House Of Commons
Monday 2nd April 1973
The House met at half-past Two o'clock
Prayers
[Mr. SPEAKER in the Chair]
Oral Answers To Questions
Posts Andtelecommunications
Fourth Television Channel
3.
asked the Minister of Posts and Telecommunications if he will announce the criteria which will determine his allocation of the fourth national television channel.
The prior question is whether the fourth channel should be allocated at all at the present time. The criterion is what is in the best interest of the public as a whole.
Will the Minister accept that I agree entirely with that answer? In the regrettable event of his deciding to allocate the fourth channel, Will he undertake to publish a Green Paper setting out the Government's view of the various alternatives before any final decision is taken?
As the hon. Gentleman knows, no final decision has been taken. That is the purpose of the reference in the White Paper to the fact that the whole question is the subject of a separate study. I cannot be specific at present about the exact form in which conclusions will be presented to Parliament.
Will my right hon. Friend assure me that when the Commission which is dealing with this subject considers matters in relation to Wales it will hear the views not only of the vociferous minority but also of the ordinary public, as well as of the broadcasting organisations, which have their own axes to grind?
There is a later Question on the subject of the terms of reference of the study group which will look into matters in relation to Wales. In so far as its study will take it into considering possible applications of the fourth channel, that is one thing. The position about the future of the fourth channel is a separate matter, which is reserved and is outwith the broad terms of the study group.
Does not the Minister accept that, although it is important that all sections of Welsh opinion be heard as to the allocation and the arrangement for the fourth channel in Wales, some arrangement is nevertheless needed, perhaps more urgently than in England, to ensure that both English- and Welsh-speaking Welshmen have justice in their own land?
Having made a decision to set up a study group to consider specifically the broadcasting needs and the existing plans for areas such as the Principality, it is right to allow that study to proceed. It will be taking into account all sections of opinion and not those related exclusively to one interest.
If the right hon. Gentleman believes in open government at all there should be no hesitation on his part in declaring that there will be a Green Paper. Will he go further and state that he will hold a public inquiry into the possible allocation of the fourth channel? Will he at least confirm today that he will be prepared to publish any evidence that is presented to him to assist him to arrive at his conclusion?
There is nothing to prevent anybody who wishes to bring views to my attention about the fourth channel from making those views public. I hope that such a person will do so. I see no difficulty about that. However, that must be a matter for the organisation or the individual presenting views to me for this purpose. I have made it clear that Parliament will be given an opportunity to consider a number of matters which were specifically reserved for this purpose in the terms of the White Paper before Parliament was invited to take a decision about extending the franchises for the future of the BBC and the IBA for five years. I cannot be specific about the exact form that that will take until my own studies of all these matters are further advanced.
The Minister has had a good deal of time to reflect on this matter, even since the publication of his White Paper. Why is he still being so dogmatic? He is being as dogmatic about the question of the Green Paper as he was about the public inquiry. What is his contribution going to be towards open government?
I suggest that the hon. Gentleman waits and sees.
Investment
4.
asked the Minister of Posts and Telecommunications what major investment decisions are under consideration by his Department at the present time; and whether he will make a statement.
i am currently engaged in the annual review of the Post Office's investment programme for the next five years. I am also considering Post Office proposals for the modernisation of large local telephone exchanges.
Is the Minister aware that the current discussion on cable television clearly shows the need for a national telecommunications policy and the introduction into Britain of an integrated telecommunications network?
My studies on cable television are leading me to take account of the views which have been put forward in a recently published document by the Cable Television Association. I will then seek the views of many other interested parties, including the broadcasting authorities and the Press. At this stage it is early to talk about the development of a national cable television system. It is more likely that this will grow naturally out of the extension of local television broadcasting.
Do the major investment decisions envisage the certainty that postal charges will go up in the very near future?
No. The whole question of the Post Office's investment plans are currently being studied, and the nature of those decisions will appear in the White Paper on Public Expenditure later this year.
Television Licence Fee
5.
asked the Minister of Posts and Telecommunications how many old persons' homes licences have been issued for each of the past three years; and how many elderly people have benefited from this scheme.
In December 1972 there were 7,994 licences in force, under which 172,075 retired people benefited. I will, with permission, circulate the figures for the two previous years in the OFFICIAL REPORT.
I thank the right hon. Gentleman for his reply. Have the Government any intention of extending the concessionary television licence to every old-age pensioner throughout the country? Does the right hon. Gentleman realise that there is tremendous dissatisfaction amongst those old-age pensioners who do not qualify for this concession? Will he take a progressive step forward himself and, as a temporary measure, grant to married couples living on their pensions a licence at 50 per cent. of the present rate and to the single pensioner living on his own a licence costing not more than £2 a year?
As the hon. Gentleman will recollect, the Government's view on this matter has already been announced. Although there may be a degree of satisfaction in moving in the direction which he has suggested, to exempt all old-age pensioners entirely from paying licence fees would cost about £25 million.
Does my hon. Friend recognise that many old people, particularly in my constituency, would appreciate, as much as a reduction in the fee, the chance to receive the service of their choice? Are we to read my right hon. Friend's proposal for a commission to study this matter as a delay in any efforts to resolve the territorial problems of frequencies?
My hon. Friend is asking a question about another matter.
Following are the figures:
Number of licences
| Number of retired people benefiting
| ||
| December 1970 | … | 7,493 | 145,658 |
| December 1971 | … | 7,563 | 155,314 |
6.
asked the Minister of Posts and Telecommunications what further steps he has taken to give publicity to the reasons for his decision not to alter the present system of television licence fees.
None, Sir. The reasons for my decision are well known.
May I remind my right hon. Friend that on 12th March he said that he would try to give further publicity to the fact? Does he not agree that what the present system needs is not more publicity, but reformation? Is he aware of the widespread dissatisfaction at the present television and broadcasting licensing system, and will he not take the initiative and put forward some proposals for an alternative system?
I have no proposals to put forward at present. I recognise that the present system gives rise to a number of difficult situations, particularly affecting special categories of persons. I am sure, however, that my hon. Friend recognises the need to devise a system which is not too expensive to collect and is reasonably simple to operate.
Will the right hon. Gentleman now accept the reservation of many hon. Members that the regressive nature of the licence fee system generally and not all this beating about the bush about pensioners is at the root of the problem? Will he set up a departmental inquiry to consider the question of the funding of public service broadcasting, which in itself is relevant to questions like the destiny of the fourth channel?
Notwithstanding the last part of the hon. Gentleman's observation, I recognise that this is in itself an extremely important matter, and, as I explained in answer to questions a few days ago, there is no reason why this should not be separately considered.
Will my right hon. Friend make clear that he has not closed his mind to the abolition of the black and white television licence fee and the collection of the revenue in some other way?
My mind is certainly not closed.
My right hon. Friend did not exactly answer the question put to him by the hon. Member for Derby, North (Mr. Whitehead) who asked whether there was a departmental inquiry—I think that is what he said— into the whole question of the abolition of the licence fee? May we have an: assurance that such a thing is being done and that he is working towards the abolition of the licence fee and the raising of revenue in another way?
I must refer my hon. Friend to the debate that we had on this subject a short while ago.
Will the right hon. Gentleman bear in mind the dissatisfaction that was expressed in all sections of the House during the course of that debate, and that the victory on that occasion was due more to the Whips than to the force of argument presented by the Government Front Bench? Is the right hon. Gentleman aware that there is still considerable feeling in this House that something ought to be done about licence fees for old people? Secondly, will he do as many have suggested and hold a general inquiry into the whole system of financing the public sector of broadcasting? Such an inquiry would be greatly welcomed by both sides of the House.
The views of the Government were clearly expressed during that debate, in which the position held by previous Governments was reiterated, namely, that it is better to attend to the needs of elderly people by payment in cash rather than in kind. So far as that question was invoked in the context of the overall financing of the BBC, I think the hon. Gentleman will accept that there is no doubt where the Government stand.
Trade And Industry
Offshore Oil
8.
asked the Secretary of State for Trade and Industry when he expects to announce the setting up of a British offshore oil drilling capability as recommended in the IMEG Report.
A number of British companies have already announced steps they have taken to enter the field of offshore drilling. Some further possibilities are being discussed with my Department.
Does the Under-Secretary realise that one of the key recommendations of the IMEG Report, published in January of this year, was that British companies ought to get in on the ground floor, so to speak, in offshore drilling for oil and gas? Can he confirm or deny the report by Chapman Pincher which appears on the front page of the Daily Express, that the Government have sold British companies short once again and have given away North Sea oil and gas to another American company?
The answer to the first part of the supplementary question is that it was one of the recommendations. The hon. Gentleman may have seen that Mr. Gibson, of the Offshore Supplies Office, told the Aberdeen Offshore Conference two weeks ago that the IMEG recommendation which appeared to be the most difficult is developing as one of the easiest to implement.
Although the second part of the question is not entirely relevant here— [Interruption.]—I mean, not entirely relevant to the subject of drilling—I wish to make it absolutely clear that the Department will ensure that British interests are fully safeguarded and, what is more, that a full and fair opportunity is given to British companies. We are striving so to do.Does my hon. Friend agree that there is not much point in trying to force oil companies to give more orders to British firms when our own nationalised British Steel Corporation cannot provide the overland as well as the undersea pipes? Will he do what he can to ensure that our steel industry is in a position to take orders which are offered to it on a plate?
Yes, Sir.
Does the Under-Secretary accept that there is grave disquiet throughout the country at the way in which the gas situation, in particular, is now being handled? Will he undertake that when events are clarified he will make a full and frank statement to the House on who has got this company which is to be transferred from Gulf Oil?
Order. I have allowed considerable latitude, but that supplementary question is really about gas and not oil.
The Minister cannot get away with it like that. He has accepted some responsibility, because he has answered a supplementary question. It concerns the North Sea, whether it be gas or oil. Will the Minister tell the House whether a decision has been taken to—
Order. I must adhere to my decision. The Question deals with British offshore oil drilling. We must stick to that. There may be another opportunity for the right hon. Gentleman to raise his other question.
I am sorry, Mr. Speaker, but I submit that it concerns both gas and oil. Both gas and oil were struck in this instance, and the oil companies are involved—
Order. The Question deals with the British offshore oil drilling capability, and I can allow supplementary questions only arising out of that.
On a point of order, Mr. Speaker. I fully respect your ruling, but the Question refers to the IMEG Report and, with great respect, I submit that that covered the potentiality of British industry to serve all aspects of North Sea developments.
In fact, the Question is limited to a certain section of the IMEG Report. Perhaps there will be a later opportunity to raise the other matter.
It concerns offshore drilling, Mr. Speaker, and we are asking the Minister, first, whether a decision has been taken already to transfer the Rough gasfield—
Order. Even the Front Bench must obey my ruling.
Reverting to the Minister's answer, in which he spoke of a full and fair opportunity, may we know whether such full and fair opportunity was given to British firms in what has turned out to be the Amoco contract?
As I told the House earlier, the Department and the Government wish to do everything possible to ensure full and fair opportunities for British firms. No decision has yet been made on the transfer of Rough.
Later—
On a point of order, Mr. Speaker. In view of your ruling and the answer I received from the Undersecretary of State, I beg to give notice that I shall seek to raise the matter of the Government's administration of Continental Shelf production and exploration licences on the Adjournment at a suitable time.
Well, at all events, the hon. Gentleman has got away with that.
Shipbuilding Industry
9.
asked the Secretary of State for Trade and Industry if he will make a statement on the order book of the shipbuilding industry.
The recent improvement in shipbuilding orders is welcome. The value of outstanding orders in British yards is probably the highest it has ever been.
Does my hon. Friend agree that this dramatic transformation in the shipbuilding scene reflects great credit on what the Government have done over the past two years? Second, as a good chunk of this work is represented by orders placed provisionally by Maritime Fruit Carriers, has my hon. Friend any news whether these important orders have been confirmed?
It is of particular interest that the order books stand at the record figure of about £1,000 million at the moment. Swan Hunter is negotiating contracts with the Maritime Fruit Carriers group for an initial order for 20 vessels, worth about £150 million. Negotiations are still continuing.
Although the shipbuilding side shows encouraging signs, the picture is not the same in ship repairing, which is closely allied and is usually carried out in the same yards. Does the Minister recognise that there is a severe crisis in ship repairing, with a loss of orders and widespread unemployment developing? What do the Government intend to do about that side of it?
If the hon. Gentleman will put down a Question about ship repairing I shall be delighted to answer it.
These orders will take several years to complete. Is my hon. Friend satisfied that the cost escalation clauses are adequate?
It is not entirely for the Government to vet the escalation clauses which may be arranged, but they wish to make quite clear that it is essential that orders when placed should be able properly to reflect possible increases in costs.
Does the Minister agree that Clydeside is now playing its full part in achieving this new and increasing output in shipbuilding?
I am delighted to be able to tell the House that Govan Shipbuilders is currently negotiating contracts for four cargo vessels and four bulk carriers, worth over £27 million.
Thanks to the Tories.
Steel Prices
10.
asked the Secretary of State for Trade and Industry if he will make a statement on the increase in steel prices following the end of the standstill, indicating what will be the largest percentage increase to customers in Eastern Scotland; and whether he has confirmed with the Brussels Commission that the British steel industry will henceforth be operating in compliance with the rules of the European Community.
I understand that the British Steel Corporation will be making an announcement on steel prices later this month. The order made yesterday under the Counter-Inflation Act 1973 exempts from control prices charged by producers of products covered by the ECSC Treaty, and my right hon. Friend is so informing the European Commission.
I am grateful for that reply, but it hardly answers the Question. The important question is whether the British Steel Corporation and the private sector are to be allowed, without Government interference, to charge prices which will enable them to obtain the 8 per cent. return on assets which has been set for them as their commercial target, and whether the European Coal and Steel Community, since it has been in communication with the Government, has agreed that the corporation and the private sector are to be allowed to charge the commercial rates which they are required to charge by the rules of the Community.
There are two parts to that question. First, the pricing factors which will be taken into account by both the BSC and the private sector must obviously reflect their desire to be able to get on top of the inflationary spiral. Second, the steel industry is well aware of the treaty obligations which it has to match up to.
Will the hon. Gentleman say specifically whether the corporation's announcement will be made after, or as a result of, consultations with the Government?
The matter is entirely for the corporation.
Has my hon. Friend had any consultations with the corporation on this matter of pricing, and has it intimated to him what it thinks will be its price structure as a result of the decision it will be taking later this month?
The corporation has had consultations with my hon. Friend the Minister for Industry, as it normally does about all matters which affect its investment plans.
Steel Mill (Manchester)
11.
asked the Secretary of State for Trade and Industry what consultations he has had with the British Steel Corporation regarding the regional policy aspects of siting a steel mini-mill in the Greater Manchester area.
Regional policy aspects of the British Steel Corporation's 10-year development strategy, including the siting of mini-mills, were fully considered in the consultations leading up to my right hon. Friend's statement on the 10-year development strategy for the BSC—[Vol. 848, c. 1576.]
Does the hon. Gentleman realise that since the Government came to power male unemployment in the Greater Manchester area has risen by 63 per cent., that the situation will be seriously aggravated by the forthcoming closure of steel manufacture at Irlam, that the only aid held out by the Government has been one advance factory, described by the Manchester Evening News as a shed, and that the hope of a mini-mill held out by the Secretary of State for Trade and Industry last December has been disposed of in the statement made by Lord Melchett at Shelton last week? What will the Government do to bring us some work in Manchester?
The Government have taken more measures to assist the Manchester area and to bring industry to areas of high unemployment than were taken by any previous Government. When he visited Shelton last week the Chairman of the British Steel Corporation said that although Shelton was also a possible site for another electric arc plant it would not be possible at that stage to make any further statement.
Is the hon. Gentleman aware that the Government's efforts have so far been singularly unsuccessful and that even if they were able to bring 30,000 new jobs for men to the North-West Region the unemployment level would still be reduced only to the national level, and that if they wished to bring it down to the level in the South-East they would have to bring 65,000 new jobs for men to the North-West? Has the hon. Gentleman grasped the magnitude of the problem facing him there?
Not only do the Government appreciate the problem but they have been taking positive steps to deal with it. The decline in unemployment and the rise in job opportunities in the area are welcome and helpful signs.
Will the Minister clear up the question of the second mini-mill? On 25th January the Minister for Industry made a categoric statement to the House that two mini-mills would be required, one in Scotland and one elsewhere. Last week Lord Melchett said at Shelton that it was not yet clear whether the second mini-mill would be required. Are we to believe Lord Melchett or the Minister for Industry?
May I take this opportunity of making the situation absolutely clear? Perhaps I can remind the hon. Member that it states quite clearly in Command 5226 that
which are mini-mills"perhaps two new smaller electric arc steelworks"—
That is quite clear."should be built, one of which should be located in Scotland."
Is the Minister aware that Lord Melchett said that the mini-plant is to go to South Wales? Last week Lord Melchett announced the sacking of 1,600 men at Shelton, and he has made it clear that steel production will end at these works years before any arc furnaces are installed. Is the Minister also aware that these decisions have followed quite clearly from the low steel targets set by the Government and that men in all these areas are looking to the Government to provide alternative work before their jobs disappear?
The hon. Member is talking about the need to enlarge steel-making capacity. If that line were to be adopted there would be a greater redundancy factor, because there would be a move to more modern plant and that would mean even greater closures. In that sense, Labour Members are misleading the country. I do not believe that the Chairman of the British Steel Corporation has stated where the mini-mill intended to be built outside Scotland will be placed.
Environment
Members' Dining Room (Portraits)
12.
asked the Secretary of State for the Environment if he will replace in the Members' Dining Room the remainder of the portraits of distinguished parliamentarians which used to hang there before it was redecorated.
On the recommendation of the Advisory Committee on Works of Arts, portraits for this room are being cleaned and reframed in my Department's studio. The portraits of Palmerston and Pitt the Younger are already back in place; and those of Walpole, Onslow, Speaker Turner and Hansard will be in a week or so. The others will be returned as soon as they are ready.
I thank my hon. Friend for that answer. Does he agree that the walls facing the window and at each end of the room look very bare at the moment, particularly for visitors who use the room at weekends?
That is something which the advisory committee under the chairmanship of my hon. Friend the Member for Ealing, South (Mr. Batsford) will certainly consider.
Will the Minister tell us what has happened to the Duke of Devonshire?
I do not think that he ever appeared in this dining room, but if the hon. Member would like to have a self-portrait painted I am sure that that would be considered.
Mortgage Interest Rates
14.
asked the Secretary of State for the Environment if he has had any further discussions with representatives of the building societies concerning mortgage interest rates; and if he will make a statement.
Discussions with representatives of the Building Societies Association are still proceeding.
Is the Minister aware that there is a crisis situation on mortgages? A number of building societies have already increased their lending rates to 10 per cent. Will he give an assurance that if any much-needed help is given to the building societies or to borrowers by the Government in the course of the next few days it will be matched by comparable help to council tenants who have already been suffering from the effects of the Housing Finance Act?
Discussions with the representatives of the Building Societies Association are still proceeding. When the hon. Member mentions the Housing Finance Act he should remember the high percentage of take-up of rebates and allowances which has developed and the great benefit this is giving to a large number of low-income families.
Does my hon. Friend agree that the situation on mortgages in areas like my constituency is extremely serious, and is made the more serious by the policy adopted by my local authority, which is to refuse planning permission to any private development in order to deprive people of the right to buy their own homes?
I have noted the view which my hon. Friend has expressed.
Has the Minister noticed that Sir Stanley Morton, President of the Building Societies Association, said that whatever the Government might propose it is likely that interest rates will go up? Do the Government see that as any reason for being discouraged from making new proposals?
The hon. Member should not invite me to consider hypothetical questions. We must wait and see what happens on 4th April.
When the Chancellor announced a public sector borrowing requirement in excess of £4,400 million in the current year, was it the view of the Department of the Environment that this would have the impact upon building society rates which is now taking place?
I shall certainly note very carefully the implications of my hon. Friend's question and report back to my right hon. and learned Friend the Secretary of State.
In addition to considering the interest rates of building societies' will the Minister also consider the position of finance companies, and what they are doing to people who, unfortunately, are unable to get a mortgage from a building society? In one instance a loan of £1,300 was sought and the building society said the interest charges would be £680 over 10 years. The finance company said that the interest charges for a similar loan would be £1,800 over 10 years. When will the Government do something to stop these sharks from fleecing the public?
In his question the hon. Member illustrates the value of the work done by building societies. The question about finance companies is another matter. I understand very well the hon. Member's anxieties in that respect, and if he puts down a Question I shall be pleased to answer it.
In the Government's discussions with the building societies will they bear in mind that 20 per cent. of the depositors with building societies have no income tax liability, and the 6·3 per cent. rate being offered to them at the moment represents a public fraud, given the rates of interest which are available on the Government's own stocks? In the light of this will my hon. Friend assure the House that nothing will be done by the Government to prevent a proper rate of return being offered to depositors with the building societies?
My hon. Friend left out of account certain considerable advantages which accrue to depositors in building societies—for example, rights of withdrawal, convenience of deposit, security, and similar matters. However, I shall certainly report his other words to my right hon. and learned Friend.
May I declare my interest in this matter as one who has already been clobbered by interest rates and who will be clobbered again, no doubt? Does the Minister realise the seriousness of the situation? A newly married couple will simply not have the opportunity of purchasing their first home if things continue as they are.
Although one or two individual societies have said that they will increase their mortgage lending rates above 8·5 per cent., the Council of the Building Societies Association has not made any recommendation, and we shall have to wait and see what happens on 4th April. I have noted the anxieties expressed by the hon. Member.
Will my hon. Friend make it clear that if a proposal is put forward which might have the effect of relieving people from what appears to be an all-time record in interest rates the Government will not turn their minds against it, and that they have not closed their minds to the problem? Will he make it clear that the Government have open minds on the proposals which might come out of the meeting?
I still have to tell my hon. Friend that it is best for me not to consider hypothetical questions, and that we shall have to wait to see what happens at the meeting on 4th April.
Will the Minister consider what can be done in direct approaches to the Building Societies Association, and will he take account of what my right hon. Friend the Member for Deptford (Mr. John Silkin), who normally speaks on these matters, said over the weekend? Will he also put it to the Chancellor that it is the Chancellor's direct responsibility, because it is as a result of his Budget that building societies are having to compete at the high levels of interest which they now face for money which the Government are trying to borrow because of the vast Budget deficit?
I shall report to my right hon. and learned Friend the views which have been expressed on both sides of the House.
Civil Service
Pay
15.
asked the Minister for the Civil Service if he will make a statement on his latest discussions with the Staff Association on Civil Service pay.
I have nothing to add to my reply to the hon. Member's Question on 19th February.—[Vol. 851, c. 18–19.]
In the discussions with the Civil Service could consideration be given to the position that has developed at Swansea, where the provision of provisional driving licences has been centralised? Is the Department aware of the chaos around the country for those who are applying for provisional licences? Can something be done in the interim, by restoring the old method of providing the licences locally or issuing temporary licences on the cashing of a cheque? Cannot something be done about a very difficult situation?
The reorganisation of the issuing of driving licences is too far advanced to put that whole administrative reform into reverse. The difficulties arose in the past fortnight because of sporadic industrial action, but the reports I have received today show that no civil servants—or hardly any—are continuing that action.
Retired Civil Servants (Employment)
16.
asked the Minister for the Civil Service when he intends to announce the results of his review of the conditions under which civil servants may taken positions in private firms after their retirement.
My right hon. Friend is answering a Question on this subject today from the hon. Member for Western Isles (Mr. Donald Stewart).
Does not my hon. Friend agree that there could be concern if, after they retired, civil servants approaching retirement age were offered employment by industries for which they now have some responsibility? Will my hon. Friend give an assurance that my right hon. Friend's reply, to which he has referred—which I have not seen—and continuing surveillance will take account of the risk and make sure that it does not occur?
The gist of my right hon. Friend's reply will be that there has been a careful review of the existing rules, that in general we are satisfied that they are working satisfactorily, and that at present, therefore, we have no proposals to alter them. But I can give my hon. Friend the assurance he seeks that the rules will be kept constantly under review.
Will the Minister give an assurance that retired civil servants will not be allowed to take up jobs with firms that are in contractual relations with the Government? There is a good deal of concern in Scotland about the matter. Incidentally, will the hon. Gentleman tell us the latest stage of play with regard to Mr. Pottinger?
The latter point does not concern retired civil servants. It concerns gifts. The hon. Gentleman will recall that I answered several questions on that matter last year. Police inquiries are continuing. The rules are that all officers of the rank of under-secretary and above —that is, down to the third tier from the top in the Civil Service—must obtain the Government's consent before accepting, within two years of retirement, offers of employment in business and other bodies with which their Department or branch of government is in contractual or special relationship. Where the positions held are of a special or technical character, a similar requirement below under-secretary applies. We are satisfied that these rules are fully carried out.
I think that my hon. Friend will agree that in recent years the occasions have been pretty rare when approval has not been granted. Will he assure us that attention is being paid to the evidence that is forthcoming from the Poulson bankruptcy case, including one instance in which it was suggested that an official had left the Ministry of Housing to work for Mr. Poulson and then returned to the Ministry of Housing afterwards? Surely that is a bit much?
The reason why, on retirement, civil servants are allowed to join companies was reinforced by the Fulton Report, which said:
Provided the rules are observed, I think it is fair that this expertise should be made available to the nation."civil servants do have valuable contributions to make to other areas of our national life; it should be natural for others to wish to employ them."
Now that the Government's policy is in the direction of greater involvement between Government and industry, added impetus is given to the need to watch the position much more carefully than might have been necessary a year or two ago. Is the Minister aware of the great misgivings of a number of people about those senior civil servants who join industry having had previous involvement in the granting of considerable sums of money, as a result of the discretion that civil servants have today? Is a record kept, even after the period of two years, of where senior civil servants have gone, and what kind of employment they have taken?
That would be quite difficult to do. In the case of civil servants who have left the Civil Service it would be difficult, practically, to trace each person's subsequent career. But I shall consider the possibility of placing in the Library details of the specific cases we have had over the past few years, if that will help the hon. Gentleman.
Later—
On a point of order, Mr. Speaker. I wish to draw your attention to Question No. 16 for oral answer today. You will recall that the Parliamentary Secretary to the Civil Service Department said that he could not give an answer but could only refer to an answer which was being given to a Written Question from the hon. Member for Western Isles (Mr. Donald Stewart) today.
I cannot find that Written Question by the hon. Member for the Western Isles— but I have had only a short time in which to search for it. My main point is not so much to find where the Written Question is—although that would reinforce the point—but to ask you whether this is correct practice. Is it in order for hon. Members to put down Questions in precisely the same terms? If it is not, how can a Minister shelter behind a Written Answer which denies a Member who had put down an Oral Question the chance of putting a well-informed supplementary question to reinforce his point? I am not necessarily blaming the Parliamentary Secretary to the Civil Service Department because I do not know the nature of the Question which the hon. Member for the Western Isles is reputed to have put down for Written Answer, since I cannot find it. Nor am I necessarily seeking an answer from you today, Mr. Speaker. But I submit that, as this could be the beginning of an undesirable practice, we would welcome your ruling.I have taken note of what the hon. Gentleman has said and will look into it.
Civil Servants (Eec Trainingcourses)
17.
asked the Minister for the Civil Service if the arrangements made by the Civil Service College for special training for British civil servants concerned with EEC matters are sufficient to meet the needs of Departments.
In the current year there are 12 courses on general EEC matters at the Civil Service College, attended by over 400 civil servants, and a further seven courses on specialist matters, attended by over 200.
In addition to this, by the end of the year we will have arranged for seven courses of British civil servants to go to France and we will have received three groups of French civil servants in this country. Three groups will have gone to Germany and we will have received two groups of German civil servants.Is my hon. Friend satisfied with the facilities for training civil servants in the affairs of the smaller Community countries, particularly Holland and Denmark?
At present I am not entirely satisfied with the arrangements for the other countries in the Common Market. We are arranging, in the course of this year, further exchanges, particularly with Holland, Italy and Denmark— that is, courses going from those countries to here and back again.
Will my hon. Friend see that those civil servants in our immigration services who deal with EEC nationals entering this country are also given courses, so that we can get rid of our present reputation for being one of the rudest countries that visitors can enter?
I have not heard that criticism before about the conduct of our immigration officers. If my hon. Friend has any evidence that they are being discourteous or over-official I shall be pleased to examine it.
Government Offices (Dispersal)
18.
asked the Minister for the Civil Service when he now expects to publish the report of the Hardman Committee on Civil Service dispersal.
As my right hon. Friend the Prime Minister told my hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe) on 22nd February, we expect to publish the report in due course and to announce decisions on it during the summer, after consultations with staff representatives.—[Vol. 851, c. 173–4.]
When the Government prepare their response to the report, will they bear in mind the long-standing resentment that has been felt in many areas of high unemployment that so many civil servants, whose jobs are generated directly by taxpayers' money, should be concentrated in London? Will he also bear in mind that South Yorkshire is one of the few areas that have not so far benefited from the de-centralisation of Government functions, and that new jobs of this kind would be a welcome offset, in this area, to the present high unemployment, which is a result of its over-dependence on heavy and often declining industry?
Only three out of 10 civil servants work in London. The rest work in the various regions. I give the assurance that Yorkshire and Humberside have been considered, as have all the other regions, by Sir Henry Hardman.
The Yorkshire and Humberside area has one of the lowest proportions of population in the public service in the country. Therefore, if the economy is to be more broadly based in that region it would be a good thing if Government offices were dispersed to a greater extent to Yorkshire and Humberside.
I shall bear my hon. Friend's views in mind.
What criteria will determine the dispersal of Government offices in the provinces and determine what area gets what Departments?
The whole purpose of the Hardman exercise was to balance the gain to the regions of dispersal and the loss to the efficiency of the central Government machine. The criteria that the Hardman Committee considered were the size of the area, whether there were sufficient school leavers to sustain steady recruitment for the Civil Service, the housing situation, and things of that kind.
Employment Of Women (Report)
19.
asked the Minister for the Civil Service whether he is satisfied with the progress made in implementing the report of the Committee on the Employment of Women in the Civil Service.
I am satisfied but not complacent. The Civil Service's treatment of its women employees makes it one of the leading employers in the country in this respect. The recommendations of the committee are being implemented and mean equality of pensions and allowances, more generous maternity leave, and encouragement for women to resume their careers after the early years of marriage. All Departments have been asked to eliminate working arrangements which may hinder the career development of women.
I thank my hon. Friend for that fairly encouraging report. Is he satisfied that women are given the opportunity to reach the upper echelons of the Civil Service, as opposed to the middle and lower ranks?
My hon. Friend will no doubt have seen the announcement on Saturday that Miss Eleanor Emery has been appointed High Commisioner of Botswana. I can assure my hon. Friend that over 300 women have posts in the Civil Service with salaries over £4,000 a year.
House Of Commons
Questions To Ministers
20.
asked the Lord President of the Council if he will seek to provide a specific time for Oral Questions on London.
I am always willing to consider suggested changes to the Question roster, but I think that alterations such as this should first be examined by the Select Committee on Procedure.
Will the right hon. Gentleman give his blessing to the consideration by the Select Committee of this proposal? Is he aware that it is completely incongruous that London, with a population greater than Northern Ireland, Scotland and Wales, has no special day allocated for questioning?
I do not think it necessary for me to give my blessing to this proposal. Once we start on this path we shall be on dangerous ground.
Will my right hon. Friend consider allotting a special time for Oral Questions on Cirencester and Tewkesbury?
My hon. Friend has made the point.
Select Committee Reports(Departmental Replies)
21.
asked the Lord President of the Council what has been the average interval of time between the publication of a report from a Select Committee and the publication of the departmental reply; what has been the longest interval in the last two years; and if he will take steps to expedite replies from Government Departments.
Since the Session 1969–70 the average time taken to publish the departmental replies to Select Committee reports was seven-and-a-half months. The longest interval between publication and reply was twenty-two months, which was in the case of a report published in Session 1968–69.
I do, of course, realise the importance of replying to Select Committee reports promptly, but I am sure the hon. Member for Fife, West (Mr. William Hamilton) would agree that some reports are fairly complex and contain more recommendations than others.The right hon. Gentleman no doubt knows that some reports are more politically embarrassing to the Government than others. The report produced by my hon. Friend the Member for Wolverhampton, North-East (Mrs. Renée Short) on the abuse of the National Health Service by private practice has been deliberately delayed by the Department because of the political embarrassment which the report would cause. Is it the case that the reply to that report will be produced tomorrow? Why the delay? Why will the right hon. Gentlement not give a firm direction to all Government Departments to ensure that replies are given in the current Session or within 12 months, whichever is the shorter period?
I reject what the hon. Gentleman has said. The fact is that the reply to the report to which he referred is coming out very shortly. I cannot think that from the point of view of political embarrassment to the Government it would have mattered whether it came out six months ago or six months hence. I am sure that the Government have a very good reply to the report.
I think that it is for the Department concerned to produce its reply as quickly as possible. I am glad to help the House to try to get the replies earlier where possible.Does the right hon. Gentleman agree that it is more important to have a report debated in the House than await the Government's reply? Is he aware that the Select Committee on Nationalised Industries has produced four reports in this Parliament, and that none of them has been debated? Does he agree that that is a serious state of affairs?
I only hope that when we have such debates in the House hon. Members will turn up and take part in them.
Second Reading Committees
22.
asked the Lord President of the Council what is his policy about moving to refer Bills to Second Reading Committees.
The procedure for referring Public Bills to a Second Reading Committee is a useful one; it enables suitable Bills to be accommodated in the legislative programme when time can not be found for them on the Floor.
More in sorrow than in anger, may I rebuke the Lord President for not referring upstairs—it would have been, to use his own definition, a suitable occasion—the agreed measure on the pollution of the North Sea? That measure is one that the right hon. Gentleman wanted when in a previous incarnation as Minister of Agriculture, Fisheries and Food. It is now wanted by my right hon. Friends. It will not take up very much time. On his own definition, contained within his answer, it is an ideal measure to go upstairs. Why will not he so refer it?
I stand rebuked. I should like to see the Bill taken as quickly as possible by the House either on the Floor of the House or in Second Reading Committee. The difficulty from my point of view is that it is quite a long Bill. The preparation of the Bill is not yet finished. It is always difficult to have Bills available just when we wish to have them. I have noted what the hon. Gentleman has said.
The right hon. Gentleman said that it was ready.
No, I did not say that it was ready. I said that the Government would introduce the Bill at the earliest possible moment.
In view of the general dissatisfaction about procedure on Friday afternoons, will my right hon. Friend consider seriously the suggestion that when Bills are introduced to the House under the Ten Minutes Rule the Member in charge of the Bill should have the right to ask for it to be submitted to Second Reading Committee?
I should like to consider my hon. Friend's suggestion. My experience is that a good many Bills introduced late on a Friday afternoon tend to be highly controversial. I doubt whether they would find wide acceptance for Second Reading Committee. My hon. Friend's suggestion is something that we can consider.
Members' Interests (Report)
24.
asked the Lord President of the Council whether he has now completed his consultations in regard to the implementation of the recommendations of the report from the Select Committee on Members' interests; and if he will make a statement.
The consultations on this matter are still continuing, but will be completed as soon as possible.
Does my right hon. Friend accept that in the last Parliament the Select Committee spent many hours on, and gave much study to, the scrutiny of the evidence and the consideration of the material factors affecting the issue, and thereafter reached a conclusion which was unanimous, except for one hon. Member who failed to survive the General Election? Does my right hon. Friend accept that, without prejudice to the details of draftsmanship, the Select Committee's conclusion should form the general guideline to the further consideration and action which is taken?
Not entirely, because the resolutions reached by the Select Committee were so restrictive that it would have been almost impossible for large numbers of hon. Members on both sides of the House to take part in debates. On 10th February 1971 my right hon. Friend the present Secretary of State for Northern Ireland told the House that he did not feel that they were very suitable. That apart, there are other considerations which my right hon. and learned Friend knows were discussed during the Select Committee's deliberations, which I think the House now feels should have a further airing.
Is the right hon. Gentleman aware that the passing of the two resolutions suggested by the Select Committee would make it easier for many hon. Members to speak in the House, as they are now inhibited by a very vague rule?
In view of the renewed advocacy in some quarters for the establishment of a public register for hon. Members' private interests, will the right hon. Gentleman bear in mind that the Select Committee came to the conclusion that the keeping of such a register would be cumbersome, easy to evade, ineffective and damaging to Parliament, and that the solution suggested by the Committee would be much more comprehensive and effective? Will the right hon. Gentleman reconsider the matter and bring the proposal before the House as quickly as possible?I can give the right hon. Gentleman the assurance that I am reconsidering the matter. I agree that this is a matter which, in due course, the House will wish to discuss. I feel that it will be better for the House if there are further consultations within the parties before the matter is debated on the Floor of the House.
Is the right hon. Gentleman aware that virtually all my right hon. and hon. Friends want a compulsory public register containing all the outside financial interests of hon. Members? Such a register would be feasible if it were desired. Anyone who has nothing to hide need have no fear of any such register. The more that the Government procrastinate the deeper are the suspicions of people outside.
I am not going to let the hon. Gentleman get away with the suggestion that the Government are procrastinating. There are many views on this very important matter on both sides of the House. On this occasion, as on some others, the hon. Gentleman would not be right in assuming knowledge of what all his right hon. and hon. Friends wish to do.
In making his review of this important and contentious subject, will my right hon. Friend undertake to grasp the nettle of trade union-sponsored Members, who are explicitly committed to speak for an outside interest which is not necessarily their own constituency?
I think that my hon. Friend has illustrated only too well the need for very careful thought about the way in which we draft any resolution of this nature. It was generally agreed that the resolutions drafted by the Select Committee would have been too restrictive in this respect.
Will the right hon. Gentleman bear in mind that the Select Committee's report is quite inadequate to deal with the situation that many of us want to see ended? Does he appreciate that most of us—certainly on the Opposition side of the House—want to see a situation in which Members have imposed upon them no less a standard than that which is imposed upon civil servants? Does not the right hon. Gentleman agree that if it is right that civil servants should not take jobs in industry within two years of leaving their Department, that should go for Ministers, from Parliamentary Secretary level upwards, in that they should not take employment in any private industry which is concerned with matters that they have been dealing with as Ministers, and may be called upon to deal with again as future Ministers?
That is a very different question. What we are all concerned to see is that the good reputation of the House and of its Members is protected from unfair imputations from outside. That, to my mind, would be the main purpose of having any register or any change in the rules as we now have them.
Twickenham Post Office (Burglary)
(by Private Notice)asked the Minister of Posts and Telecommunications if he will make a statement on the robbery over the weekend at Twickenham main post office.
This is a matter for the Post Office itself, which tells me that the approximate amount stolen was £440,000, including £80,000 in cash. The police and Post Office officials are investigating. The precise extent of the amount will not be known until the audit is completed.
This seems to be the biggest raid on the Post Office since the great train robbery. Will my right hon. Friend ask the Home Secretary to make as many police available as may be necessary to give the best chance of bringing the criminals to justice? Will he ask the Post Office authorities to take a look at the quantity of stocks of postal orders and cash and stamps held in post offices and at the security measures in operation at post offices?
