itself.

    For the reason which the hon. Gentleman indicated, where foreign bearer securities are issued on behalf of a State or a company abroad, provided the bond itself is not delivered in this country the duty is not payable. That is the reason why arrangements are made for their delivery to be effected in Luxembourg. This is something that has been going on for a very long time, it is well known and organised, and quite unobjectionable. This is the advantage which results from our Stamp Duty law.

    In other countries, one cannot succeed in evading the duty by effecting the delivery in Luxembourg. The hon. Gentleman referred to Zurich. There is a liability to duty if foreign bearer securities are issued in Zurich; it is not something one can avoid by arranging delivery in Luxembourg. There is also a duty in New York—a much smaller one in that case—

    If this practice is, as the Financial Secretary says, unobjectionable, does he not think it a good idea to make it even more unobjectionable?

    No, for the reasons I am about to give, if the hon. Gentleman will be patient. I am seeking only to deal at the moment with clearing away any possible misunderstanding there might be among hon. Members listening to the debate who might think that there is some great disadvantage in our system compared with that of other countries, and to point out that the reverse is the case.

    I am sorry to interrupt the hon. and learned Gentleman, but would he not agree that if we are concerned with the earnings of foreign exchange in this country we do not simply want not to put ourselves into a worse position than anyone else. What possible reason is there for not putting ourselves into a better position?

    I cannot understand the impatience of hon. Gentlemen opposite. It is awfully difficult to answer three different arguments at the same time. I am seeking to answer the arguments addressed to me seriatim, and I have been dealing so far with one argument.

    Now comes the question as to what would he the effect of the change that is asked for in this Clause. The effect, in our view, would be twofold, or I will put it this way: there are two reasons why we think the proposal is objectionable. If the exemptions proposed by the Clause were given to foreign bearer bonds issued and transferred here free of Stamp Duty, they would of course be competing with stampable securities as investments for internal investors.

    If we were minded to do that on principle, I would submit that the present juncture would be a singularly inopportune moment to introduce such a change. At a time when my right hon. Friend finds himself obliged to take a number of steps to restrain investment abroad, anything which would cheapen the cost, however marginally, to United Kingdom residents to invest in foreign securities is not something to be encouraged.

    I see hon. Gentlemen opposite shaking their heads. We will hear their reply, but this would be the effect at the present moment of what is proposed in this Clause.

    Of course, it would not be the effect if the relief were extended also to United Kingdom bearer securities, ones issued on behalf of United Kingdom borrowers, and this is really our major ground of objection. We think that if we were to accept what is proposed in this Clause it would be bound to lead to pressure, and rightly so, for a similar exemption for other bearer securities. One really cannot distinguish on principle any reason why the one class should be exempted and not the other, and this in itself would then undermine the basis of the whole of the Stamp Duty and lead to pressure not merely for bearer securities but for the Stamp Duty there is on issues and transfers of shares.

    We have looked at this proposal which has been put up and considered both under the previous administration and certainly by us since we have been in office. It has been looked at very carefully. I could accept what has been said that its immediate effect would be negligible in terms of revenue for the reason I gave at the outset—that a great deal of this business is transacted in the way I have described in Luxembourg. So I am not putting this on the basis of its immediate effect but because it would be striking at the principle underlying Stamp Duty and would erode the basis of the duty.

    12 m.

    I will deal with the two points which the hon. and learned Gentleman produced to thwart the arguments so ably put by my hon. Friend the Member for St. Ives (Mr. Nott).

    The first point was that there was not a great disadvantage suffered by our market compared with the markets in Zurich and other financial centres. If we think, as hon. Members do on both sides of the Committee, that invisible earnings are a good thing, surely the argument must be that if other financial centres or countries wish to hamper themselves by separate forms of duty, that is no good reason why we should follow in their wake. In fact, very much the reverse. If invisible earnings, as we all accept, are beneficial to the country's balance of payments position, surely we must try to further those earnings by every means at our disposal. In these Clauses we are not asking for any benefit that has not already been extended to the banking houses which are able to raise loans abroad for foreign companies and governments.

    The second point was that there would be competition with stampable investments in this country. I cannot see how this can be so, because the subscribers to these issues are not, and could scarcely be, British residents, because by the very nature of the Exchange Control Acts they are disabled from being able to compete for these loans because of the dollar premium that they have to pay. In consequence, the only people who are providing the funds for these loans are those very foreign centres of which we have spoken before.