I am sure that there will be no withholding of any necessary reinforcements that the Post Office may require in order to ensure that those responsible for this burglary are brought to book. I am certain that if there are special security lessons to be learnt from the experience, the Post Office will not hesitate to apply them.
Allowing for the nature and scale of the raid, we are relieved that at least there was no loss to life or limb by employees of the Post Office. But is it not incredible that an amount of this kind should be left in a post office overnight unattended? What conversations will the right hon. Gentleman have with the Chairman of the Post Office Corporation about security precautions?
I agree with the hon. Gentleman's first comment. The money was, of course, held in readiness for disbursal to post offices during the course of today. I should reiterate that if there are any particular lessons to be learnt from what has happened in this case, I am sure the Post Office will not hesitate to review its arrangements. That applies equally to security measures. I will, of course, ask the Chairman to give me a full account of his findings as soon as he is able to do so.
I refer back to the first part of my right hon. Friend's reply to my hon. Friend the Member for Twickenham (Mr. Jessel). Is my right hon. Friend satisfied that this is just a matter for the Post Office, since a very large sum of money is involved and the taxpayers at the end of the day have to pay for any deficit of the Post Office? Is he satisfied that the Post Office has sufficient safeguards for postal orders? Is it not extraordinary that something has not been done to ensure that when postal orders in large numbers are stolen they are not exchangeable outside for cash?
I stressed that this was a matter for the Post Office, not because I do not recognise the importance and magnitude of what has taken place but because, as Minister, I am not directly answerable for detailed aspects of Post Office security and therefore cannot be expected to have full information about every post office or sub-post office robbery which takes place.
It is a fact that stolen postal orders are cashable only if they bear a post office franking mark, but I gather that in the past when postal orders have been stolen it has proved fairly difficult to track them down. I hope that that will not be so in this case.Is it either usual or necessary for a post office such as that at Twickenham to hold such a large amount of cash on the premises? If the money were to have been distributed today, why could it not have been delivered to Twickenham today instead of being kept overnight there?
This is one of the most important aspects which I am certain the Post Office will take fully into account when considering the findings of its own study.
As the Post Office is such an obvious target for criminals and as there have been a number of serious losses over the past 10 years, would the Minister consider going further and setting up a team of inquiry, including at least one senior policeman, to examine the whole subject of Post Office security?
I emphasise again that this is primarily a matter for the Chairman of the Post Office It is for him to decide how to arrange for security matters to be handled. However, I will certainly take note of my hon. Friend's suggestion, and I am sure that the chairman will.
As the right hon. Gentleman probably knows, there was almost as big a raid in my constituency not many months ago. As it is plain that it is known when a post office carries this amount of money over the weekend, will he not arrange for post offices not to hold such large amounts overnight and over weekends?
I am certain that any knowledge of the amount of money held in the post office overnight would be among the factors that the security investigators would look into most closely.
Bill Presented
NORTHERN IRELAND (EMERGENCY PROVISIONS)
Mr. Secretary Whitelaw, supported by Mr. Secretary Carr, Mr. David Howell, Mr. van Straubenzee, Mr. Attorney General, and Mr. Peter Mills presented a Bill to make provision with respect to the following matters in Northern Ireland, that is to say, proceedings for and the punishment of certain offences, the detention of terrorists, the preservation of the peace, the maintenance of order and the detection of crime and to proscribe and make other provision in connection with certain organisations there, and for connected purposes.
And the same was read the First time. and ordered to be read a Second time tomorrow, and to be printed [Bill 104.]
Business Of The House
Ordered,
That, at this day's Sitting, proceedings on the Motion standing on the Order Paper in the name of Mr. Chancellor of the Exchequer relating to the Committal of the Finance Bill shall not be subject to the provisions of Standing Order No. 40(3) and may be proceeded with, though opposed, for a period of three-quarters of an hour after Ten o'clock or after they have been entered upon, whichever is the later, and at the end of that period Mr. Speaker shall proceed to put any question necessary to dispose of those proceedings.— [Mr. Weatherill]
Orders Of The Day
Finance Bill
Order for Second Reading read.
3.42 p.m.
I beg to move, That the Bill be now read a Second time.
The House will recognise that this is a short Bill, shorter than other Finance Bills of recent years, having only 45 clauses and 19 schedules compared with 69 clauses and 14 schedules in 1971 and 134 clauses and 28 schedules in 1972. The fact that it is a short Bill reflects two things. First, it reflects that the tax reform programme is now complete— indeed, it is operative this week. VAT in place of purchase tax and selective employment tax started yesterday; the new neutral corporation tax started yesterday; and the unified personal tax starts next Friday. Two years ago, my right hon. Friend the Chancellor of the Exchequer described his tax proposals as the most comprehensive and far-reaching reform of the tax system this century. All this Finance Bill needs to do is to cross the t's and dot the i's: the substantive legislation is already on the statute book. The second reason why the Bill is a light one is that the Budget is broadly neutral in its effect upon demand. Before turning to the details of the Bill, I should like to say a few words about the Government's economic strategy. Our objectives are simple and clear—we aim to raise the living standards of all sections of the community as rapidly as possible. Since the middle of 1970, the average rate of increase in the standard of living has been almost 5 per cent. a year, and this compares with an average between 1964 and 1970 of 1½ per cent. a year. Our strategy depends upon a faster growth rate, and all the signs are that this is now being achieved. In the past 12 months, unemployment has fallen by a quarter of a million. Investment is now gathering pace and we expect to see a marked upswing in the current year. Against this background, the Chancellor's Budget judgment was that to maintain a growth rate of 5 per cent. the demand effect of the Budget should be broadly neutral, and the Bill therefore contains no major measures exerting a short-term influence on demand. I now turn to the Bill and I deal first with those parts that touch on indirect taxation. The House will have noted that the only VAT provisions are a few relatively minor amendments in Clauses 5 to 8 together with Clause 4 covering the purchase tax rebate scheme and Clause 1 and Schedules 1 to 7 making the necessary adjustments to the revenue duties broadly to offset the effect of VAT on these goods. The limited nature of this year's changes is a tribute to the thoroughness with which the House did its work last year on the main VAT provisions. Despite intensive scrutiny by many interests outside the House, very few changes are having to be made. Perhaps I should also explain, although I am sure that the House is well aware of them, that the changes in the coverage of the tax —zero-rating of young children's clothes and shoes and zero rating of purchase tax foods—have already been effected by orders laid on Budget day. Subsections (1), (2) and (3) of Clause 1 provide for changes in the rates of revenue duties on spirits, beer, wine, British wine, matches and mechanical lighters. As my right hon. Friend made clear in his Budget statement, the basic rates of these duties have been abated from 1st April—the date of the introduction of VAT—by such amounts as are necessary to secure from the goods concerned broadly the same total revenue in 1973–74 from the revenue duties and VAT combined as would have been obtained solely from the pre-VAT rates of revenue duties. These changes, although broadly neutral in their revenue effect overall, will affect different products differently. This is because the revenue duties are specific duties, that is to say, charged by reference to quantity, whereas VAT is an ad valorem tax, charged by reference to price. Because VAT is in part replacing specific duties, the effect will be that some prices will move up and others down. Speaking generally—and of course there will be exceptions, depending on the pricing policies of different establishments—within each class of product the cheaper ranges will go down in price and the more expensive will go up. For instance, the off-licence prices of bottles of whisky, gin and the cheaper ranges of wine will tend to go down, but pub prices for shorts sold by the nip may go up a little. Again, while prices of the most popular cigarettes are largely unaffected, some brands may be slightly cheaper. I stress again, however, that the overall effect of the imposition of VAT and the revenue duty cuts is broadly neutral both in its effect on the yield of tax and in its overall effect on the prices of the goods concerned. Clause 1 and the first seven schedules also provide for small, and some may think marginal, cuts in most of the revenue duties as part of our obligation to abolish the protective elements in these duties within the enlarged European Economic Community. Such further changes as may be necessary in these protective elements in order to fulfil other EEC obligations may be made by order under Clause 1(4). The other change of substance is the purchase tax rebate scheme, for which Clause 4 provides. It is of great importance, not least in the context of the Government's pay and prices policy—our counter-inflation policy—for the proposals now embodied in the Bill substantially to achieve the aim pressed on us last year by both sides of the House, namely, to avoid double taxation on goods which were tax paid before 1st April but sold by a registered VAT trader after that date. The scheme applies not only to purchase tax goods but also to revenue duty goods, about which I have just been speaking. The relief applies to stock held for resale on 31st March 1973 by a registered trader. As I think is now recognised by most traders, a trader who is not registered will not be able to make a claim: he does not have to account for VAT and there is no double taxation to relieve. But one who is registered with effect from 1st April, even if registration is not formally effected until later in the month, will be entitled to claim. As the House knows, this rebate scheme has been widely welcomed by the trading interests concerned and it will remove any excuse for putting up prices to recover tax already paid. VAT came into operation yesterday. This is nothing less than a revolution in our indirect tax system. We are moving from two narrowly-based, discriminatory taxes to one fairer and more broadly-based tax. With a change of this magnitude involving well over a million businesses in new rules and procedures, and altering the relative prices of many different goods and services, no one ever expected that the change could be achieved without some birth pangs. Those who complain about VAT ought to be prepared to stand up and defend all the distortions and discriminations and illogicalities of purchase tax and selective employment tax. Such people are few and, as far as I recollect, they do not include Members of the Opposition Front Bench. The Government are grateful to the many hundreds of trade and professional organisations who have given us the benefit of their advice and help in devising and introducing this major reform. We for our part have gone to great lengths to see that the public are informed about the impact of the change on the prices of what they buy. I hope that they will make the best use possible of the factual information about price changes available in the Press advertisements and also in the VAT booklets obtainable from Post Offices throughout the country. The House will see that I have my own. This was available a week ago and gives price information about a large number of ordinary purchases and tells the shopper what to expect. Furthermore, the changeover to VAT during April is taking effect while the prices standstill remains in force. This will mean that shoppers can see exactly what changes, if any, result from the changeover from purchase tax and SET to VAT. Under the recent legislation, price increases for other reasons are not allowed apart from the exceptions specifically authorised by the Government because of unavoidable increases in costs, for instance on imported food and raw materials. Unlike the situation with decimalisation, there is now strict price control to ensure that price changes up or down are fair. The weights and measures inspectors have been given special powers to help to see that this is so. I am confident that the vast majority of traders have done and are doing their best to carry out the changeover as fairly and as accurately as possible. In any case, where a customer does not think that the new price is right, he or she should ask about it. I echo the advice given by Mrs. Regina Dollar, quoted in the Daily Mirror this morning, "If in doubt, find out."Who is she?
She is a leading figure in the consumer movement. Shoppers should first ask the shopkeeper. Most shopkeepers will be ready to explain the position and if a mistake has been made to put it right.
If no satisfaction can be obtained from that source the shopper should put her complaint to the local weights and measures inspector. He is charged under the Counter-Inflation Act with the job of investigating and reporting on any failure to re-price goods and services properly. If it turns out that a shop is over-charging and a shopkeeper refuses to put it right, then in the last resort a notice can be served on him by the inspector requiring the price or charge to be reduced.Without being unduly personal about this, may I ask the Minister whether he envisages a situation whereby his wife would solemnly go and report her hairdresser to the local weights and measures inspectorate?
This is what was pressed on us by the TUC General Council during the tripartite talks. We felt that this was sound advice.
Secondly, it is open in many cases, I recognise not in all, for a shopper to take her custom elsewhere. If a shopper has that sort of row, given the kind of personal relationship involved with a hairdresser, it seems probable that the shopkeeper has lost her custom for good. Most shopkeepers in those circumstances will want to retain the goodwill of then-customers. One can say that shoppers should go to the shops they know and trust and they will get a fair deal. The machinery for the redress of grievances is there, exactly as the TUC asked that it should be. It is up to a dissatisfied customer, in the appropriate cases, to use it. In the longer term it is too soon to begin to assess the effects of this change in our indirect tax system, but I am convinced, and the Government are convinced, that VAT is a much better and fairer tax than purchase tax or SET. Charged at the lowest standard rate in Europe on a wide range of goods and services, it will avoid all the distortions of the pattern of consumer choice and therefore of the workings of industry which SET and purchase tax caused.The hon. Gentleman has said that it is the lowest standard rate in Europe. Will he give the House the assurance that it will not go beyond the present standard rate?
I think the hon. Gentleman recognises that that is an assurance which neither I nor his own Front Bench could conceivably give.
VAT does not push up industrial costs in the same way as purchase tax and SET did. VAT will be rebated on exports more fully than SET and purchase tax could be. The use of VAT to regulate the economy will be much less damaging than has been the case with purchase tax. For any given revenue or demand effect, a change in the VAT rate will affect a much broader range of goods and services and so can be far less drastic in its impact than was the narrowly-based purchase tax. By allowing traders to hold goods tax free and by allowing an average of two and a half months credit, VAT reduces their cash requirements. When the VAT rate is cut, traders will no longer suffer a loss on tax-paid stocks, as happened every time when purchase tax cuts were made—not when the Labour Party was in power. When prices are cut to clear stocks at sale time the tax is cut, too— impossible with purchase tax. VAT does not involve industry in a forced loan to the Government as did SET. VAT does not draw the economically illiterate distinctions between manufacturing and services which lay at the heart of SET. For all of these reasons, VAT is a much better tax than those which it replaces. Furthermore, by cutting purchase tax and SET before introducing VAT and by zero-rating, or exempting many categories of goods and services, we have made sure that VAT is a fair tax. The changeover should have no significant effect on the general price level. Indeed, the yield of VAT and car tax will be about the same as purchase tax and SET at their present rates—and £900 million less than if those taxes had continued at their rates in June 1970. Nor will the changeover be regressive. Pensioners and other low-income families spend a substantially higher proportion of their income on zero-rated and exempt goods and services than those further up the income scale. By zero-rating all food, fuel, passenger fares, housing, young children's clothes and shoes, we have deliberately taken action to protect the less-well-off. The combined effect of the cuts in purchase tax and SET and the wide-ranging zero-rating and exemptions for VAT is to ensure that virtually every family in the land, large or small, young or old, rich or poor will be paying less tax on their spending with VAT than if purchase tax and SET had continued at their 1970 rates. Many people will regard that as a solid gain.Absolute rubbish.
The hon. Gentleman says that it is absolute rubbish. Perhaps he would like to explain. I would be happy to give way.
I will wait. I will make my points later.
The result is that the yield from VAT and car tax is £900 million less than if the other two taxes had continued at their 1970 rates. That is solid gain.
The hon. Gentleman talks about it being a fairer tax. What about the working man who has to buy clothes and shoes, who has to buy meals in a canteen, and washing powders and so on? These things matter very much to ordinary working people. When the Minister talks about the tax being fair let him ask the ordinary housewife and working man whether they think it is fair.
I do not think that anybody, whether inside or outside the House, has seriously challenged the Government's statement that there is no reason why the changeover should be regressive. We have taken the measures that I have described—wide-ranging zero-ratings and reductions in purchase tax and SET—to make sure that the tax is fair.
I turn now to the second major reform, which is the new unified personal tax system. The legislation for this is complete and the new system starts next Friday. There are only two items in this year's Bill to which I wish to refer today —the increase in the age exemption limits and the treatment of accumulation trusts. Last year my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) and others pressed the Government to raise the age exemption limits and to go for round figures. Notwithstanding that this is not a year when we felt it right to make any general increase in the tax allowances, my right hon. Friend agreed that it was right to recognise the special claims of the elderly. By increasing the age exemption limit to £700 for an elderly single person and to £1,000 for elderly married couples I believe that we have gone a long way to meet the pleas made to us last year. These figures represent the third increase in the age exemption limit that we have made since coming into office. In consequence, the tax threshold for an elderly single person has been raised from £9·13 a week to £13·46 a week. This is an increase of over 45 per cent. in money terms, and almost 20 per cent. in real terms, since June 1970. The other change in the personal tax system is the imposition of investment income surcharge on the income of certain accumulation and discretionary trusts. Hitherto this income has been liable to tax at the standard rate in the hands of the trustees. If it was distributed the beneficiary was given credit for the tax paid by the trustees, and, if he was not liable to tax at the standard rate, he could reclaim the whole or part of the tax deducted from the payment. With the abolition of the standard rate of income tax, it would not be right that income accumulated under trusts should suffer lax only at the basic 30 per cent. rate. It is proposed that it should be liable to investment income surcharge, as well as basic rate tax, and this charge will extend to any income apportioned to the trustees from a close company. So far as possible, the treatment of distributions by trustees follows past practice. On making a distribution of income, the trustees will, in effect, deduct tax at 45 per cent., but they will not in practice have to account for any tax unless the tax deducted exceeds the tax which has in fact been suffered on the trust income. In the hands of the beneficiary, the payment will of course be treated as having suffered tax at 45 per cent., and, if he is liable at a lower rate, he will be able to reclaim the difference. These provisions do not apply to ordinary life tenancies or to charitable and certain other trusts. Nor do they apply to income distributed by personal representatives during the administration of an estate; but if, on the completion of the administration, there is accumulated income which is handed over to trustees of an accumulation or discretionary trust, such income will then be liable to the additional rate of tax. I turn now to the rest of the Bill. Last year we legislated to regulate the tax treatment of share incentive schemes and to reintroduce comparable provisions for share option schemes. We believed then, and we still believe today, that such schemes, properly administered and subject to reasonable limits, can not only be a valuable incentive to those who bear the responsibility for the management of industrial and commercial enterprises but can help to achieve a closer community of interest between those who own these enterprises and those who work in them. By their very nature schemes under that legislation are primarily aimed at those holding managerial or executive positions. But when my right hon. Friend announced his proposals last year he told the House that we were no less anxious to devise and introduce share ownership schemes for employees generally. While, of course, the incentive aspect of such schemes is much less applicable to junior staff and shop floor employees, the need for a closer community of interest between employer and employee is every bit as great as in the case of senior managers. Therefore, this year we are introducing measures to encourage companies to set up share savings schemes for all their employees. While no doubt the House will want to examine the provisions in detail in Committee, I should like to say a brief word or two about them now. The attraction of the kind of scheme which the legislation envisages is that employees will be able to acquire shares in the company they work for and to pay for them later out of the proceeds of related SAYE contracts. The employee can acquire shares on favourable terms and yet during the savings period be protected against a fall in the value of the shares. This is achieved by his having a right, when the time comes for him to pay for his shares, to decide to surrender the shares and retain the cash proceeds of his SAYE contract instead. Where a company introduces a scheme it will be a condition of approval that all adult employees with at least two years' continuous service with the company will be entitled to participate, though of course it will be for each individual to decide whether or not he takes advantages of the scheme. If he decides to join, his participation will be directly related to the amount of his savings under his SAYE contract, and this can go up to £20 a month. Furthermore, this will be in addition to any other SAYE contracts he may have. Once his SAYE contract matures and he uses the proceeds to pay for his shares, from that moment he will be treated in exactly the same way as other shareholders of the same class in the company. If he sells his shares then the sale will be subject to ordinary capital gains tax rules. If he leaves the company he takes his shares with him. If he leaves before his SAYE contract matures he cannot, of course, lose the benefit of the contract. Any contributions made are repayable to him, not to his employer. Moreover, schemes may well provide for such a leaver either to continue in it until his SAYE contract has matured or to keep a proportionate part of the shares for which he has contributed. Under the Prices and Pay Code there is for the present a virtual embargo on the introduction of new share option or share incentive schemes, and the need for this has been recognised. But, as the January White Paper made clear, the Government are seeking a way in which these may be started again within the context of pay policy. So far as the new share savings schemes are concerned, the legislation must first be passed, and we envisage that it may be possible to introduce these schemes in the autumn, perhaps in conjunction with Stage 3.Without anticipating the amendment that I hope to put down on share options, may I ask why the limit of 18 years of age has been chosen? Why should it not be for every employee in the company if this is to be done?
As I have indicated, we are imposing some limits. We intend that the scheme shall be available to all employees but that it should be limited to employees with at least two years' service—this point can be examined in Committee—because it is difficult for those who join a company and leave after a short time to start in schemes of this kind. This should be for those who have become fairly well established. On that basis 18 is not an unreasonable age to choose. It is the age of majority, the age at which a person can make a contract of this kind in which there is some measure of risk.
Next, I move to company taxation. Here, again, our main reform is complete.Will my hon. Friend make clear what these share are? Will a company issue new shares to give to its employees or will they be part of the existing shares in the company?
I do not envisage a special class of shares being issued. It is intended that employee shareholders, when the scheme has matured, should be on the same basis as ordinary shareholders of the company. However, it may be open to companies to introduce a special class of shares if that seems appropriate.
I was turning to company taxation. Here, again, our main reform is complete, and all that is required in this Bill is some tidying up. I dealt at length in my speech in the Budget debate with our proposals for groups of companies, and I need not refer to that again now. The Bill also makes several detailed technical changes to the new close company rules introduced last year. There is only one provision of any substance and this relates to property investment companies. For many years—the rules were carried over into the 1965 legislation—the law has been that the income of a close property company may be treated as used for the requirements of the business, and so free from any liability to apportionment, if it is used to acquire additional land or properties. It may also be used to repay bank loans for financing expenditure on additional land or properties. This seems unduly generous compared with treatment of other investment close companies which cannot plead the takeover of other businesses or the repayment of loans as a justification for not distributing dividends to participators. We propose, therefore, in Schedule 9 to tighten up the rules for close property companies and so limit the extent to which undistributed profits may be used for property speculation by such companies.Will my hon. Friend clarify that statement? Does he mean that such a company may not use its funds for the maintenance and development of business? That was always a reasonable pretext for not distributing the full amount of income.
We can examine the details in Committee. It will be a question of fact in any case whether a particular acquisition which a company is proposing is for the development of its business or whether it involves a new departure and the purchase of new property— embarkation on the development of a new aspect of business, or something of that sort. It is the latter that we are intending to bring within the scope of the shortfall rules.
I had hoped that before leaving the question of corporate tax my hon. Friend would have said something more about the impact of the new system on the larger unquoted company. My hon. Friend will recognise that during the debates on last year's Finance Bill he undertook to look carefully into the possibility of at least providing tapering relief for these companies which otherwise would face a 25 per cent. increase in tax. The consequence this year of that provision is accentuated by the fact that under phase 2 companies will be discouraged from increasing distributions, while at the same time they will be expected to increase them under the new system. Will my hon. Friend elaborate further on the possibility of fulfilling that undertaking?
I am aware of my hon. Friend's concern in this matter, but perhaps I may answer his question briefly by saying that I have not referred to this issue this afternoon because I am not able to add anything to the explanation given by my right hon. Friend the Chancellor of the Exchequer in his Budget statement for not being able to introduce the kind of transitional relief for which my hon. Friend argued last year. This year, when we are facing a large borrowing requirement, any worthwhile relief would have been extremely expensive.
In his Budget statement my right hon. Friend announced some far-reaching changes affecting the tax treatment of profits arising from North Sea oil. As he said, the necessary legislation will be introduced next year. There is, however, one change which we are making in this year's Bill, and that is in Clause 34 which, together with Schedule 15, brings profits from the exploration and exploitation of the United Kingdom sector of the Continental Shelf into the scope of United Kingdom tax. Firms which are licensed for this work —licensed to have one of the blocks— have, under existing regulations, to be resident in this country and they are already, therefore, within the United Kingdom tax charge. But non-residents may also participate in some aspects of the work, such as installing and operating rigs and pipelines, and so on, and it is right that they, too, should pay United Kingdom tax. There is an obvious difficulty about enforcing the payment of tax from a non-resident company. Provision is therefore made for the tax charged on the non-resident to be collected from the resident licensee if the non-resident defaults. I believe that it is reasonable to ask the licensee to bear the responsibility for seeing that tax is duly paid by any non-residents who make profits from his area. The clause also puts Schedule E employment in these activities on the same footing as employment in the United Kingdom itself for income tax purposes; and provides for the territorial sea to be part of the United Kingdom for income tax, capital gains tax and corporation tax. There is, however, one category of corporation tax payer—and I am moving from North Sea oil—about which I should like to say something, and those are the unincorporated associations. We have been considering during the year the position of unincorporated associations, and other bodies of a public nature which are precluded by their constitution from distributing income or capital. As I promised during the debates last year, the Inland Revenue issued a consultative document last August inviting comments on the scope for a limited scale or relief. I am sorry to have to say that no satisfactory scheme of relief has emerged. Several of the main representative bodies have emphasised the difficulties of the issues involved but there has been nothing approaching a consensus on what should be done about them. On the evidence so far it seems likely that any satisfactory scheme of relief would require a complexity of legislation and administration quite out of proportion to the number of bodies which would in the event benefit and to the genuine hardship involved. At this moment, therefore, I do not want to encourage any hope that we may find a solution, but the Revenue has not finished its study of the subject and if we do find a satisfactory solution we shall certainly bring it before the House.May we return to the North Sea? It will be within the recollection of the hon. Gentleman that on Friday in a debate initiated by my hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. Douglas) a great deal was said about property rights and property speculation in the Shetlands, Peterhead and Cromarty. We raised the question of enhanced value. By common consent in the Scottish Press and in the national Press it is conceded that there is a major case. Has the Treasury considered the questions that were put to it during Friday's debate? Perhaps in winding up the debate the Minister concerned will comment on that?
My hon. Friend the Financial Secretary has heard the hon. Gentleman's comments. I read most of Friday's debate in HANSARD. I recognise that this is a matter of great importance.
I now propose to say something about stamp duty. Clauses 39 to 41 bring our law on stamp duty into line with an EEC directive. The changes were outlined by my hon. Friend the Minister of State in a written answer to my hon. Friend the Member for Hornchurch (Mr. Loveridge) on 2nd February. I would, however, mention one important respect in which the provisions in the Bill differ from his announcement. We have given further consideration to the arrangements which ought to operate for the period between our entry into the EEC on 1st January and 31st July next. As a result we have decided that the loan capital duty ought to be repealed retrospectively from 1st January so that our companies will not be at a disadvantage by comparison in other EEC countries which, because of the directive, could not be charged with a duty on loan capital. Companies which have already paid loan capital duty on issues of loan capital made after 31st December 1972 will be able to claim it back after the Finance Bill becomes law. Meanwhile, as an administrative arrangement, the Inland Revenue will not enforce the provision requiring companies to deliver to it a duly stamped statement of any issue of loan capital. We have also decided to make a corresponding concession in relation to the duty on share capital. Any company which between 1st January and 31st July inclusive had to pay duty on authorised share capital in excess of the amounts which it would have had to pay had the EEC provisions been in force will, after the end of that period, be able to claim back the difference. The only other clause to which I wish to refer today concerns charities. Clause 42 gives effect to the Chancellor's proposal for cash payments to charities by way of compensation for the loss of income which they will suffer in respect of net covenants when the basic rate of tax takes effect. This special relief seemed to us to be justified because the reduction in the rate of tax from 38¾ per cent. to 30 per cent. as a result of going over to unified tax is clearly exceptional. But there is no case for continuing the relief indefinitely. Most covenants are for seven years, and by 1977–78 almost all payments will be under covenants made in the knowledge of the new system, which those entering into covenants will have been able to take into account. So we propose to phase the relief out over four years. The cash payments to charities will be based on the income tax repayments in respect of these covenants for the year 1971–72 and represent for 1973–74 the full difference between the amount of the repayment due for 1971– 72, and the amount which would have been due had the standard rate of tax in that year been 30 per cent. This means, for example, that if in a specific case the same covenants are in force in 1973–74 as were in force in 1971–72, the charity's income will be "topped up" to what it was in the earlier years. For 1974–75 and the two subsequent years the payments will be reduced by 25 per cent. of the 1973–74 amount each year. It is estimated that the proposal will cost about £7½ million, about £3 million of which is expected to be paid in 1973–74. As my right hon. Friend said in his Budget speech, this concession, together with the zero-rating of goods exported by charities, and the zero-rating of gifts sold in charity shops, and the important estate duty and capital gains tax concessions made last year, means that charities as a whole will be substantially better off even after taking full account of the changeover to VAT. I want to say a word about the Opposition's amendment. They charge us with irresponsibility and irrelevance. That comes oddly from a party which has just decided that the best contribution it can make to the economic debate is to support the futile May Day protest strikes. This seems to me to be just another example of all that is worst in the Labour Party. The voices of common sense are drowned. The arguments of reason, moderation and respect for parliamentary democracy are overwhelmed. While the Leader of the Opposition characteristically sits silent, in silent impotence, the militant Left rampages on. [Interruption.] I see that the hon. Gentleman the Member for Walton (Mr. Heffer) has left already. By this one decision, the Labour Party has demonstrated its total unfitness for office, whether at Westminster, at County Hall or in any of the new local authorities throughout the country. It is not only that this singularly foolish, short-sighted decision is contrary to the national interest, or even that it is clearly damaging to the Labour Party's interest—and I can bear that thought without shedding too many tears. It is totally out of harmony with the mood of a growing number of ordinary trade unionists throughout the country. By their votes, their decisions and their agreements one union after another is recognising that its best interest as well as that of the nation as a whole lies in accepting the constraints of the Government's prices and pay policy. By listening solely to the voices of the irresponsible Left, the Labour Party seems to be bent on digging its political grave. I suspect that a majority of those who normally sit on the benches opposite are uneasily aware of that fact. So when at 10 o'clock tonight the Labour Party seeks to divide the House by charging the Government with irresponsibility and irrelevance, I ask that my hon. and right hon. Friends fling the charge back in their faces with contempt. This is a short Finance Bill. It does not make major changes in tax rates, for the economy is on course for the higher growth rate which is our objective. It does not contain major tax reforms because, apart from tax credits, our reforms are now complete. What it does is to carry forward our economic strategy with a number of minor but sensible improvements in the structure of our taxes to safeguard and sustain expansion over the period that lies ahead, and as such I commend it to the House.
4.23 p.m.
I beg to move to leave out from "That" to the end of the Question and to add instead thereof,
In moving the motion the Chief Secretary spoke about anything but the Finance Bill. There must be a case for reducing the work load on Treasury Ministers. That is the only explanation I can suggest for some of the things that the Chief Secretary said about VAT. He must be spending too much time at Gt. George Street. He cannot know what shoppers, housewives and traders are talking about, otherwise he would not utter this sort of rubbish about how wonderful it all is. If it is so wonderful, why have the Government turned upside down so many of their policies? Is there, or is there not, a crisis? According to the Chief Secretary, everything is for the best in the best of all possible worlds. We are all having a marvellous time and everything is great, but he was unable to reply to the amendment. There is case for an annual debate on the Finance Bill rather than on the Budget. The debate should be on the annual accounts as a whole, including expenditure. I can hardly imagine the chairman of any company, even of BSA, presenting to his shareholders a statement of accounts on one side only. There is a case for debating together both the income and expenditure sides of the nation's accounts. There is a case for discussing the Chancellor's tax philosophy and the sort of society we want. The Chancellor presented his tax strategy in his Budget statement. He dealt with it in a comparatively short section of a long speech of nearly 800 words. He managed never to use the word "fair" in the whole of those 800 words. It must have been difficult, but he managed it. That is perfectly understandable, because no one can say that the Chancellor's tax philosophy is fair. The Chancellor has in his make-up a strange, obstinate streak—unusual for a nice chap—but all his hon. and right hon. Friends have reversed the policies on which they were elected. We have had increased public expenditure and an increase in the number of civil servants. The Government have made home ownership virtually impossible, they have reduced manufacturing investment and intervened in every conceivable way from Rolls-Royce to BSA motor cycles. The only lame duck left is the right hon. Gentleman the Chancellor of the Duchy of Lancaster. The Chancellor of the Exchequer's colleagues have all reversed their policies right down the line. They have intervened on an enormous scale in profits, prices and dividends. Only the Chancellor still persists in talking about the need for tax incentives of the kind he started to introduce in 1970, although those incentives have been killed for at least three years by the Government's prices and incomes legislation. It says a lot for the Chancellor's tax philosophy that he sticks to this aspect of his strategy. I have never disputed that there is a disincentive at the higher level of taxation, but in the main it does not fall on executives but rather on the professional and entrepreneurial classes, although even at that level age and lack of ambition also have major disincentive effects. Let us be clear about what levels we are considering. A married man with a wife and two children under 11 has an effective rate of tax on an earned income up to £20,000 a year of 49·1 per cent. and a marginal rate of 70 per cent. On £10,000 the effective rate is 33·4 per cent. and the marginal rate 55 per cent. That is always provided that the individuals do not take avoiding action, which many do. There is no doubt that tax avoidance involves a considerable waste of time by accountants, tax counsel, solicitors and others. The Chancellor's great mistake is to believe that he can stop it by concessions. That simply is not true. Despite all the concessions of the last three years, tax avoidance flourishes as ever; indeed, to an ever greater extent than previously. Not even the present Chancellor—This House declines to give a Second Reading to a Bill which is irresponsible and irrelevant to the needs of the time.
I should be extremely interested if the hon. Gentleman would deploy his evidence for that very challenging statement. The House would be interested to hear him enlarge upon it.
I do not know whether the hon. and learned Gentleman is underemployed. I do not know about his affairs. But if he imagines that those involved in tax avoidance schemes are doing less now than they were three years ago, I can only disagree with him.
Tell us about it.
On some other occasion.
Not even the present Chancellor can reduce the highest levels of taxation as much as he would like, for social and economic considerations that even the Chancellor is bound to accept. So the position is as bad as ever. Indeed, one must consider with it the question of fringe benefits, which distort the structure of salaries. The extent of these has been shown in a very interesting study by Jane Moonman, published recently. It is clear that this, together with everything that the Chancellor has done, has still not prevented the disincentive effect of high taxation causing a considerable amount of the waste of time in the tax avoidance industry. One can never stop tax avoidance by concessions. The system has made everyone concerned too greedy. That cannot be helped. It is what the system has created. The Opposition will have to recognise that we cannot solve it, as it should be solved, by tinkering with the system. There is a need to make substantial changes, but not changes moving in the direction in which the Chancellor has been moving for the last three years. The answer surely lies eventually in moving towards a major break with the materialistic, acquisitive, greedy sort of society that we have at present. Some will say that with higher levels of taxation on the highest incomes there will be some in our society who will decide that it is not for them, and they will opt out, leave the country and try to find a place where taxation levels are lower. But that happens today. Even under the Chancellor's beneficial tax system there are people who decide that the levels of taxation are too high, and they go. I suppose that in some cases it is sad. But we shall have to manage without them. Any reasonably objective person looking at what has happened to our economy in the last 20 years would wonder whether, given the situation we have had during that time, with successive attempts to reduce the high level of taxation, it could honestly be said that the economy has gone from strength to strength under the management of the very people who might leave if there were higher tax rates. We may have to face up to that situation, because many of the people at the sort of level of taxation about which we are talking make their money through acquisitive, speculative gains and manipulation. That is so particularly in respect of land and housing, which causes the greatest heartbreak at the lower end of our society, the end which is and should be much more important to us in this House. It is against that background that the Chancellor does not choose a neutral Finance Bill but chooses to consolidate his previous unfair Finance Bill. This is Conservative Party policy. It is Conservative Party philosophy to create an unfair society. I suppose that they are entitled to proceed with it, although one wonders why the Chancellor should wish to be the only exception in reversing policies as compared with all other Ministers. The Chancellor's priority is for expansion and to combat inflation. He has said that this is impossible without a successful counter-inflation policy. It is incredible folly to jeopardise his priorities with a Finance Bill which is, as we say, both irresponsible and irrelevant. I should like to give some examples, together with alternatives, of what the Chancellor might have done, which would have given him a much greater chance and a better opportunity of achieving his economic priorities. I turn at once to value added tax and the Chief Secretary's remarks. The Chief Secretary said that we had a revolution today. I travelled from Manchester today, this day of revolution. Before coming to London, I spoke to a number of shopkeepers and other traders. If we have had a revolution, it was not exactly a happy one. They were not altogether pleased with the revolution which the Chief Secretary was proudly proclaiming today. He talked about birth pangs and the fact that there would always be some difficulties. That must be the understatement of the century. He lives in an unreal world if he imagines that it is just a few birth pangs which are being experienced by a million traders and all the shoppers subjected to VAT. We are in for a period of considerable difficulty in the tax system. The Chancellor should talk to some of the accountants who have to handle the affairs of small traders in particular. He would then know what sort of a revolution he has created.Regarding VAT and the hon. Gentleman's remarks, does not he agree that that is just the type of talk which has persuaded vast numbers of the public to buy indiscriminately before VAT those articles which have now been reduced in price? Does not he agree that it is scaremongering of that type which has misled the public?
I am obliged to the hon. Gentleman. It was decent of him to pay me credit by suggesting that a speech of mine will outweigh the hundreds of thousands of pounds' worth of advertisements, some of them terribly misleading, which the Government have been putting out to tell the public how they can deal with VAT and handle it.
The Chief Secretary told us again today that if the housewife goes shopping and says to the shopkeeper "Surely that price is too high" the shopkeeper may say," Is it really? I will see about reducing that, shall I? "If the shop keeper does not say that, the housewife will then thumb through the telephone directory and telephone the weights and measures inspector. Prior to this day of revolution, I assume that the weights and measures inspector has been working on other matters. Presumably all those matters will now be neglected. The weights and measures inspector will proceed to act upon the housewife's complaint. He will say to the shopkeeper "Can you explain why you did not reduce your price to allow for SET and purchase tax on your stationery and so on?" The weights and measures inspector has previously received accountancy training and served his five-year articles, and so on. He will explain to the shopkeeper that he must reduce certain prices by about 235 per cent. What sort of world is the Chief Secretary living in if he believes that that is what will happen in the real world?It was to me that the TUC made this suggestion. We considered it with care. We also considered whether there were alternative and better means of dealing with this situation. At the end of the day we came to the view that the TUC was right. I have just checked with my hon. Friend the Chief Secretary and, so far as I know, I do not recall the hon. Gentleman ever putting forward a better means of dealing with transitional arrangements of this kind. It is all very well for the hon. Gentleman to criticise the transitional arrangements, but if we were to follow his lead and the lead of the Opposition Front Bench, there would never be changes of any kind. We should simply stay exactly as we are.
I am obliged for the Chancellor's remarks. I concede willingly that I do not always agree with the TUC, and I imagine that the Chancellor does not either. I certainly do not agree with the TUC that, if what the Chancellor says correctly states the TUC's view, what he is now doing is the best way of dealing with an appalling situation. My answer would be not to have got oneself into this situation.
It is not right for the Chancellor to blame us because we do not provide him with the answer when he has got himself into a situation like this. He talks about our being the party that does not want change. The average housewife, if she had been asked, would have been perfectly delighted not to have had this change. The Chief Secretary said that he did not today refer to VAT as a broad-based tax, free from anomalies, and so forth. When the Chancellor was announcing during his Budget Statement additional anomalies, the only person with a miserable face was the Financial Secretary; his well-loved tax—this lovely, broad-based tax—had been eaten away time after time with one anomaly after another, when he had wanted a broad-based tax. Therefore, the Financial Secretary looked really miserable when in his Budget Statement the Chancellor spoke of yet further anomalies in this formerly broad-based, comprehensive tax. I hope that we shall never again hear, either from the Financial Secretary or from any other Treasury Minister, that this is a great change to a non-discriminatory tax, free from anomalies, and all the rest of it. It is nothing of the sort. What we are likely to have in the coming months is utter chaos amongst traders and shoppers. If the Chief Secretary does not believe that, he should go out and speak to those who have to deal with it—those who have to handle the complicated provisions, have to know how to prepare returns, have to tell people in the antiques trade, in secondhand trades, and all the other difficult parts of industry, about the ramifications of this great, wonderful, well-loved value added tax. The only major concession on this tax in the Budget related to sweets, chocolates, ice-creams and lollipops. If there is a prize to be given for irresponsibility, it is here. Any number of the Chancellor's hon. Friends condemned him during the debate on the Budget for this concession. It speaks volumes for the Chancellor's statistical priorities. We know why he introduced the concession. It was to have a marginal statistical effect on the food index. There can be no other reason for doing it. It was surely far from being the best way to spend £110 million when he could have used just a small part of the sum to reverse the miserly cuts he made in school meals and milk just prior to making very considerable tax cuts. That was a disgraceful thing to do. If the Chancellor could not have reversed those cuts, he could have made a start on what the late Iain Macleod had promised to do before the last General Election, which was to increase family allowances. That would do something about the cost of living for the low income groups. It is through such policies that the Chancellor kills any chance of success for his counter-inflation policy, on which growth depends. Of course he is right to persist in his growth policy. I congratulate him on persisting in that. He knows that I have always been in favour of consistent growth and that I was very critical of some of my right hon. Friends who did not pursue such a policy. However, at the same time the Chancellor persists with corporation tax.I will take up some of the statements the hon. Gentleman has made about VAT if I am fortunate enough to catch the eye of the Chair later. A few moments ago the hon. Gentleman promised us that he would tell us what his alternatives were to Government policy. Will he tell us now what his alternative is to value added tax as an indirect tax?
It is perfectly simple— raise exactly the same amount of revenue from the taxes that exist, without the revolution that is hurting so many thousands of people throughout the country in its handling.
Purchase tax and selective employment tax do not exist as of today. Does the hon. Gentleman mean that he would not abolish SET and purchase tax but would restore them, or does he mean that he would have no indirect tax of that sort?
The perfectly fair answer is that I would not have started from this point. The hon. Gentleman is tempting me to open my first Budget which I do not expect to do for a little while yet.
The Financial Secretary has asked me to suggest a few alternatives. I have already suggested some. The Chancellor abolished two taxes which were doing a perfectly reasonable job and which were raising exactly the same amount of money as this enormously complicated tax will raise. It is stupid in the extreme to suggest that there was no alternative to the introduction of VAT. Of course there was. There was no need to have introduced the tax at this time. I have said that the Chancellor was right to persist in growth. However, at the same time he has persisted and is persisting with corporation tax, which harms that growth. I refer to the effect of the new corporation tax to which the hon. Member for South Angus (Mr. Bruce-Gardyne) referred—the imputation system—on the comparatively small family company, the growing family company, of which we used to hear so much from hon. Members opposite. I believe that small family companies do a great deal. Many of them have the fastest rate of growth of company I know. As the hon. Member for South Angus rightly said, small family companies are now to be subjected to an increase of 25 per cent. in their tax Bill. This is on top of having to prepare additional records for VAT prices through the Price Code, pay returns, detailed control over their profit margins—all the other forms of stifling initiative about which we used to hear so much from hon. Members opposite. Where are all those valient defenders of yesteryear? We remember the hon. Member for South Angus. He is still at it, but all the others have vacated the Floor. We do not hear from them any more—[Interruption]—we know about the hon. Member for Basingstoke (Mr. David Mitchell). We pay tribute to his remarks and to his conflict during the course of our debates last year. However, he was not able to obtain any supporters, either in Standing Committee or on the Floor of the House. The hon. Member for Surrey, East (Mr. William Clark) spoke about it, but that was about all. We have heard about it, but the Conservatives benches are now supporting a Chancellor who is introducing a corporation tax change and all the other measures that will harm just these companies.I beg the hon. Gentleman to understand that all this is a little much to take from somebody sitting on the Opposition Front Bench. We know the attitude that he personally took during our discussion on the Finance Bill in 1965. However, day after day and night after night, other Labour Members walked into the lobbies behind Lord Diamond, as he now is, who was the biggest hammer the private sector company has ever had. If the hon. Gentleman were now to express a word of apology for the damage that his noble Friend did to the unquoted company, we would treat his remarks with greater respect this afternoon.
I will take up that point immediately. The hon. Gentleman paid tribute to the fact that I did not support many of the things which Lord Diamond advocated, but there is one tax which I do support and that is the former corporation tax. I make no apology for supporting it. I believe that form of taxation, particularly for the family company, is enormously better than this imputation system. If the hon. Gentleman is honest he must admit that that is so. He knows that these small family companies do not pay dividends at all. They plough back their profits for future expansion, and that is precisely what we need. The classical former corporation tax was ideal for that type of family company. I was as critical as any of what Lord Diamond did, but what he did in respect of this tax was absolutely right.
The family company is now faced with a very difficult situation Many such companies are mercifully unaware of the records that they will have to keep, although one day presumably someone somewhere will send them a reminder that they have to send in pay records, price records and profit margin records. Most of them do not know about it yet. If they did, I imagine that some hon. Members opposite would be hearing even more than they are at present from some of their constituents. It seems to me that the only family firms which are likely to grow are the accountancy firms. It will be known that I have a very considerable interest to declare in that respect. I am not pleased about that growth because most accountancy firms, in my experience, had plenty to do before this happened. But they are now inundated, and we are only at the start of it. What the Government have done to this well-loved family company about which we have heard so much from hon. Members opposite—[Interruption.] The hon. Member for Enfield, West (Mr. Parkinson) was not in the House between 1964 and 1970. If he had been, he would have had the opportunity to do exactly what hon. Friends of his did and say what a wonderful thing was the family company. But now what have we got? He, no doubt, along with his hon. Friends, will support everything that the Chancellor is doing. The hammer of the small family company, as was said just now will be calling very soon "Bring back John Diamond." The family company, when it realises what it is faced with under this imputation system, will very much want to see the former classical system of corporation tax return. But there is not only the family company. There is also the large public company. On the one hand, these companies are encouraged to distribute through the imputation system, and, on the other, there is legislation positively to restrain them from distribution. I wonder whether the Chancellor of the Exchequer—or the Financial Secretary, as he is to reply tonight—will give us his estimate of the effect of a combination of the imputation system and dividend restraint on the yield of corporation tax in 1974–75, all of which will have to be reserved for in 1973–74. It must be absolutely clear that the imputation system is not only irrelevant but will do harm to the economy of this country. The Chancellor and his hon. Friends on the Front Bench constantly proclaim the wonderful tax reforms that we have had since 1970, but there is nothing to boast about in tax reforms which do positive damage. I willingly congratulate the Chancellor on the fact that he has been very bold in his tax measures, but I do not find anything on which to congratulate him in introducing great tax reforms which are positively harmful. If the companies which are earning the nation's income are having a bad time, at least those individuals on higher incomes are not having it too bad. How much better a chance would the Chancellor's counter-inflation policy have had to work if that £300 million that is being given away this year—and was given away in last year's Budget—were used, for example, to subsidise just a few major food items. What an effect that would have had in enabling the right hon. Gentleman to go to the trade unions and say, "We would like you to support a family incomes policy." It is true that one is talking about only a few people who are getting the major part of this relief. This is the general criticism that one gets when we talk about these higher levels of income and the tax relief that these people are getting —that these are only a few people who are not terribly important. We do not hear enough about the hospital ancillary workers, and there are only a few of them. Why not make an exception for them? There is a better case for making an exception for the hospital ancillary workers than there is for the highest paid surtax payers. Not only have we had great concessions to the highest paid in terms of direct taxation, but on top of it we find, on reading this very interesting book by Jane Moonman on the effectiveness of fringe benefits in industry, that a survey in 1971 by the Director found that perks per executive amounted to £770. That is £770 per person, and it is on top of what the Chancellor has kindly given to them this year on 5th April, arising out of last year's Finance Bill.Does that include free coal, or is it exclusive of free coal?
The hon. and learned Gentleman demeans himself. If he thinks that a coal miner working below ground gets £770 a year in perks, he does not deserve an answer. That was a quite disgraceful intervention—absolutely outrageous.
The hon. Gentleman is excited.
I am sorry. The hon. and learned Gentleman must forgive me. One is bound to get excited when talking about perks for the higher paid and an hon. Member intervenes to talk about the coal that the coal miner gets as perks. It was a disgraceful intervention.
But it is not only on incomes at the higher levels of taxation that the Chancellor has been beneficent. The loan interest concession that he announced recently has been taken up avidly by many of his friends outside the House. But even the Chancellor found that he had gone too far—even for him. So we had the removal of the relief for certificates of deposit and removal of a relief which previously had ensured that people had been making hundreds of thousands of pounds free of everything, precisely because of that concession which the Chancellor gave on loan interest. I assume that he has decided, having removed that one, that there was not enough left, so he had to do something else, and he did something which even the City pages found a little naive. The Chancellor gave this year's free gift—he generally gives at least one a year—to the high surtax payer by way of the new 3 per cent. stock. Once again, this would not have been possible were it not for the concession that he gave on loan interest. How much better for the interest market if he had gone for the lower income end and had issued something like a small index-linked bond. Instead of that, we have the advertisements in the Sunday papers, and they fill the gap substantially with dubious propositions which will leave many people tragically disappointed when they expect to have enormous increases in the capital which they have invested. Meanwhile, the Chancellor has created an interest rate war, and killed any dream of a property-owning democracy with 10 per cent. mortgage interest rates and house prices at a level which makes it impossible for the newly-married young couple to be able to buy a house. We know of the rumours going about. I imagine that this could well be why the Chancellor and the Chief Secretary have left the Chamber. They apologised for having to leave to attend a Cabinet meeting. There are rumours of possible further tax concessions in an adjustment for the building societies to enable mortgage interest rates to remain lower. I make no objection to such a step being taken, provided that at the same time corresponding concessions are given to council house tenants, and mortgage interest relief is removed altogether for those with a second house and for those at the higher end of the income scale. That is what the Chancellor should be doing. [Interruption.] We did not have the same level of inflation as the Chancellor has managed to preside over. The major omission is any provision having an effect on land prices. I appreciate that this is to come in a separate Bill, but I must point out that the item in the Budget about a land hoarding tax gets at the wrong person. It is not the house developer who is at fault, although the commercial developer is frequently at fault. He pushes up business costs, with the inevitable result on the prices of traders who have to pay the increased business rents. I hope that the Chancellor intends to retain not temporary but permanent control over business rents, because that is the only way to stop the land speculator. I know about all the great representations which have been put to the Government, and I hope that they will be ignored. The least the Chancellor could have done was to stop the enormous concession given in roll-over relief to those farmers who make great profits from selling a few acres of land at considerable profit only to find that, if they buy a larger number of acres of farming land at a lower price inside the year, they pay no capital gains tax whatever. This is quite absurd, and I hope that the Chancellor will stop it once and for all, possibly by accepting the new clause which we shall introduce at a later stage of the Bill. Even if the Chancellor did not do that, he might have some effect on land prices by stopping the 45 per cent. agricultural relief for estate duty. I refer here to the crazy system whereby wealthy people on their deathbed can reduce their estate duty enormously by buying land, and woodland in particular, to avoid estate duty.Is the hon. Gentleman advocating scrapping the 45 per cent. relief altogether or is he advocating scrapping it only in the case of those who buy on their deathbed? Is he in favour of scrapping it for all farmers?
I should not necessarily be in favour of scrapping it for all farmers. One would have to look at the lower end of the scale to see whether some concession could be made. There is a possibility there. But the main point is that there is massive abuse. If the hon. Gentleman is not aware of it, I advise him to speak to those who know about it.
What we have before us is, in effect, a non-Bill, at a time when what was needed was measures to support the Chancellor's own objectives. At times, the Government act as though their right hand does not know what their left is doing. The Prime Minister makes concilatory noises to the trade unions, and then the Chancellor nullifies them all by a Budget and Finance Bill which make matters considerably worse. The Chancellor is obsessed by simplicity when, as the Royal Commission on the Taxation of Profits and Income pointed out, simplicity cannot be reconciled with equity. The need of the time is, surely, a dramatic gesture to workers who are asked to accept wage restraint, a gesture which would show that the restraint is being equally shared. We needed a Finance Bill with positive action on prices instead of positive action to increase prices through VAT. We needed a resolute refusal to allow prices, especially food prices, to rise. Instead, we have the reverse. Presumably, what President Nixon has done today this Government will do a little later. [Interruption.] I was not referring specifically to "today" in that sense. I was thinking of beef prices, not of monetary policy, in that context. Above all, we needed a Finance Bill which did not persist in pursuing tax policies which provided higher real incomes to those with higher incomes. It is no wonder that in that not entirely Socialist newspaper, the Financial Times, Mr. Joe Rogaly had this to say on 21st March:That is why we condemn the Bill. It is irresponsible, it is irrelevant to the needs of the time, and I ask my right hon. and hon. Friends to support our amendment."It was irresponsible. Its terms may soon be forgotten, but its ill effects will probably be felt for many years."
5.6 p.m.
It is some years since I spoke in a Finance Bill debate, and I am glad to have the opportunity to do so today.
The hon. Member for Heywood and Royton (Mr. Joel Barnett) and I share an interest in a certain profession, even though we hold different views on several other matters. When I last heard him speak, he seemed rather quiet and subdued in support of his own Government. Now, in opposition, and, I am glad to see, firmly placed on the Opposition Front Bench, he has a good deal more to say. I suspect that some of what he has to say is rather similar to what we had to say when we were sitting on his side. But that is the way of Government and Opposition. The hon. Gentleman argues that our policies are not fair. I ask the House to study the effect of our respective policies on the people of Britain. I am sure that the consensus of support lies with us, not with him. The average standard of living in this country grew by only by about 1½ per cent. a year under Labour, but under our Government the increase is 5 per cent. per annum. Under Labour, the tax threshold—that is, the point at which income tax started to be paid by a family man with two children— fell in real terms by about 12 per cent., and under the Conservative Government it has gone up by about 8 per cent. Next, I take our respective records in the method of introducing taxes. When I returned to the House in 1966 and attended the debates on the Budget which followed soon after that election, I heard with astonishment of a completely new tax introduced for the first time, without preparation and without consultation, and hurried through the House. I contrast that treatment of the public, having a new tax sprung upon it in that way, with the treatment which we thought it right to give in our preparations for the new VAT system. We announced it in our election address. Various discussion documents were produced. They were discussed both in the House and in the country, and then, when the details had been fully discussed and passed in a Finance Bill, we deliberately delayed before implementing their provisions. The document explaining the tax in detail to retailers and others who were interested and had to carry it out started being circulated last August, well before the time the tax came into effect. On all these counts I believe that we have a much better record of consultation with the public and the House. I will speak briefly about some of the provisions incorporated in the Bill. First, I welcome the excellent assistance given by way of age exemption limits to the elderly, those who are least able to help themselves. I welcome too Clause 13 with its increase in relief for savings and bank interest, but particularly I welcome the share incentive schemes, which have been extended to cover all who work in industry and commerce. It is vital that we do everything possible to encourage a community of interest throughout the firms that make up our complex of industry. It is equally right that we make no law to make such schemes compulsory, because not every firm and not every industry can, with advantage, adopt such schemes. Unless there is a steady pattern of secure growth in those firms there can be, as I have seen, dangers, difficulties and disunity for them. Clause 37 deals with the valuation of shares for the purposes of estate duty. It shows with great clarity the determination of my right hon. Friend the Chancellor. For years accountants, solicitors and others had been trying to obtain the change in the law that is embodied in the clause. All of us have seen from time to time violent fluctuations in stock market values and the great difficulties being thus created for executors and their beneficiaries. In one extreme case I know of an estate of over £1 million was virtually wiped out because of slowness in dealing with the estate and the change in stock market values that took place before the estate was dealt with. There is, as usual, a tax avoidance clause, and this year it deals with group relief. I have a sneaking suspicion that we shall deal with this more fully on a future occasion. Perhaps I have not grasped the full import of it, but there are one or two niggling points in the Bill. I notice, for example, although I will not go into great detail, that ownership depends on the assets divisible on a winding up as disclosed in the balance sheet at the time of the relevant accounting date. As my right hon. Friend will know, not all relevant accounting dates have balance sheets. A balance sheet may be made up at the end of a 14-month period but the relevant accounting period may end on a date that occurs within that period. No relevant accounting period can be longer than 12 months. Perhaps we can examine that aspect of the subject later. It is clear that year after year we shall continue to have such a clause, unless we reach that wonderful state in our development that was envisaged by the hon. Member for Heywood and Royton. Although he said that he would change the situation so that avoidance provisions could be dispensed with he did not tell us in any detail how he would set about it. My hon. Friend the Chief Secretary is to be congratulated on the way in which he has listened to countless deputations about value added tax and consulted people who were worried about the impact of the tax on their affairs, and also on the way in which he has been prepared to change his mind when he felt that the argument justified it. I have one point to put to him which over the next month or two may well come to his attention more than he at present believes. It concerns retailers who put their receipts through the till, both the cash sales and the receipts for accounts rendered. This is a perfectly acceptable way of recording sales, and it is one that is recommended by Customs and Excise. Under such circumstances VAT is charged on the total on the till roll. It means—and this applies to the interim period—that many accounts rendered before 1st April will be paid after that date. The retailer will be charged tax on those accounts, even though he cannot pass the charge on to the customer because the customer in-incurred the charges before 1st April. Many retailers put a note on their invoices to ask for a settlement before 1st April. In some cases the note was misleading. I would admit with the gift of hindsight that it could have been worded more clearly. In all cases, whether misleading or not, as a result of Press publicity the impression has got about that retailers were trying to pull a fast one. Many customers have deliberately refrained from paying last month although they had been asked quite legitimately to do so. This means that where there are a number of accounts outstanding and the money comes in at a later date and is pushed through the till, VAT will have to be charged even though it will not have been paid by the customer. I have a feeling that in certain cases this will lead to some hardship for some small retailers. I hope that my hon. Friend will look at the problem again and reconsider such cases. In the cases that have been brought to my attention the Customs and Excise officers have been consulted and have given every possible assistance to the retailers concerned. We all owe a great debt of gratitude to the officers for the tremendous amount of work they have done in going around the country to meet as many people as possible and discuss the problems that arise in putting the new tax into operation. I do not believe that the long-term difficulties envisaged by the hon. Member for Heywood and Royton will come to pass. Of course there are difficulties now, and will be for a few months, but after that the system will settle down into one that is easily understood and in the vast majority of cases easily handled as well. I agree with my right hon. Friend that charities should be helped. It is accepted that when tax rates go up charities have an advantage, but on this occasion the drop in the benefit derived from a tax rebate would be substantial. I know from my own and other churches to which I have spoken that the relief offered by Clause 42 will be of real benefit to them. They appreciate it, and fully accept that at the end of the interim period it must cease. I congratulate my right hon. Friend on introducing the new tax deposit system for mainstream corporation tax liability, which is welcome. Many people said to me when they knew that the tax reserve certificate system was ending that that was a pity, and that it was also a pity that something could not be put in its place. Many firms like to put aside the money that they know they will have to use to meet tax in the future. The new system will give them a ready way of doing that. The Bill must be considered against the background of my right hon. Friend's Budget speech, in which he said:When the Government came to office it was at the end of a long period of national stagnation. I absolutely agree with my right hon. Friend that the need was to bring back growth into our economy, and with it more jobs and better wages. We hoped—I certainly did —that in going for growth and creating greater opportunities for bigger incomes we should find that all concerned would act with a measure of restraint. But that was not to be. The strong few were preared to go to almost any lengths to gain wage settlements that could not be justified by greater production. I have always believed that some form of incomes policy was necessary. In the long term any such policy must be voluntary. The major industrial and economic forces—management, labour, Government—must act together well within the limits of power possessed by each, as so great is the modern power of any one of these forces that it can disrupt any pattern of national progress. If voluntary means failed, as they did last autumn, the Government had no option but to introduce the compulsory freeze, a freeze which was no solution but gave time for us to realise the fatal path along which we were going and to create new and more flexible policies. If those policies are to succeed, we must have hope in the country as a whole and confidence in the Government. The hope must be that the growth now in the economy will continue. I believe that that hope exists in the country today and that the confidence exists as well, in particular in my right hon. Friend the Chancellor. I have always believed that it was a tragedy for the country that my right hon. Friend the Member for Barnet (Mr. Maudling) could never finish the policy on which he was embarked in 1964. Unfortunately, in October of that year the right hon. Member for Huyton (Mr. Harold Wilson) came to power, and by November was confessing that, while there was nothing basically wrong, a new factor had crept in—the confidence factor, or perhaps I should more properly say "the lack of confidence" factor. There is confidence in my right hon. Friend. At the same time there is a good deal of concern and worry whether he has got it right on this occasion He must be as worried and concerned as the critics are and as all of us must be, because great things are at stake for the country. My right hon. Friend has got it right so far. The changes since we came to office have been remarkable, and for the benefit of the country as a whole. Nowhere is the policy of maintaining a faster rate of growth more important than in the regions. Our policies there are having a dramatic effect. The stagnation that has been there for far too long is going. New firms are beginning to show an interest in those regions, and unemployment is coming down. I believe that this year's Budget—a neutral Budget, as it has been called—is right in the circumstances. I hope that progress will have been made to such a degree that by the time of the next Budget my right hon. Friend can begin to make further steps forward."The central objective of the Government's economic strategy is to maintain a faster rate of growth of national output. And a key part of that strategy must be to control inflation."—[OFFICIAL REPORT, 6th March 1973: Vol. 852, c. 235.]
5.28 p.m.
The hon. Member for Scarborough and Whitby (Mr. Michael Shaw) was a little more hopeful about regional development than he has a right to be. He says that firms are beginning to move back into the regions. They are indeed beginning to take an interest in the regions at last, after two years in which his Government killed off regional incentives and destroyed all confidence in firms to develop in the development areas.
I welcome the move back into development areas that we have been seeing in the past few months. But there is still a long way to go to catch up on the 27 new factories that moved into my constituency between 1966 and 1970. Between 1970 and 1973 very few new factories arrived. There will have to be many more in the next two years to make up for that. The Minister referred to the Chancellor's strategy in the Bill and in his Budget statement. We learned that that strategy, as we have learned from the Chancellor, is a faster rate of growth. It is intended to maintain a growth rate of 5 per cent. That is most welcome. Of course, fast growth brings its own problems, as we are constantly being advised by those who care deeply, as do all hon. Members, for the environment. It brings pollution problems and many other problems in its wake. Nevertheless, there is a desperate need for a fast, if selective, rate of growth. Those who argue for no growth or slow growth totally ignore the appalling political problems inherent in that policy. There is no surer recipe for national misery and gloom than holding the growth rate constantly below the rising aspirations of the people. A 5 per cent. growth commitment is, therefore, extremely welcome. I should like, however to probe the strategy before dealing with the Bill itself. How strong is the Chancellor's and the Government's commitment to 5 per cent. in future? For how long will they hold that commitment? Is the Chancellor already weakening in his strategy for growth? I believe that he may be and that we need to stiffen his sinews. Growth in 1973 will almost certainly be, as the Government claim, on target. It may be about 65 per cent. in volume terms. However, the economy will be slowing down in the coming year. The forecasts contained in the official publication show that the GDP in volume terms will grow at an annual rate in the first half of 1973 by 65 per cent., in the second half by 5·2 per cent. and in the first half of 1974 by as little as 3 7 per cent. Yet the National Institute has estimated that there is 5 per cent. spare capacity. We can assume that the underlying productive potential is rising between 27 per cent. and 34 per cent. per annum depending on whether the figures are based on the last decade or on the last five years. Even on a pessimistic assumption about the growth in the underlying productive potential, there is no reason to suppose that we cannot sustain the growth rate prevailing in the first half of 1974 of 3·7 per cent. It would be helpful if industry generally knew whether the Government accept that it is possible to maintain that rate in the foreseeable future. Everything depends on the success of the prices and incomes policy. In the words of the Opposition's motion, the Budget in that respect was "irrelevant". It did nothing to help the policy work, or to gain for it the acceptance of the broad mass of people. It is, however, a moot point whether the Opposition would have liked it if the Government had introduced any measure which had made that policy more acceptable. We had the £300 million concession to surtax payers. Admittedly that was left over from a previous year, but it hardly sweetened the pill for the majority of people. We had the £110 million sweets concession. I suppose that concession was popular with some people, but it was hardly popular with the dental profession. There was no concession for food prices, unless sweets are included in that category. There was no concession on rents and no raising of the tax threshold. As a result of the decision not to raise the tax threshold, a million more people will be taxed this year than last, and the average income tax burden throughout the population will increase. However, the prices and incomes policy is the difference between a future growth rate of 2 per cent. and a future growth rate of 4 per cent. It must work. It would have been far better to have had some direct Government action to make the prices and incomes policy acceptable. It is a policy which I have supported both in speeches and with my votes. Nothing else in the history of the Government has worked so quickly and "at a stroke" as their efforts to raise interest rates. Hardly had the Chancellor sat down than the "stroke" took place. That was particularly true of mortgages. The Government are responsible for the crisis which the building societies are now facing, which, as we understand, the Government are now seeking to solve. They are responsible and they must accept their responsibility. It might be useful to announce that the first £40 of interest paid by building societies will be tax free. That applies to money invested in trustee savings banks and in the Post Office. That would not bringing in a mass of funds but it might do a little to attract some funds from the small investors. It would particularly benefit those who are not paying tax at the standard rate. A second and much more important concession would be on the composite interest rate. The Building Societies Association has estimated that if the Government were prepared to bring the rate down from 24 per cent. to 14 per cent. the building societies could hold their rate at 8·5 per cent. instead of raising it to 95 per cent. for the coming year. I accept entirely the points which the hon. Member for Heywood and Royton (Mr. Joel Barnett) made about mortgages for second homes. I also accept the Minister's intervention—namely, "Why did not the Labour Government do something about it?" That was not a question which we heard being asked from the Conservative benches when the Conservative Party was in Opposition, although it did come once or twice from this bench. At any rate, the time has now arrived when second homes can no longer be given the tax concession which all parties accept must continue to be given on interest on mortgages for first homes. I do not suppose that anyone will ever welcome a new tax. However, I find the Opposition's attitude to VAT to be inexplicable. I cannot believe that they ever thought that they could get into the EEC without accepting VAT. They might have thought that they could postpone it for perhaps as many years as Italian Governments have done, but they must have realised that they would have to accept it sooner or later and that postponement would hardly be other than a breach of their European faith. But it is not on such terms that the Opposition are opposing VAT. The hon. Member for Birmingham, All Saints (Mr. Brian Walden) in Committee on the Counter-Inflation Bill on 19th February 1973 said:If we follow that philosophy, which is conservative by definition, to its ultimate conclusion, no Chancellor would ever change anything. I am also mystified by the case made by the hon. Member for Heywood and Royton that value added tax is in some unique way regressive. There is a belief in the Opposition that income taxes are supremely progressive while all consumption taxes are regressive. I wish they had held that view in Government. I want to quote from "Labour and Inequality", published by the Fabian Society and written by dedicated and committed members of the Labour Party. It might well have been entitled "Six Wasted Years". It said:"I take Senator Conkling's view about all tax reforms, even those sometimes suggested by my own side—that reformers can sometimes be one hell of a nuisance That is never more true than of tax reforms."— [OFFICIAL REPORT, Standing Committee H. 19th February 1973; c. 919.]
I hope the Opposition have now been converted to the view they are now setting forward, but I did not see much evidence of their determination to make the tax system more progressive when they were in office. I do not wish to deal in detail with the share ownership scheme, which in principle we welcome and have advocated for many years, because there will be, I hope, ample opportunity in Committee to go into it in detail. But I should like to hear now, since we have not yet heard it, something about the Government's basic philosophy behind the introduction of the scheme. Are they converts to a concept of industrial partnership? Or does the very term make them shudder? If they are converts to it and wish the scheme to be part of a developing partnership, they need to go much further if we are to get any industrial benefits at all. The hon. Member for Scarborough and Whitby (Mr. Michael Shaw) said that he would not like profit sharing to be made compulsory. I wonder whether tax concessions will work. If they do not, I am prepared to make profit sharing compulsory. Profit sharing needs far more "clout" than the Bill gives it. It is a pity that the Government—it would not have been compulsion but certainly would have been strong encouragement —did not accept my amendment in Committee on the Counter-Inflation Act which would have exempted benefits paid through a profit-sharing scheme from the £1 plus 4 per cent. formula, provided, of course, that the money was not drawn out and spent. I am sure that the Government will accept that if money were paid over the £1 plus 4 per cent. formula and kept in a deposit account and not spent, this would have an effect in keeping with the purposes of the prices and incomes policy. Finally, I turn to the question of land values and rates. There is no doubt that the Government's scheme for helping ratepayers is half-baked and totally inadequate. It is incredible that the Labour and Conservative Governments have been sitting on this volcano of rising rates and the total inadequacy of the structure of local government finance for decades and have done nothing about it. It is incredible that the present Government should have introduced a huge reform of local government, most of it totally irrelevant to the requirements of the individual local electors, to the extension of local democracy and to whatever other purposes one can maintain, and yet have not got down to the fundamental problem that what is wrong with local government is what is wrong with its financial structure. If we had put the financial structure right first, we could have got on with a more sensible reorganisation. The Government are bringing forward proposals in another Bill to deal with rising land values. If their proposals fall short of an outright site value taxation, they will fail miserably to solve the problem. I did not hear the hon. Member for Heywood and Royton mention the Opposition's attitude to site value taxation. I hope, therefore, that the Liberals will receive their support in pressing for a full-scale outright site value taxation. Any return to the extraordinary policy of the betterment levy, which actually discouraged people from bringing their land to the development market, would be totally disastrous. The great benefit of land value taxation is that it is a continuing tax on the development value of the land. It is not something which happens when the land is parted with, but happens the moment that the development value is given— the moment when some bureaucrat draws a line on a map and says "This piece of land can be built on." The moment that happens, the land may go up from £1,000 an acre agricultural value—it has not gone beyond that throughout Cornwall yet—to over £20,000. But that increase has been earned by the community and not by the land owner. He has no rights in it, but to extract money from him simply when he sells it is to do exactly what the betterment levy unfortunately did—to dry up the supply of land to the building market. I was interested in the remark by the hon. Member for Heywood and Royton about death duties for fanners. I hope that we shall have an opportunity in Committee to debate the matter more fully. What is needed surely is that the Government should state clearly in legislation that the 45 per cent. concession applies only to owner-occupiers of farms. It should in no sense apply to those who buy up a multitude of farms on their deathbed in order to get out of paying the full rate of death duty. I agree entirely with the hon. Member on this, but he must be careful to think it through—and he hesitated when I interrupted him on the subject—because if he is arguing that virtually all large farms should be subject to the full rate of death duty he is doing something to the tenure and relationships of British agriculture which would destroy what is an extremely efficient industry. I hope that the Government will be prepared to go along with the reform I have already suggested —that the 45 per cent. should relate only to owner-occupiers. I do not believe that the word "irresponsible" in the Opposition amendment is necessarily apt, because I regard the Budget judgment as a whole as being rather more cautious than irresponsible. But the word "irrelevant" is totally apposite, and I shall, therefore, support the amendment with my vote."But these services, along with the other expenditure requirements of Government, were financed through a tax and national insurance system which were far from progressive… During this period there was an increased emphasis on indirect taxation, the burden of which fell with disproportionate weight on poorer families."
5.47 p.m.
I shall confine my contribution to a matter which I believe should have been included in the Bill. For many years gross anomalies have occurred in the PAYE system, and this is the third Finance Bill debate in which I have tried to persuade the Government to do something about it.
Ever since 1949, when short-term benefits were first exempted from taxation, these anomalies have existed. They are very much larger now than when the mistake was first made. I have been trying by innumerable Questions to persuade the Treasury to take action, as I believe that the situation is doing grave damage to the general incentive to people to work, particularly the lower paid. I will give a few examples to illustrate the size of the problem. For practically all people with earnings of below about £36 a week it is possible to be better off by being out of work for as much as, in some cases, 25 weeks per year and reclaiming tax refunds. Here are a few examples. A man and wife earning between £17 and £27 a week, with no children, can be better off for an average of 15 weeks. A man earning between £17 and £32 a week, with a wife and one child, can be better off for an average of 14 weeks a year. A man earning between £20 and £33 and with a wife and two children can be better off for 10 weeks a year. A man earning between £20 and £36 with a wife and three children can be better off for an average of 12 weeks a year. The amounts by which they can be better off are probably of interest. A man earning £20 a week, with a wife and no children, will be £2·41 better off out of work for the period mentioned. A man earning £25 a week, with a wife and one child, will be £2·88 better off; a man earning £25 a week with a wife and two children, will be £4·01 better off; a man earning £25 a week with a wife and three children will be £5·31 better off. This position is absolutely absurd. It covers a vast range of people and straddles the national average wage. People who are working have to spend money to get to their work. It is not unreasonable to suggest that it may be as much as £2 a week. If that sum is added to the figures I have just mentioned, the scale of the problem can be seen. I have estimated that, while there may be minor exceptions, most married people earning between £15 and £36 a week would be better off not to work regularly. That is most discouraging to the regular worker. Many lower-paid workers particularly are extremely irritated to find that while they are working and paying tax, other people who have found out how to use this State-approved tax fiddle are getting higher wages than they are for certain periods of the year, having a State paid holiday, reclaiming tax and having the satisfaction of paying no tax at all.The hon. Member should have presented that evidence to the Fisher Committee, which has just reported. It commented that there was little abuse of this kind and did not recommend any significant tightening up of the regulations. If the hon. Member is concerned about tax fiddles, would he not agree that the evidence suggests that they are mainly at the top end of the income scale?
Not at all. I draw the attention of the House to the fact that the Fisher Committee interviewed only one hon. Member—the hon. Member for Oldham, West (Mr. Meacher). I and 64 other hon. Members offered to give evidence. Furthermore, judging by the little that I have read of that report, I think that it is an extremely woolly document and needs to be challenged seriously. It is wrong that it should have taken the committee two years to prepare its report which is nothing more than a screen for doing nothing for a long time.
I want the hon. Member to explain something that he has just said. If people go on holiday for half a year three years in succession, will they not become seasonal workers and so lose entitlement to unemployment benefit?
I must say the hon. Gentleman has much to learn about this matter, but it would be an unprofitable exercise to try to teach hon. Members opposite.
This is not a minor matter, as has been suggested, but major. When we first asked questions on the subject, we were told that £150 million was lost through the exemption of short-term benefits from taxation. A little later I asked a Question myself and was told that, quite reasonably perhaps, the figure had gone up to £175 million. After that, the Treasury seemed to think that the answer had to be tailored to suit itself. The figure has now been trimmed back to £150 million. However, taking the Treasury's figures, in the past three years £475 million has been lost. This money has been paid by regular workers and pensioners in taxation, and it is worth remembering that pensions are taxable. There is a grave injustice when people who have worked regularly all their lives have to pay, as pensioners, tax on their pensions if they have an outside income while others receive perhaps three times as much from the State— tax-free. I do not believe the Treasury when it states that £150 million has been lost in this way. If the figure of £150 million was correct in 1970, the field in which these anomalies occur has since vastly increased. Every time the tax threshold rises, the anomalies increase. Whereas the top limit was about £26 when I first came to the House, it has now reached about £36. Furthermore, when the figure of £150 million was given, about half a million people were unemployed. Since then there have been a million unemployed and now the figure is down to 700,000, but the number involved must have risen substantially. A reasonable present estimate would be nearer £300 million than £150 million. It could be that £800 million has been lost in the past three years. This is money lost by the Treasury and therefore by regular workers and taxpayers. The loss is doing grave harm to the economy and destroying incentive among regular workers who are extremely irritated that this abuse is allowed to happen and that the Government seem to shut their mind to the problem.Would the hon. Member tell us the present average level of unemployment, the number seeking jobs and the number of vacancies? If this is a problem, how can it be solved, given the present levels of unemployment?
I am sure that the problem will be solved to some extent when the tax credit system comes into operation. It is important to establish beforehand that all income should be taxable. There is no reason why we should not do that now. There is certainly no excuse for not doing so. A small clause could be inserted into the Bill to deal with this. I urge my hon. Friend the Minister to consider this. Last year and the year before there were so many tax changes that it was no doubt impractical to do it. There is the chance now.
I hope that I can debunk the excuse which my hon. Friend will no doubt try out, if he bothers to answer this point, that it would involve 11,000 extra civil servants. That was the 1970 figure. Perhaps they do not do so much now, so let us double it. Let us say it would take 22,000 extra civil servants. At 1970 figures it would cost £15 million. I am prepared to call it £30 million. It is good busines if we can save £150 million on the Treasury's figures or £300 million on mine. Surely these would be the most profitable civil servants in the country. I urge my hon. Friend to consider this suggestion carefully. Such a move would be applauded by the vast majority of people, not merely those who support the Government but a great many who vote for Opposition Members. They, too, would see the sense and justice of this reform.6.2 p.m.
I hope that the hon. Member for Norfolk, North (Mr. Ralph Howell) will forgive me if I do not follow him in the intricacies of his argument. He clearly knows far more about the subject than I do.