    The capital market in London is raising from a variety of centres funds for foreign companies and governments which otherwise would certainly have been raised by those foreign centres. In other words, all the net benefits are entirely due to the expertise that exists in the City of London and the ability of those concerned there to outstrip their competitors in other financial centres.

    So I have tried to combat with all the moderation at my command the two main arguments that the hon. and learned Gentleman produced. It is very important to say at the end of the new Clauses and of this Bill, in the spirit of my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith), that we should try to agree on certain benefits that accrue to this country, notably those from invisible earnings. It is simply the case that our total income—I am very glad that the Chancellor is here because he will know this to be true—from both our investment income and our invisible earnings has increased in the last 10 years from £350 million to £750 million. Our invisible earnings have more than covered our trade gap for almost every year in the last 100. So on no account should our invisible earnings be threatened in any way. My hon. Friends are only too aware of how they have been so affected by the various measures that the Government have introduced, notably by the Corporation Tax.

    The Financial Secretary might have produced the objection that there might be a loss of revenue—I think that that was what he was saying on his second point—because these activities could have been considered to be competing with stampable investments. But no funds are raised in London at the moment because of the 2 per cent. Stamp Duty. So it cannot be argued that there is a loss of investment, because it is physically not possible to do worse than make no revenue. There cannot be a loss to the revenue on this occasion. Again, the hon. and learned Gentleman has not sought to claim that the Exchange Control Regulations might be breached in any way.

    His reply seems to reverse the previous Government's policy of encouraging invisible earnings. Only three years ago the Governor of the Bank of England said that this entrepreneur business of capital filled a vital and vacant rôle in Europe in mobilising foreign capital for world economic development. But, as my hon. Friend the Member for St. Ives said, the Financial Secretary's reply seems to go against what the Chancellor himself is trying to do—to encourage foreign companies to raise money abroad.

    This is where so much good work has been done by the City. It therefore seems regrettable that the Government should turn down what the Chancellor himself has put forward as a vital need in our present situation. The position in the capital market is one of great opportunity, although of increasing competition, for our own bankers. The effect of the United States interest equalisation tax has been that the dollars arising from the U.S. deficit are being put to proper use and the Euro-dollar market has increased very rapidly in the last few years.

    In 1963 the total market, as it were—the number of loans raised—amounted to only 75 million dollars, rising to 575 million in 1964 and to 775 million last year. In London in 1964–65 the amount raised amounted to 600 million dollars. On a very large proportion of this the commission of 1½ per cent. was earned. This is very valuable income.

    The point about invisible earnings, as the hon. Member for Manchester, Cheetham (Mr. Harold Lever) would recognise, is that there is no import quantity and this is one of the only gains the Treasury can rely upon without having to think about import quantities as in manufactured goods. However, the Euro-dollar market is becoming more competitive and the rates are creeping up towards 7 per cent. The City will continue to compete in this market and raise loans and issue bonds in Luxembourg but it will be missing the opportunity of building a market in the City for these bonds themselves. London could indeed become the centre of the Euro-dollar market and this is the opportunity the Government are missing by their refusal to adopt this new Clause.

    It is all very well to recognise that invisible earnings may come from Luxembourg if bonds are to be issued there, provided that they are not seen to be coming from London. One really cannot see where either the sense of that proposal can lie or the morality of it. It is almost as if it is all right that we should be having invisible earnings so long as they emanate from some mysterious source underground and the Government cannot be seen to be having anything to do with them. That is the weakest possible ground for turning down the well-argued points put by my hon. Friend.

    One can but wonder what advice the Government have had from the Bank of England on this question. We are talking here about a net gain to the country in invisible earnings and how the City competes favourably with other financial centres. We have shown that the market is becoming competitive, that we shall lose our commanding position if we do not give further benefits to the City. For all these reasons, it is essential to maintain our very strong position in the Eurodollar market and although I cannot advise my right hon. and hon. Friends to vote against the Government's position we shall certainly look at this again on Report and consider our attitude then. With that assurance, I hope that my hon. Friend will see fit to withdraw the Motion and the Clause.