Any tax system involves a certain amount of evasion, be it at the lower or higher level. The Government have introduced VAT which appears to be more susceptible to evasion because of its bureaucratic nature than any of the taxes it replaces. The opportunity it gives for evasion because of its complicated nature will prove to be one of its major defects. The Government have introduced the tax without thinking about it. It has been introduced not because of any inherent logic or justice, but because a French civil servant or a German tax professor thought it up for the Continent of Europe. That is the main reason why we have it. The only reason why the Government introduced the imputation system of corporation tax was that they did not like the classical system of corporation tax introduced by my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) in the 1965 Budget. There is no other reason. We can now see that the imputation system of corporation tax does not suit the Government's present economic policy. It militates against close companies and against public companies because the whole basis of the imputation system is that companies should be able to pay out their dividends so that the tax on profits is neutral as between distributed and retained profits. These taxes have not been introduced for any logical reason. They are simply political decisions taken in the kind of amateurish way in which this Government from time to time take decisions. One significant aspect of the Bill is that the Chancellor has failed to do anything about the massive tax concessions he has given over the last three years to the better-off. He has failed to remove these injustices, and that is the major condemnation of the Bill. The Government have changed their policies in many directions. They did not believe in a prices and incomes policy in 1970. Now we have such a policy. Public expenditure was to be cut. Now it is increasing. There has been a change of policy on regional development. For two years the Government destroyed regional incentives. Now we are to have them back again. The Government also changed their policy about "lame ducks". There have been all these changes, yet when it comes to the tax concessions to the better-off they are not prepared to make any change. That is because the changes in the past have in no way affected the pockets of those who support the Conservative Party. They may have disturbed the ideological sensibilities of hon. Members opposite, but they have not affected their pockets. The withdrawal of tax concessions would harm the pockets of these people. That is the main reason why the Chancellor, despite the changing climate, has seen fit to retain these concessions. We have heard the figure of £350 million mentioned. That relates to income tax at the surtax level or excess rate levels. If we consider the last three Finance Bills and aggregate all the tax concessions, not merely the income tax concessions, we arrive at a figure which is, conservatively, in excess of £600 million. That figure is an annual recurring loss—an annual and recurring concession to those who do not really need the money. Instead of using the Bill to raise taxes from the rich to finance the public sector deficit, the Government have resorted to massive borrowings in the market at exhorbitant rates of interest, competing with the banks and the building societies for money, thus pushing up interest rates still further at a time of a supposed prices freeze and squeeze. Young couples who will soon have to pay as much as 10 per cent. interest on their mortgage repayments—if they can get a mortgage— should know that they are suffering because of this Government's policies, first, in freeing competition for deposits between the banks and, second, by going into the market to compete with the financial institutions, pushing up interest rates. When a Labour Government borrows money abroad in an attempt to maintain the value of the pound and thereby reduce the cost of imported food and raw materials, we hear speech after speech from the Conservative Party about the vice of borrowing, as if it were one of the seven deadly sins. When a Conservative Chancellor borrows at high rates of interest instead of raising taxes from those who can afford to pay them, we hear very little about the vices of borrowing. There is one change in income tax which I welcome. That is the reversal of one of the more blatant injustices created by the unification of income tax and surtax relating to the rather arcane area of discretionary and accumulation trusts. Some of us pointed this out two years ago to the Chief Secretary, who was then the Financial Secretary. He was very grudging. It took us a long time to convince him that there was a problem. Today he presented the change as if it was something of which the Government had been aware for a long time. I recall that, very grudgingly, he set up some kind of inquiry. I never thought that it would result in legislation, but I was wrong, and it would be churlish of me not to admit that the Chancellor has tried to legislate here and to recoup £5 million in tax concessions to those who do not really need it. The pity is that he has not gone the whole way and taken back the £350 million. There is provision in the Bill dealing with the taxation of profits arising from the exploitation of the Continental Shelf around our coast. This is contained in Clause 34, upon which the Chief Secretary touched in his opening speech. During the Budget Statement, I recall, hon. Members on both sides gave a welcome murmur to the Chancellor when he made his statement about taxing North Sea oil profits. Therefore, I expected to see something new, perhaps not radical, to try to remedy the situation. On reading Clause 34 we find that the Chancellor has done nothing. Basically, all he has done is to tax the earnings and remuneration of those who work on the oil rigs. He has done nothing else. Resident companies which operate in the North Sea are, as the Chancellor said in his Budget Statement, taxable on their profits. As I understand the report of the Public Accounts Committee, non-resident companies have not been given licences to exploit the North Sea, so their position does not arise. What is the point of this rather elaborate clause and schedule? As far as I can see, it is unlikely to bring in any more revenue. I suggest that it is another attempt by the Chancellor at window dressing, or "cosmetics" is possibly the right modern word. When we have a Chancellor who was able to avoid putting up Bank Rate to 9 per cent. by calling it the minimum lending rate, this further foray into the "cosmetics" business is a small matter for him. It is purely window dressing to try to head off public indignation against the way that the oil companies are now, and will in future be, taxed. Another aspect of the taxation of oil companies that disturbs me is the way that the Inland Revenue seems to have acquiesced in the deal that was made between the oil companies and some of the Middle East Governments in fixing artificial prices for the purpose of deter- mining the profits of the oil companies. The Inland Revenue accepted that the oil companies were allowed to bring into their accounts figures in excess of market value in computing their taxation. I understand that there is authority which enables the Inland Revenue to substitute the market price for any artificial price if a trader tries to bring in an artificial price instead of the market price for tax purposes. If an ordinary trader were to seek to operate in this way, by putting in artificially high prices, no doubt the Inland Revenue would pursue him through the courts. In this instance the oil companies appear to have got away with it because the Revenue was not concerned to apply the law fully to them. We have been told that it does not matter because the losses have been created in the distribution companies, that those losses have not yet been utilised against the profits, and, therefore, the revenue has not been lost to this country. That is not correct. If the Inland Revenue had insisted on the market price, the effect would have been twofold: first, the double taxation relief allowable to the oil companies would have been lower, and, secondly, and more important, the distribution company operating in this country would have made a profit. As it is, the oil companies constantly make losses because the price is artificially high compared with the market price.It may help if I explain the situation to the hon. Gentleman. The Chancellor referred both to the accumulated tax losses of the oil companies and to the tax take in c. 264 of his Budget Statement. If the hon. Gentleman reads the Chancellor's remarks on offshore oil and gas I think he will be satisfied with what my right hon. Friend said, because these points are fully covered in his statement.
I do not think the points are fully covered. My final remarks were not directed at the Chancellor. I was saying that I could not understand why the Inland Revenue over the years had not sought to apply what I thought was the law: that artificial prices cannot be substituted for market prices, thereby reducing liability to British taxation. That is the point I was trying to make. I was not criticising the Chancellor. I was merely asking why the Inland Revenue had not applied the full rigour of the law to the oil companies. Perhaps we might pursue this matter further in Committee.
The amendment states that the Bill isIt is irrelevant because the two most serious problems facing us at the moment are the rising cost of food and the downward floating of the pound, both of which are interrelated. These two problems are not dealt with in the Bill. Indeed, I do not believe that the Government can possibly deal with them because we are now within a larger Community in Europe and they do not have power to deal directly with these matters. What the Government are doing and have done by continuing the tax concessions in the Bill is to enable some people to be cushioned against the effects of rising food prices and the fall in the value of the pound. They have done this for a few people, but they have failed to do it for the majority of people. We should not be surprised at that, because it has always been the way of the Tory Party."irrelevant to the needs of the time".
6.15 p.m.
First I should like to mention the subject of value added tax, about which a number of comments were made by my hon. Friend the Chief Secretary to the Treasury in introducing the Bill.
I have been out talking to small businessmen in my constituency and they are very concerned about the work and the expense involved. They have drawn my attention to the fact that it is relatively easy for them to calculate the 10 per cent. that must be added; their difficulty is in calculating the amount of offset from expenses. Such businesses have their accounts made up each year by accountants. I must tell my hon. Friend that there is a great distance between the Treasury and what happens out in the sticks where all that is presented to the accountant for drawing up the accounts of a firm for the year are two spike files from which he has to pull off the tatty bits of paper and then extract the figures. This is beyond the capability of these small businessmen. Therefore, they employ an accountant to do it. If he has to produce quarterly accounts this will add considerably to his costs. Therefore, I make the simple request that they should be allowed to make quarterly estimated payments of VAT liability and at the end of the year make a properly audited final payment. I commend that as a realistic, simple proposition which would save a great deal of time and work of my hon. Friend's Department and of Customs and Excise in querying all the improperly compiled quarterly returns which will come up and have to be corrected by companies' auditors at the end of the year. I turn now to the Bill and the general Budget policy. The key to the Budget, indeed the key to success in the management of the British economy, lies in ensuring that we produce more of everything—more schools, hospitals, houses, fish, food, pensions and so on. In short, there is no limit to the things on which we can all spend money. The key to the problem is in producing and creating, in a word, more growth. The Chancellor's target is 5 per cent. I understand that the Budget is based on the assumption that he is confident that there are no factors at present preventing this growth of 5 per cent. from being achieved. I beg to disagree. I think that there are four limiting factors which ought to be changed and which we ought to take on board. If the Government do not do what is necessary to trim the sails, we shall go on until we break the mast and come to a shuddering halt with the restoration of these stop-go policies which we thought we had grown out of when the Labour Government left office. The four limiting factors to which I want to draw attention are the supply of labour, the balance of payments, investment and corporation tax. I will start with labour, especially skilled labour. This is now in shorter supply than the Government seem to recognise. On 12th March the number of unemployed in the United Kingdom, seasonally adjusted, totalled 630,700. The number of vacancies was 254,400. This is said to produce two and a half unemployed persons per vacancy, and thereforce to suggest that there is no limiting factor here, but what is the truth? What is the reality? On 27th February I asked my right hon. Friend the Secretary of State for Employment a Question about this. He replied that only 25 per cent. of vacancies were notified to his Department. Since the figures in the official returns are made up from the vacancies notified to his Department, the real number of vacancies in British industry today is 1,017,000, against notified unemployed of 630,700.Will my hon. Friend take into consideration the fact that many people are available for work but are not recorded in the unemployment figures, as shown by the fact that there is a substantial drop in the number of people in employment today compared with, say, 1965–66?
I am prepared to accept that, although I believe that the position varies substantially from area to area as there are substantial regional variations.
It is perhaps interesting, as an aside, to refer back to the National Plan which was an exercise conducted by the Labour Government in 1965 projecting the effect of a 3·8 per cent. growth rate. It showed that there would be a 200,000 shortfall in labour by 1970. We have now a re-run of something greater than the growth expectation of the National Plan. Although I do not place much credence upon it, it was a valuable exercise in projecting what happens. If one extrapolates into future years the sort of buoyancy that we had in the economy in 1962, 1963 and 1964, one then sees where the shoe pinches. One place where it pinches is in the supply of labour, and particularly of skilled labour. There is a real limitation of growth here, especially in the South-Eastern area. I suggest that the Chancellor should keep the regional employment premium, or have some other measure to encourage industry away from the South-East and other areas of labour shortage. Secondly, there should be no more doling out of taxpayers' money under the Industry Act in any area where there are more vacancies than the number of unemployed. Thirdly, the Government should press on with retraining as hard as they can. I now turn to the second limiting factor, the balance of payments and of trade. The Chancellor proposes to take the strain on the exchange rate of sterling, not on the reserves. I think that I have quoted the phrase correctly. If we take much strain on the exchange rate, that simply means that sterling floats down and our imports become that much more expensive. We are then importing inflation, though the central theme of the pay and prices policy is that this should not happen. As we expand at 5 per cent. we shall suck in a great deal more in the way of imports, partly to supply work in progress and stock building and partly because we may be living beyond our means, and the balance of trade will deteriorate. It may be that the gnomes of Zurich will work out that this is nothing to be worried about, but the ordinary trading community will be worried and as it sees the position starting to deteriorate we shall notice leads and lags develop in overseas payments. A ½ per cent. here may seem small but on our turnover as a trading nation it would have an enormous impact and I suggest that something has to be done to bring home to those in the trading community who look at these figures and assess prospects for the economy what is the proportion of our imports for stock building and for work in progress and what proportion is simply because we are living "the life of Reilly" as a nation. The national accounts are drawn in such a way that one cannot distinguish between them. I am told that they are drawn to be in keeping with the original tally system of national accounting. Be that as it may, I think that there must be some changes here so that people can assess how much of our balance of trade is because of growing expansion of stocks and work in progress and future exports and how much is through consumption. Investment has improved slightly, but the forecast is for a better improvement. One welcomes that, but the forecast was drawn up before the profit limit in phase 2 was known. Most of the growth in our economy during the last year has come from the take-up of under-utilised capacity in British industry, and the primary need now is for a substantial increase in investment. In some circles it is fashionable to blame the City institutions, the merchant banks, because, as the Government have ended the credit squeeze and made credit easier and inflated the money supply, they have channelled that money into land, property and so on and not into industry. I believe that that criticism is cruelly unfair, because British industry has been so unprofitable that it has not been logical or sensible for anybody to invest in a vast part of British industry with the level of profitability that we have experienced. We have seen the profits and profitability of British industry falling year by year. That fall was accelerated under the Labour Government which imposed price control. There has been very little improvement in it since. If the answer to investment is higher profitability—and so it is—one is led inexorably to one conclusion, and that is that either the Government must lower corporation tax or they must allow the profits of industry to rise. Under the policy for dealing with pay and prices the Government have said that prices and profits are not to rise. They have therefore driven themselves into the only other conclusion, which is that corporation tax must be lowered if we are to attract investment to British industry. I turn from that to my final point, which concerns corporation tax itself. The Bill entrenches the new system which is based on an assumed 50 per cent. corporation tax. I wish that the Chancellor would let us know what it is to be, since many companies are operating under it and need to know what their future post-tax results will look like. I must here declare my own interest and some experience in the smaller business field. The new system is designed to encourage distributions. The philosophy is simple. Money flows out of companies through the Stock Exchange into new and expanding companies.indicated assent.
I see that the hon. Member for Heywood and Royton (Mr. Joel Barnett) agrees with me. I do not quarrel with that idea.
New and expanding industry needs to be able to raise new finance and so to get a better distribution of investment and of national resources. But if a company's profits are under £100,000 a year it is not able to get a quotation on the Stock Exchange, and therefore two things follow. First, the Chancellor's purpose is not fulfilled, because such companies do not raise their money for expansion on the market. Secondly, if the company is growing, if it is big enough and important enough to have some effect on the national economy, and if it needs funds to finance work in progress and for stock building and debtors, it suffers an increase in corporation tax of from 40 per cent. to 50 per cent. It is wholly illogical to apply to such companies an increase in corporation tax at the very time when the Government are seeking to get a 5 per cent. growth in the economy. The result will be to cut down the flow of money available to such companies for the purpose of expanding their businesses. I deplore this lack of understanding of the problems of owner-manager and unquoted companies. Their need for funds is accelerated by inflation and reinforced by the demand for growth.I entirely agree with my hon. Friend's argument, but this year the effect of the new system on the unquoted company will presumably be to encourage it to increase its distributions at precisely the moment when my right hon. Friends are telling companies that they may not do so under phase 2.
Not for the first time, my hon. Friend has put his finger on one of the central illogicalities of the Government's position. On the one hand they are pursuing a policy designed to secure greater distribution, and on the other hand they are pursuing a policy designed to secure a greater investment flow within these growing companies.
I deplore the lack of understanding of business motivations—not of the ICIs and the Unilevers, but of the "acorns to oaks" companies. The men who run such companies work to create an enterprise and to pass it on to the next generation, but by capital gains tax and high corporation tax we frustrate their desire. In doing so we may think that we achieve some fairness, but what we are actually doing is frustrating our own national objectives as well as their desires and hopes to expand their businesses and our national wealth.6.31 p.m.
The hon. Member for Basingstoke (Mr. David Mitchell) in his interesting speech said that he wished to encourage industrial growth, and I hope to deal with that matter later.
Most people who give the Finance Bill an unbiassed look will be struck by its extraordinary irrelevance to the present economic and social situation. The first thing that a stranger from another planet would notice on coming to this country is its divided state, the great gap between the Government and British industry on one side and the trade unions on the other. I had hoped that the Bill would do something to diminish that gap and show a desire to create a greater degree of equality, but it does the very reverse. The Bill fails to redress the grievance of the trade unions about the giving away of £300 million to people with incomes over £5,000. That is a social injustice when there is so much absolute poverty. It is also extremely provocative to the trade unions, which are being asked to co-operate in a wage freeze which means that their members' incomes will be kept low, when they see wealthy people having their incomes enormously increased by a deliberate act of Government policy. It is extraordinary that the Chancellor has not at least made a token attempt in the Bill to appease the natural indignation and desire of the trade unions not to co-operate.Treasury Ministers have said this so frequently that it is difficult to know what more one can say. The £300 million in last year's Finance Bill and this year's Finance Bill did not go to those earning over £5,000 a year. That figure is not accurate.
That includes those with investment income. It is an indication of the shabbiness of the Government's case that the Minister of State should offer such a miserable and paltry explanation.
I must protest. In telling the hon. Gentleman that £300 million has not gone to those with incomes over £5,000 a year, I am trying to correct the facts. He is wrong.
Investment income.
Investment income was the mistake which the hon. Gentleman made when he spoke last week. It is not true.
I can understand the Minister being sensitive about this. Surely he will accept that £300 million is being given away this year to people in the higher income groups. If he wants to deny that, he is welcome to intervene a third time.
Perhaps my hon. Friend will ask the Minister to deny that the greater part of the £300 million goes to those with incomes of £5,000 a year or with investment income.
The Minister has heard that intervention. I am sure that he will not deny it, becauses he cannot.
It is an extraordinary act of folly that the Government should recklessly hand over to the wealthy people large sums of money while pressing the trade unions to accept a wage freeze for their members. One could perhaps understand the Government's point of view if the money they are redistributing to their friends and political supporters had been won by prudent husbandry of the national economic resources. But, as the Chancellor said, Government borrowing is rising from £2,800 million to £4,423 million, so this splendid bonanza of tax reductions is being financed by increased borrowing. Surely that is a most reckless act in terms of simple finance, quite apart from its social injustice. The most important background to the Bill is the balance of payments deficit, which is a darkening scene. In 1971 there was a balance of payments surplus of £1,000 million, but it is prophesied by the Institute of Economic and Social Research and the Department of Applied Economics at Cambridge that at the end of next year the deficit will be in the neighbourhood of £1,000 million. The Bill gives no indication of how the Government intend to cope with that deficit. Part of this impending catastrophic increase in the balance of payments deficit is caused by the foolish import-led boom which the Chancellor tried to introduce last year. He was warned by the Opposition and by prominent industrialists like Lord Stokes that there was not sufficient manufacturing capacity to produce the goods which could be sold in exchange for his concessions. Consequently, last year there was a straight loss of £200 million in the motor industry alone. This is leading to a mounting balance of payments deficit which will probably reach about £1,000 million at the end of next year. What does the Chancellor intend to do about it? Will he let the pound devalue further? That would have to be paid for by the people in the low income groups who would have to pay much more for their food and goods with a large import content. Is there no limit to the extent to which the Government will let the pound float down? It is a worrying situation. The Chancellor derided the Labour Government on the one occasion when they devalued, after they inherited a balance of payments deficit of £800 million. But the Conservative Government have contrived to devalue three times after inheriting a balance of payments surplus of £1,000 million. There seems to be no limit to what the Government are prepared to do in devaluing. I should be glad if the Minister would say what the Government's intentions are. Will the pound float lower? Will there be no limit to the depth to which it will float? Will the Chancellor borrow from abroad and increase interest rates even more? Or will he introduce import controls? The Chancellor must do one of those three things if the balance of payments deficit is not to go very much higher than the £1,000 million which has been prophesied. The Chancellor has talked about having a growth rate increase of 5 per cent. The Government must regard the Confederation of British Industry as being unbiassed by any political motives against the Government. The CBI says that to sustain a growth rate increase of 5 per cent. the present proportion of the gross national product used by capital investment must increase from 9 per cent. to 19 per cent. Do the Government really envisage it as possible that this extraordinary increase in investment will occur? In 1971 there was a fall in manufacturing investment of 8 per cent., and last year there was a fall of 10 per cent. One thing which is clear beyond all doubt is that the business community has shown a total lack of confidence in the Government's economic policy. Is the Chancellor convinced that in these circum- stances he can maintain a growth rate of 5 per cent.? Most of us on the Opposition side of the House were greatly disappointed that the Chancellor did nothing about increasing family allowances. One of the wretched facts of Britain at present is that about 10 per cent. of the community still live in conditions of abject poverty. Apart from the small increase for retirement pensioners, practically nothing has been done about it. The Chancellor ought to give further thought to increasing family allowances. It would in some ways take away the bitter memories of getting rid of concessionary milk, for example. It would also go some way to making the trade unions feel more co-operative, although if the Chancellor is to get the full co-operation of trade unions he will have to do very much more. The other interesting thing in the Bill was the extraordinary lollipop concessions. They seem remarkably frivolous. I can see that they have a real effect on the cost-of-living index. But, in the present darkening economic scene, to make this one of the principal concessions of the Bill seems an act of extraordinary frivolity. The Bill is a frivolous non-event. But the dreadful thing is that we have to set the Bill against an economic background which is most dark and sinister. At this very moment we have the biggest cost-of-living increase, unemployment of more then three-quarters of a million, a record trade deficit, record interest rates and record price increases. I suggest to my right hon. and hon. Friends that we also have the worst Government on record this century.6.44 p.m.
Until the hon. Member for Loughborough (Mr. Cronin) came to the question of the borrowing requirement and of the balance of trade, he followed fairly faithfully the line marked out for him by his hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett). Some of the hon. Gentleman's remarks, however, about what the Government have or have not done for the relief of poverty demonstrated to me, and probably to many other hon. Members, that he simply has not followed what the Government have been doing. There are very large gaps in his political knowledge. I am sorry to say that about the hon. Gentleman. He seemed, however, to show a remarkable lack of awareness about the positive steps that have been taken by the present Government.
I return to the main theme of the debate as outlined by the hon. Member for Heywood and Royton. We had the rather endearing spectacle of the hon. Gentleman posing first as the late Professor Tawney and then as Savonarola. I am all for a move away from the acquisitive society, although whether the hon. Gentleman is the right person to lead us I venture to doubt. It was amusing to hear the hon. Gentleman castigating the Government Front Bench for frivolity. But behind it all there were those flashes of wit and insight that remind us that he is still the same hon. Gentleman who walked with leaden feet behind his noble Friend Lord Diamond into the Division Lobby in support of the Finance Bill of 1965. The flashes of experience that he made free with from time to time demonstrated that he has a very great knowledge of tax avoidance in his professional capacity. We respect his professional knowledge in these matters, but many of us on the Government side of the House have the benefit not of his professional advice but only of his political views, and there is a great deal of difference. The burden of the hon. Gentleman's attack, as that of the hon. Member for Loughborough, was that this is an unfair, irresponsible and frivolous Budget which consolidates the Government's unfair fiscal policies. It is usual for the Opposition benches to buttress their arguments with misleading statistics. But the hon. Member for Oldham, West (Mr. Meacher) has not yet had the privilege, Mr. Speaker, of catching your eye. We must wait a little further in the debate for those statistics. However, in advance of that, I hope that the House will allow me to give some statistics from the Government side of the House. We also had the same old dreary phraseology—hand-outs to the rich, the give-away Budget, gifts to the better-off and so on. I suppose that it is too late to expect Opposition Members to eliminate from their vocabulary this perversion of the English language. It cannot be stated too often that when the Chancellor of the Exchequer allows taxpayers to keep a slightly larger proportion of their income he is not giving a hand-out. He is not responsible for any gifts—not that my right hon. Friend the Chancellor is not a man of great generosity who would like to give away money were he able to do so. He is charged with the task of raising money from us. The burden of the Opposition speeches has been a spurious comparison between these so-called fiscal giveaways and the Prices and Pay Code. But the Opposition have never mentioned the restraint on dividends unless it be in the context of the new form of corporation tax. It is probably too late now to have a rational debate on cuts in taxation. However, it is right to observe that all the tax remissions to which the Opposition have drawn attention derive from my right hon. Friend's first two Budgets. Indeed, certain sections of the community could complain that, at least in the last Budget, the remissions were delayed until this year. Again, there has been no mention of the overlap of surtax and the new combined income tax, which will bear quite hardly on surtax payers. There was a more generous precedent for the transition to a new method of collecting tax, the transition to PAYE, when there was a total remission of tax for the earlier year—if I remember correctly. Perhaps for reasons one can understand, my right hon. Friend did not feel able to give a total remission to surtax payers, but there was a very respectable precedent for so doing.I have heard the hon. and learned Gentleman and many of his hon. Friends weep tears for the apparent double taxation of surtax payers this year. He must, however, be aware that, in effect, surtax payers can overdraw for the purpose of paying tax and that this presents no difficulty in the long run.
I do not know how the hon. Gentleman manages his personal finances. I should judge that he does so very successfully. On the whole, I should prefer not to overdraw to pay my tax, as would be the case with most hon. Members— certainly not at present interest rates.
If we are to have comparisons and statistics, let them be honest comparisons and statistics. Let us by all means compare average earnings with the tax rates. In October 1950, which fell during the last 12 months of the first post-war Labour Government, average male earning were £7·83. I have taken the trouble to convert the figures. In October 1964, the last year of the previous Conservative Government, earnings were £18·67—they had increased by just over three times. In October 1970, after six years of a Socialist administration, average earnings were £28·91—they had multiplied by about four. In October 1972 they were £36·20 —a multiplication factor of about five since October 1950. I do not grudge that at all—Can the hon. and learned Gentleman tell us what overtime hours were included in the 1950 figure, and what today?
I am not concerned with that, and I honestly do not know.
Let us now see how these average earnings compare with the income after tax of people in the higher income brackets—and, indeed, of some in the lower income brackets. Let us compare average earnings with the tax take. Let us look at 1950–51, that again being the last year in which we had a Socialist Government after the war, and take a married man with two children and a total unearned income, or investment income as I prefer to call it, of £50,000 a year. The total tax take in his case was just about 90 per cent. If it was earned income, the tax take was not much belter—89 per cent. I call that confiscation rather than taxation. Taking the same cases in 1970–71 the take was 84 per cent. of a total investment income of £50,000 and 79½ per cent. of a total earned income of the same amount. As a result of the measure introduced by my right hon. Friend for 1973–74, the take from a married man with two children and having an investment income of £50,000 will be 79 per cent. and if the income is earned it will be 64 per cent. I do not consider those reliefs to be very exaggerated. I regard them as a modest measure of long-overdue justice.Would it not short-circuit the whole of this fairly lengthy exposition if the hon. and learned Gentleman were to deal with the record number of millionaires who were created last year?
I do not have that figure, and in any case I shall make my speech in my own way.
Let us now consider a married man with £1,000 a year and having two children. In 1951, assuming that income to be entirely investment income, he would be paying £251 in tax—in other words, a quarter of his income. If that income were entirely earned the tax figure would have been £165. In 1970–71, after six years of beneficient Socialist administration, the man on £1,000, which was just slightly less than average earnings, would have been paying £138 if his income were entirely investment income, or, if it were entirely earned, £51. In 1973–74, with this long overdue measure of justice, in neither case will any tax be paid at all. Let us move from the domestic front and make comparisons with our main competitors overseas and consider the average rate of tax current for someone with £1,000 a year of earned income. In the United States, Germany, France and the United Kingdom no tax would be payable, so at least we find parity there. A man with earned income of £1,500 a year in the United States would pay nil, in Germany 3·4 per cent., in France nil and in the United Kingdom 8·7 per cent. Fgures for an earned income of £2,500 are: United States 4·4 per cent.; Germany 8·5 per cent.; France 3 per cent., and the United Kingdom 17·2 per cent. Let us turn now to maximum marginal rates of tax on earned income. In the United Kingdom it is 75·4 per cent., and that figure is reached at £20,870; in the United States 50 per cent.—25 per cent. less—reached at £19,800; France, and I take the least favourable figure—because there are two types of earned income— 60 per cent., and that is not reached until the taxpayer reaches £23,000. In Germany it is only 59·9 per cent., and that is reached at £31,900. Against figures of that kind the stark truth is that by any rational comparison there is a continuing need for reduction in all levels of income tax, and such a reduction might make a dramatic improvement in both our working and our investment habits. It is perhaps too late to eliminate a tendency to tax avoidance, about which the hon. Member for Heywood and Royton in his professional capacity knows so much at first hand. It is the penalty we pay for having such penal rates of taxation for far too long. Perhaps the House will forgive me if, after that rather long prelude, I turn to the details of the Bill itself. I congratulate my right hon. Friend that in connection with the land hoarding tax he has resisted a temptation to introduce something on the lines of betterment levy which had such a disastrous impact on land prices and, indeed, on the availability of land, and I am sure that the various aspects of his proposal are being very carefully considered. I have two practical suggestions to make. The first is that taxpayers should be allowed to shed planning consent so that they will not be penalised if, in order to protect such amenities as gardens, they have bought land with planning consent. There will also have to be proper account taken of applications by third parties in connection with land which they do not own. As I say, I am sure that we will be told that all these many aspects are being taken into consideration. Certain of my hon. Friends have dealt with far more authority than I can with corporation tax. My only comment is that it is extremely irksome for companies not to know what the going rate of corporation tax will be. It may be objected that companies have to make profits whether or not they know the rate of tax. That may be true of profits, but it is not true of disposals of the capital assets. Corporation tax on chargeable gains is an important factor which may well predispose businessmen not to sell capital assets. I hope that my right hon. Friend may be able to indicate at what rate corporation tax on chargeable gains may be charged. I welcome the extended share option scheme, but it is not now appropriate to go into the details. It is a modest measure but it is crucial, and I hope that the two sides can find common ground here in an attempt to establish some kind of identity of interest between employees and capital and management. I cannot pretend—I do not imagine that my right hon. Friend would—that the extended share option scheme will make a dramatic impact, but it is a first modest step in the right direction. I welcome it on that basis. As regards the tax on the accumulated income of discretionary or accumulated settlements, the points to be made here are rather refined ones and are perhaps better made in Committee. I appreciate fully the underlying principles, but there are at least two points that I hope my hon. Friend will be able to deal with. First, trustees are, as a result of the measure, to be put in a less favourable position than individuals because they will not have the £2,000 threshold. I know that the simple answer is that if they are given a £2,000 threshold there will be a proliferation of settlements. However, I throw this out as something on which I hope my hon. Friend can give some comfort. Again, there is the case of trusts in favour of children, whether they are given vested or contingent interests. It is unfair that they should be deprived of the £2,000 threshold. It may be that my right hon. Friend can devise a means whereby, when they acquire a vested interest in the trust fund, when the income is finally paid to them on their coming of age some relief may be given to them. As to estate duty, I welcome this very small but long overdue measure of relief in relation to the date of sale of securities. Too many of us—certainly on this side, and perhaps opposite—have come across cases of whole estates being wiped out because of the utter practical impossibility of realising the assets sufficiently soon after death. I recall one case where it was impossible to obtain probate in Canada, and some Canadian shares comprised in an English estate dropped to virtually nothing before they could be realised. In a sensitive market it is obvious that there must be a measure such as this. On the question of grouping or the denial of tax relief to groups of companies, my hon. Friend the Chief Secretary was a little less than fair to those who have embarked on this kind of venture. It was not a question of the Revenue losing tax or of the total avoidance of tax. It was merely a question of anticipating the capital allowances which would be theirs in any event. I suggest to my hon. Friend that there was a very good case for doing that in the past few years because it encouraged investment. I do not say that I am against the measure, but it is only nibbling at tax avoidance. I hope that here I strike a sympathetic echo from the hon. Member for Heywood and Royton. I hope very much—indeed, there was an indication of this in the speech of my hon. Friend the Chief Secretary—that the Treasury or Somerset House will look comprehensively at tax avoidance and that we will not merely have specific problems dealt with in a piecemeal fashion. The time has come when there should be a comprehensive look at the whole field. I, too, am against a diversion of effort against tax avoidance, but too often the Revenue has closed one loophole only to impose hardship over a whole range of perfectly bona fide commercial transactions. The measures in this field have become too complex and too harsh. There should now be a comprehensive review. I am therefore a little discouraged that there should be this piecemeal approach this year. As regards value added tax. I make no point on the general impact, but I revert once more to the case of charities. I well recognise that my right hon. Friend has done a considerable amount for charities, and it is right that this should be acknowledged. There is one area in which he has possibly been a little insensitive; that is the case of charities that provide services—in other words, charities that provide care and homes for children, say—for local authorities. There are many such institutions. I understand that they are still concerned about their position and are uncertain about exactly whether they should register. I hope that this can be cleared up briefly. Those are all points of detail, but when one is considering a Finance Bill of this nature one is bound to consider points of detail. Some of the details are welcome—indeed, most of them are—to me. There are one or two unwelcome points which I do not hesitate to draw my hon. hon. Friend's attention. The details of the Finance Bill and of the whole Budget have been overshadowed by the borrowing requirement. This was the point made by the hon. Member for Loughborough, whom perhaps I have driven from the Chamber by my over-copious production of statistics. In any event, the technical details of the Finance Bill are overshadowed by the borrowing requirement and the methods of financing it. I do not know whether I can say that we are all monetarists now. I certainly do not want to get involved in esoteric arguments about the reliability of Ml as against M3. The Chancellor is faced with a borrowing requirement of £4,400 million. I want to state very briefly why I think we should not be over-pessimistic about this. First, we have had no detailed expose from hon. Members opposite as to how much or what quantities of gilts may be sold to the non-bank sector. In 1971, which may have been a particularly favourable year, it amounted to £3,000 million. I have heard from experts who are not at all optimistic about the present financial position that the Government may confidently expect to sell as much as £2,500 million. If so, we are talking about a deficit of £1,900 million. Against that, I think that most people would accept—this is fair, and certainly this is the proposition advanced by the Economic Ministers of the Common Market when they met at Luxembourg—that a country can stand, without adding to its inflationary pressures, an increase in the money supply equivalent to the increase in its gross domestic product plus the tolerable percentage of inflation. If we are to achieve an increase in the gross national product of 5 per cent. and if we can stand, say, an inflation at the rate of 2 per cent.—this is a little less than we had under the previous Conservative administration—then, depending on whether one takes Ml or M3 as the correct figure, the Government can tolerate an increase in the money supply of between £700 million and double that figure. If that is added to the figure of gilts that may be sold to the non-bank sector the deficit assumes manageable proportions. Finally, I say, although this may not commend itself to the Chancellor or even to the hon. Member opposite, who is not burdened with these responsibilities, that we can take a certain part of the strain on our currency reserves. After all, this is what reserves are for. I hope that my right hon. Friend will take a flexible view of this problem. This I throw out only en passant, because it is bound to be a matter of speculation. I do not think that in the light of these figures we should talk ourselves into some kind of financial crisis that I do not believe exists at present. Where the economic high priests read such contradictory messages from the financial entrails, my right hon. Friend's task is particularly difficult. He has introduced a neutral Budget. That is, indeed, a course of prudence which I commend. I hope that no sentimental attachment to the spring rite in which we are participating at the moment will deter him from making adjustments in the late summer or in the autumn as the situation demands. On that modest and qualified basis, I end by saying only that I shall support the Bill without any hesitation in the Lobby tonight.7.28 p.m.
As a prelude en passant to borrow one of the picturesque phrases uttered by the hon. and learned Member for Dover (Mr. Peter Rees), before I try my hand with the Treasury to see whether I can get any further on Clause 34 and North Sea oil than I did with the Scottish Office and the Department of Trade and Industry on Friday, I want to refer to the critical question of the borrowing requirement.
I have today received an answer anticipating this debate. The Question I asked was—"what is the estimated borrowing requirement of the electricity generating boards, 1973–74."
The answer which I received is pretty alarming to any serious person. It is as follows:
"Net borrowing from all sources by the electricity supply industry in 1973–74 was estimated in the recent White Paper, 'Loans from the National Loans Fund 1973–74' (Cmnd. 5253), as follows:
£ million
| |
| Electricity Council and Boards (England and Wales) | 270·0 |
| North of Scotland Hydro-Electric Board | 23·9 |
| South of Scotland Electricity Board | 72·3" |
I am glad that the hon. and learned Member for Dover is not over-pessimistic, because what these figures mean to me and possibly to the hon. Member for Oswestry (Mr. Biffen), by the way that he is cocking his ear in this direction, is that there will be a serious effect on interest rates sooner rather than later. I should like some kind of an assessment, which we have not so far had, of the leap in the borrowing requirement on interest rates later in the year. If it is said that this can be countered by borrowing from the non-bank sector, some of us would doubt it. That is the first issue that I raise with the Treasury.
As a foretaste of the Committee proceedings upstairs, may I tell the Minister of State that my hon. Friend the hon. Member for Birmingham, Northfield (Mr. Carter) and I will be turning to the ways in which the fiscal system can be used on pollution, and I give warning that we shall be moving a clause providing that Section 51 of the Capital Allowances Act 1968, which defines "Qualifying expenditure" in relation to mines, oil wells or other source of mineral deposits, and so on, shall be amended by inserting at the end of subsection (2):
"on the restoration of the land and its amenity".
This follows a letter which the right hon. Gentleman wrote on 6th September, after last year's Finance Bill, on the way in which the landscape can be helped by a fiscal system. I leave it at that as a foretaste of what we should like to discuss in Standing Committee.
We return to our old friend, liquefied petroleum gas. My hon. Friend the Member for Northfield and I will be moving a clause to the following effect:
"The following vehicles shall not be chargeable to car tax: vehicles using liquified petroleum gas, steam powered vehicles and vehicles powered by electric cells."
I say this in the hope that there will be serious reflection by the Treasury, and that if it does not like the measures that we put forward, they will be considered with some seriousness. The same goes for the treatment of recycling and reclamation industries as infant industries.
I come to the last matter which I wish to discuss, and I do not apologise for doing so at some length. It arises out of Clause 34. It is a matter of considerable importance not only to all Scots but to anybody who is concerned with planning and the British landscape. Indeed, it is an attempt to prevent what happened in Texas and California and many other parts of the world happening to our own east coastline.
I had the good fortune on Friday morning to have a two-hour breakfast with David Packer, the former United States Defence Under-Secretary, who is now a board member of the Standard Oil Co. of California. In California, as in many other parts of the United States, what has happened in the oil production industry and its effect on the landscape has often been put semi-right, but at an enormous cost. The Californians may be able to afford it, but we cannot. We have got to get it right first time. Therefore, I say to the Minister of State, who is beginning to look gloomy—
He always looks like that.
that if I speak at length I make no apology for doing so. In fact, I pray in aid the Glasgow Herald, which is not exactly a Socialist newspaper. What the Glasgow Herald said this morning is as follows:
This is not Labour Weekly; it is the Glasgow Herald. It goes on to say:"In particular the questions Mr. Tam Dalyell has put to parties interested in the development of North Sea oil seem fairly reasonable.'
I quote from another newspaper—not exactly a Labour newspaper, the Scotsman. Mr. Mike Russell says:"The day has gone, or should have, when great national assets (and here one is thinking of the natural environment as well as the resources) could be held in secret and developed without restriction."
by which is meant my hon. Friend the Member for Fife, West (Mr. William Hamilton) and myself, not inaccurately described as a wide range of Members of Parliament—"Shetlanders are further encouraged to hope for a happy outcome by the vehemence of Friday's Commons debate on opportunities for industry from North Sea oil in which a wide range of MPs "—
Already, I have had a wide range of correspondence, from Mrs. Naomi Mitchison and others, making represen- tations. I take heart because I read in the OFFICIAL REPORT that the Chancellor said:"displayed an interest in the affairs of not only Shetland but the Cromarty Firth, the Western Isles and the West coast."
That referred to North Sea oil. I hope the same determination and spirit exists in the Treasury on the matter of the development of onshore establishments. I agreed with the Chief Secretary when he was interrupted earlier today, when he said that it was a matter of some importance. What I am asking the Minister of State to do is to act like Mercury and take a message to the Financial Secretary, who I gather is to wind up the debate tonight, saying that we should like many more answers than were given in Friday's debate. His colleagues at the Scottish Office on that occasion were either unable or unwilling to answer points on which it had been given notice —not two hours' but eight days' notice. I turn to this question of the acquisition of land—land which can be used as a springboard for oil exploration. Last year a full report was produced by my friend and constituent, the Rev. Norman Swann, minister of Carriden and Bo'ness, in a joint report with Dr. Francis of the Church of Scotland. They really outlined what was at stake for the communities in the north. I think we Scots all feel, even if we do not represent Highland constituencies, a certain responsibility to take an interest in what happens in the Highlands. But this matter is not only one which concerns the Highlanders. It very much affects the oil companies. Their reaction is anything ranging from gentle annoyance that so much of the coast has been acquired by connected interests, to sheer consternation and fury that the oil companies are in danger of being blackmailed. The people who actually do the work for the oil companies want to know what physical good those who have acquired this land are going to do. What service other than a flat rake off from the oil companies and from ancillary industries will be performed? I turn to the letter of 28th March that the Minister of State wrote to me. He reminds me that I wrote to the Chancellor on 12th March"If we are to safeguard our position we must take action."—[OFFICIAL REPORT, 6th March 1973; Vol. 852, c. 263.]
I make no apology for quoting this letter at length because the matter is of great importance for my countrymen."asking him to comment, in his speech winding up the Budget debate, on a point you raised in the debate on 7 March about the acquisition of land in the Shetlands. As you know, the Chancellor did not have time to do this and has asked me to write to you about it".
Treasury Ministers and their advisers are hardly naive. Do they think that the Town and Country Planning Acts are sufficient as they have been, and are, operated by small local authorities, often covering only a few thousand people? We are not talking here of Greater London, Lancashire, or even Manchester. We are talking about hitherto tiny local authorities. Does the Treasury think that such authorities can operate the Town and Country Planning Acts to meet this situation? Have they the expertise to do so? What that letter reveals is that the Treasury knows very little of the North of Scotland. I am a greater respecter of the Treasury and of the magnificent advice which Treasury Ministers receive in the Standing Committee on the Finance Bill. But that has little to do with this problem. The Treasury is not familiar with it, and, perhaps, can be forgiven for not being familiar with it. The situation is totally different from anything in its experience. Do the Treasury Ministers' advisers, those able men in Great George Street, really believe that in this context the Town and Country Planning Acts are sufficient? The Minister's letter continues:"It is natural that, in association with the North Sea oil developments offshore, there should be development on land as well, and that, on occasions, this may lead to the purchase of land in advance of requirements. But any development on such land is subject to the usual controls under the Town and Country Planning Acts."
To be fair to him, the hon. Gentleman went on:"It is perhaps premature, moreover, to assume that the buyers will in fact make excessive profits at the expense of the oil companies or any other potential buyers."
Again, it is unlike the Treasury to be naive, and I wonder whether it is really assumed that the buyers will not make excessive profits at the expense of the oil companies or any other potential buyers."Nevertheless, I appreciate your disquiet at anything which seems likely to contribute to rising prices for land, and particularly to rising prices for housing land."
I am trying to follow the hon. Gentleman, and I want him to elucidate his argument. Is he suggesting that private companies, industrial companies, be given powers of compulsory acquisition over people who own land?
No. What I am getting at is this. We have here a unique situation, with the finding of a major national asset under the sea. The rules which have applied, or may have applied, more or less satisfactorily on land in different circumstances no longer apply here. We must think about it seriously and without vituperation. I have not been vituperative on this issue. We must reflect on the Treasury's attitude towards the whole concept of enhanced value, because land has here had its value enhanced out of all recognition by the finding of North Sea oil.
If it is assumed that the Town and Country Planning Acts and our system of planning permissions will look after the situation in the North of Scotland, that assumption will have to go. It is simply not on. It is not realistic in the context. The Treasury must be told this. If it does not know, it is up to Members of Parliament such as myself to make it known. I return to my question. Is it assumed that the buyers will not"make excessive profits at the expense of the oil companies or any other potential buyers"?
Does the hon. Gentleman suggest that powers of compulsory acquisition should be given to the oil companies? I am trying to ascertain what he is suggesting.
I want to know how the Treasury, having in good time after the PAC report recognised the new problems in relation to North Sea oil, will make it possible for wealth, which has not been created overnight, to accrue to the community. I am in no sense a spokesman of the oil companies. I am simply saying that I seriously question the activities of a small group of inter-connected interests. We outlined them on Friday and gave names, and I shall not do it again because there has been no denial that the information given on Friday is accurate.
What kind of mechanism is to be introduced in this Finance Bill—it must be done now—to secure for the community a rightful share of the natural wealth now created? However it has been created, it has certainly not been created by a small group of finance houses in Edinburgh or elsewhere. I see that the Minister knits his brows. It is a new problem, and I supose that it is unfair to expect him to give an answer straight away. If he has not understood the problem, perhaps he will interrupt me again. As he does not, I take it that he has understood. I return to his letter of 28th March:As far as I know, no policy statement covering this matter has yet been issued. When does the Department of the Environment propose to do so? One of the difficulties in all this is that more than one Department is responsible. There are the Scottish Office, the Treasury, the Department of Trade and Industry and the Department of the Environment. The fear which many of us have is that these serious problems are falling between several stools. The Minister of State ends his letter in this way:"The Secretary of State for the Environment has in recent months taken a number of steps to achieve this, and, as you will know, a further announcement on the matter is expected to be made by him in the near future."
So far so good. I want to know what means the Inland Revenue has for obtaining information from those who are buying up land with a view to selling it. It may be all above board, but there is at least a general feeling that a lot of the operations which are going on should be exposed to the public magnifying glass. What knowledge do the Government have of current land acquisition in the Cromarty area, in the Peterhead area, in the Shetlands, and, for that matter, on the North-West coast and in the Western Isles, in anticipation of the discovery of oil in the Minch and the Western Approaches? I put again bluntly the question which was not answered on Friday. Is a Nordport-type operation being done in the Western Isles and on the mainland in anticipation of oil discoveries in the Celtic Sea? It may be that these firms are performing a function in offering valuable expertise. It may be that they are taking all sorts of risks. But, at least, they have a moral obligation to open their operations to public scrutiny, and, in my opinion, their quarterly accounts, to the Government in this unique situation. The Chief Secretary said that he had read Friday's debate. As he has done us the courtesy of so doing, and as, presumably, this matter has been discussed in the Treasury since I raised it in the Budget debate, I should like to know the Treasury's reaction to the suggestion that these companies' quarterly accounts should be scrutinised. I put another question to the Treasury. What is its view of the way in which certain senior and distinguished officials have left office and taken new positions? I ask this of the Treasury in its rôle as manager, shared with the Civil Service Department, of senior civil servants. What is the Treasury's view of a senior civil servant leaving the Highlands and Islands Development Board on 6th August 1972 and shortly afterwards becoming chairman of the Cromarty Development Company? I ask also about the ethics of Dr. Skewis leaving the Highlands and Islands Development Board on 8th December 1972 for the post of managing director of the Cromarty Development Company. It is not just a question of an individual MP asking freelance questions. These are questions that have been bandied around in the Scottish Press. There needs to be a statement from Great George Street about the ethics of this. It is not sufficient for justice to be done, in this case justice has to be seen to be done and equity has to be seen to be achieved. For the benefit of the Financial Secretary, he might like to know that I said much of this on Friday. I have had no answer to these questions from the Scottish Office. I hope that the Treasury has given the matter its attention. Perhaps I may read a representation I received this morning from a perfectly serious person. She said:"So far as taxation is concerned, one ought not in any case to overlook the fact that in the case of speculative buying and selling of land which amounts to a trading operation the profit is already taxable under the existing rules at income tax rates, which may go up to 75 per cent. for individuals."
In this context perhaps I can refer to the letter sent to me by the Treasury. In such circumstances it is a complete misrepresentation of the situation to suggest that any development of such land is subject to the usual planning controls under the Town and Country Planning Acts. That might be all very well for a major authority, but it will not do in the present situation. What is not in doubt is that some people are making a lot of money—I repeat, a lot of money—in this kind of dealing. How can any hon. Member go to his local hospital and look in the eye people who are earning under £20 a week as hospital ancillaries? In any society like ours there must be some kind of social equity. Clause 34 may be the way to deal with the problem, and perhaps an amendment can be made either upstairs in Committee or on the Floor of the House, preferably by the Government, to provide for a full disclosure of what these companies are up to in the unique situation that now faces us. Will the Treasury, for example, undertake a departmental inquiry to ask the land acquirers if they will make public the buying price of the land and its notionally enhanced value at quarterly or annual intervals? If they are not prepared to do that, some part of the Government machine must tell them that this is not on in the social contract on which any modern society must depend. The Treasury will have to look hard at the rôle of the City in this matter and enter into a serious discussion—I am not asking that it be vituperative—with the Burmah Oil Company, Stenhouse Holdings, London Merchant Securities and, not least, the bankers to the Shetland County Council, Rothschilds, as to what undertakings they will give to the various parts of the Government machine that there shall be proper planning and a proper conceptual whole to establish the necessary onshore facilities for North Sea oil. I end by saying that if the Government will not take all this from a Socialist, at least they might take it from St. Thomas Aquinas. We must balance the Church of Scotland with the Roman Catholic Church. [Interruption.] I simply refer Treasury Ministers to the whole concept of a just price. I cannot quote the Summa Theologia, at least on the Floor of the House, at length; I will refer only to what was said about natural wealth and how it should be shared out. In this situation there are two possibilities. Either the companies concerned have nothing to hide, in which case they should have no qualms about presenting all the facts to the Treasury and to the British people, and they can be assured of a full and objective Press; or the companies and finance houses will not be able to persuade us that they are providing a worthwhile contribution to the work of North Sea oil development, in which case they should be exposed as the parasites they then would be. Ministers must focus their minds on this problem and must think coolly about the right new clause that the Government should introduce to overcome the very real problem that I have tried to outline on four separate occasions in the House. They should not think that it is not a real problem. It can be dealt with now. If it is not, it will fester and will return to plague successive Governments in their turn. As quietly, gently and firmly as I can I tell the Government that this is their opportunity to think about the legislation that will cover these problems. Although I cannot speak on behalf of my right hon. and hon. Friends, any kind of legislation designed to show that the community onshore and offshore would get its rightful slice of the cake would have, I am sure, the co-operation of the Opposition Front Bench."It is interesting to note that the Managing Director of the Cromarty Firth Development Co. left his post as Director of the Industrial Development and Marketing Division of the Highlands and Islands Development Board (where he was deeply involved in all industrial projects in the Board area) early in December 1972 and three days later took up his present post. An ex-member of the H1DB is the local County Councillor for the Nigg area, a member of the Planning and Development Committee and brother-in-law of the seller of Pitcalzean Mains."
7.37 p.m.
The hon. Member for West Lothian (Mr. Dalyell) has gained a reputation for persistence in the House and he has alighted on yet another topic which he will pursue with the same dogged determination with which he has pursued other issues before. In view of its highly Scottish nature I hope he will acquit me of discourtesy if I do not follow him on the subject. There are some Labour Members who might think it impertinent if I concentrated my remarks too obviously in that direction.
Second Reading debates on the Finance Bill normally divide between those who want to talk about the Bill and those who draw upon their political instincts and economic prejudices and want to talk about the general economic situation. In the former category we have had powerful speeches from my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) and my hon. and learned Friend the Member for Dover (Mr. Peter Rees) who are clearly relishing with anticipation the minutiae of the clauses of Parts III and IV of the Bill. I will confine my remarks to the more general economic considerations, what the hon. Member for Cornwall, North (Mr. Pardoe) referred to as the Budget strategy. In that context I will talk about the borrowing requirement, economic growth and the level of demand in the economy. Certainly the whole question of the public sector borrowing requirement has received a deal of attention already in the debate. This is hardly surprising because of the way in which the borrowing requirement has grown over recent years, from just over £1,000 million in 1971–72 to over £2,800 million last year and in the current year with a prospective target in excess of £4,400 million. I will make three short points. First, to what extent does the borrowing requirement carry the danger of further fuelling monetary inflation? Clearly the Chancellor himself is a little worried, because at least he acknowledged in his Budget Statement thatBut we should proceed with modest caution on that analysis. I was interested in the figuring of my hon. and learned Friend the Member for Dover. As he has dashed on to this delicate ground, the least that can be done by my hon. Friend the Financial Secretary to the Treasury when winding up the debate is to add his own comments on the analysis of the public sector borrowing requirement proffered by my hon. and learned Friend. The second point, which is of more immediate political interest to us today, is the extent to which the sheer magnitude of that borrowing requirement will lead to some kind of interest rate war. The point was touched on by the hon. Member for Llanelly (Mr. Denzil Davies). The whole House will be most interested to see what will now happen in respect of interest rates and above all, of mortgage rates, which is the immediate political problem. We learned from that reliable source, John Dickinson, in tonight's London Evening News, that the matter has been referred to Lord Rothschild. We know from the Sunday Times colour supplement just what goes on in the Rothschild circus. Who knows? Perhaps at this very moment there is a joint meeting between the Cabinet and the think tank in the Mirabelle, trying feverishly to achieve a long-term solution to a matter of such short-term political immediacy. So they will travail through the night until my right hon. and learned Friend the Secretary of State for the Environment suggests that they adjourn to Anna-belle's. Doubtless after that concentrated appreciation of the problem we shall know the Government's reactions, which will be presented to the House within the next 48 hours. My only observation is to ask whether all this was really unforeseeable when a public sector borrowing requirement of upwards of £4,000 million was budgeted for. In these debates we often refer very affectionately to the late Iain Macleod. It is a measure of the high esteem in which he was held that those references are still made, and were made today by the hon. Member for Heywood and Royton (Mr. Joel Barnett). It might be helpful for the House to recall what Mr. Iain Macleod said in the very week in which he became Chancellor of the Exchequer. This was what he said on the Monday before the election day, speaking at Wellingborough on 15th June 1970:"the large borrowing requirement in 1973–74 poses a considerable financing task for the authorities. It would be quite unacceptable to rely to any substantial extent on borrowing from the banking sector."—[OFFICIAL REPORT, 6th March 1973; Vol. 852, c. 254.]
There is a certain eternal ring of topicality about those comments. What the House should bear in mind is that the relevant figure for War Loan is the yield. When that statement was made the yield on War Loan was 9·97 per cent. In today's Financial Times it was given as being in excess of that, at 10·19 per cent. No one can contemplate that without realising that a borrowing requirement of the present magnitude has serious implications for an interest rate war, and we should be foolish to suppose otherwise. I turn to the third consideration of the borrowing requirement, which is the mild anxiety—I put it no higher—that its sheer magnitude might encourage the Government to follow the behaviour of some other Governments and engage in conscript savings by requiring the insurance companies or the pension funds to place certain identified savings in Government stock, either from their existing savings or from new savings. That point is given real topicality by the passage through the House of the Social Security Bill. My hon. Friend the Member for Surrey, East (Mr. William Clark) has already done us a great service by pointing out the dangers of political interference in the savings that will accumulate under the provisions of that Bill. That is why I should like my hon. Friend the Minister who winds up the debate to make it quite clear that the Government totally reject any idea of obliging insurance companies or pension funds in the year in prospect to become conscripts in the campaign to fund this substantial Government debt. That leads me to my second consideration, that of economic growth. The anxieties I have expressed about the public sector borrowing requirement have been so widely canvassed on both sides of the House and throughout a great deal of the responsible Press that there has been a natural tendency to assure us that economic growth is the means whereby so many of these seemingly substantial difficulties will be revealed as being not much more real than shadows. It is time the House took note, with some sense of alarm, of the extent to which we are almost becoming superstitious about economic growth. I want to raise two questions in passing. We shall have plenty of opportunity to return to the matter. I should like to know whether we can even measure economic growth in the way in which we talk about it and with the precision with which it becomes bandied to and fro across the Floor of the House. My anxieties on that point were given some substance by so prosaic an organisation as the Central Statistical Office, which recently published a Press statement to accompany the Preliminary Estimates of National Income and Expenditure 1967 to 72. It was very concerned about the increase in the gross domestic product of 1972 over 1971, saying:"Mr. Wilson pretends that all is well. He knows it is not. War Loan has hit its all time low, and War Loan is the barometer of confidence inside and outside the country. It is lower than it was at devaluation, lower than when the Bank Rate was 8 per cent. Not only the holders of War Loan, but the people are being deceived. They are being deceived too about prices. Increases in coal, steel and postal charges are being held back … "
The output-based estimate shows an increase of 3 per cent. to 3½ per cent., while the expenditure-based estimate showed an increase of only 1 per cent. to 1½ per cent. Those are substantial discrepancies. We should hardly be surprised that in paragraph 29 of that fairly ample Press release from the Central Statistical Office, from the hallowed address of Great George Street, it is said:"Because the expenditure, income and output-based estimates of the increase in the gross domestic product between 1971 and 1972 show greater divergence than usual … there are uncertainties about how precisely to interpret the figures."
past experience suggests that they may be widened—"Nevertheless, as large a discrepancy as was experienced in 1972, even though it may be reduced as the provisional figures are subsequently revised "—
In the circumstances I wonder how wise we are to revolve our political debates around whether we hit a 5 per cent. growth rate or otherwise when we do not even know by what measuring rod the statistic was chosen. I suspect that it will be chosen by whatever measuring rod proves the most useful. In the present enthusiasm for growth, even the Prime Minister's speech writers have succumbed to lyricism. When my right hon. Friend addressed the Nottingham University Annual Conference of the Federation of Conservative Students, he said:"is a cause for serious concern."
My reaction is "What flash and which pan?" If we can get these degrees of variation, they put a serious question mark over the intelligibility with which we conduct this important aspect of economic affairs. There is a second issue which was touched upon by the hon. Member for Cornwall, North—namely, to what extent are we prepared to allow environmental or ecological considerations to obtrude upon the rate of expansion of the gross domestic product. Above all, it may not be our decision, unless we have totally abdicated our interpretive and representative rôle. The decision will be that of a much wider public outside, who will frequently, and I suspect with increasing stridency, argue in favour of non-growth options. I hope that we will be particularly circumspect. We advance growth as being the technique whereby we can square the circle, the technique whereby we can achieve the magic of cutting taxes while at the same time increasing public sector expenditure. Meanwhile I believe that we are likely to hit a much more immediate obstacle in developing economic growth—namely, the shortage of capacity within the economy. The latest available evidence from my right hon. Friends is that they still believe that there is ample capacity within the economy to sustain the kind of expansion which we are currently experiencing. My hon. Friend the Member for Harrow, East (Mr. Dykes) suggested to my right hon. Friend the Chancellor of the Exchequer that there was substantial spare capacity in industry. He said:"I see no reason why the expansion which we are now seeing should be a flash in the pan."
My right hon. Friend the Chancellor of the Exchequer responded:"Does that not lead him and others to believe that the concept that early over-heating is creeping into the economy is a ridiculous exaggeration?"
I do not share that optimism. It is not all that frequently that I find myself in full-hearted agreement with editorials in the Financial Times. However, almost barely had my right hon. Friend spoken than there was an implied magis- terial rebuke from the editorial columns of the Financial Times on 24th March, which summarises the situation sufficiently well to deserve repeating. It said:"My hon. Friend is right. Almost all commentators agree on one point, namely, that there is still plenty of spare resources to sustain a fast growth rate for some time to come "—[OFFICIAL REPORT, 22nd March 1973; Vol. 853, c. 645.]
My hon. Friend the Member for Basingstoke (Mr. David Mitchell) is right in saying that economic management has been vitiated and made infinitely more difficult by the unreliability of our unemployment statistics. That is a subject which can be touched only with some trepidation because of the easy fashion in which can be generated a great deal of emotion. I want to be as detached as I can on this issue. Again, the House will do well to reflect what the late Iain Macleod had to say on 4th May 1966, so shortly after he took over shadow responsibilities for economic affairs. When speaking from the Opposition benches, he said:"Before very long demand pressures are likely to be just as important as trade union wage push in acting as inflationary influences. Indeed, in some industries, they are so already. Whatever theoretical arguments there might be about the effectiveness of wage and price control when there is a great deal of slack in the economy they do not stand any chance at all if working against fundamental economic forces."
He went on to say that"Yet it is not possible to understand the way the economy is going unless one discusses openly the level of unemployment; what is happening in the frictional unemployment sphere and how much of the unemployment figure is genuine and how much, in one sense or another, of that figure represents the unemployable."
"the old thoughts and fears of pre-war years are completely out of date and it would be a good thing if, in modern circumstances, we could see if we could redefine our attitude towards unemployment."—[OFFICIAL REPORT, 4th May 1966, Vol. 746, c. 1644.]
Will my hon. Friend tell the House what the rate of unemployment was on 4th May 1966? Does he realise that it was about 300,000 to 350,000? That is a different situation from the present situation.
I can confirm that the figure was of that order. I can also confirm that the relationship between the unemployed and unfilled vacancies has clearly ceased to have its former relevance. The unfilled vacancy position of today closely approximates to the unfilled vacancies position at the time when Iain Macleod made that speech. Whatever shadow of suspicion hung over the unemployment figures when that speech was made in 1966, that shadow has become infinitely darker and more reinforced in the intervening years. My hon. Friend the Member for Leek (Mr. Knox), who I know takes a very opposite view to that of my hon. Friend the Member for Basingstoke on this issue, is woefully out of touch with the realities of industrial and commercial life.
My hon. Friend the Member for Norfolk, North (Mr. Ralph Howell) entertained us with a robust speech on taxable benefits. He should take hope and comfort from those like Eleanor Rathbone who campaigned for family allowances. Of course, initially it is thought to be absurdly eccentric to challenge all the reasoned wisdom which clutters up the Front Benches. But my hon. Friend should take no fear from that. He will be proved right. He is also one of those who has campaigned on the unreliability of the present unemployment figures. I simply do not believe that there is in prospect a vast number of people who do not register as unemployed until the demand appears, although I believe that there may be a substantial element of female labour in that category. But I am certain that the labour bottleneck in the economy in the next few months will be in the availability of skilled labour, particularly of skilled male labour.indicated assent.
I am glad to have the acquiescence of the hon. Member. As I was saying, I think that the bottleneck will come there rather than among those who normally do not bother to register as unemployed. If I had emerging doubts about that, they were reinforced by a recent comment by Mr. John Elliott, labour editor of the Financial Times, about the building trade on 26th March. He said:
"As revealed in the Financial Times on Friday, some 25 to 30 per cent. of the industry's 800,000 workforce is now thought to be self-employed, and pay rates of more than £20 a day have been paid on some sites because of the shortage of craftsmen.
Indeed, in these circumstances we have to ask ourselves whether the Budget provisions match the economic situation. When my right hon. Friend presented his Budget, it being Shrove Tuesday, he indicated a disposition to penitence. That was in respect of children's clothing. We may be entitled to ask the Treasury whether its analysis of the level of demand in the economy and the likely ability to maintain the rate of growth and all that goes with it has been vindicated in its view by all the statistics which have become available since Budget Day. I must confess that there is a certain seductive ring of truth about the Opposition amendment, although I cannot say from the somewhat thin ranks of Tuscany that it is being pressed with much enthusiasm. I must confess my scepticism, however. My hon. Friends and I perhaps in particular went through the fairly disagreeable task of supporting the counter-inflation legislation. We did so believing that it would provide a short-term arrangement during which the psychological impact upon inflationary expectations could be matched by the appropriate budgetary, fiscal and monetary policies. What we have to ask ourselves is whether this Budget provides the budgetary, fiscal and monetary disciplines which we think appropriate to the situation to reinforce the counter-inflation legislation or whether it may prove harmful to the to the effective short-term working of that legislation. It is my view that Parliament no less than those to whom we speak has a rôle to play in fighting inflation, and I think we should have the resolve and the dignity to concede that unless and until public sector expenditures are reduced taxation should be increased. This view was expressed by my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and by me before the Budget, which was a difficult and delicate time at which to proffer such advice. Of course these are words which come reluctantly from a Tory. They are harsh words. Maybe they are harsh, but it is my view that they speak aloud what many others, perhaps even the Chancellor himself, uneasily murmur in their sleep."In this situation local councils, especially in London, are finding it difficult to obtain tenders from contractors, and the London Boroughs' Association has taken the issue up."
8.5 p.m.
It is always a great pleasure to listen to the hon. Member for Oswestry (Mr. Biffen), since we have learned to expect from him a speech that is witty as well as sincere and penetrating. We were not disappointed tonight. He spoke in particular about a matter crucial to the Bill —the question of capital investment and growth. He commented on provisions in the Social Security Bill in the context of arguing that the enforced savings which will be produced should not be used to shore up the means of investment because, as one well understands, he would prefer other means.
It is true that, under the Government's plans, by the end of the century the Occupational Pensions Board will own precious close to its ceiling of 10 per cent. of almost all the major holdings on the Stock Exchange. Otherwise it certainly will not be able to invest its money. This is a very considerable power within the economy. I ask the hon. Gentleman to consider—although he likes the Bill, he dislikes these provisions—the extent to which capital investment now cannot be expected to come from the normal capitalist source of profits. Over the last decade gross profits in private manufacturing industry have been cut by slightly more than half. This is not to do necessarily primarily with wage inflation. It had begun to occur, and had significantly occurred, well before the explosion of wage inflation at the end of the 1960s. Although the Government have made an attempt to shore up the profit rate, it has continued to decline. The latest figures, given in a parliamentary answer a few days ago, indicate that gross profit rates in private manufacturing industry, when one includes capital consumption and stock appreciation as a proportion of company capital stock—the best definition of profits in private manufacturing industry—continued to decline in 1970 over 1969, in 1971 over 1970 and in 1972 over 1971. That is an exceptionally serious situation for private capitalism. Therefore, the method proposed in the Bill—engendered, curiously enough, by a Conservative Government—is likely to be an innovation followed by further Bills, in that the only way by which we can expect now to keep up a sustained level of capital investment comparable to those of our European competitors will be increasingly through such means if not directly through the institution of some form of State investment agency. The hon. Gentleman perhaps spoilt his speech when he referred to the hon. Member for Norfolk, North (Mr. Ralph Howell) and his campaign, suggesting that his espousal of an eccentric cause such as that would necessarily win out. The hon. Member for Oswestry quoted the example of Eleanor Rathbone. But Eleanor Rathbone was on an extremely important point, about which I want to remind the House. If one is seriously concerned about evasion, which beyond a certain level is a matter for concern, one should bear in mind that Government figures indicate that the level of tax evasion is eight to nine times the level of all welfare benefit abuse. This is not a figure taken from the Fisher report, about which the hon. Gentleman was so disparaging, but a general figure taken from Government sources. If one is seriously concerned about this issue, it is important to look at the main source of such abuse.In order to put the whole problem into perspective, would the hon. Member say what the amount collected by taxation is compared with the amount handed out by way of welfare and social benefits? That comparison might redress the balance.
That is an unimpressive argument for the hon. and learned Gentleman as the number of claims made for welfare benefits last year was about £23 million, and as a proportion of that the number of abuses was exceptionally small. Comparing that with evasion of taxation is not a parallel that will assist that argument.
The hon. Gentleman has totally misunderstood what I was saying. Perhaps it was my fault. I was speaking not about tax evasion or abuse but about the system which makes it possible for people to work for part of a year and then legally reclaim tax.
I appreciate that point but the hon. Gentleman was clearly putting it in the context of abuse and it was not unreasonable to look at it in that context.
I wish to talk about the millions of people who are notorious by their absence from the Bill. The true importance of the Bill lies in its omissions. It shows no second thoughts about the gift of about £300 million shortly to be made largely, but not wholly, to the rich by reduced tax on unearned incomes. It is not an essential component of a unified tax system, but purely a gratuitous supplementary concession. At the same time, the Bill increases taxes on the poor by £600 million. That is the simple meaning of the bland but inexcusable failure to raise the tax threshold. This is a glaring omission which gives the lie to the Chancellor's assiduously propagated claim which he made again at the end of the Budget debate on 12th March when he said:The simple truth is that by the time of the next spring Budget, assuming an increase in money earnings over the next financial year of between 9 per cent. and 10 per cent.—a conservative estimate— the tax threshold for a married man with two children under 11 will have fallen in relation to the national average earnings to an all-time low of about 53 per cent., which is lower than at any time under the Labour Government. I hold no brief for the fact that that Government allowed the tax threshold to fall, but under the present Government it is going to fall remorselessly before next spring to a lower level than was ever reached under the Labour Government. This means that the Chancellor has chosen to finance a so-called broadly neutral Budget on the backs of the lower-paid workers. The Chancellor's second well-cultivated deception was that he could not raise family allowances although it is admitted that their real value has fallen by a third since 1968 because with clawback they would reduce the tax threshold unacceptably. Some combination of a raised family allowance and increased tax threshold would obviate this difficulty. No doubt the Chancellor would say that that would be inflationary, but that difficulty could be met by some counter- inflationary measures elsewhere, such as withdrawing the gratuitous £300 million gift soon to be bestowed on the relatively well-off. This kind of switch of resources by the Chancellor must have been deliberate, because he must have considered the possibility of this course. The Government are revealed in their true colours by this rejection of the proposed switch of resources to protect the poor at a time of raging inflation. It is becoming increasingly recognised that about one-fifth of a million more, than in total tax reliefs are concentrated exclusively on the richest 1½ per cent. of the population. Under the Tories, the rich have become richer. It is now becoming apparent from information entirely from Government sources that under the Tories the poor have become distinctly poorer. The Financial Secretary is shaking his head, but I invite him to listen to what I am about to say, for the evidence of greater poverty over the past three years is irrefutable. Far more people are depending on supplementary benefits, about one-fifth of a million more, than in 1970. The standard of living of many has fallen. A married man with two children and dependent on supplementary benefits received in 1968 about 45 per cent. of the gross national average earnings; the figure for 1972 was 41 per cent. These are not my figures; they are to be found in the OFFICIAL REPORT for 13th February. In 1967 a single person's retirement pension was worth 21 per cent. of gross national average earnings. After next October, following the increase about which the Chancellor of the Exchequer has made such a loud boast, a single person's retirement pension will be no more than 19 per cent. of gross national average earnings. The low paid are the third main group traditionally regarded as forming the poverty groups comprising one-fifth of the population with the lowest income. In a few instances they are no better off compared with 1970, but in the majority of instances they are significantly worse off. We have heard much about how far the Government has helped lower-paid families. A married man with four children in this group had an income of 79 per cent. of the average in 1970; by 1971, the latest date for which figures are available, it was 72 per cent. These are the Government's own figures. I make no apology for going through the tedium of quoting them, for unless I state that they are Government figures and not mine they will not be believed. They reveal a drastic drop in a short time among the hardest hit section of the working poor—not those about whom hon. Gentlemen opposite are so concerned, those parasitic people on State benefits, but the working poor. They are people doing a full week's work. Their situation has markedly declined compared with 1970, according to the Government's figures. That statement is reinforced by the fact that, whatever index one takes, all show exactly the same picture of growing poverty at the same time as the growing concentration of money on the rich. It is not merely that the Government have completely disregarded the interests of the poor in this Bill; no one would remotely deny that. It is clear that the Government have no intention of taking any further special anti-poverty measures before the end of the decade. In a significant sentence in his Budget speech, in the context of excusing his disavowal of family allowances the Chancellor said that the tax credit system was "specifically designed" to help the poorer members of the community, the low paid, the pensioners, large families, particularly those with young children, and so on. The message from this is clear—there is to be no change while we wait for this great, all-embracing reform which is coming up over the horizon at the end of the decade. This is a convenient stop-gap formula for Ministers to justify procrastination for five years. The Chancellor is being distinctly slippery in making that statement. First, it does not preclude an interim award for the poor. If they need £1,300 million in five years' time presumably they need it now or certainly an advance award of some substantial size now. Yet under this Bill they have virtually nothing. More seriously, the Chancellor is being deliberately misleading, in my view, when he claims that the tax credit system is "specifically designed" to help the poorer members of the community. I believe that it is nothing of the sort. It is primarily an administrative rationalisation measure and one in which, once again, under this Government, the biggest beneficiaries will be the well-off. This is apparent—it may be contrary to the impression which many people have—if we look at the Treasury costing of the scheme at nil cost, utilising the same structure. On that basis the low-wage earner with £15 a week and two children would lose 30p a week whereas the company executive with £5,000 a year, with exactly the same family responsibilities, would gain over £1. Further, a third of the total expenditure in the Bill, no less than £425 million, will go to those with incomes over £2,000 a year who are not poor by any stretch of the imagination. No less than 60 per cent. of the benefits under this scheme will accrue to those with earnings above the national average. To claim that a scheme of that kind is "specifically designed" to help the poorer members of the community is a statement of the sheerest deceit. I can see that the Chancellor felt obliged to adopt this pretence. The tax credit scheme is really the sole political figleaf at which he can clutch to protect himself against the charge of complete indifference to the interests of the poorer sections of the comunity, in a climate in which he has been forced at least to pay lip service to the idea of fairness. Like the Emperor's new clothes, when we look at this closely the benefits are non-existent. The realities of this Government are now becoming brutually clear. After the most unequal and unfair handout of what is perhaps the biggest collection of fiscal largesse in history through this Bill, the Government are imposing a tax, through fiscal drag, of £600 million on the poor while at the same time giving the lion's share of £300 million unearned income tax reductions to the relatively rich. After reducing surtax on the barons of industry they have extended the poverty surtax to a third of a million of the lowest-paid workers. Again that is a figure given by the Government. After running a Budget deficit of the colossal size of nearly £4,500 million, all that the Government have been able to do in their financial dispositions this year for the lowest paid is to give them a miserable increase, through family income supplement, of precisely £1 million. This is not a policy of fairness; it is a policy of consolidating and cosseting privilege."Under this Government the threshold has been raised and raised in real terms."— [OFFICIAL REPORT, 12th March, 1973; Vol. 852, c, 1025.]
8.25 p.m.
The hon. Member for Oldham, West (Mr. Meacher) has not disappointed the House. As usual he has gone off at a tangent. When he is talking about the tax credit system I would invite him to look at the evidence that has been given to the Select Committee. He will find if he does his arithmetic with a little more care that the lower paid and the people on low incomes will be helped under a tax credit scheme.
Since the hon. Gentleman has raised this point in a rather pejorative way with regard to my sums, perhaps he would like to confirm that the sole amount going to those with incomes of less than £1,000 a year is £150 million, while £1,150 million will go to those with incomes of over £1,000 a year.
If we take any minority in a community and say that it is getting £150 million or whatever the sum might be, it does not follow that relatively it is not getting the same proportionate increase as anyone else. The hon. Gentleman always takes the wrong figures. For example, he compares the increase in old-age pensions with national average earnings. This disguises the fact that in real terms the standard of living of the old-age pensioner, single or married, has increased since 1970.
I was delighted that my hon. Friend the Member for Oswestry (Mr. Biffen) raised the question of the borrowing requirement and the danger, under the Social Security Bill, of a build-up of a State pension fund which could be used for political purposes. The borrowing requirement for this year of £4,400 million will not be affected because the pension fund will not be in existence. I can understand why the hon. Member for Oldham, West likes this sort of thing, because it is backdoor nationalisation. As the hon. Gentleman said, by the end of the decade the pension fund will own about 10 per cent. of the equity in all companies in this country. I remind him that the pension fund will also be able to invest in gilt-edged stock, long and short. It is as well to remind ourselves that there has been political manipulation of funds. In 1946 Mr. Dalton, the then Labour Chancellor, used the unemployment fund—which until then had been invested in short-dated gilts—for investment in long-dated gilts. In 18 months it had acquired £250 million worth of 2½ per cent. Daltons. This obviously must have been in furtherance of the cheap money policy of those days. There is this precedent for manipulation of funds. The Budget as a whole has had a reasonably good response. My one regret is that we have not done sufficient for those buying a home for the first lime, whether the newly-married couple or the middle-aged couple. It was obvious that the George Street advisers, knowing that there was a borrowing requirement of £4,400 million, knew that interest rates would not come down. The chances were that they would go up and that this must affect the building society market. The Budget is always concerned with priorities. My right hon. Friend announced his VAT proposals the year before. We have had many debates about whether there should be exemptions, zero-rating and so on. At the eleventh hour my right hon. Friend decided that he could relieve the collection of VAT to the extent of £110 million through lollipops, icecream and crisps. I should have preferred it if, without increasing his borrowing requirement, my right hon. Friend could have used that £110 million relief of taxation for the benefit of the house owner, particularly the person trying to buy a house for the first time. Once someone has bought a house he is in the lifeboat when we consider the inflationary trend that we have seen in house prices. If he wants to move he will have to pay more for a new house, but at least he has the increased value of his existing house. I think that my right hon. Friend should have helped people who are trying to buy their first home instead of channelling the money into lollipops, ice-cream and crisps. I am not an adherent of giving too many subsidies to people. There are two ways in which we can help the building society movement. One method is by reducing the composite rate which at the moment stands at 24 per cent. I understand that to reduce it to 14 per cent. would cost about £110 million. That is purely coincidental. That would at least allow the building societies, because of the tax concession, to maintain their existing rates of 8¼ per cent. or 8½ per cent. or whatever they are charging in different parts of the country. The second and better way of using the £110 million would be to give an interest-free second mortgage to a person buying a house for the first time. This would alleviate the cost of paying a mortgage. I do not think that we should overemphasise the cost of a mortgage. After all, if a man is paying tax at 30 per cent. and his mortgage interest rate, for the sake of ease, is 10 per cent., he gets a 30 per cent rebate, which leaves only a 7 per cent. interest rate. The hon. Member for Oldham, West referred to tax credits. When tax credits come in presumably building society and other interest will be paid tax-free. I think that the hon. Gentleman missed the point. These tax credits go to people whether they have taxable income or not. They are positive credits. At the moment we have tax allowances. However, unless a man has an income sufficient to utilise those tax allowances it does not matter whether we increase them because it does not help the person at the lower end of the scale. In the Budget Statement my right hon. Friend referred to investment. Over the years our investment programme has been bedevilled by the fact that we keep chopping and changing. We have had a change of Government with a change of emphasis, and so on. I was interested to see that my right hon. Friend said:That is a momentous statement because that period will straddle a General Election. I had always assumed that one Government could not commit another. But I am sure that unless businessmen have the assurance that the investment incentives will not change for a fairly long period, we will not get the investment that we need. The share savings scheme is excellent, but my right hon. Friend must spell out the details more clearly. Unless we are to change our company law we cannot issue shares at a 30 per cent. discount. If shares are standing at 143, that is splendid. We can take 30 per cent. off, leaving a par value of 100. Or are the Government at last moving towards shares of no par value? We would not then have the difficulty of issuing shares at a discount. The share savings scheme must succeed because whoever takes part in it cannot lose. It is "Heads I win, tails you lose". If the shares have gone down at the end of the seven-year period, one still gets the cash back. This is an easy way of making a quick profit. This is a good thing because it enables a man after seven years, if he so wishes, to take up his shares. He presumably takes them up only if they are showing a profit. He could convert the profit to cash, pay his capital gains tax and then invest the residue in some other company or a unit trust. That would prevent all his money throughout his working life from staying in the one company in which he works, because it is a mistake for somebody who works regularly for a company to be dependent upon that company not only for his employment but also for the security of his savings. I think that there may be some trouble with this scheme, because it seems a bit unfair that if someone is working for a company he can invest in it by buying shares at a 30 per cent. discount while those who are working for other employers—I am thinking about local authorities, nationalised industries and the Civil Service—are unable to do so. This may be the thin edge of the wedge. It is splendid as a first step, but I urge the Government to consider the point that we must extend this right across the board because we cannot for very long single out one section of the community for preferential treatment. My third point concerns estate duty. The date of valuation of securities is long overdue for consideration. My one regret is that this is confined to Stock Exchange quotations. Many hon. Members, on both sides of the House, will realise that in the case of a family business, a close company or an unquoted company, one can have the same valuation trouble with regard to estates as with a quoted share. I hope that my hon. Friend the Minister will look at this, because I remind him, if he needs reminding—which I am sure he does not—that it is our philosophy to help the close company, the family business and so on, and I think that we should extend the valuation to that kind of company. I should like to echo what some of my hon. Friends have said about corporation tax with the imputation system. Our philosophy is that we should distribute profits. It is not a question of the survival of the fattest. One remembers all the debates on this issue, but the freeze and phase 2 are diametrically opposed to that philosophy. My hon. Friend should look at the small companies which are to be subjected, we assume, to a 50 per cent. rate of corporation tax rather than 40 per cent. When this was announced last year it was received with acclamation because, with 50 per cent. corporation tax but with the clawback of 30 per cent. on the distribution, it meant that a company paid less tax and it encouraged the distribution of dividends. With the freeze and phase 2, that has been put to nil. I think that my hon. Friend should look at this again because we do not want small companies, particularly family companies, to be penalised in any way. In his Budget speech, when dealing with offshore oil, my right hon. Friend said:"As a result of the changes we have already made, we now have in the United Kingdom a more generous system of national incentives for industrial investment than in any member country of the enlarged Community or in the United States … the new system of investment incentives should endure at least until the end of the EEC transitional period, that is 1st January 1978."—[OFFICIAL REPORT, 6th March 1973; Vol. 852, c. 248.]