    I should like to make two very brief observations. First, although I have put my name to it, the Clause is too widely drawn. I agree with the principle, but not with the Clause in its present form. It should have included sterling bonds, and then the points which have been made from the Treasury Bench would not have been necessary. Secondly, in the opposite sense, my hon. and learned Friend is mistaken in supposing that the dollar securities if bought in this country would represent a strain on our dollar resources. On the contrary, the transaction would have the opposite effect, because if dollar bearer bonds are introduced in the City, they would have to be bought from the dollar pool and a quarter of the payments would land in the Treasury's lap.

    Therefore, the Treasury has a vested interest in this and, apart from not representing a strain on our dollar resources, it results in an additional gain. I have already said that the present method is too wide, and I hope that during the Report stage we can have an amended Clause upon which a different argument can be put forward. I hope that the right hon. Gentleman will have another look at this and introduce a new Clause freed from the objections which have so rightly been taken to this Clause tonight.

    Question put, and negatived.

    Schedule 12—(Repeals)

    I beg to move Amendment No. 295, in page 107, line 41, column 3, at the end to insert:

    "In section 37(3)(b) the words 'acquired on or after that date'".

    This Amendment is consequential on an Amendment we have already made to Schedule 9.

    Amendment agreed to.

    Schedule, as amended, agreed to.

    New Schedule—(Reliefs For Shipbuilders)

    Part I

    Determination Of Open Market Value

    1.—(1) The open market value of any vessel or other structure and its fittings and equipment shall be taken for the purposes of section (Reliefs for shipbuilders in respect of certain duties) of this Act to be the price which they would fetch at the time of their delivery pursuant to the contract in question on a sale in the open market between buyer and seller independent of each other.

    (2) The said price shall be determined on the assumption that the buyer will bear freight, insurance and all other costs, charges and expenses incurred in respect of the vessel or structure and other items in question after their delivery as aforesaid or, where delivery is to be effected outside the United Kingdom, after their departure from the United Kingdom for the purpose.

    (3) For the purposes of this paragraph, a sale in the open market between a buyer and seller independent of each other presupposes

    ( a) that the vessel or structure and other items in question are the sole consideration for the price paid, and

    ( b) that the price is not influenced by any commercial, financial or other relationship, whether by contract or otherwise, between the seller or any person associated in business with him and the buyer or any person associated in business with him (other than the relationship created by the sale of the said vessel or structure and other items), and

    ( c) that neither the seller nor any person associated in business with him has provided any part of the price, and that no part of the price will be returned to the buyer or any person associated in business with him.

    (4) For the purposes of the last foregoing sub-paragraph, two persons shall be deemed to be associated in business with one another if, whether directly or indirectly, either of them has any interest in the business or property of the other, or both have a common interest in any business or property, or some third person has an interest in the business or property of both of them.

    Part Ii

    Reductions In Purchase Price Or Open Market Value

    2.—(1) Where the amount payable in respect of any vessel or other structure under the said section (Reliefs for shipbuilders in respect of certain duties) is, by virtue of subsection (3) thereof, to be determined by reference to the price payable as mentioned in that subsection, then—

    ( a) if the terms of the contract in question are such that the applicant for the payment will bear any of the following, that is, any freight, insurance or other costs, charges or expenses incurred in respect of the vessel or structure or its fittings or equipment after their delivery pursuant thereto or, where delivery is to be effected outside the United Kingdom, after their departure from the United Kingdom for the purpose, the price shall be treated for the purposes of that subsection as reduced by an amount reflecting the burden thus assumed by the applicant;

    ( b) if the whole or any part of the price is payable twelve months or more after the time when the property in the vessel or structure passes or, if later, the time of delivery of the vessel or structure or if its departure from the United Kingdom for the purpose of delivery, the price shall be treated for those purposes as reduced by an amount

    representing the discount which would be chargeable for obtaining payment at that earlier time at a rate of interest equal to the bar k rate then prevailing.

    (2) In the foregoing sub-paragraph "bank rate" means the minimum rate at which the Bank of England will lend to a discount house having access to the Discount Office of the Bank.