My information is that no licences have been given unless the operation of the licence is by a company registered in this country."But under the present law profits which a non-resident enterprise makes from such operations on the Continental Shelf are not liable to tax here unless made through a branch in this country."—[OFFICIAL REPORT, 6th March 1973: Vol. 852, c. 263.]
The purpose of the clause is not to catch the firm which has a licence, because firms are required to be resident as a condition of having a licence. The clause has been put in to catch all the subsidiary and ancillary operations in the North Sea which can be carried on by non-resident companies.
I am grateful to my hon. Friend. There was some confusion about this and I willingly accept what he says. I am delighted that there will be no necessity to pursue this in Committee.
I started by saying that the Budget has had a good reception. We should look at this Budget not in isolation but in conjunction with the previous Budget. Together they have achieved a tremendous reform of taxation. There are some points which we must come back to in Committee, but the whole success of the Government's economic policy depends on whether we attain the 5 per cent. growth rate. The indications look encouraging and I hope that they will continue to be encouraging, because my right hon. Friend deserves success for what he has done for taxation.8.41 p.m.
The Government's troubles, and so the nation's troubles, stem from one source, that they are acting only in the interests of the rich. I believe the Finance Bill to be irresponsible and irrelevant for that reason. It is necessary for people to believe that the Government's actions are fair, and they do not judge them to be so.
In the first two years of office, as a sop to the conscience of some of their supporters the Government threw a few crumbs to the poor. But the Government have become too greedy for their friends, and even that mild philanthropy has been abandoned in this Bill. My hon. Friend the Member for Oldham, West (Mr. Meacher) always speaks eloquently on behalf of the very poor. But the people who have been hardest hit are the craftsmen and technicians who earn between £30 and £54 a week. That is the group that on 12th April will register their protest at the polls. The Press headlines this year described the Budget not as a give-away Budget but as a neutral Budget. But it was a give-away Budget to the rich. It was not a neutral Budget between poor and rich. Never has so much money been given to so few with so little protest. While life gets harder and harder for workers and their families, it gets easier for the rich, particularly for those who do not work for their living. I do not include the Prime Minister in that category, but I wonder what is the logic of the Prime Minister getting an additional £6 tax concession from 1st April. What justification can there be for that? How can hon. Members justify increases in the take-home pay of Ministers substantially greater than the increases being offered to manual workers? What a comment on society it is when the newspapers report Mr. Le Mare as saying that he had spent more than £100,000 on the winner of the Grand National. On seeing his horse win, he is reported as having said "I regard it as chicken feed". Many of my constituents feel guilty when they bet 50p on a horse running in the Grand National. That sums up the type of society in which we are living. No doubt the present reduction in taxation will help others to spend even more money on trying to produce winners of the Grand National. In the Sunday Express it was reported that Sir Eric Drake, the Chairman of British Petroleum, has a salary of £66,270 and, after tax, draws £26,000 a year. His comment to the reporter was "I am not rich". Presumably this would be the comment, too, of the Chairman of Imperial Chemical Industries, who similarly receives £66,000 a year. That seems to be the common rate for that type of job. As I understand it, those individuals will get a tax concession of £1,000. Their tax concession this year will be greater than the pay of the hospital workers of North Staffordshire. This is a scandalous situation. How can the Government get away with giving away £143 million in 1972 in reduced estate duty, and £300 million in 1973 mainly in order to assist the very rich? The events of the past two years have excluded the theory that incentives increase production. It has been apparent over that period that, mainly due to investment, the most substantial increases in productivity have come in the public sector rather than the private sector in many cases. Taxes ought to be increased. Mortgage interest rates are high and rising because the Government are borrowing rather than raising money from the rich. This is because of the reluctance of the Government to tackle their friends the rich through taxes. These high interest rates hit those who are paying mortgages. The solution put forward by the hon. Member for Surrey, East (Mr. William Clark) will not be helpful. It is not sufficient today to say "We shall help prospective home owners by making some allowance towards the deposit." It is existing home owners repaying mortgages, having already found the deposit, who are the hardest hit. It is those who have taken on commitments up to the limit. They are now very frightened at having to find an extra £8 a month. It is not helpful to young couples to tell them that the value of their house is increasing or that there will be a tax adjustment. All that they know, and what they fear, is that when living absolutely up to the limit they may well have to find another £8 a month. There should be subsidies to owner-occupiers repaying mortgages, but on two conditions. First, those subsidies should come from the very rich, from that £300 million and not from tax on the average wage-earner or on those earning between, for instance, £30 and £54 a week. Secondly, if there be subsidies to owner-occupiers there should also be subsidies to council house tenants, and of the same order. The biggest mistake the Government have made has been to abolish subsidies in the housing and food sectors. That was done in a calculated way. In order to give money to the rich these subsidies have been abolished at a stroke. The Government have stopped taking from the rich and have started taking from the less-well-off. Bacon is to increase in price, and many of my constituents will be eating egg on toast rather than bacon and egg because of the Government's deliberate policy of abolishing £11 million worth of subsidies. It is intolerable, following the increase in the price of school meals last year, and at a time when the Government are asking for voluntary agreement on wages, that when workpeople went to work today they found that their canteen meals had been increased in price. This is a psychological blunder. This Budget give-away to the rich is at the expense of the average family. The increases in pensions and other benefits have been inadequate, but it can clearly be shown that their cost is to be met not by the rich through the Exchequer but by increased contributions, and the biggest increase in contributions falls on those earning between £30 and £54 a week. Increased pensions should not be financed in this way but through the Exchequer taxing the rich. I agree with my hon. Friend the Member for Oldham, West that the Bill is deficient because it makes no provision for increased family allowances. Nor does it help the local authorities enough. My neighbours in Stoke-on-Trent are suffering very much because of massive increases in rents and rates. The increase in rates will have other unfortunate consequences. The chronically sick and disabled persons legislation has not been properly implemented by local authorities in the last two years but because of the present pressure on their finances local authorities will find it even more difficult to implement it in the next year. Incidentally, the Bill will disappoint the many thousands of widows and the organisations which have been making recommendations to the Treasury in the last year. The TUC made it clear in its representations that we need not only a levelling of incomes—and that is certainly needed—but a redistribution of wealth, and its recommendation of an annual wealth tax on those with more than £20,000 a year is welcome to us. The TUC calculates that a progressive wealth tax rising to a maximum rate of 3½ per cent. on wealth holdings of over £½ million would bring in about £300 millon a year. The poor could spend that money. It could be used for the benefit of the chronically sick and disabled. The top 10 per cent. of those who own 75 per cent. of the nation's wealth would not miss some of that money going to the poorest sections. What do the Government intend to do about the massive profits being earned by the television companies following the increase in advertising which has arisen out of the derestriction of hours? It is clear that the companies are getting a bonus rather greater than even they expected. What is to happen about this bonanza? Finally, I beg the Government not to give in to the pressure from either side to cut public sector borrowing. If that were to be done, and if investment were to be cut in the nationalised industries, the Government would have a much greater problem to face in reducing unemployment. I condemn the Bill as irrelevant and irresponsible.8.55 p.m.
I am grateful to the hon. Member for Newcastle-under-Lyme (Mr. Golding) for allowing me a few minutes at the end of the debate. In appreciation of the hon. Gentleman's generosity I shall not take up and demolish any of the points he made.
In my speech in the debate on the Budget Statement I welcomed my right hon. Friend's continuation of the growth strategy. This Bill, in part, seeks to implement that strategy. I make no apology for returning to the subject of growth though I want to develop my argument in a slightly different way this evening. I do not apologise for talking about growth again, because, despite what my hon. Friend the Member for Oswestry (Mr. Biffen) said, this is the most important single aim of the Government in the economic or any other sphere. Without growth there is precious little else any Government can do. I wish that some of my right hon. and hon. Friends would sometimes appreciate that, unless there is growth, people's living standards and social and public services cannot be improved. However, growth on its own is not sufficient. Obviously there are environmental factors to be taken into account. But in the purely economic sphere, not only do we need growth but we need to operate the economy at a high level of activity, so that there is high employment, low unemployment and full utilisation of capital equipment and plant. Growth and a high level of activity are interdependent. From a low level of activity such as we have at present and as we had 18 months ago, we need first to take up the slack and to get the economy operating at a higher level of activity. Then, to get a high rate of growth over a long period, we need to keep the economy operating at a high level of activity. It is important to recognise this interdependence. I do not believe that one is possible without the other. I do not believe that a continuous high growth rate is possible unless the economy, is being operated at a very high level of activity. That is one reason why the Government have adopted this high growth strategy. I hope that they will move to a position where, as a permanent policy and strategy, they operate the economy at a high level of activity. It is alarming that after a mere 18 months of expansion, following six years of very little expansion, voices are already crying out, and not alas crying out in the wilderness, for a stop to all growth. The money supply school in particular, with its strange and unrealistic views, is clamouring for this. It would be disastrous for the economy if my right hon. Friend were to pay the slightest attention to that clamour. After a mere 18 months of expansion it would be a disaster to try to stop that expansion. It is not enough to expand for 18 months. It is not even enough to expand for another 18 months, as my right hon. Friend has pledged himself to do. If we are to get an economy which is competitive with the best in the world, we must determine to expand at 5 per cent. a year for five years and set that as our highest priority, otherwise it will be impossible ever to get things right again. I can never see investment taking off properly unless this happens. If one looks at Britain's post-war history, one finds that it has been a story of stop-go. The periods of "stop" have become longer each time. The deflation has got deeper. The sag in investment has been greater. Investment in the last few years has, if my memory serves me right, been lower than it was in the early 1960s, before the credit squeeze of 1961–62. If we have another stop now, the effects on investment—investment which has not even taken off properly this time—will be quite disastrous to this country's competitive position. I was a great supporter of my right hon. Friend the Member for Barnet (Mr. Maudling) in his great bid for growth in the mid-1960s. It was a disaster that that bid came to an end because of the change of Government. I hope that we shall put this right this time and that my right hon. Friend the Chancellor will attempt to achieve what the electoral change in 1964 prevented. If we can run the economy in that way, we shall have fuller employment, higher living standards and better social services. This is the sort of economy that we should aim at, and this is the sort of policy which I hope my right hon. Friend intends to pursue so long as he remains Chancellor of the Exchequer.9.1 p.m.
I would be disposed to say to the hon. Member for Leek (Mr. Knox) would that life were so simple.
I start by putting to the Financial Secretary a minor point but one of which he and I are strongly seized. For goodness sake, will somebody on the Government Front Bench say something to my hon. Friend the Member for West Lothian (Mr. Dalyell) about this land and this oil to which he keeps referring? We have to sleep at nights, and I shall get no peace until somebody makes some sort of a statement. Will somebody write a letter or, better still, actually do something, but at all events put my hon. Friend's mind at rest? Otherwise none of our lives will be worth living in the next fortnight. I must admit that I do not feel in a particularly partisan mood, which is rather unfortunate as the amendment that we have tabled calls for a rejection of the Second Reading on the ground of its irrelevance. I agreed very strongly with the hon. Member for Scarborough and Whitby (Mr. Michael Shaw) when he said that basically we were all in this together and that there were great issues at stake for the British people. I think there are. I want to follow what the hon. Member for Oswestry (Mr. Biffen) said, that debates of this kind fall into two parts— first, the tax men; and my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett), the Shadow Chief Secretary, has done a splendid job in that respect. Incidentally, the amount of money that he makes from avoidance is not as great as is apparently supposed by the hon. and learned Member for Dover (Mr. Peter Rees). I want to concentrate on the economic aspects of this debate. I want to talk about things which greatly alarm me. I think the stakes for this country are high. Indeed, they are higher than many people suppose. We cannot afford another failure. I mean that the system cannot afford another failure. If hon. Members opposite think that the Labour Party wants to see the Government strategy go wrong and wants to see the maximum amount of chaos and a massive balance-of-payments deficit, they are quite wrong. Even if there were not a sense of patriotism that unites us all in this House, there would be the crudest and simplest political reasons for not wanting that state of affairs. There is no basic evidence that general elections are determined by the level of economic activity. There is a great deal of evidence that the more sour and poisoned the mood of this country, the harder it is for the Labour Party to win an election and the more difficult it is for a Labour Government to do the kind of things that they want. Therefore, I worry about the viability of the system itself. We have, perhaps, become so used to failure that we do not always realise how short people's patience has become with all of us. We had better try to get things right this time. I speak in that sense. I turn, first, to the whole business of tax reform. The more I hear about it, the more I realise that what lies at the root of it is linguistics. What matters to the ordinary man, or, for that matter, the extraordinary man, is his disposable post-tax income. It is illiterate to imagine that the only thing that counts is tax rates. It is not the only thing that counts. It may not even be one of the most important things that count. Obviously, the level of prices matters enormously, and most important of all is what the original income was. Obviously, that has a good deal to do with what a man's living standards will be after he has paid tax. Therefore, although I like him very much, I wish that the Chancellor would sometimes sing us some other tune and not always harp on the amount of money that has been given back in taxes. We have always suffered in our consideration of the country's economic affairs from a kind of naive budgetary arithmetic, according to which, if one can manage to exact a charge from the people without calling it a tax, the mere exercise in linguistics somehow demonstrates that under one's own Government great progress is being made. I give just one example, though without developing it in any way—the whole business of agricultural levies, which the Conservative Party, we are told, would have introduced even if we had not gone into the Common Market. This is pure accountancy. It gives no one greater disposable wealth. It simply means that the Government knock off a particular subsidy, and people have to pay it in increased prices. We had the lunatic spectacle of the Minister of Agriculture actually asking our foreign suppliers to put prices up because this would assist the Treasury in the sort of sums which it does to prove the way things are going. The hon. Member for Cornwall, North (Mr. Pardoe) is right, therefore, when he accuses me of being somewhat suspicious not only of the way tax figures are manipulated but of the whole idea of tax reforms. Although I am strongly in favour of reform, I am not in favour of tacking that word on to everything one chooses to attach it to when what is really meant is not reform but innovation. On this point at least, I incline to the view of the hon. Member for Surrey, East (Mr. William Clark): I think that this country needs, among other things, a period of stability in terms of its tax laws. I am not all that keen—after all, I was not born to be on the Front Bench—on my party going in for a lot of innovatory changes when we next take office. I am all for some dramatic redistribution, but to fiddle about with the way we do certain things does not seem to me necessarily to merit the name of reform. When the Chief Secretary says that no one on the Opposition Front Bench has supported purchase tax or SET, he knows that that is not right. He challenged me directly in Committee, and I said then— I repeat it now—that it was nonsense to introduce value added tax at this time. In every sense, in my view, purchase tax and SET were preferable—easier of collection, and basically much less inflationary. We have got VAT for a reason which the Chancellor and the Treasury Bench seldom discuss. Their whole so-called reform policy in terms of taxation is completely "out of sync." with their demand management. They never did expect this rate of inflation. They never thought we should have problems of this kind. They never knew they would have a borrowing requirement at the present rate, and they never realised—though, heaven knows, they should have done—the effect it would have on interest rates. The so-called tax reforms have just ground on while the economic management side of what the Chancellor has been doing has, to put it very mildly, hardly been successful. I believe that we could well be in the presence of a major disaster. I take a very gloomy view of our balance of payments prospects. It is all very well for the hon. and learned Member for Dover, who has some extraordinary ideas on tax matters and should acquaint himself with the difference between the management rate and the normal rate, quickly to calculate how, by buying gilts and various other devices, in the end the Government will discover that their borrowing requirement virtually melts away, presumably without having any particularly inflationary effect. I would be surprised if the Chancellor held that view. I think he must be extremely worried at the turn-round in the balance of payments position and must know that there is no guarantee that the situation in the medium term will be improved in the slightest. It is a serious worry for the country that that should be so. Nor am I greatly impressed by the growth rate. I agree with the hon. Member for Oswestry. How the growth rate is quantified depends on the particular yardstick that is selected to measure it, and as all the measurements are inaccurate anyway it can never be certain precisely what happened at a particular time until a few years after. One of the troubles with all Treasuries is that they speak with great authority and exactitude about matters of which they know precious little. None of us knows. We do not have refinement in the statistics or refinement in the analysis to be able to make predictions in the way they sometimes are made. Sometimes I despair as when the other day I noticed that the Bank of England had announced that it could no longer interpret its own monetary statistics. If that be the case I think claims about growth rate must be taken with a certain caution. Although I believe in growth, and, like my hon. Friend the Member for Heywood and Royton and my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), I was a heretic on devaluation and on growth, I am not a manic growth man. I do not believe that growth is the only answer to all our problems. I disagree with the hon. Member for Leek on that point. He simply does not take sufficient account of the sort of strain that this growth figure will produce on available capacity, or take sufficient account—this is probably the most crucial feature—of what is the point of growth at this rate, if the only effect is to suck in imports in such quantity that the growth figure in the end has to be abandoned. That is the basic problem. But without going into all the boring stuff about export-led and consumption-led booms, the merest glance at the figures demonstrates what happened. We have been sucking imports in at an unacceptably high rate. If that is to go on the growth will obviously be sustained only for a relatively short period even if—I think that must be about my fifth proviso on growth—there is investment to support it. Unless there is investment to support it there will be no long-term sustained growth. What evidence is there that the investment will be achieved? I hope it will, because I do not want to see it go wrong again, but there must be the gravest doubt. Look at the rates at which businessmen have to borrow money and the amount of profit that they can take. One of my hon. Friends, I think my hon. Friend the Member for Oldham, West (Mr. Meacher)—I was so entranced at what he had to say about the poor that I did not take a note about this point— said there had been a drop year by year in the profits made in manufacturing industry. That is a serious matter. Why should a man go out and borrow at current rates of interest in order to invest when he has a falling profit to look back on for the last three years, apart from anything the Government's counter-inflationary policy might do to his profits. Why should he invest? If I were giving advice to a man in that situation I would have to be cautious in investing his money. We have no guarantee that we shall have the investment to sustain the growth. The House should not forget one other frightening paradox. If someone borrowed the money at present rates to invest, the thing he would pray for most would be that the inflation would continue. He would not want it to stop, because his estimate of monetary profit would depend upon an inflationary assessment that was bound to be high, otherwise he would not invest the money. The House must face the issue frankly. We are getting into the incredibly dangerous situation in which inflation has become so serious that the cure can barely be contemplated. We are so hooked on the drug that the thought of having to take it away frightens all of us. I confess that it frightens me. I have no magic solutions that have not occurred to the Government. I disagree with a great deal that they have done. In many ways they have funded the inflation themselves. I I do not pretend that it is an easy problem. It is a grave problem, and the graver it becomes the less likely it is that we shall cure it. The idea that there will be a great national consensus for putting things right is false. Too many people will have a vested interest in things continuing as they are. That is why I worry a little about the kind of things the hon. Member for Leek says and about the simple answer that somehow growth will pull us out of all this. The Financial Secretary and the Chief Secretary and I have established by now our rabid partisanship, upstairs in Committee and elsewhere. We have quoted every kind of argument at each other for most of the past year it seems, given the length of last year's Finance Bill and our consideration of the Counter-Inflation Bill. I should like to digress for a few minutes to take a quick look at our recent economic history. Here, if anywhere, lies the key. I am not sure what it is, but at least I have fairly clear in mind what are the factors that we should be trying to analyse. It could be, and I often think that it is, that the whole of the nineteenth century was, in terms of our longer national history, rather freakish and that we may well be the kind of people who are basically more skilled and fitted for selling services rather than for selling industrial goods. That used to be true before the nineteenth century and it may well be true again. I know it is a fairly extraordinary idea that the home of the Industrial Revolution and the country in which all those tremendous developments took place somehow cannot hold up its head with its industrial betters. I should never dream of saying that, but I do say that we must face the fact that long before the Labour Party was even founded, long before John Maynard Keynes ever wrote a book, long before the Tory Party evolved in its modern form, we were not doing well. We probably have not been doing well ever since 1870. Plainly there must be a fundamental reason why that is so. Possibly we should look very carefully at the idea that we are fundamentally and irrevocably an industrial country well suited to the making of engineering products. We should perhaps have a careful look at the way in which we deploy our available resources, both public and private. Secondly, I do not think that we can get away from the loss, if we want so to describe it, or the transformation, as I would say, of the old Empire. I do not think that we ever fully realised just how important the Empire was as a trading outlet. More and more now we see the kind of comfortable market we enjoyed there that was so vital to us and the loss of which we find so difficult to make up. I do not intend to be a Jonah. I do not say that we cannot make it up, but I do say that we have had taken away from us a great asset and that that has not helped our basic structural problems. Even our victories have been our defeats. We sweated blood to win the war, and by doing so we saved mankind from what would have been the most abysmal kind of tyranny. However, by winning the war we not only impoverished ourselves but we did not have the benefit of having all our obsolete equipment wiped out. That sounds paradoxical but it is true. Once a country's basic capital equipment is wiped out it has to tighten its belt for a few years until it is replaced. It is, of course, replaced with new equipment. We struggled on until the last 10 years, and in some cases even within the last five years, with equipment that was not as good as that used by our competitors. I shall not run our country down, but I could name at least two places abroad where I have been where I have had the embarrassment of being shown British and foreign equipment side by side. The performance of the equipment was palpably different, and to our disadvantage. It is not that we do not have inventive skills. I should never believe that of us. The explanation lies in the equipment which we have continued to use. There are few countries in the world where class feeling is stronger and where there is a greater division between classes than in Britain. It is a puzzling phenomenon because there are few countries in the world with a stronger sense of civil liberty and where, if I may say so without appearing to be flatteringly cringing, a stronger sense of what Clem Attlee described as the ordinary decency of ordinary men is more apparent. We have all that, yet somehow we have a nagging irremovable class dislike of each other. That dislike comes out again and again in all sorts of ways. It came out in this debate when the hon. Member for Norfolk, North (Mr. Ralph Howell) spoke about the amount of money given to the unemployed as short-term benefit. We love so much to blind each other. It is either the fault of the upper classes, who did not know how to govern us properly and spent all their time on the racing fields, or else it is the fault of the trade unions which lack all patriotism and which try to bleed money out of an impoverished nation. It could be, but of course it is not, anybody's fault that there are endemic factors—and serious, fundamental factors —which apply to all classes and which are not in this instance matters of redistribution, that are responsible for many of our problems. Our constant desire to pick upon each other as the culprits does nothing but envenom class feeling. None of the Government's trade union legislation has helped one iota. All it has done is to reduce the power of moderates within the trade union movement. It has done nothing to solve the problems that it was supposed to solve. It is miraculous that there is any prospect of trade union co-operation with the Government, although that is essential. The trade unions must co-operate with any Government of any political colour if they possibly can. It is up to the Government to set such terms and conditions as will make that co-operation possible. A Government in a democracy, and especially a British Government in a British democracy, have to take some notice of both organised labour and investors. One may argue that that is unfair and that every man is equal. In philosophical terms I agree with that argument. However, investors and organised labour are crucial in any economic strategy. The Government must make it easy for the unions and approach them with arrangements that will work. That is why the Budget is irrelevant. Not only does it do nothing for the poor —the poorer sections of our community will not be better off in terms of average earnings. Poverty is a comparative concept; people feel poor in comparison with other people and do not compare themselves with an ideal standard. Much worse than all that is the position of the man on average earnings. Almost never does he benefit from anything that the Government do. His income is nearly always above the level that qualifies him for the range of benefits going, and the only advantages he gets are from marginal changes in his tax rate. I have said that tax rates are not the only crucial factor in a man's disposable income. In addition, prices have risen on him and so has his rent—by the Government's own actions. All these things have fallen upon the average worker. Also in many cases, the more able a man is the more militant he is inclined to be, and the more able of the industrial working class feel rightly or wrongly—I hope wrongly—that they are under some measure of threat against them in their trade union activity, their industrial position and their traditional bargaining rights. It is all very well to say that they ought to change their habits and traditions, but that is not so easy for any of us as individuals or as people with group interests. This is a tradition-ridden country, and I have not yet heard the Prime Minister or the Chancellor of the Exchequer say that they regard a managed compulsory prices and income policy as a permanency. Even they say that, of course, we want to get back to a voluntary arrangement as soon as possible. Let them think of the position of a trade union leader. If such pressures operate on the Government, let them think a little more about the pressures which operate on him when he has to go to his members to try to persuade them to accept unpalatable decisions in terms of their own monetary reward. If we could all reproach each other a little less and show a greater sympathy with the problems we all face in large groups, maybe at least marginally the country's position would be improved. Plainly, something has to bend somewhere. Plainly, somebody has to start the round of sacrifice. Who should it be? My constituency was once represented by Joseph Chamberlain, a very great man even when he became a Tory—I will admit that. He was an even greater man when he was a Liberal. Those, of course, were the days of the capitalist Liberal Party and not of the post-capitalist Liberal Party. Chamberlain said something which I think is absolutely crucial. People did not like the wording and I myself am not keen on one word in it, but the sentiment is vital. He asked this House: "What ransom will capital pay for the security that it enjoys?" That is really the vital question. Some of us get more out of this country than others do. Do not let us go round stirring up every available piece of envy but admit the fact that our stake in the country's stability is the greater and that therefore, if there are to be sacrifices, they should come from us. I have no doubt in my mind that economically this is what is basically wrong with the Bill and the Government's whole budgetary strategy. It does not place the burden of sacrifice psychologically where it should be placed. It does not ask the right people to move into the front line first. Some of these things we are stuck with have, I suppose, to go on. I am opposed to value added tax but we have it now and there is nothing much we can do about it except vary the weight and burden. We shall see. But in terms of these constant attempts to move the burden from the income tax payers on to the ordinary people the process will at least be reversible. I hope that if the Government are to have a major borrowing requirement which is bound to be inflationary in consequence, they will use the money to improve the infrastructure of society and do something for the masses of ordinary people who can never be in any substantial sense property owners. That is the ransom I want property to pay. I believe that if it paid that ransom we might be astonished to see how dramatically the climate would be improved.9.30 p.m.
During the course of the debate there have been many remarkable speeches. They have generally been typical of the hon. Members who made them.
That is true particularly of the speech which we have just heard from the hon. Member for Birmingham, All Saints (Mr. Brian Walden). I believe that I carry the entire House with me in saying that none of us has ever heard him make a bad speech or one which was not immensely enjoyable and on occasion contained a high degree of wisdom. That being so, I have some difficulty in achieving a balance between the various speeches which have been made because, as they have been so typical of the hon. Members who made them, they have been extremely diverse. I should have some problems if I were, on the one hand, to try to follow the hon. Member for All Saints and, on the other hand, to follow the hon. Member for West Lothian (Mr. Dalyell), my hon. Friends the Members for Oswestry (Mr. Biffen) and Norfolk, North (Mr. Ralph Howell) or the hon. Member for Oldham, West (Mr. Meacher). However, I think that I should seek to answer many of the points which have been made. My hon. Friend the Member for Oswestry said that it was usual for Finance Bill debates to divide between those who were determined to talk about the Bill and every detail of its clauses and those who were more concerned with talking about the general economic situation. This debate has been no exception, and I shall seek to pick up the main threads of the discussion which has taken place. I do not wish to dissent from the view expressed by the hon. Member for All Saints that it is important to concentrate on what is happening to real disposable income per head. Indeed, I would go further. I agree that there is a real danger that inflationary expectations become a drug, that inflationary interests may become a drug, and that it is difficult to withdraw them. But that is what the Government are determined to do. It is for that reason that we have engaged in the standstill and are now in phase 2 of the Government's economic policy. We are determined to break those inflationary expectations. Before coming to those wider questions I should like to take up some of the points which have been made. The Finance Bill, while shorter than its two predecessors—there may be hon. Members on both sides of the House who welcome this—is the third in a trilogy. It is the third in a series of Finance Bills which since 1970 have transformed our economic system.Does the hon. Gentleman mean that there will not be any more?
No. I was referring to it in the context of the reforms which we have made regarding personal, corporate and indirect taxation. As my right hon. Friend made clear in his Budget speech, the whole question of the tax credit system is before us. We believe that that, too, will make a radical change and improvement in our overall fiscal and social service system.
It has been usual for the hon. Member for All Saints to regale us with quotations from Chamberlain, on the one hand, and Gladstone, on the other. I am puzzled why many hon. Members have taken to saying that my right hon. Friend's reforms are the most important and widespread since Gladstone's time. It may be that my right hon. Friend's speeches are three or four times shorter than those made by Gladstone. None the less, the reforms which have taken place over the last three years have been far more sweeping than those which were made in the nineteenth century. The Finance Bill deserves to be taken in the context of the previous two, because the three together form a package. It is right that fiscal reform of itself cannot solve all our economic problems. I do not think that any of us on this side of the House would argue that that is the case. We cannot cure inflation or sustain economic growth just by fiscal reform. What I am sure is true is that fiscal reform can encourage people to work harder and management to operate more efficiently. It can reduce discrimination and remove distortion in production and consumer choice, which, if it is not removed, can reduce welfare. It can, moreover, encourage worthwhile investment. The question of economic growth has been raised by many hon. Members and I hope to say a word about that later. This Bill and its two predecessors reform taxation in a way which will enable us to achieve those objectives more easily and with greater facility. I do not accept for one moment what the hon. Member for All Saints said; namely, that the Bill is irrelevant or irresponsible in that context. In answer to the point by the hon. Member for Heywood and Royton (Mr. Joel Barnett), I am sure it would be wrong for us to be deterred from these reforms because of short-term considerations. If we were we would never reform the tax system. Goodness knows, while some of the measures have not long been introduced they were none the less greatly overdue. The hon. Member for All Saints made a passionate appeal for me to reply to the points made by his hon. Friend the Member for West Lothian, who pointed out that he raised those same points in the debate last Friday and on other occasions. My hon. Friend the Minister of State has replied to the hon. Member. I have listened carefully to much of what he had to say today. We will study it with care because as of now my hon. Friend and I are somewhat puzzled as to precisely what interest the Treasury as against the Scottish Office or the Home Office has in these matters. I give the undertaking that we will go into this, and if the hon. Member is not satisfied perhaps he will take the matter up again. We have known each other long enough for him to take that assurance. I hope that he will appreciate why in the time available I cannot go into the extremely complex matters he has raised. I trust that with that assurance the sleep of the hon. Member for All Saints and his hon. Friends will not be disturbed. I hope that I shall eventually manage to put the mind of the hon. Member for West Lothian at rest.Will the hon. Gentleman undertake that a Treasury team from Great George Street will visit Scotland to discuss these matters?
I have sought to indicate to the hon. Member that we are not yet convinced that there is any Treasury interest in this matter. I cannot give that assurance. We will read carefully what he has said, and if he wishes to discuss it further we shall be happy to do so.
My hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) welcomed Clause 37, which is concerned with the valuation of shares for estate duty. A number of points were raised on the question of unquoted companies by my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne). We will return to a number of these points in Committee, and it would be better to defer substantive and prolonged discussion until then. Since tradition demands it, I will say a word about the staffing implications of the Bill, because Finance Bills do not have explanatory memoranda. Our understanding is that the application of the investment income surcharge to the income of discretionary trusts, the share savings scheme, the transitional relief for charities in respect of net covenants and the proposals relating to the date of valuation for estate duty will together require a small addition to the staff of the Inland Revenue amounting to about 150 in 1973–74 and 300 in 1974–75. If we take the overall effect of the Government's tax reform package, including the change to VAT, unification and in the longer term the tax credit scheme, there will be a substantial saving in staff. [Interruption.] I am seeking to concentrate on the points made in debate rather than on the points which tradition requires me to make because there is no explanatory memorandum.May we have it clear that the Financial Secretary was not trying to mislead the House but was talking about a reduction of staff if and when the tax credit system is on the statute book and comes into force in 1979?
I was not trying to mislead the House; I was trying not to bore the House. Hon. Members are aware of the figures, and I do not think that there is any danger that they will be misled.
I was about to mention unified income tax. In four days' time income tax and surtax will be replaced by the single unified income tax. The single tax with one set of rules will be administered by one office and will replace two taxes and two sets of rules and two offices, and the graduation of rates will be smoother and the marginal rates of most payers will be the basic rate. It will have the great advantage that, without the former complex calculations of standard rate and so on, people will have a fairly clear idea of what their marginal tax rate is. I come now to questions about value added tax. I wish to deal in some detail with the comments made during the debate, I have said that our prime concern is to eliminate discrimination and distortion in the tax system. In the same way as that has motivated us in the systems of personal and corporate taxation, so it has in the change from SET and purchase tax to value added tax. In that respect we should take at least a slight backward glance at the departure of selective employment tax and purchase tax. I think I am right in saying that in Committee upstairs last year the relevant clauses went through on the nod, or virtually on the nod. That was not uninteresting. Opposition Members on that occasion were remarkably reluctant to advance arguments in favour of purchase tax and SET. I have listened with interest to their significantly different approach this afternoon. It would be a bad Treasury Minister who would filibuster his own Bill, and I, therefore, refrained from comment last year. None the less, the change will be of great importance, and I should like to comment on it. We are getting rid of SET with all its absurdities and anomalies. In an untypical inconsistency, the hon. Member for All Saints argued for retaining SET, which discriminates against the service industries, and in the latter part of his speech he said that a secular trend towards service industries would be a good thing. It is not often that one catches the hon. Member in an inconsistency in one of his speeches.I hate to be called inconsistent, and there was nothing inconsistent about that. Those industries that can best develop must pay their fair tax whack. What is wrong with that?
Because SET was specifically designed to discriminate against the service industries, which the Labour Government regarded as in some way wicked and immoral. The hon. Gentleman is perfectly aware of that.
It is worth recalling that in 1970 under the Labour Government purchase tax was charged at four rates—55 per cent., 36·2/3 per cent., 22 per cent. and 13¾ per cent. It was a highly discriminatory tax. In substitution for those two taxes we have imposed a tax at a single positive rate and without these discriminations. With purchase tax the discrimination was absurd, and there were anomalies, such as electric light bulbs and paraffin heaters being taxed at a discriminatorily high rate. Apart from those main areas that are being relieved of tax, value added tax is being applied without discrimination at the basic rate of 10 per cent. It is the Government's view that after someone has earned his income and paid personal tax on it, it is not right for the Government to say in minute detail what items are in some sense luxuries and to be discriminated against and what items should be taxed at a lower or zero rate. That produced the most extraordinary anomalies. We have concentrated on relief of food in shops, on fuel such as coal, electricity and gas, on bus and train fares, on housing, rent and rates, and on children's clothes and shoes. That being so, I share the view of the hon. Member for Cornwall, North (Mr. Pardoe) who said that he was mystified about why Opposition Members believe that the tax is regressive. We believe that the reliefs which have been given are appropriate and that a single, positive rate of tax above that level is the right form of tax for VAT. There are other advantages to traders, which my hon. Friend the Chief Secretary spelled out in his speech this afternoon, but as VAT came in only yesterday afternoon there are some particular points which I think it would be appropriate for me to make. The first deals with that which is dear to the heart of the hon. Member for Heywood and Royton, namely, the number of traders who have registered for VAT. By the time VAT came into operation yesterday, the initial take-on of registration was well up to schedule and more than 1 million sets of traders' particulars had been put on to the computer. The number of taxable persons who had been issued with VAT registration numbers was considerably higher than that, since those whose applications for registration show that they are registrable are immediately advised of their registration number. Traders were thus equipped with all that was necessary for the handling of VAT, whether or not they had a formal certificate. The hon. Gentleman will be glad to know that we believe that the registrations—though no doubt some will come in belatedly—are satisfactory. It is clear that the working figure of 1½ million which we quoted in earlier answers was too high as a measure of the initial take-on. The main reason for that is that whereas the 1972 estimate allowed for rather more than 200,000 voluntary registrations among those who had no legal obligation to register, only a small proportion of that number has decided to do so, though more may decide in future. It is also the case that group registration has tended to depress the numerical total. We believe that the tax has come in on a firm basis and that it has been introduced in a satisfactory way. I should like to say a word or two further on the question of prices. Quite understandably many people are concerned about this, and they quote the experience of decimalisation as a basis for their worries. In this context I think it is worth while spelling out what it is the consumer needs to know, because a number of newspapers have concentrated a great deal upon the trader aspects rather than on the consumer aspects. The first thing that consumers need to to know is that we are not merely introducing VAT but that we are also abolishing purchase tax and SET, and that is why there are variations in tax burdens and variations in prices. That is why some prices have gone up, some have gone down and some will remain the same. The second point which it is important for consumers to understand is that VAT is not a cascade tax or, as one hears it called in the constituencies, an accumulator. The 10 per cent. is not charged at each level thereby making the end result a tax of 100 per cent. or so. We in the House are familiar with that point but it has not yet been entirely grasped by the public at large. It is an important one, and that is why we decided to publish in a series of advertisements a list of the changes that shoppers could expect in more than 150 items. Those advertisements have, I believe, been widely welcomed. In this respect, as in many other aspects of VAT, we have done everything possible to base our work on consultation with trade, consumer and other interests. That is in marked contrast with the situation under the previous Government when SET was produced without notice or consultation. There are two matters which should be stressed in this context, apart from the publication of the advertisements and the list of changes in the Press. First, the position is not the same as it was under decimalisation. Whatever may be the truth about the effect of decimalisation upon prices, the position now is quite different. The changeover to VAT is taking place during April while the standstill is in force. That means that shoppers can see exactly what changes, if any, result from the transfer from purchase tax and SET to VAT. Under the recent legislation price increases are not allowed, apart from exceptions specifically authorised by the Government because of unavoidable increases in costs—for example, of imported food or raw materials. Unlike the situation under decimalisation, there is strict price control to ensure that price changes up or down are fair. The first stage of the price standstill finishes at the end of April but, again unlike decimalisation, stringent controls will continue beyond that time under the counter-inflationary legislation. Over all, the housewife will get a fair deal in the measures we have put forward which, as my right hon. Friend the Chancellor said in an intervention, are quite consistent with the suggestions of the TUC. Opposition Members have not suggested any radical improvement which could be made, and I believe that our proposals will prove to be satisfactory. Clause 42 of the Bill makes special provision in respect of the loss of income to charities as a result of the new system of unified income tax. My right hon. Friend has also put forward important proposals for charity gift shops. It has not been widely recognised that for VAT purposes the supply by a charity of goods or services at less than cost for the relief of distress is not regarded as supply in the course of business within the meaning of the Finance Act 1972. Such supplies will therefore be regarded as outside the scope of the tax. This interpretation will benefit very many charities which provide goods and services to the distressed at uneconomic charges, for example by subsidising accommodation in hostels. Several hon. Members have referred to the broader economic situation. My hon. Friend the Member for Oswestry quoted at some length from the Central Statistical Office Press statement on the national income White Paper. He said that there were big variations this year in the estimates made of national income by the three normal methods. He argued from that a number of different propositions. He argued that, because we had measures which were necessarily imperfect, we could not tell whether or not we were growing at a satisfactory rate. The statistics that we have are not perfect. None the less, the available data are such that we are achieving a very fast rate of economic growth at present. I find his argument a little strange. He seemed to be arguing that because the statistics were bad one ought not to seek to achieve a fast rate of economic growth. I said that everyone made typical speeches today. My hon. Friend's view was immediately repudiated by my hon. Friend the Member for Leek (Mr. Knox). But I found it very difficult to understand the argument of my hon. Friend the Member for Oswestry that economic growth is not important. It is only through achieving a fast rate of economic growth that we can give confidence to the country, as my hon. Friend the Member for Scarborough and Whitby pointed out, and achieve a fast rate of investment, which, if we are to sustain economic growth over a long period, is absolutely essential. The figures for money supply, which have been giving cause for concern to a number of my hon. Friends, must be looked at in the context of the very substantial unprecedented structural changes which have been taking place in banking following the welcome increase in competition made possible by the reforms of 1971. The measure of M3, at all events, has been proving a very unreliable guide indeed to the underlying trend. I take it that my hon. Friend the Member for Oswestry believes that we are already in a situation where we have a danger of demand-pull inflation being added to cost-push inflation. I do not share that view, as I indicated during the Budget debate. As my right hon. Friend the Chancellor said on 12th March, we do not believe that we need to rein back the rate of economic growth which we are planning for in the Budget. The general level of economic activity has been rising fast. For example, in the last quarter of 1972 the volume of retail sales and consumer expenditure as a whole was more than 7 per cent. higher than it was a year earlier, and production is also running very fast. But, given the level of unemployment at present, and given the indicators concerning excess capacity, it would be wrong to do other than to have a neutral Budget at present.
Division No. 94.]
| AYES
| [10.0 p.m.
|
| Abse, Leo | Davis, Terry (Bromsgrove) | Heffer, Eric S. |
| Allaun, Frank (Salford, E.) | Deakins, Eric | Horam, John |
| Archer, Peter (Rowley Regis) | Dell, Rt. Hn. Edmund | Houghton, Rt. Hn. Douglas |
| Armstrong, Ernest | Dempsey, James | Howell, Denis (Small Heath) |
| Ashton, Joe | Doig, Peter | Huckfield, Leslie |
| Atkinson, Norman | Dormand, J. D. | Hughes, Rt. Hn. Cledwyn (Anglesey) |
| Barnett, Guy (Greenwich) | Douglas, Dick (Stirlingshire, E.) | Hughes, Robert (Aberdeen, N.) |
| Barnett, Joel (Heywood and Royton) | Douglas-Mann, Bruce | Hughes, Roy (Newport) |
| Bennett, James (Glasgow, Bridgeton) | Driberg, Tom | Hunter, Adam |
| Bidwell, Sydney | Duffy, A. E. P. | Irvine, Rt. Hn. Sir Arthur (Edge Hill) |
| Bishop, E. S. | Dunn, James A. | Janner, Greville |
| Blenkinsop, Arthur | Edelman, Maurice | Jay, Rt. Hn. Douglas |
| Booth, Albert | Edwards, Robert (Bilston) | Jenkins, Rt. Hn. Roy (Stechford) |
| Bottomley, Rt. Hn. Arthur | Ewing, Harry | John, Brynmor |
| Boyden, James (Bishop Auckland) | Faulds, Andrew | Johnson, Carol (Lewisham, S.) |
| Brown, Robert C. (N'c'tle-u-Tyne,W.) | Fernyhough, Rt. Hn. E. | Johnson, James (K'ston-on-HulI, W.) |
| Brown, Hugh D. (G'gow, Provan) | Fitch, Alan (Wigan) | Johnson, Walter (Derby, S.) |
| Brown, Ronald (Shoreditch & F'bury) | Fletcher, Ted (Darlington) | Jones, Barry (Flint, E.) |
| Buchan, Norman | Foot, Michael | Jones, Dan (Burnley) |
| Campbell, I. (Dunbartonshire, W.) | Ford, Ben | Jones,Rt. Hn. Sir Elwyn(W.Ham,S.) |
| Castle, Rt. Hn. Barbara | Freeson, Reginald | Jones, Gwynoro (Carmarthen) |
| Clark, David (Colne Valley) | Galpern, Sir Myer | Jones, T.Alec(Rhondda, W.) |
| Cocks Michael (Bristol S) | Garrett, W. E. | Judd, Frank |
| Cohen' Stanlev | Gilbert, Dr. John | Kaufman, Gerald |
| Coleman Donald | Ginsburg David (Dewsbury) | Kelley, Richard |
| Cancannon, J.D. | Gourlay, Harry | Kerr, Russell |
| Corbert, Mrs.Freda | Grant, George (Morpeth) | Kinnock, Neil |
| Cox, Thomas (Wandsworth) | Griffiths, Eddie (Brightside) | Lamborn, Harry |
| Cox, Thomas (Wandsworth, C.) | Griffiths, Will (Exchange) | Lamond, James |
| Crawshaw, Richard | Grimond, Rt. Hn. J. | Latham, Arthur |
| Crossman, Rt. Hn. Richard | Hamilton, James (Bothwell) | Lawson, George |
| Cunningham, Dr. J. A. (Whitehaven) | Hamilton, William (Fife, W.) | Leadbitter, Tea |
| Dalyell, Tam | Hamling, William | Lee, Rt. Hn. Frederick |
| Davidson, Arthur | Hannan, William (G'gow, Maryhill) | Leonard, Dick |
| Davies, Denzil (Llanelly) | Hardy, Peter | Lestor, Miss Joan |
| Davies, G. Elfed (Rhondda, E.) | Harper, Joseph | Lewis, Ron (Carlisle) |
| Davies, Ifor (Gower) | Harrison, Walter (Wakefleld) | Lipton, Marcus |
| Davis, Clinton (Hackney, C.) | Hattersley, Roy | Lomas, Kenneth |
The fact is that there is now every reason why business should have confidence in the future. We are achieving a fast rate of growth in demand. We do not believe that we are in danger of overheating the economy. But, clearly, one needs to take account of the indicators, and we are well aware of this. I believe that it is apparent that we are well aware of it given our record over the past two and a half to three years.
With regard to the overall situation, under the Labour Government tax rates rose by £3,000 million. Under the Conservative Government they have come down by £3,000 million. The standard rate of income tax and the effective rate have been significantly reduced. The main indicator, mentioned by the hon. Member for All Saints, is real disposal income per head. This rose under the previous Government at 1·5 per cent., and under the present Government at 5 per cent.
This Finance Bill will help in furthering our aims and in maintaining that. I ask the House to approve it.
Question put, That the amendment be made: —
The House divided: Ayes 214, Noes 241.
| Loughlin, Charles | Orbach, Maurice | Spearing, Nigel |
| Mabon, Dr. J. Dickson | Paget, R. T. | Spriggs, Leslie |
| McBride Neil | Pardoe, John | Stallard, A. W. |
| McCartney, Hugh | Parker, John (Dagenham) | Stewart, Donald (Western Isles) |
| McElhone Frank | Parry, Robert (Liverpool, Exchange) | Stewart, Rt. Hn. Michael (Fulham) |
| McGuire Michael | Pavitt, Laurie | Stoddart, David (Swindon) |
| Machin George | Peart, Rt. Hn. Fred | Strang, Gavin |
| Mackenzie, Gregor | Perry, Ernest G. | Summerskill, Hn. Dr. Shirley |
| Mackie John | Prentice, Rt. Hn. Reg. | Thomas, Jeffrey (Abertillery) |
| Maclen'nan, Robert | Prescott, John | Thorpe, Rt. Hn. Jeremy |
| Mahon, Simon (Bootle) | Price, David (Eastleigh) | Tinn, James |
| Mallalieu, J. P. W. (Hudderslield, E.) | Price, William (Rugby) | Tope, Graham |
| Marks, Kenneth | Probert, Arthur | Torney, Tom |
| Marquand David | Radice, Giles | Tuck, Raphael |
| Marsden F. | Reed, D. (Sedgefield) | Urwin, T. W |
| Marshall, Dr. Edmand | Rees, Merlyn (Leeds, S.) | Varley, Eric G. |
| Mason Rt. Hn. Roy | Rhodes, Geoffrey | Wainwright, Edwin |
| Mayhew, Christopher | Richard, Ivor | Walden, Brian (B'm'ham, All Saints) |
| Meacher, Michael | Roberts, Albert, (Normanton) | Walker, Harold (Doncaster) |
| Mendelson, John | Roberts, Rt. Hn. Goronwy (Caernarvon) | Wallace, George |
| Millan, Bruce | Robertson, John (Paisley) | Watkins,David |
| Milne, Edward | Roderick, Caerwyn E.(Brc'n&R'dnor) | Weitzman, David |
| Mitchell, R. C. (S'hampton, Itchen) | Rodgers, William (Stockton-on-Tees) | Wellbeloved, James |
| Molloy, William | Roper, John | White, James (Glasgow, Pollok) |
| Morgan, Elystan (Cardiganshire) | Ross, Rt. Hn. William (Kilmainock) | Whitehead, Phillip |
| Morris, Alfred (Wythenshawe) | Rowlands, Ted | Whitlock, William |
| Morris, Charles R. (Openshaw) | Sheldon, Robert (Ashton-under-Lyne) | Willey, Rt. Hn. Frederick |
| Morris, Rt. Hn. John (Aberavon) | Shore, Rt. Hn. Peter (Stepney) | Williams, Alan (Swansea, W.) |
| Moyle, Roland | Short, Rt. Hn. Edward (N'c'tle-u-Tyne) | Wilson, Alexander (Hamilton) |
| Mulley, Rt. Hn. Frederick | Short, Mrs. Renée (Whampton.N.E.) | Wilson, Rt. Hn. Harold (Huyton) |
| Oakes, Gordon | Silkin, Hn. S. C. (Dulwich) | Wilson, William (Coventry, S.) |
| Ogden, Eric | Sillars, James | Woof, Robert |
| O'Halloran, Michael | Silverman, Julius | TELLERS FOR THE AYES: |
| O'Malley, Brian | Skinner, Dennis | Mr. John Golding and |
| Oram, Bert | smith, John (Lanarkshire, N.) | Mr. Tom Pendry. |
NOES
| ||
| Adley, Robert | Costain, A. P. | Hall, John (Wycombe) |
| Alison, Michael (Barkston Ash) | Crouch, David | Hall-Davis, A. G. F. |
| Archer, Jeffrey (Louth) | Crowder, F. P. | Hamilton, Michael (Salisbury) |
| Astor, John | d'Avigdor-Goldsmid, Sir Henry | Hannam, John (Exeter) |
| Atkins, Humphrey | d'Avigdor-Goldsmid, Maj.-Gen. Jack | Harrison, Col. Sir Harwood (Eye) |
| Awdry, Daniel | Dean, Paul | Havers, Michael |
| Baker, Kenneth (St. Marylebone) | Deedes, Rt. Hn. W. F. | Hawkins, Paul |
| Baker, W. H. K. (Banff) | Digby, Simon Wingfield | Hayhoe, Barney |
| Balniel, Rt. Hn. Lord | Dixon, Piers | Micks, Robert |
| Barber, Rt. Hn. Anthony | Dodds-Parker, Douglas | Higgins, Terence L. |
| Batsford, Brian | du Cann, Rt. Hn. Edward | Hiley, Joseph |
| Beamish, Col. Sir Tufton | Dykes, Hugh | Holland, Philip |
| Bell, Ronald | Edwards, Nicholas (Pembroke) | Hornby, Richard |
| Bennett, Dr. Reginald (Gosport) | Elliot, Capt. Walter (Carshalton) | Hornsby-Smith, Rt. Hn. Dame Patricia |
| Benyon, W. | Elltott, R. W. (N'c'tle-upon-Tyne,N.) | Howell, Ralph (Norfolk, N.) |
| Biffen, John | Emery, Peter | Hunt, John |
| Biggs-Davison, John | Eyre Reginald | Iremonger, T. L. |
| Boardman, Tom (Leicester, S.W.) | Farr, John | Irvine, Bryant Godman (Rye) |
| Body, Richard | Fenner, Mrs. Peggy | Jenkin, Patrick (Woodford) |
| Boscawen, Hn. Robert. | Fidter, Michael | Jessel, Toby |
| Bray, Ronald | Finsberg, Geoffrey (Hampstead) | Jopling, Michael |
| Brewls, John | Fisher, Nigel (Surblton) | Joseph, Rt. Hn. Sir Keith |
| Brinton, Sir Tatton | Fletcher-Cooke Charles | Kellett-Bowman, Mrs. Elaine |
| Brocklebank-Fowler, Christopher | Fookes, Miss Janet | Kimball, Marcus |
| Brown, Sir Edward (Bath) | Fortescue, Tim | King, Evelyn (Dorset, S.) |
| Bruce-Gardyne, J. | Fowler, Norman | King, Tom (Bridgwater) |
| Bryan, Sir Paul | Fox, Marcus | Kinsey, J. R. |
| Buchanan-Smith, Alick (Angus, N&M) | Fraser, Rt. Hn. Hugh (St'fford & Stone) | Kirk, Peter |
| Buck, Antony | Fry, Peter | Kitson, Timothy |
| Bullus, Sir Eric | Gardner, Edward | Knox, David |
| Butler, Adam (Bosworth) | Gibson-Watt, David | Lambton, Lord |
| Campbell, Rt. Hn. G. (Moray & Nairn) | Gilmour, Sir John (Fife, E.) | Lamont, Norman |
| Carlisle, Mark | Glyn, Dr. Alan | Lane, David |
| Carr, Rt. Hn. Robert | Godber, Rt. Hn. J. B. | Langlord-Holt, Sir John |
| Channon, Paul | Goodhart, Philip | Le Marchant, Spencer |
| Chapman, Sydney | Gorst, John | Lloyd, Ian (P'tsm'th, Langstone) |
| Chataway, Rt. Hn. Christopher | Gower, Raymond | Longden, Sir Gilbert |
| Chichester-Clark, R. | Grant, Anthony (Harrow, C.) | Loveridge, John |
| Churchill, W. S. | Gray, Hamish | Luce, R. N |
| Clark, William (Surrey, E.) | Green, Alan | McAdden, Sir Stephen |
| Clarke, Kenneth (Rushcliffe) | Grieve, Percy | MacArthur, Ian |
| Clegg, Walter | Griffiths, Eldon (Bury St. Edmunds) | McCrindle, R. A. |
| Cooke, Robert | Grylls, Michael | McLaren, Martin |
| Coombs Derek | Gummer, J. Selwyn | McMaster, Stanley |
| Cooper, A. E. | Gurden, Harold | McNair-Wilson, Patrick (New Forest) |
| Cormack, Patrick | Hall, Miss Joan (Keighley) | Maddan, Martin |
| Madel, David | Proudfoot, Wilfred | lapsell, Peter |
| Maginnis, John E. | Pym, Rt. Hn. Francis | Taylor, Sir Charles (Eastbourne) |
| Marten, Neil | Raison, Timothy | Taylor, Edward M.(G'gow,Cathcart) |
| Mather, Carol | Rawlinson, Rt. Hn. Sir Peter | Taylor, Frank (Moss Side) |
| Maude, Angus | Redmond, Robert | Taylor, Robert (Croydon, N.W.) |
| Maudling, Rt. Hn. Reginald | Reed, Laurance (Bolton, E.) | Tebbit, Norman |
| Mawby, Ray | Rees, Peter (Dover) | Temple, John M. |
| Maxwell-Hyslop, h. J. | Rees-Davies, W. R. | Thomas, John Stradling (Monmouth) |
| Meyer, Sir Anthony | Rhys Williams, Sir Brandon | Thompson, Sir Richard (Croydon, S.) |
| Mills, Peter (Torrington) | Ridley, Hn. Nicholas | Tilney, John |
| Miscampbell, Norman | Ridsdale, Julian | Trafford, Dr. Anthony |
| Mitchell, David (Basingstoke) | Rippon, Rt. Hn. Geoffrey | Trew, Peter |
| Moate, Roger | Roberts, Michael (Cardiff, N.) | Tugendhat, Christopher |
| Money, Ernie | Roberts, Wyn (Conway) | Turton, Rt. Hn. Sir Robin |
| Monro, Hector | Rodgers, Sir John (Sevenoaks) | Vickers, Dame Joan |
| Montgomery, Fergus | Rossi, Hugh (Hornsey) | Waddington, David |
| More, Jaspe | Rost, Peter | Walder, David (Clitheroe) |
| Morgan-Giles, Rear-Adm. | Royle, Anthony | Walker-Smith, Rt. Hn. Sir Derek |
| Morrison, Charles | Russell, Sir Ronald | Wall, Patrick |
| Mudd, David | St. John-Stevas, Norman | Ward, Dame Irene |
| Murton, Oscar | Sandys, Rt. Hn. D. | Wells, John (Maidstone) |
| Neave, Airey | Scott, Nicholas | White, Roger (Gravesend) |
| Nott, John | Scott-Hopkins, James | Wiggin, Jerry |
| Oppenheim, Mrs. Sally | Shaw, Michael (Sc'b'gh & Whitby) | Wilkinson, John |
| Owen, Idris (Stockport, N.) | Shersby, Michael | Winterton, Nicholas |
| Page, Rt. Hn. Graham (Crosby) | Sinclair, Sir George | Wolrige-Gordon, Patrick |
| Page, John (Harrow, W.) | Skeet, T. H. H. | Wood, Rt. Hn. Richard |
| Parkinson, Cecil | Smith, Dudley (W'wick & L'mington) | Woodhouse, Hn. Christopher |
| Percival, Ian | Soref, Harold | Worsley, Marcus |
| Peyton, Rt. Hn. John | Speed, Keith | Wylie, Rt. Hn. N. R. |
| Pike, Miss Mervyn | Spence, John | Younger, Hn. George |
| Pink, R. Bonner | Sproat, lain | |
| Pounder, Rafton | Stanbrook, lvor | TELLERS FOR THE NOES: |
| Powell, Rt. Hn. J. Enoch | Stewart-Smith, Geoffrey (Belper) | Mr. Victor Goodhew and |
| Price, David (Eastleigh) | Stuttaford, Dr. Tom | Mr. Bernard Weatherill |
| Prior, Rt. Hn. J. M. L. | Sutcliffe, John |
Question accordingly negatived.
Main Question put forthwith pursuant to Standing Order No. 39 ( Amendment on second or third reading), and agreed to.
Business Of The House
Ordered,
That the Costs in Criminal Cases Bill [Lords] may be proceeded with at this day's Sitting, though opposed, until any hour.—[Mr. Fortescue.]
Finance Bill
Ordered,
That Clauses 3, 4, 10, 12, 18 and 38 of the Finance Bill be committed to a Committee of the whole House:
That the remainder of the Bill be committed to a Standing Committee:
That, when the provisions of the Bill considered, respectively, by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.—[Mr. Barber.]
Committee tomorrow.
Costs In Criminal Cases Billlords
Order for Second Reading read.
10.13 p.m.
I beg to move, That the Bill be now read a Second time.
This is a consolidation Bill. It consolidates what remains of the Costs in Criminal Cases Act 1952, the Criminal Appeal Act 1968, the Courts Act 1971 and the Criminal Justice Act 1972, with certain minor amending revisions. The Joint Committee has reported that the Bill is pure consolidation and represents the existing law, and there is no point to which the attention of Parliament should be drawn. There is no alteration of any kind.Question put and agreed to.
Bill accordingly read a Second time.
Bill committed to a Committee of the whole House.—[ Mr. Fortescue.]
Committee tomorrow.
Sugar(Distribution Repayments)
10.15 p.m.
I beg to move,
That an humble Address be presented to Her Majesty, praying that the Sugar (Distribution Repayments) (Amendment) (No. 4) Order 1973 (S.I., 1973, No. 306), dated 26th February 1973, a copy of which was laid before this House on 27th February, be annulled.
Is it the wish of the House that the other two orders be discussed at the same time? Very well. We shall consider the two other Prayers in the name of the hon. Gentleman and his right hon. and hon. Friends:
That an humble Address be presented to Her Majesty, praying that the Sugar (Distribution Payments) (No. 4) Order 1973 (S.I., 1973, No. 307), dated 26th February 1973, a copy of which was laid before this House on 27th February, be annulled.
That an humble Address be presented to Her Majesty, praying that the Composite Sugar Products (Distribution Payments-Average Rates) (No. 4) Order 1973 (S.I., 1973, No. 307), dated 26th February 1973, a copy of which was laid before this House on 27th February, be annulled.
We are becoming used at this time of the evening to debates which have a common pattern. We regard these debates with distaste because they are about statutory instruments which crudely increase the price of food. We have had a bacon order and one sugar order already, and we now have before us three further sugar orders, with promise of more such orders to come.
The Government are earning a reputation for not being willing or able to introduce any form of subsidy to help the low-paid worker—no subsidy on food, in particular—while at the same time they are becoming experts at removing various subsidies. The order before us is of that kind. These orders are of particular significance because, although they might appear to be of a purely technical domestic character, they have far wider repercussions. Indeed, the repercussions are world-wide, as I shall show. It is a mistake to look at these matters only in their domestic context. These orders demonstrate vividly the shortcomings of the common agricultural policy. There are many hon. Members on both sides of the House who do not share my views on British entry into the EEC, but I believe that almost all to whom I have spoken, whether for or against Britain's entry into the Common Market, admit that the common agricultural policy is not sensible, is far from perfect, and demands radical alteration. I am sure that hon. Members opposite will not disagree with that. The orders now before us show how necessary it is to introduce a sensible agricultural policy within Europe. It has long been recognised, and must still be recognised, that certain parts of the world, for climatic and other reasons, are ideal places for the growing of particular crops. One could give many examples, but I need do no more than refer to sugar in this context. Traditionally, Governments of both parties have accepted that case. We have felt it right to encourage underdeveloped countries in the tropical and sub-tropical areas to produce cane sugar. By our Commonwealth Sugar Agreement, we have encouraged them to grow more sugar, and one can fairly say that the economies of many underdeveloped countries are dependent solely upon sugar. The system developed in the EEC is incompatible with that traditionally accepted philosophy. The EEC countries produce their sugar from sugar beet, and they currently have an annual surplus of about 1 million tons. There is a clash here between the traditional and common-sense system which we have hitherto adopted and the protectionist system in Europe. This is no secret. It was admitted throughout the negotiations. The Government recognise it very well. I think that it was one of the major issues in the negotiations which caused hon. Members on both sides the greatest anguish. Many hon. Members are extremely unhappy about the end result achieved with reference to sugar. The Minister was unable to secure a written assurance or guarantee on this issue. We appeared to have an aura à coeur. We hope and we believe that this was given in good faith and we hope that the Common Market will treat it as such. We have noted the Minister's statement on Friday and we hope that the interests of the underdeveloped countries will be looked after. We further hope that the 1·4 million tons of sugar which will have access to the EEC will not come in at the expense of other primary products from the underdeveloped countries. The orders deal with a section of our sugar supply system which contravenes the EEC regulations. Our system has been devised from the 1920's, consolidated under the Sugar Act 1956 into a highly complicated system of sugar support. The system has managed to protect the country from what is probably the most volatile of all primary commodities. Britain has had a regular supply of sugar at a reasonable price. It protected the Commonwealth sugar-producing countries and at the same time it protected British sugar beet producers. We recognise that there is a good case for growing sugar beet in certain parts of the country and we recognise its value as a rotation crop and for the way it provides employment in areas where unemployment would otherwise be high. Nevertheless, there has been a balance in the past and we want that balance to be continued. Our complicated system of sugar support covers many facets, including refining margins, which the Minister last Wednesday on his return from the Council of Ministers announced had been increased by £4 a ton, and distribution payments. It is the distribution payments aspect with which we are specifically concerned tonight. The history of this goes back 13 months. On 8th March 1972 in a Written Answer at col. 359 the Minister announced what was in effect a subsidy to the consumer. He announced that the price of raw sugar bought under the Commonwealth Sugar Agreement from the underdeveloped countries had been increased and he made the point quite rightly that this was for the benefit of the developing countries. We did not dispute that point. He went on to argue that the refined sugar prices should be, as he termed it, "contained". In order to do this special payments were to be made to the Sugar Board. We supported the idea then and we wish that the Government would continue it now. The estimated cost was £25 million which worked out as a subsidy of about £15 per ton. That was the background at that time and so since then we have had experience of this direct subsidy. However, the subsidy is illegal under the EEC rules and the Government are having to fade it out. Earlier we dealt with statutory instrument 1973/132/4 which withdrew the fluctuating distribution payment with effect from 1st February 1973. It replaced it with a fixed payment of £15 a ton. The orders we are now discussing lower the rate of payment by £5 to £10 a ton for refined sugar as from 1st March. I understand that if the orders are not annulled the subsidy until the end of April will be £10 a ton and new orders will be laid before the House reducing £10 a ton to £5 a ton. At the end of June it will be phased out completely. The payment, which has been a direct subsidy paid by the Sugar Boards to the refiners, the British Sugar Corporation or the sugar importers, as appropriate, is being phased out. That is the second stage of the operation. The cost has to be passed on 100 per cent. to the consumer. What will be the effect? In a Written Answer the Minister told me a few weeks ago that the estimated effect would be to increase the cost of a 2-lb. bag of sugar by about l½p. That may not appear very much, but when we look at it in another way we see that it is quite considerable. The matter was put more forcefully earlier today by the President of the Food Manufacturers Federation, Mr. A. Beresford, who said that the cost of sugar would rise by 18 per cent. this year. That is roughly in line with what the Minister has suggested. The sum of l½p does not appear very much, but we see that an increase of 18 per cent. is quite considerable on a staple basic food product. I remind the Minister that we have just emerged from a freeze, and are still in a period of severe restraint. The Government are controlling wages rigorously and are supposed to be controlling prices. We all applauded the Minister of Agriculture, Fisheries and Food when he told us last Wednesday that in the Council of Ministers he was fighting to contain prices. He believed it necessary at this time of inflation to freeze prices. But the support we gave last Wednesday makes us feel rather cynical now when we consider orders by which in effect the Government are deliberately increasing the price of food. The Minister tells us that he is fighting in Europe to avoid that. The situation does not make much sense. We are praying against the orders because we believe that they are not sensible. We are worried about the effects of dismantling our delicate, tried and tested sugar apparatus. We are especially worried about the effect on our traditional suppliers, the underdeveloped countries. We all know how volatile the market is and how important it is to keep the confidence of the sugar producers, because of what it means to the underdeveloped countries. We are worried about the repercussions on the world market, especially as the EEC is not a signatory of the International Sugar Agreement. If the orders divert on to the world market many tons of sugar in addition to the Australian sugar that will be diverted, there could be chaos. On the domestic front, the public cannot have too much confidence in the Government's fight against the pernicious phenomenon of inflation when the Government constantly come before the House after 10 o'clock at night, without publicity, to increase the price of basic foodstuffs. For these reasons, because of the inconsistency and illogicality of the Government's case, I urge my right hon. and hon. Friends to support me in the Lobby tonight in trying to annul the orders.10.29 p.m.
I await with interest the Minister's reply on the impact of the orders on the cost-of-living index if we are not successful in praying against them. No doubt she has all the figures to hand. They may seem marginal, and she will no doubt argue that that is so.
However, the Government cannot take much comfort from the cumulative effect of the changes since our entry into the EEC, particularly when, at the same time, they are trying to operate a prices and incomes policy. I am surprised that, in those areas where they have some control left—sugar, for example—they are not being more cautious. Indeed, their pattern of behaviour since entry is remarkably inconsistent. Sometimes they are adventurous, sometimes timid. These orders are timid. The Government have cautiously and without much resistance admitted to the Commissioner that they should take all necessary steps to withdraw what remains of these food subsidies—which essentially is what they are —in order to conform to the Treaty of Rome in all its purity. This attitude contrasts with the answer given to the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) on 23rd March. While the Minister is "saving" money for the Treasury by these orders—how much is he saving?— He is spending a great deal introducing a subsidy which, according to the French Government, is entirely against the letter and spirit of the Treaty. According to the Financial Times, we are threatened with being taken to the European Court of Justice for introducing a new subsidy which, although it does not replace this subsidy, is nevertheless very much part of the economics of sugar. I applaud the right hon. Gentleman for doing it. I hope that he will persist. No doubt we shall learn the size of the subsidy on a Supplementary Estimate which, I understand, will extend from about the present time to 30th June. I should like to know why it extends for so short a period. Thus, one subsidy is being taken away and another put in its place. I cannot understand why. The £17 a ton being given to the sugar refiners is to make up the difference between the price at which they can sell and the sugar refining margins recently agreed in Brussels. All this shows that our initial negotiations with the EEC were not as successful as they first appeared. The Minister, having lost the first round, is apparently trying to win the second, and I shall support him. He is right to make vigorous efforts in defying the French and others in order to reach a fair and sensible result. If cane sugar refiners and port refiners cannot sell at the present commercial price, they will not be able to refine cane sugar, irrespective of quotas or orders or promises or anything else. Without the economics of refinement being understood and accepted, the figures in cane sugar tons are nonsense. We are, in effect, beginning the debate on the Commonwealth Sugar Agreement and other cane sugar implications which follow from re-negotiation, together with the International Sugar Agreement. The orders are not just concerned with a marginal half penny or penny on sugar. Although they are not immediately involved, they touch also on the whole future of the cane sugar refining industry of the United Kingdom. While I speak for nearly 2,000 workers in Greenock there are many more thousands of workers in London and Liverpool who will be substantially affected if anything adverse happens to the United Kingdom sugar refining industry. I do not speak of beet sugar. It seems from the Financial Times of 23rd March that everyone is growing more beet. The French are growing more. Despite our pledge to the Commonwealth, we are to grow more. Those European countries not in the Nine will grow more and even in Eastern Europe the acreage of sugar beet in 1973–74 will increase substantially. This bodes ill for the developing countries. We must have a definite policy from the Minister and from the Council of Ministers. With respect, I do not see how these orders are part of a consistent policy. They seem to be part of a retreat and advance pattern which the Government are following. As I understand it, there is to be a submission by the sugar refining industries of the Nine, to the Commission in the first instance, which will ultimately be referred to the Council of Ministers. They are putting up a blueprint for a new sugar system. This accommodates the interests of beet sugar, the Commonwealth cane and the port refiners. This kind of comprehensive approach is the right way to deal with the problem. I hope that the Parliamentary Secretary will not simply limit her reply to the narrow margins of the orders. I should like her to tell us when we will see the Supplementary Estimates. I should like her to tell us why there is this restriction of 30th June. Otherwise, the way things are evolving we will need to have a proper debate on the Floor of the House at a sensible time, not late at night. This issue concerns consumers and workers and the interests of many millions of people who work in the developing countries supplying this country with sugar.10.38 p.m.
My hon. Friend the Member for Colne Valley (Mr. David Clark) made a strong, indeed compelling, case in opening this debate. He quite properly referred to the wider implications of our deliberations and particularly to the uncertainties still facing cane sugar producers in the developing countries of the Commonwealth. The economies of many developing countries depend almost entirely on the prospects for their sugar industries.
My hon. Friend referred to the Commonwealth Sugar Agreement. The House should be reminded that for 21 years and more that Agreement has been the charter for Commonwealth sugar. The Agreement has linked countries across the globe, from Mauritius to India and from Barbados to Fiji, in long-term contracts at settled prices for two-thirds of the sugar consumed in this country. All of these countries are poor countries and for them the Agreement has been a catalyst for social and economic progress, for reviving once derelict industries, for earning much-needed foreign exchange, for providing better wages, for improved housing and health and, above all, for more jobs. For Britain, the Agreement has meant absolute security of supply, in bad times as well as good, at prices for the consumer which have been among the lowest in any developed country. We have been reminded of the importance of the price of sugar. None of us wants to under-estimate the difficulties facing the Minister. Last week the Minister met representatives of the Governments of Barbados, Belize, Fiji, Guyana, India, Jamaica, Kenya, Mauritius, St. Kitts-Nevis-Anguilla, Swaziland, Tanzania, Trinidad and Tobago, and Uganda. I understand that at that meeting in London the exporting countries made it clear that they had already planned the future of their sugar industries on the strength of the assurances given at Lancaster House, that is, at the previous conference, on long-term access to the enlarged EEC, and that they would continue to do so. Of course, one of the problems for the developing Commonwealth countries is that they have been given an assurance by the British Government that has not been backed by an assurance of equal force by the European Economic Community. My hon. Friend the Member for Greenock (Dr. Dickson Mabon) has referred to the increase in the production of beet sugar in the member States of the Common Market. We often hear from people in Western Europe that the poorer developing countries should diversify their economies, that they should not be so dependent on the production of cane sugar. It is notoriously easy for people in the temperate zones to lecture the poorer countries on diversification. The fact is that diversification is much easier in Western Europe than it is in Mauritius or in Fiji or in any of the sugar-producing countries of the Caribbean. None of us wants European farmers to starve. The problem is to find ways of supporting them that do not have the mischievous side effects of the Common Agricultural Policy. There are various acceptable alternatives, all depending on using income support instead of price support. The French scheme, devised by M. Pierre Uri, would directly subsidise the incomes of the poor and medium farmers. Britain has some experience of applying both deficiency payments and selective production grants. In the end the Common Agricultural Policy will have to be drastically amended if it is not to destroy itself. I referred earlier to countries that were present at last week's London conference on Commonwealth sugar. For my part, I much regret that Australia was not present as a full member of that conference. There are many who now wish to overlook the great part played by Australia in supplying the British market. The Australians have been treated badly by the British Government and there are those, on both sides of the House, who recognise the rôle that Australia still has to play in both helping the developing countries and in supplying her traditional market with cane sugar. I hope that the Parliamentary Secretary, in reply, will not merely read a prepared brief. I hope that she will address herself to the issues raised in the debate. I hope, most of all, that she will have something to say about the wider implications of the debate as they affect Commonwealth countries.10.45 p.m.
I can understand the feelings of anxiety which have been expressed by the hon. Members for Greenock (Dr. Dick-son Mabon) and for Manchester, Wythen-shawe (Mr. Alfred Morris) on behalf of the Commonwealth. They feel that the developing countries—I leave Australia on one side for the moment—will be hard done by by the three orders. This is not true. The orders will not affect the production or the level of refining which is being done in the United Kingdom. This is not the immediate anxiety. I am glad to observe the hon. Member for Manchester, Wythenshawe indicating agreement. They are worried about the long-term effect of Community policy towards sugar and the United Kingdom's reaction to it.
The hon. Member for Manchester, Wythenshawe referred to the Australian position. Some of my family are in Australia. I have just as much affection for that country and those who produce cane sugar there as the hon. Gentleman. But it is extraordinary that we should be asked to provide a subsidy, which is what we have been doing, towards the Australian economy for the production of cane sugar when there is no need for it. This is a matter that I have failed to understand in recent years, but I believe that the Australians do understand it. [Interruption.] The hon. Gentleman spoke about subsidising the French or other countries in Europe.Why is the hon. Gentleman prepared to subsidise the French?
I am not prepared to subsidise the French. [Interruption.] Let us not be diverted too far by these comments which come from hon. Gentlemen in sedentary positions. Doubtless they will make their points at a later stage if they have the pleasure of catching your eye, Mr. Deputy Speaker.
I turn from the position of the Australian producer to the main gravamen of what has been said by the hon. Members for Greenock and Manchester, Wythen-shawe concerning the developing countries of the Commonwealth and their position regarding production and access into not only the United Kingdom, but Europe. I find it extraordinary that hon. Gentlemen opposite completely refuse to accept the word of those in the Community about the increasing and continuing access of cane sugar. Indeed, from what hon. Gentlemen opposite have said about what was negotiated and embodied in the articles, they seem to think that the Community will break them willy-nilly and refuse to honour their word about continuing access. The hon. Member for Manchester, Wythenshawe referred to the conference which has just taken place in which my right hon. Friend the Minister of Agriculture, Fisheries and Food took part. The representatives of the Commonwealth sugar producers, which the hon. Gentleman kindly enumerated for us, were satisfied with the arrangements which are being made at this moment.
I said that the British Government had given an assurance which had no definitive backing from the European Economic Community. That was the position at Lancaster House and that is the position today.
Continuing access was agreed not only into the United Kingdom, but into the Community. I do not need to read a lesson to hon. Gentlemen opposite about the conditions and the methods whereby the Community work out their three-quota system. This would be tedious for the House to endure. We have heard it in many debates concerning our accession to the Community. It is only on quota A that the Community is guaranteeing a price. Quota B is that amount of acreage or hectares, or however one wishes to compute it, which can be grown and which will pay a levy to sustain the quota A within the Community. Quota C can be grown only for export to world markets. No matter what the hon. Gentleman may think about these orders, the fact is that they do not affect the position in any way and will not be detrimental to the position that we have taken up.
As the hon. Gentleman knows, during the recent negotiations in Brussels my right hon. Friend the Minister of Agriculture was adamant about the subsidy— for want of a better word—which is paid in the United Kingdom for the refining of cane sugar. There were suggestions that the subsidy should be removed but my right hon. Friend stuck to his guns and insisted on our right to continue it, and I congratulate him on that. The existing situation will continue until 1974. There is no doubt in my mind, or in the minds of our Commonwealth producers who supply us with cane sugar, that the present level of access will be continued. Nor is there any doubt about the continuing access of cane sugar to this market after 1974. The doubt being expressed by the hon. Gentleman relates to what will happen after 1974. The first point to remember is that a promise has been given of continuing access of a comparable amount in value. The second point to remember is that if the Community finds that the production is uneconomical there will still be the remedy that our Commonwealth sugar will have access to the United Kingdom market, and through that market into the Community, of the amounts spoken of originally in the negotiation agreements. I have no doubt that the Community will honour the intention expressed in the negotiations. I see no reason to doubt that. The Community has honoured the intention of the agreement up to now. They are honourable men, and the agreement is in writing. I cannot understand why hon. Gentlemen opposite should think that people in the Community—be they German, French, Dutch or any other nationality—will renege on what has been agreed. I understand the reason for hon. Gentlemen wishing to raise the matter. It is a fairly good aunt sally at which to throw coconuts, but I see no reason for doubting the promises which have been given. I am confident that they will be honoured, and so are the representatives of the Commonwealth countries whose livelihood depends on the agreement being carried out. If they are content I see no reason why I, too, should not be content. I suggest to the hon. Gentlemen opposite that rather than try to find difficulties and create imaginary problems which cause anxiety not only abroad but in this country, too, they should take the facts as they are. They should consider what has happened in the short weeks since we joined the Community. They should confine their remarks to the honouring of agreements since our joining the Community. By their comments tonight hon. Gentlemen opposite are doing a disservice not only to this country but to those members of the Commonwealth who are listening to what they are saying. Hon. Gentlemen opposite are creating anxiety, worry and doubt in the minds of our Commonwealth sugar producers when there is no need for them to worry.Given the hon. Gentleman's optimism, which I am sure we all hope will be realised, about what will happen after 1974, what I cannot understand is how the hon. Gentleman, who was a Minister at the Ministry, can say that all will be well until 1974. On 28th March his right hon. Friend said that the subsidy would go on until 30th June. What will happen between 30th June 1973 and the renegotiation in 1974?