    3. If, after consultation with the Board of Trade, it appears to the Commissioners that the fittings and other equipment supplied with any vessel or other structure include any items the supply of which would not in the ordinary course of events be undertaken by a person building such a vessel or structure for delivery to another as that other's property, the price or, as the case may be, open market value referred to in the said subsection (3) shall be treated for the purposes of that subsection as reduced by an amount equal to the open market value of the items in question; and the provisions of paragraph 1 of this Schedule shall apply for the purpose of determining that value, subject to any necessary modifications.

    Part Iii

    Supplemental

    4. The following provisions of the Act of 1952 shat apply in relation to payments under the said section (Reliefs for shipbuilders in respect of certain duties) as they apply in relation to drawbacks, allowances or repayments under that Act, that is to say, section 270 (time limit on payment), section 271(1) (offences in connection with claims) and section 301(2) (recovery of overpayments).

    5.—(1) Any officer or person authorised by the Commissioners may require any person who has been concerned at any stage with a vessel or other structure in respect of which an application has been made under the said section (Reliefs for shipbuilders in respect of certain duties), or with any fittings or other equipment supplied therewith, or with any payment in respect of the vessel or structure or any fittings or other equipment so supplied—

    ( a) to furnish, within such time as that officer or person may require, such information as may be reasonably necessary to enable the Commissioners to determine whether the applicant is entitled to a payment under that section, or liable to make any repayment thereunder, or to determine the amount of any payment to which the applicant is so entitled, and

    ( b) to produce for inspection by that officer or person, at such time and place as he may require, any books or accounts or other document of whatever nature relating to, or to any payment in respect of, the said vessel, structure, fittings or equipment.

    (2) Any such officer or person shall be entitled to take extracts from or make copies of any document produced to him under the foregoing sub-paragraph.

    (3) If any person fails to comply with any requirement under sub-paragraph (1) above, he shall be liable to a penalty of one hundred pounds, together with a further penalty of ten pounds for each day during which failure to comply with the requirement continues.

    6.—(1) Any dispute as to the determination for the purposes of an application under the said section (Reliefs for shipbuilders in respect of certain duties) of the price or value referred to in subsection (3) of that section, or of any amount by which that price or value is to be treated as reduced by virtue of subsection (4) thereof, shall be referred to a referee appointed in accordance with the next following sub-paragraph.

    (2) A reference under the foregoing subparagraph shall be to a person (not being an official of any government department) appointed by the Lord Chancellor or, if the application for the purposes of which the determination is made relates to a vessel or structure constructed in Scotland or Northern Ireland, or was by a company incorporated in Scotland or Northern Ireland, and the applicant in either case so requires, appointed by the Lord President of the Court of Session or as the case may be, the Lord Chief Justice of Northern Ireland.

    (3) The procedure on any such reference shall be such as the referee may determine.

    (4) Sub-paragraph (1) above shall not have effect, and any price, value or amount falling to be determined for the purposes of the said subsection (3) or (4) shall be that fixed by the Commissioners, unless, within three months from the time when the Commissioners' final determination thereof is communicated to him, or such longer time as the Commissioners may allow, a notice requiring a reference under that sub-paragraph has been served on the Commissioners by the person for the purposes of whose application the determination was made.

    7. The making by the Commissioners of a payment under the said section (Reliefs for shipbuilders in respect of certain duties) determined by reference to the price or value referred to in subsection (3) of that section, or that price or value as reduced by virtue of subsection (4) thereof, shall not be taken as constituting the making by the Commissioners of a final decision under the said subsection (3).—[ Mr. MacDermot.]

    Brought up, and read the First time.

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

    This is consequential on the new Clause which we adopted dealing with the new rebate arrangements for shipbuilders. It is concerned with a number of administrative matters in connection with that relief.

    Question put and agreed to.

    Schedule added to the Bill.

    Bill reported, with Amendments; as amended, to be considered this day and to be printed. [Bill 66.]

    Construction Industry(Labour-Onlysub-Contracting)

    Motion made, and Question proposed, That this House do now adjourn.—[ Mr. Charles R. Morris.]

    12.14 a.m.

    (Houghton-le-Spring): It is with a good deal of pleasure that I welcome this opportunity, despite the lateness of the hour, to raise the subject I seek to put before the House. When I looked at the Notice Paper this morning, I anticipated having to do so at about breakfast time, and am glad that I have not had to detain my hon. Friend who is to reply until then.

    I wish to draw the attention of the House to what I personally consider—and it is an opinion certainly held within the industry—to be the scourge of the construction industry. It is the system of sub-contracting. This insidious practice is tragically contributing to fragmentation and creating greater inefficiency within an industry which is at the heart of the Government's drive towards modernisation of industry and social expansion.

    If we look briefly at the history of labour-only sub-contracting it will be seen that several factors have contributed to the present situation. Immediately after the war there was a very serious shortage of skilled craft labour, coupled with artificially low wage rates and the reluctance of building employers to introduce bona fide incentive bonus schemes, in accordance with the agreement concluded at national level in 1947. All of these factors have assisted in providing a ready-made spawning ground for a growing array of adventurers. The disparity in wages within the industry is being intensified because of the present system.

    In order to contract labour, particularly over the last few years, employers have been in fierce competition with each other, and to attract the labour required, they have offered substantial under-the-counter payments, in addition to nationally negotiated wage rates. Even this aspect of the situation has been lessened, because in many cases these conditions of employment have been superseded by recourse to what we know as labour-only sub-contracting.

    Under this system, the main contractor, having successfully tendered for building work, engages one, and frequently several, labour-only sub-contractors on an undiluted piece-work basis, on the premise that these men become self-employed and independent contractors. The main contractor is thereby the employer only in name. It is true that many of the larger contractors in industry now only lend their name to the contract which they have secured. In this extremely mobile and' highly casual industry, still undermanned and notably deficient of skilled craftsmen, this invidious system permits and encourages the use of semi-skilled or even unskilled labour to supplement the skilled men available. The average labour-only sub-contractor has few, if any, scruples and it can readily be understood that there can be a serious diminution in standards of workmanship, with subsequent disastrous consequences for a consumer.

    Equally abhorrent is the fact that this type of employment provides to the unscrupulous the opportunity of cheating the public by the evasion of statutory responsibilities. Here I would quote the instance of the Construction Industry Training Board, responsible for raising the training levy. In 1965 it circularised 45,000 labour-only sub-contracting firms for assessment purposes. Responses were varied, and indicated very clearly the anarchic state of the industry and certainly of this particular section of it. In the case of 15,000 of those 45,000 firms, forms were returned to the Dead Letter Office of the General Post Office, the intended recipients being untraceable. Another 16,000 have so far not deigned to reply to the circular. Seven thousand more claimed that because of self-employment or being in partnership as self-employed persons, they were not liable to pay the training levy. Seven thousand more forms were returned by employers who claimed that their wages bill was below the minimum of £5,000 per annum and, therefore, they were also entitled, according to their claim, to exclusion. Only 647 out of the total have conceded their liability to contribute to the Construction Industry Training Board by levy.

    Additionally—and this exercise emphatically underlines the possibility of participation in other evasion—these people can, and do, avoid payment of National Health Insurance contributions. They frequently fail to take out employers' liability insurance policies against accidents. They ignore their responsibilities under the Redundancy Payments Act, 1965. The liability for payment of Income Tax on an annual assessment basis instead of, as hitherto, on the P.A.Y.E. system is also subjected to considerable abuses.

    In similar fashion, the joint industrial agreements in the construction industry are rendered nugatory. Safety, health and welfare regulations are either ignored or treated with impunity. The labour-only sub-contractor makes no contribution to the future of the industry because of the non-inclusion of apprentices in his gang—a veritable burden on the industry.

    Every trade union office in the construction industry—and I speak with a good deal of knowledge having regard to my previous experience as a full-time officer for a trade union in the construction industy—has literally been inundated with claims from members against these buccaneers for recovery of wages which were not paid at the time when, quite frequently, the sub-contractor has absconded and taken with him the money that was negotiated with the main contractor.

    They are all parasites. Holidays-with-pay stamps frequently not applied to the holiday-with-pay stamp card, unpaid National Insurance stamps and unpaid Income Tax to the Inland Revenue—these are the problems with which trade union officers have been, are being and will continue to be faced under this system of labour-only sub-contracting.

    It was against this background that the Amalgamated Union of Building Trade Workers, fierce opponents of this unsocial system, recently sought by industrial action to abrogate a labour-only contract at a power station contracted to the Ministry of Power. I hesitate somewhat to raise this issue because of the danger of infringing the rather delicate rules of order. Let me say briefly that the part of this contract for constructional work was let to a national firm of great repute. Despite assurances from the local trade union officers that sufficient labour could be supplied on a direct employment basis, the firm chose to operate exclusively on a labour-only system.

    The construction company, with labour-only sub-contractors involved, was then engaged for a portion of the work. The sub-contracting company was formed only after the main contract had been let to the main contractor, a typical example of mushrooming, as we describe it in the construction industry. This firm, whose owners are a husband and wife, with £500 capital, with their home as their registered office, was engaged in the kind of practice which operates in so far as labour only is concerned. An industrial dispute was declared, as a result of unsuccessful efforts of the union concerned officially and legitimately to terminate this sub-contract. They were rejected by the firm.

    An injunction was sought, and refused by Mr. Justice Lawton. On appeal, Lord Denning and Lord Justice Diplock, by what I consider to be somewhat weird interpretations of the 1906 and 1965 Trade Disputes Acts, reversed the previous decision and granted the injunction.

    I mention this merely to highlight the situation which now developed in so far as sub-contracting is concerned. These judgments, as in the case of Rookes v. Barnard, appear to open the door to further attacks on the rights of trade unions to protect the interests of their members. Most certainly they are hostile to the A.U.B.T.W. in its offensive against labour-only sub-contracting. Backed by the force of law and the prospects of greater escalation of subcontracting as a result of the ultimate introduction of the Selective Employment Tax, these brigands must be relishing the prospect of an even greater bonanza in future.

    This is by no means a trivial matter, as it is estimated that there are already some 250,000 men, equal to one-sixth of the labour force, currently employed on this basis in this great industry. Neither the industry nor the country can afford, for moral, social or economic reasons, to see a growth of this unpleasant system.

    Because of the failure of the union, gallant as has been its efforts, to control this system by industrial methods, I call upon my hon. and right hon. Friends in the various Ministries concerned to address themselves, perhaps a little more urgently, to the task by exercising more statutory control, and thereby participating in a restoration of order out of the chaos which now exists.

    My hon. Friend the Parliamentary Secretary, I know, is fully cognisant of the difficulties which are inherent in this situation, and I ask her to convey to my right hon. Friend the Minister of Labour, whom I hope to see back in his place quickly after his illness, the deep concern which is felt, and to suggest to him the possibility, through the National Joint Advisory Council, where, I know, he has made great efforts to resolve this matter, of finding an acceptable solution of this problem. May I further suggest to him that it may be opportune to consider further the possibility of the introduction of legislation to apply control over this veritably monstrous practice. This would inevitably be essentially a long-term solution.

    Hitherto, labour-only has been largely confined to housing. This may spread quite rapidly into civil engineering and other large building contracts. Here I turn to what I describe as the building Ministries—of Education, Power, Health—the big spending Ministries, and suggest to my hon. and right hon. Friends in those Ministries that they consider with the Minister of Labour the possibility of introducing into future contracts clauses which will prohibit the use of labour-only sub-contracting, and insist on the employment on direct labour of workers nominated and directed by those Ministries.

    I should like to leave my hon. Friend sufficient time to deal with the matters which I have raised, in the full knowledge that I have her sympathy, and, I am sure, that of my right hon. Friend the Minister of Labour, in dealing with this very important aspect of the construction industry.

    12.29 a.m.

    I should like first to thank my hon. Friend for raising this subject, a very important one, of which he has a very great deal of knowledge and a very great deal of experience. I might point out also that, at this late hour, it is unusual for such a substantial audience of hon. Members to be in the House, and that exemplifies the importance of the subject to many people concerned with the construction industry.

    The practice of labour-only subcontracting normally takes one of two forms, of which the first is the form of employment by labour-only sub-contracting employers, and, until recently, that has been the more usual form. The form which is growing rapidly at present is that which consists of gangs of men who sub-contract for labour only on a self-employed basis, and that presents, if anything, even more difficulties than the first form.

    My hon. Friend will bear me out when I say that it is most marked in the South-East and other regions of acute labour shortage, and it is more common in the construction industry than in any other, though it has occurred in the engineering industry as well.

    If I may, I should like to look at some of the specific points raised by my hon. Friend. He mentioned the disparity in wages, and we must recognise that that can be inflationary in its effect. The disparity in wages is possible because many of the fringe and supplementary benefits available to employed men are not made available to self-employed men or those on labour-only contracts. In consequence, the difference is made up by additional payments, which can be both inflationary and lead to ill feeling in the industry.

    My hon. Friend referred to standards of workmanship which are alleged to be very poor in labour-only sub-contracts, and he also referred to the fact that in certain cases tax is evaded. A more common form is where men described as self-employed claim expenses which are not available to employed men who otherwise are doing the same work. That leads to a strong feeling of injustice between men engaged on identical work and in identical conditions in all other respects.

    My hon. Friend also referred to the implications of the judgment in the Emerald case. He will not expect me to discuss that at length tonight. Suffice it to say that we are aware of the concern that it has caused in the trade union movement. It has been raised and evidence about it has been given to the Royal Commission on Trade Unions, and I hope that the Royal Commission will be able to look at the implications of the case in the consideration which it gives to trade union law.

    My hon. Friend spoke about the effects of labour-only sub-contracting on the industrial training levy, and the fact that it is very difficult to get an effective levy paid by a labour-only sub-contractor, in particular a self-employed labour only sub-contractor. He gave an impressive list of figures which show how few firms are liable to pay the levy. The Construction Industry Training Board is now looking at ways of dealing with the problem—ways which I hope that we shall be able to make more specific to hon. Members before long.

    On the problem of tax evasion, it is worth telling my hon. Friend about the constructive steps being taken. Last year, the Board of Inland Revenue authorised tax inspectors for the first time to call for special returns from all contractors employing labour-only sub-contractors and making payments of over £100 to them, the aim being to find out whether evasion is occurring. My hon. Friend will be glad to know that the evidence resulting from the study will be available in the autumn of this year. Another study has been done by the Ministry of Pensions and National Insurance into the evasion of National Insurance contributions, with particular reference, in the case of self-employed men, to compliance and classification. Once again, the evidence will be available to hon. Members at a fairly early stage, and certainly not later than the autumn.

    One of the most serious aspects of the problem is the effect on the organisation of the trade union movement itself. There are those of us who feel strongly that in the construction industry, as in some others which have been plagued by the casual nature of the trade, it is important as far as possible to move on to a more secure type of employment which gives a man the certainty of permanent and steady work throughout his lifetime and can therefore justify him in acquiring greater skills. Many of us feel that the long-term solution for this industry should be along the lines which have occurred in other industries which were equally plagued by the casual nature of the job. This is a highly organised industry. The effect on the trade unions of the growth of labour-only sub-contracting is certainly a serious element of it, as it means that those who come under labour-only sub-contracting, and particularly those who are self-employed, are not governed by nationally negotiated agreements and the general conditions and standards in the trade.

    My hon. Friend also referred to the lack of supervision for safety. This is a very serious aspect of the problem because, as my hon. Friend knows, nobody who is listed as self-employed has protection under the Factories Acts. This is an industry which suffers from a very high accident rate, and one of the particularly difficult aspects is applying high safety standards. At the moment my Ministry is engaged in a detailed inquiry into construction sites with regard to safety, and one, of the particular objects is to discover what provisions are made by large employers of labour-only sub-contractors for accident prevention and how far this is able to be carried out. I hope, again, that we will be able to make this information available to my hon. Friends who are interested in this subject.

    My hon. Friend said that the question had been raised with the National Joint Advisory Council with particular relevance to the position in construction. At the last meeting of the Council there was a full discussion on all aspects of labour-only sub-contracting, in which the representatives of both employers and unions took a full part. The position at the moment is that the Ministry has been asked to pursue some of the inquiries I have mentioned and to report back to the Council at the earliest possible opportunity, and this will be done

    The T.U.C. at the N.J.A.C. suggested that there should be an independent inquiry into the problem in construction. My right hon. Friend pointed out that such an inquiry should look at the wider question of labour-only sub-contracting and should look at the broader problems of the casual nature of the industry, at the need for training in the industry, at the provision of a stable pattern of employment, and at the efficient use of labour in the industry. I think that my hon. Friend will be with me in suggesting that a wider inquiry would be very useful, provided that it could look closely at the problems that we are discussing tonight.

    I should perhaps mention one or two more specific steps which are being taken. Manpower working parties of Little Ned dies in building and civil engineering are looking at the broad problem of casual working, and a sample inquiry is going ahead into the nature and extent of casual working in the industry This is being done on behalf of the Ministry of Labour and the Ministry of Public Building and Works, the results of which should be available in the autumn This is supplemented by a survey of operative skills which was undertaken by the Building Research Station, starting in June, 1964, and ending in March the following year. The results of this should be available shortly.

    My hon. Friend may be interested to know that my Ministry is intending to hold informal discussions with trade unions and employers in construction on the question of a wider independent inquiry to which I have referred. I should also mention, because my hon. Friend mentioned the question of Government contracts, that the Ministry of Public Building and Works recently sent out a circular to all those firms which contract for Government construction contracts under the Ministry of Public Building and Works, designed to prohibit the use of self-employed labour-only sub-contractors.

    Broadly, we are pressing ahead with trying to get the basic information which we must have before we can decide what further steps should be taken. My hon. Friend will be aware that we need to carry with us a number of people in the industry who are not contractors, and he will also be aware of the difficulties that arise from labour-only sub-contracting. I think that my hon. Friend will be interested to know of the first steps which have been taken in this respect.

    My Ministry is encouraged to see that the President of the National Federation of Building Trade Employers, Mr. L. G. Pearson, said recently that there were very unfortunate consequences of self-employed labour-only sub-contracting. I think that not all employers take this view, but he made the point strongly that nobody should use labour-only subcontracting to evade his responsibilities to his men. My hon. Friend will be aware, in respect of redundancy payments, that it was made clear by the Ministry of Labour that responsibilities under this—falling under the first type of labour-only sub-contracting—would have to be carried out, and that it would not be possible to dismiss men and reemploy them as a method of evading responsibilities under the Redundancy Payments Act.

    I want to point out that there are difficulties involved in legislation on this subject—although there is no reason for suggesting that such difficulties should not be got round. Both sides of the industry are well aware of these difficulties. and a section of the trade union movement—not the including the union referred to by my hon. Friend, the A.U.B.T.W.—is moving towards a system of meeting these by agreement, introducing a new rule into the general working rules of the industry. This is fairly effective in its application to those employers providing direct labour only but does not deal with the second type of case, the self-employed labour-only sub-contractor.

    There is another way forward which has recently been taken by the A.U.B.T.W., namely, the agreement with Tersons, an important construction firm, under which the firm agreed that it would not use self-employed labour-only subcontractors. This is one way to push forward in dealing with this problem.

    I end by saying that this is an industry which requires large-scale reconstruction, where we need to get to grips on a much greater scale with the requirements of the industry, and in which provision must be made for much better training. There are difficulties here with the labour-only sub-contractors. This is an industry where we need to get on to a basis of permanent work as far as possible, and where we need to provide an incentive for employers to use the best methods not only in getting labour but also in improving conditions in the industry. It is in the light of these long-term requirements that I say that my Ministry and the other Ministries to which I have referred are very well aware of the problems raised by my hon. Friend. I repeat that I am grateful to him for raising the subject on this occasion.

    (Warwick and Leamington): I do not know whether the hon. Member for Houghton-le-Spring (Mr. Urwin) is satisfied with the reply of the Minister, which seemed to consist largely of saying that everything would he inquired into, and that we would even have an inquiry into what the inquiries should discuss.

    There was one question that I wanted to ask. In the course of his detailed and interesting speech the hon. Member stated that the Selective Employment Payments Bill would increase the amount of labour employed on labour-only subcontracts, particularly where individuals only were concerned. I wanted to ask the Minister whether it was not a fact that that Bill is bound to have the effect, in many trades and industries—more especially in the construction industry—of making it even more advantageous to employ a host of individuals on a subcontracting basis of labour only, particularly where individuals are concerned. Because they will be self-employed the contractor or sub-contractor will pay no Selective Employment Tax under Clause 42 of the Finance Bill. Those employing organised union labour on the one hand will pay the tax and get no refund, whereas the labour-only sub-contractors will pay no tax at all. This will increase the pressure in many trades—including the construction industry—for this device to be extended—

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

    Adjourned at sixteen minutes to One o'clock.