The subsidy required at that time will be on a descending scale. With the level of sugar prices, the subsidy will not be required.
The Commonwealth Sugar Agreement has been to the great advantage of our Commonwealth partners—And to the British consumer.
And to the British consumer. But at this moment it is to the disadvantage of our Commonwealth partners because the world market price is higher than the Commonwealth Sugar Agreement price for the quota that comes in and, therefore, the British consumer gets an advantage. But for many years —certainly in the 1960s when I had a degree of responsibility—it was the other way round. It was greatly to the advantage of our Commonwealth producers and not to the advantage of the British consumer. The one has to be weighed against the other.
Our Commonwealth producers will not suffer between June 1973 and the end of 1974 by the temporary withdrawal of the £17 per ton refining subsidy, bearing in mind the uncertain level of world sugar prices. What we have been saying has little to do with the orders. The issue is a wider one. I ask the House to believe that our Commonwealth producers will not suffer from the Community's policies. The Community will keep its word. Cane sugar producers are getting the best deal possible in the circumstances of increasing beet and sugar production in the western world.10.56 p.m.
I wish that I could share the optimism of the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) about the reaction of the Commonwealth to the proposals of the EEC. I recently visited the Caribbean where I found a great deal of support for the apprehension that has been expressed by my hon. Friends. This is no wild scare. We spoke to responsible members of the Governments of the Caribbean countries who voluntarily raised with us their worry about being able to sell their sugar in view of our entry into the EEC. They were concerned about the effect upon their countries if the EEC fell down on its promises. I have seen the degradation in these countries and the extremely high unemployment in Jamaica, and I hate to think what might happen if these countries were unable to get a return for their sugar.
That is a wider aspect, and I want to come back to the orders and say what worries me about them. I was very concerned about what was said by my hon. Friend the Member for Colne Valley (Mr. David Clark). I know it to be true. He pinpointed the matter for me. It was not in the forefront of my mind. However, it should be reiterated, because I am very concerned for a particular reason, which I shall explain. My hon. Friend said that over past weeks a number of orders, many dealing with subsidies on food, have been slipped through very late at night. I reiterate and endorse the serious danger in this practice. We all know what happens in the House. Many members of the Press go to bed well before 10 p.m. I do not mean that literally, but newspapers are ready for printing before a debate such as this debate can come forward. Therefore, perhaps the people of Britain are not so well aware of orders which will cause them to have to pay more in due course for many basic food commodities as they would be if the Press reported a split in the Labour Party. They are not so aware that these matters will cause them to pay more for their food. I make no apology for harping upon a pet subject which is so near to my heart. During most of my life as a trade union officer I was engaged in the struggle to obtain a better standard of life for the lowest paid and those worst hit in our community. I do not apologise for returning to this matter tonight. I did so when a similar order was brought before the House on another item of basic food. I also spoke from the Dispatch Box on behalf of low-paid workers in a debate on the wage freeze machinery. My hon. Friend the Member for Colne Valley has told us that the order will mean a 1½p increase in the price of a 2 lb. bag of sugar. Those with fairly good incomes may say that this is not very much. Possibly for most right hon. and hon. Members on the Government side of the House it means nothing. But 1½p is about 4d. in the old money. Coupled with the various increases on so much of our food recently, and coupled with the orders—also brought before the House after 10 p.m.—stopping wage increases for workers earning £15 a week, the l½p increase is very important. It is a very urgent matter, particularly for those about whom I am concerned, those among the very lowest income groups. Sugar is one of the basic commodities. This matter concerns not just the housewife who buys a 2 lb. bag of sugar to put a little of it into tea or coffee. Sugar is used in many items of manufactured foods. This order will surely have repercussions on very many foodstuffs. It will add to the past increases of the prices of many basic foodstuffs. My hon. Friend told us that some food manufacturers anticipate that the cost of five basic foods, one of which is sugar, will rise before the end of 1973 by between 4 per cent. and 25 per cent. It is not the Opposition or the Labour Party who are saying that. It is the food manufacturers.The hon. Gentleman will accept that only one person has said that about the rise in food prices and it may well be denied by other food distributors. He must be accurate about that. Secondly, will the hon. Gentleman say exactly how the three orders will raise the price of a 2 lb. bag of sugar by 1½p?
It is quite clear that if we take a subsidy off anything, be it meat, sugar or cereals, it will ultimately work its way down to the consumer by way of increased price. The same thing applies to VAT.
I make the strongest possible protest against the increases in the prices of our foodstuffs. It will be useless for the Parliamentary Secretary to reply, as has the right hon. Gentleman the Minister in the past, that we have no control over the price of many of the fresh foods, and so on, that we import. That sort of reply is no use to, say, the wife of a man on a very low wage or to a pensioner on a low fixed income. Some way must be found to ensure that people, and particularly those who are the worst off, can buy enough of the basic food commodities. The Government have been most unhelpful both by their inflexible wages policy and by the recent Budget. It is no use offering low-paid workers or pensioners an ice-cream cornet when they need a piece of meat or a bag of sugar. I hope the hon. Lady will tell us how these unfortunate people can be expected to buy these basic food commodities which they need in order to keep body and soul together whilst prices keep going up, and while the Government show no encouragement by introducing orders of this type, not only tonight, but last week and the week before.11.8 p.m.
First, it is proper that I should declare an interest, in as much as outside the House I am the Director of the British Sugar Bureau.
We have been listening to a wide-ranging and interesting debate which has had little to do with the subject of the orders. What we are discussing is a Prayer against the reduction of a purely domestic subsidy which was introduced to deal with temporary high world prices. In February of this year the subsidy was reduced to £15 a ton. In March it was reduced to £10 a ton, and with effect from the end of April it will come down to £5 a ton. It will eventually disappear altogether at the end of June. The reduction of £5 which we are now discussing is the equivalent of ½p on a 2 lb. bag of sugar, which at around 8½p represents astonishingly good value for money. Sugar is one of the cheapest commodities available to the British housewife by comparison with almost any other foodstuff one can mention. It plays an important part in the balanced diet because it is a carbohydrate, which is why the cheapest sugar is important to the housewife. But the total amount involved when the subsidy ends will mean an increase of l½p. This is a purely temporary subsidy. It is interesting to compare the attitude of hon. Members opposite on this emotive subject of sugar tonight, when they are worried about an increase of l½p, with their completely different attitude to the announcement of my right hon. Friend the Chancellor in the Budget Statement relating to reductions in the prices of ice-cream, soft drinks, confectionery, and so on, amounting to £110 million, which has given the British housewife real reductions on many hundreds of lines which are essential items of diet and which more than compensate for this small increase. Tonight we have been treated to many crocodile tears which should be exposed for what they are. This does not affect the interests of the developing countries. We are talking about a purely domestic subsidy. Therefore, I do not think that the debate should be taken as an opportunity to debate the wider questions of Commonwealth sugar. However, having heard so much about the subject this evening I cannot resist saying that the difference between the amount which was negotiated in Brussels in January and the amount of £17 which was announced by my right hon. Friend last week is not a subsidy. It is recognition of the margin already agreed between the Government and the refiners and of the efficiency of the cane industry internationally. As I have said in the House before, what the cane industry needs for the post-1974 sugar regime is a realistic profit margin on normal industrial criteria which takes account of the efficiency of the industry and the need of Commonwealth countries to export their sugar both to this country and to the Common Market at a price commensurate with the interests of all consumers within the Community. Let us not have any more crocodile tears about 1½p on 21bs of sugar. Let us hear more about the substantial reductions which have been made as a result of the Chancellor's Budget Statement on so many lines, which will compensate so many housewives for this small increase in the price of sugar.11.12 p.m.
I can well understand why hon. Members have sought to use the debate on the Prayer to refer to the Commonwealth Sugar Agreement.
It is impossible to link these orders in any way to the question of imports from developing countries. For the period up to 1974 these are safeguarded by the existence of the Commonwealth Sugar Agreement, to which my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) referred, and thereafter the developing countries will be protected by the arrangements which will be renegotiated with the Community under Protocol 22 of the Treaty of Accession. At the meeting last week all the Governments confirmed that they would continue to regard the Community's undertaking as a firm assurance of a secure and continuing market in the enlarged Community on fair terms for the quantity of sugar covered by the Commonwealth Sugar Agreement in respect of all its existing developing countries. The United Kingdom reaffirmed that it stands by its assurance contained in the communiqué, without reservations. As we are not strictly discussing the Commonwealth Sugar Agreement, I think that that deals with the point. The hon. Member for Greenock (Dr. Dickson Mabon) raised the point of the subsidy to refiners, to which my hon. Friend the Member for Uxbridge (Mr. Shersby) has referred. The sum is £3·5 million, as announced by my right hon. Friend. The hon. Member wanted to know why it had been announced only to 30th June. The margin available to the refiners depends on the difference between the prices fixed for raw and white sugar, and 1st July is the start of the Community's next sugar season. It is only until then that prices for raw and white sugar have been fixed. The three orders are the mechanism whereby the Government are injecting an Exchequer subsidy on sugar. The present rate of subsidy is £10 a ton, which at the retail level is equivalent to about 1p on a 21b bag of granulated sugar. This represents the first reduction of £5 with effect from 1st March. The remainder will be phased out by the end of June of this year. I should like to begin by recalling the origin of the subsidy. Up till March 1972, when the subsidy was introduced, it had not been the practice for Exchequer money to be used in any way in our sugar system. Indeed, there used to be Revenue duties on sugar for the Exchequer's benefit until they were abolished along with those on other foods in April 1962 by the Chancellor of the Exchequer in the administration at that time. Since then the consumer has paid the true and fair costs on our various supplies. These are derived essentially from two sources—sugar purchased under the Commonwealth Sugar Agreement at a price negotiated every three years, and homegrown sugar beet purchased from farmers at a guaranteed price. Because these prices are stable for considerable periods, the price to the consumer has similarly been fairly stable. He has been almost entirely insulated from the fluctuations in the world price which can affect other foodstuffs so much. The precise mechanism by which this has been effected is very complicated and I will not go into it tonight, but it is sufficient to say that it has required periodic adjustments in the Sugar Board's rates of surcharge or distribution payment to offset the world price movement. Early in 1972 it was clear that the price to the consumer would, if no action were taken, rise appreciably. We have just renegotiated the prices to be paid for the sugar received under the Commonwealth Sugar Agreement for 1972, 1973 and 1974. These have remained unchanged for six years and a substantial increase was due. There had also been an increase in the price to be paid for beet from the 1972 crop, and the refiners' margin had also increased to an extent which reflected changes in their costs. All in all, it looked as if the range of ex-refinery prices announced for 1972 would have to be £92 to £102 a ton compared with £79 to £87 a ton in 1971—an increase at the midpoint of the range of nearly 17 per cent. The Government then, as now, were extremely concerned about the increase in the cost of living, and we decided at the beginning of March last year that it would be proper to make additional payments to the Sugar Board, to enable it to keep the price of sugar within the range of £82 to £92 a ton, which is a rise of slightly less than 5 per cent. at the mid-point. Subsequently, in recognition of the high prices which had prevailed in December, January and February, we were able to introduce an even lower range of £77 a ton to £87 a ton. In the event, the average price for the 13 months from the beginning of 1972 to 31st January 1973 was £88 per ton, or 6 per cent. above the mid-point of the 1971 range. Retail prices which had been as high as 10p to 10½p per 2 lb. packet in January and February 1972 came down to 8½p to 9p a packet. Our original intention when the subsidy was introduced was that it was a temporary measure to last no longer than the end of 1972. By then, however, we had introduced phase 1 of our prices and incomes policy. Moreover, prices had been high in the early months of 1972, and in order to achieve our target average for the whole year the subsidy was latterly running at about £15 per ton with an average ex-refinery price of about £83 per ton.I am trying to follow what the hon. Lady is saying. May I refer her to Statutory Instrument No. 307? This is, I assume, a distribution payment. Could she tell me why, at 17·02F, caramel, solid, is 0·50 whereas caramel, liquid, is 0·34? If the hon. Lady will turn over the page—[HON. MEMBERS: "Oh!"] Mr. Deputy Speaker, we are being asked to approve these orders and I am asking for information. The hon. Lady will give me the information if hon. Members will be a little less impetuous. Under the tariff heading 20·01 there is a reference to vegetables and fruit, and the figure against that is £0·17 per cwt. At the end of that section, however, there is the word "other". What is "other", to which the figure of £003 relates?
Those are the two questions I put to the hon. Lady: first, with reference to heading 1702F, caramel, solid and liquid, and the differential between them; and, second, with reference to heading 20·01 and the word "other", at a rate of £0·03.I recognise the hon. Gentleman's keen interest in the matter. As he raises a technical point which deserves a complex reply, I shall ensure that the reply is sent to him by letter.
I was saying that prices had been high in the early months of 1972, and in order to achieve our target average for the whole of 1972 the subsidy was latterly running at £15 per ton, and the average ex-refinery price at about £83. This represented a subsidy of about l½p on a 2 1b. packet of sugar. It would have been wrong during this period of severe restraint to have removed a subsidy of this size abruptly at the end of December. We therefore extended it till 31st January, and in consultation with the Community we were able to secure its continuance until 30th June on a reducing basis. The orders which we have debated reduce the rate of subsidy by £5 per ton and reflect the first step in this process of phasing out. Of itself, this increase will not have a significant effect on consumers. In formal terms, the increase is equivalent to a rise in the food index of 0·18 per cent., attributable in roughly equal proportions to sugar bought in shops and sugar used by food manufacturers. In practical terms, we buy about 1 lb. of sugar per head per week in the shops, and the increase represents no more than ¼p a pound. The effect is ½p for each of us once a fortnight, a figure which could be covered by giving up one cigarette a month or, say, one pint of bitter a year. The full effect of the removal of the subsidy will at the end of the phasing be three cigarettes a month or three pints of bitter a year, but it is relevant to remind the House that increases in pay are now possible under phase 2 of the counter-inflation policy. It is impossible to forecast the practical effect on the price of manufactured foods, but, as my hon. Friend the Member for Uxbridge said, in the case of many foods with high sugar content, such as chocolate and sugar confectionery, icecream and soft drinks, the removal of purchase tax and zero rating for VAT will far outweigh the effect of removing the subsidy. [Interruption.] Hon. Members should not assume that people do not eat chocolate and sugar confectionery, ice-cream and soft drinks in pretty large amounts. In any event, under the Counter-Inflation Act, before any manufacturer can increase his prices he must be able to show that the increase is justified in the light of his whole cost structure and not just in the light of an increase in the price of one of his raw materials. That would relate to manufactured items containing sugar. As hon. Members know, I am not sold on the idea of food subsidies. They are an indiscriminate benefit showered equally on the rich and on the poor, and they have many other disadvantages which I have no time to go into now. In our view, the proper course has been gradually to withdraw the sugar subsidy in line with the progress of our prices and incomes policy, and that is the purpose of these orders.11.25 p.m.
Nobody could ever accuse the Government of showering their blessings over rich and poor. Their blessings have been directed very much towards the rich and away from the poor since the Government came into power. We are getting a little sick of being told by Ministers every time we are confronted with an order increasing the price of food that the price will go up by only 0·18 per cent. or 0·2 per cent. or 0·25 per cent. If all those small amounts from the last few months are added up the increase becomes considerable. The Parliamentary Secretary cannot get away with the argument about giving up three cigarettes in a year, nor can she explain it by saying that the increase is more than offset by the abolition of SET. When the Government remove SET from prices they claim that it is a large amount. When an equivalent amount is added to prices they say that it is small.
There are two main reasons why we shall vote against the orders. One is the situation in which they are being brought forward. They have been introduced in the middle of the biggest explosion in prices the country has had since the war. The Minister's latest figure for increases in all prices since the beginning of the freeze was 5·4 per cent in mid-February. That represents an annual rate of increase of 23 per cent. I remember when the Leader of the House, a former Minister of Agriculture, attacked the Labour Government in June 1971 for allowing prices to rise 25 per cent in five years. Is it any wonder that we oppose measures
Division No. 95.]
| AYES
| [11.30 p.m.
|
| Allaun, Frank (Salford, E.) | Atkinson, Norman | Bishop. E. S. |
| Archer, Peter (Rowley Regis) | Barrett, Guy (Greenwich) | Booth, Albert |
| Armstrong, Ernest | Bennett, James (Glasgow, Brldgeton) | Bottomley, Rt. Hn. Arthur |
| Ashton, Joe | Bldwell, Sydney | Boyden, James (Bishop Auckland) |
which will increase the price of food at this time?
We also oppose the orders because they show an appalling weakness. There is no need for many of the orders the Government have been bringing forward. They moved on the beef guarantee, on bacon and now on sugar. We were supposed to be operating a transitional period lasting seven years. Instead, the Government have progressed to the end of 1977 within a matter of weeks just when the workers' wages have been frozen.
That is why we oppose the orders. We are also concerned with the effect on the Commonwealth countries. It is not good enough for the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) or the Minister to talk about assurances. We have not yet received those assurances from the Common Market.
We were told in the latest document that there was a firm assurance of a secure and continuing market. Is this assurance any firmer than aurà à coeur or the assurances given before? One of the Commissioners in the Common Market this week took the opportunity to deplore the fact that there were no Labour Members in the European Parliament fighting against high prices. Labour Members are here fighting against high prices and against the Government's policies—and voting. Considering the implication of these prices for Greenock, a reputed Liberal stronghold, we might have expected Liberal Members to be present tonight.
Those are the reasons why we are opposing the orders. It is an insult to the people of this country to be scrapping the system of support that we have used for foodstuffs. We have still not received from the Government assurances about the—
It being half-past Eleven o'clock, Mr. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 4 ( Statutory Instruments, &c. ( Procedure)).
The House divided: Ayes 158, Noes 182.
| Brown, Hugh D. (G'gow, Provan) | Hunter, Adam | O'Halloran, Michael |
| Buchan, Norman | Irvine, Rt. Hn. Sir Arthur (Edge Hill) | O'Malley, Brian |
| Campbell, I. (Dunbartonshire, W.) | Janner, Greville | Parker, John (Dagenham) |
| Castle, Rt. Hn. Barbara | Jay, Rt. Hn. Douglas | Parry, Robert (Liverpool, Exchange) |
| Clark, David (Colne Valley) | Jenkins, Rt. Hn. Roy (Stechford) | Pavitt, Laurie |
| Cocks, Michael (Bristol, S.) | John, Brynmor | Peart, Rt. Hn. Fred |
| Cohen, Stanley | Johnson, James (K'ston-on-Hull, W.) | Pendry, Tom |
| Coleman, Donald | Jones, Barry (Flint, E.) | Perry, Ernest G. |
| Concannon, J. D. | Jones, Rt.Hn.Sir Elwyn(W.Ham,S.) | Prentice, Rt. Hn. Reg. |
| Cox, Thomas (Wandsworth, C.) | Jones, T. Alec (Rhondda, W.) | Prescott, John |
| Crawshaw, Richard | Judd, Frank | price, William (Rugby) |
| Crossman, Rt. Hn. Richard | Kaufman, Gerald | Radice, Giles |
| Cunningham, Dr. J. A. (Whitehaven) | Kerr, Russell | Reed, D. (Sedgefield) |
| Dalyell, Tam | Kinnock, Neil | Rhodes, Geoffrey |
| Davies, G. Elfed (Rhondda, E.) | Lamborn, Harry | Roberts, Albert (Normanton) |
| Davies, lfor (Gower) | Lamond, James | Roberts, Rt.Hn.Goronwy(Caernarvon) |
| Davis, Clinton (Hackney, C.) | Latham, Arthur | Robertson, John (Paisley) |
| Davis, Terry (Bromsgrove) | Lestor, Miss Joan | Roderick, Caerwyn E.(Brc'n&R'dnor) |
| Deakins, Eric | Lewis, Ron (Carlisle) | Rodgers, William (Stockton-on-Tees) |
| Dell, Rt. Hn. Edmund | Lipton, Marcus | Roper, John |
| Demosey, James | Lomas, Kenneth | Ross, Rt. Hn. William (Kilmarnock) |
| Dormand, J. D. | Loughlin, Charles | Shore, Rt. Hn. Peter (Stepney) |
| Douglas-Mann, Bruce | Mabon, Dr. J. Dickson | Short, Rt.Hn.Edward (N'c'tle-u-Tyne) |
| Duffy, A. E. P. | McBride, Neil | Silkin, Hn. S. C. (Dulwich) |
| Edelman, Maurice | McCartney, Hugh | Sillars, James |
| Evans, Fred | McElhone, Frank | Silverman, Julius |
| Ewing, Harry | McGuire, Michael | Skinner, Dennis |
| Faulds, Andrew | Machin, George | Smith, John (Lanarkshire, N.) |
| Fernyh'ough, Rt. Hn. S. | Mackenzie, Gregor | Spearing, Nigel |
| Fitch, Alan (Wigan) | Mackie, John | Spriggs, Leslie |
| Fletcher, Ted (Darlington) | Maclennan, Robert | Stallard, A. W. |
| Foot, Michael | Mahon, Simon (Bootle) | Stewart, Rt. Hn. Michael (Fulham) |
| Ford, Ben | Mallalieu, J. P. W. (Huddersfield, E.) | Strong, Gavin |
| Freeson, Reginald | Marks, Kenneth | Tinn, James |
| Gilbert, Dr. John | Marquand, David | Torney, Tom |
| Golding, John | Marsden, F. | Tuck, Raphael |
| Grant, George (Morpeth) | Marshall, Dr. Edmund | Urwin, T. W. |
| Griffiths, Eddie (Brightside) | Mason, Rt. Hn. Roy | Varley, Eric G. |
| Hamilton, James (Bothwell) | Meacher, Michael | Wainwright, Edwin |
| Hamling, William | Mendelson, John | Watkins, David |
| Hannan, William (G'gow, Maryhill) | Millan, Bruce | Wellbeioved, James |
| Hardy, Peter | Milne, Edward | White, James (Glasgow, Pollok) |
| Harrison, Walter (Wakefield) | Mitchell, R. C. (S'hampton, ltchen) | Whitlock, William |
| Hattersley, Roy | Molloy, William | Wilson, Alexander (Hamilton) |
| Heffer, Eric S. | Morgan, Elystan (Cardiganshire) | Wilson, William (Coventry, S.) |
| Horam, John | Morris, Alfred (Wythenshawe) | Woof, Robert |
| Houghton, Rt. Hn. Douglas | Morris, Charles R. (Openshaw) | TELLERS FOR THE AYFS: |
| Howell, Denis (Small Heath) | Moyle, Roland | Mr. James A. Dunn and |
| Hughes, Robert (Aberdeen, N.) | Mulley, Rt. Hn. Frederick | Mr. Joseph Harper. |
| Hughes, Roy (Newport) | Oakes, Gordon |
NOES
| ||
| Adley, Robert | Cormack, Patrick | Griffiths, Eldon (Bury St. Edmunds) |
| Alison, Michael (Barkston Ash) | Crouch, David | Grylls, Michael |
| Astor, John | Crowder, F. P. | Gummer, J. Selwyn |
| Atkins, Humphrey | d'Avigdor-Goldsmid, Sir Henry | Hall, Miss Joan (Keighley) |
| Awdry, Daniel | Dean, Paul | Hall, John (Wycombe) |
| Baker, W. H. K. (Banff) | Deedes, Rt. Hn. W. F. | Hall-Davis, A. G. F. |
| Balniel, Rt. Hn. Lord | Dixon, Piers | Hannam, John (Exeter) |
| Batsford, Brian | Dodds-Parker Douglas | Harrison, Col. Sir Harwood (Eye) |
| Bell, Ronald | du Cann, Rt. Hn. Edward | Havers, Michael |
| Benyon, W. | Edwards, Nicholas (Pembroke) | Hawkins, Paul |
| Biffen, John | Elliot, Capt. Walter (Carshalton) | Hayhoe, Barney |
| Biggs-Davison, John | Elliott, R. W. (N'c'tle-upon-Tyne, N.) | Hiley, Joseph |
| Boardman, Tom (Leicester. S.W.) | Eyre, Reginald | Holland, Philip |
| Body, Richard | Fenner, Mrs. Peggy | Hornby, Richard |
| Boscawen, Hn. Robert | Fidler, Michael | Hornsby-Smith, Rt.Hn.Dame Patricia |
| Bray, Ronald | Finsberg, Geoffrey (Hampstead) | Howell, Ralph (Norfolk, N.) |
| Brewis, John | Fisher, Nigel (Surbiton) | Hunt, John |
| Brinton, Sir Tatton | Fletcher-Cooke, Charles | Jenkin, Patrick (Woodford) |
| Brocklebank-Fowler, Christopher | Fortescue, Tim | Jessel, Toby |
| Brown, Sir Edward (Bath) | Fowler, Norman | Jopling, Michael |
| Bryan, Sir Paul | Fox, Marcus | King, Evelyn (Dorset, S.) |
| Buck, Antony | Fry, Peter | King, Tom (Bridgwater) |
| Butler, Adam (Bosworth) | Gibson-Watt, David | Kinsey, J. R. |
| Campbell, Rt.Hn. G. (Moray & Nairn) | Gilmour, Sir John (Fife, E.) | Kirk, Peter |
| Carlisle, Mark | Godber, Rt. Hn. J. B. | Kitson, Timothy |
| Chapman, Sydney | Goodhart, Philip | Knight, Mrs. Jill |
| Chataway, Rt. Hn. Christopher | Goodhew, Victor | Knox, David |
| Chichester-Clark, R. | Gower, Raymond | Lamont, Norman |
| Churchill, W. S. | Grant, Anthony (Harrow, C.) | Lane, David |
| Clarke, Kenneth (Rushcliffe) | Gray, Hamish | Langford-Holt, Sir John |
| Clegg, Walter | Green, Alan | Le Merchant, Spencer |
| Cooke, Robert | Grieve, Percy | Lloyd, lan (P'tsm'th, Langstone) |
| Loveridge, John | Pounder, Rafton | Stuttaford, Or. Tom |
| Luce, R. N. | Powell, Rt. Hn. J. Enoch | Sutclitte, John |
| MacArthur, Ian | Prior, Rt. Hn. J. M. L. | Tapsell, Peter |
| McCrindle, R. A. | Proudfoot, Wilfred | Taylor, Sir Charles (Eastbourne) |
| McLaren, Martin | Pym, Rt. Hn. Francis | Taylor, Edward M. (G'gow,Cathcart) |
| McNair-Wilson, Patrick (New Forest) | Raison, Timothy | Taylor, Frank (Moss Side) |
| Maddan, Martin | Rawlinson, Rt. Hn. Sir Peter | Tebbit, Norman |
| Mather, Carol | Redmond, Robert | Thomas, John Stradling (Monmouth) |
| Mawby, Ray | Reed, Laurance (Bolton, E.) | Thompson, Sir Richard (Croydon, S.) |
| Maxwell-Hyslop, R. J. | Rhys Williams, Sir Brandon | Tilney, John |
| Meyer, Sir Anthony | Ridley, Hn. Nicholas | Trew, Peter |
| Mills, Peter (Torrington) | Roberts, Michael (Cardiff. N.) | Tugendhat, Christopher |
| Miscampbell, Norman | Rodgers, Sir John (Sevenoaks) | Waddington, David |
| Moate, Roger | Rost, Peter | Walder, David (Clitheroe) |
| Money, Ernie | Royle, Anthony | Walker-Smith, Rt. Hn. Sir Derek |
| Monks, Mrs. Connie | Russell, Sir Ronald | Wall, Patrick |
| Monro, Hector | Scott, Nicholas | Ward, Dame Irene |
| Montgomery, Fergus | Scott-Hopkins, James | Weatherill, Bernard |
| More, Jasper | Shaw, Michael (Sc'b'gh & Whitby) | Wiggin, Jerry |
| Morgan-Giles, Rear-Adm. | Shersby, Michael | Wilkinson, John |
| Morrison, Charles | Sinclair, Sir George | Winterton, Nicholas |
| Mudd, David | Skeet, T. H. H. | Wolrige-Gordon, Patrick |
| Neave, Airey | Smith, Dudley (W'wick & L'mington) | Woodhouse, Hn. Christopher |
| Nott, John | Soref, Harold | Worsley, Marcus |
| Oppenheim, Mrs. Sally | Speed, Keith | Wylie, Rt. Hn. N. R. |
| Owen, Idris (Stockport, N.) | Spence, John | Younger, Hn. George |
| Page, Rt. Hn. Graham (Crosby) | Sproat, lain | TELLERS FOR THE NOES: |
| Page, John (Harrow, W.) | Stanbrook, Ivor | Mr. Hugh Rossi and |
| Parkinson, Cecil | Steel, David | Mr. Oscar Murton. |
| Percival, Ian | Stewart, Donald (Western Isles) |
Question accordingly negatived.
ADJOURNMENT
Motion made, and Question proposed. That this House do now adjourn.— [ Mr. Humphrey Atkins.]
Driving Licences (Eyesightstandards)
11.40 p.m.
I wish to raise, at this rather late hour, the question of minimum eyesight requirements and the issue of driving licences. For the United Kingdom the regulations currently in force are to be found in SI. 1970/170, which lays down that a person may not be granted a licence unless he or she is able, with or without glasses, to read a registration mark fixed to a motor vehicle at a distance of 25 yards, assuming that the registration mark contains letters and figures 3½ inches high. This is virtually the same minimum requirement as in the original regulation, made in 1930, SR & TO 1930/938.
My first point to the Minister is that this minimum requirement in the United Kingdom is a very low standard of eyesight. The conditions would be met by a person with absolutely no vision in one eye and what the opticians call 6/15 vision—quite defective vision—in the other eye. It is by a long way the lowest eyesight standard laid down by any of the major nations for motorists. I want to quote one or two examples because they are significant. In Belgium drivers must not have less than the ability to read a number plate at 32 yards in each eye—not in one eye —with or without spectacles. In addition, checks are made of the eye movement, colour blindness and adaptation to glare. In France drivers must not have a vision standard of less than the ability to read a number plate at 53¼ yards in one eye and the ability to read a number plate at 6·6 yards in the other. If spectacles are prescribed for driving they must be worn. Checks are also made on night blindness, eye muscle balance, field of vision—this is sideways vision, which is very important in terms of accidents— and adaptation to glare. In Germany the standard is extremely high. Every driving licence applicant must undergo a sight test which checks the daytime sight in both eyes. The testing is done with the aid of a vision screener. Each eye has to have what is called 6/6 vision, which is the ability to read a number plate at 66·5 yards, and sideways vision must be normal in both eyes. Stereoscopic vision—the ability to perceive depth—must be normal. In Germany in 1970 there were 1·7 million applicants for a driving licence and more than 101,000 failed the sight test. In Italy drivers must have a standard of vision of not less than the ability to read a number plate at 53¼ yards in one eye and the ability to read a number plate at 25 yards in the other. In addition, there are checks on the sideways vision, night blindness and colour vision. In Portugal drivers must not have a standard of vision of less than the ability to read a number plate at 40 yards in one eye and the ability to read a number plate at 13·3 yards in the other. Here again, there are checks on the field of vision, colour blindness and stereopsis— depth perception. In Spain, if a potential driver has sight in one eye of less than the ability to read a number plate at 6·6 yards, the other eye must not have a standard of vision less than the ability to read a number plate at 53¼ yards. If spectacles are worn, the applicant must produce a medical certificate allowing spectacles to be worn during driving, and he must have a spare pair. Other visual checks are made. There must be no night blindness, there must be no diplopia— double vision—and the adaptation to glare must not exceed 70 seconds. In Sweden the standard of vision required is the ability in one eye to read a number plate at 47 yards and in the other eye the ability to read a number plate at 20 yards. If subsequently during his driving career a driver loses vision in his best eye to below 6/12—that is, his ability to read a number plate with his best eye falls below 32 yards, and that is not correctable by the use of spectacles, he is taken off the roads and prevented from driving. In Switzerland sight tests are given to each applicant before the driving test. It is significant that the sight test is performed by opticians using what is called a vision screener. A driver has to have an ability in one eye to read a number plate at 66·5 yards and an ability in the other to read a number plate at 53¼ yards. The Swiss are careful about the way in which they treat motorists. They do not permit them to drive with night blindness, with diplopia or with any major reduction of steropsis—that is, ability to see in three dimensions—any squinting or any diminution of the field of vision; and the applicant whose visual standard is adequate only with spectacles or contact lenses must wear them for driving and carry a spare pair. My final example is the United States of America. With a few minor exceptions, all States require an ability to read a number plate at 32 yards with both eyes. In addition, in 16 States sideways vision is checked, in four States colour blindness is checked and in 29 States perception of depth is tested. There are periodic vision tests in 40 States, and all States issue limited licences for anyone wearing spectacles. Why is this country the sole exception when others insist on such high standards before motorists are allowed to drive on the roads? The second feature that I wish to discuss is that even the pitifully low minimum standard laid down in the United Kingdom is not tested by qualified opticians. Furthermore, it is estimated that it is avoided by 300,000 vehicle licence holders now driving on our roads illegally. In 1972 the Optical Information Council made a check of 22,000 drivers. On its percentage calculations of those who failed the minimum test in the United Kingdom—a 2 per cent. sample— the council estimated that up to 300,000 drivers were driving illegally because they had less than what in effect was half vision. The director of the council remarked:presumably the driving instructor—"It needs a qualified optician to provide a dear old lady with glasses for knitting while another man"—
He suggested that there should be proper optical tests at three-year intervals. There are examples of avoidance that are interesting. At Whickham, near my constituency in Northumberland, an optician recently reported a case of a person, known to him as a registered blind person, who drove a motor vehicle with a licence. Another optician recently examined a patient who was unable to achieve one-sixth uncorrected vision—he was almost blind. The optician was astonished to find when he asked the patient what his job was that he was a driving examiner whose duties, inter alia, included certification of his pupils as having adequate eyesight within the current regulations. The OIC made a survey of coroners and road safety officials which showed that those with practical experience of road safety were mostly in favour of much more stringent testing of drivers. About two-thirds of the coroners did not approve of the Minister's proposed new licence proposals—I hope that this is noted—to extend a normal driving licence until the driver reached the age of 70 with a once-for-all fee of £5. They would like a more severe test than reading a number plate at 25 yards. Since this issue has been the subject of increased public debate in the last few weeks I have received some interesting, and in some cases tragic, letters. I received a letter from a gentleman in Hull, which I will pass to the Minister. He says:"with no qualifications can certify a driver fit enough to see to drive tons of metal on our roads at quite high speeds".
He said that he was driving an average of 75 miles a day. The letter continues:"I am 54 years of age and have been driving since 1937. About 14 months ago I noticed a deterioration in my eyesight."
He reports a subsequent medical history leading to an operation on one eye for cataracts in October last. He is now awaiting another operation on the other eye. He says:"Overtaking safely was next to impossible … driving at night in the face of oncoming traffic, even with the best of dimmed headlights, was the same as driving with my eyes shut for the lights to me were absolutely blinding."
I understand his problem. The only comment I make is that perhaps he is better out of that job than killing himself or someone else prematurely. It is amazing that he could have driven for so long with his eyesight in such a condition. I will refer to one other letter which was sent to the Minister for Transport Industries and of which I have a copy. It is dated 19th March and was written from Sidmouth, Devon, by a driver who says that he is not worried about his bad eyesight because he compensates for it by driving more slowly and being more attentive. He says:"I knew I was a danger on the road but I had to drive in my job … what could I do? Put myself off the road and out of work? … I am not proud of having driven at all with my eyesight in such a bad state but I appreciate the dilemma of the half-blind driver, especially when his livelihood depends on his driving."
This letter should be sent to the local police since it has a clear address and the sender is openly admitting to the Minister that he is so blind that he should not drive but does not care two hoots about the law and will decide for himself what he will do. This is not good enough, and it is typical of the attitude of so many motorists, that they will make up their minds whether they are safe to be on the roads. This troubled me deeply. I wrote to the Minister for Transport Industries. The Under-Secretary wrote a reply to me which I found rather misleading and somewhat apathetic. He said that:"The eyesight test demands that a licence plate be read at a minimum distance of 75 feet. I can only read the licence plate numbers at a distance of 10 feet and yet I have no trouble driving and have had the same vision for 10 years. I will not wear glasses."
It is fair for me to request that a much more extensive research programme be carried out by the Department before reaching any conclusion, favourable or otherwise, on that statement. The Minister says:"research studies have failed to establish any significant correlation between road accidents and vision defects among the driving population."
I have a letter from a constituent pleading with me, not that I have the power, to get her father off the road, because he is compensating for his grave eyesight deficiency by hogging the middle of the road. This lady says in her letter that he is a danger to himself and to the traffic in his way. He is compensating but creating a traffic hazard. The Minister concludes that:"it seems likely that drivers with defective vision compensate for their deficiency."
How does he know what the cost will be since I have never suggested what the frequency of the tests should be? I do not claim to know how frequent they should be. I merely suggest annual testing. Clearly, something is radically wrong, and something should be done. Why do we in the United Kingdom, alone among the civilised countries, allow these regulations? Why do we allow people who are half blind to drive? Why do we not check up on how many people are evading the law? When they are caught out—and they are occasionally— they often receive ridiculous fines, as in the case reported in The Times on 20th July 1971 when a Mr. Grimes, who could read a number plate at only 9 yards, caused an accident and was fined £10 and had his licence endorsed. Why does the United Kingdom have the lowest eyesight test for drivers of all the major motor driving nations? Are all the others wrong? Are they out of step? Are they stupidly bureaucratic? Or is it that we are too conservative in our Ministry to re-examine in depth the 1930 test in the light of traffic conditions in the 1970s? I do not pretend to know all the answers to this problem. But I suggest that I am on a strong point which is worth examination in depth and objectively. Pedestrians and other drivers need to be free from the threat of the half-blind drivers on our roads. Some of these half-blind drivers need protecting against themselves before they kill or maim either themselves or others. I hope for a more helpful comment from the Minister this evening than I have to date received in correspondence. I assure him that many of my hon. Friends, not that they are here at this time of night, have expressed deep interest in this question and will not let it rest until greater satisfaction is received on the matter."compulsory period eyesight tests for 17 million drivers would impose heavy costs on the community which could not be justified".
11.56 p.m.
I should like to start by congratulating the hon. Member for Newcastle-upon-Tyne, East (Mr. Rhodes) on raising this subject on the Adjournment this evening. It is a matter that he and a number of his hon. Friends have pursued.
I welcome the opportunity which the debate gives me to emphasise again the great efforts which are being made to reduce the heavy toll of casualties on our roads. It also gives me the opportunity, in one particular context, to explain why a measure which at first sight must appear sensible and attractive is not justi- fiable at all. I freely concede that when I first came to the Department a year ago I might have argued very much on the lines that the hon. Gentleman has done tonight. The hon. Gentleman will be aware that over the past five years both this Government and their predecessors have introduced a number of road safety measures. In 1967 the laws relating to drink and driving were introduced, the result of which was an immediate annual saving of 40,000 road casualties. More recently the present Government raised the minimum age for motor cyclists to 17, the same as that for cars, confident that this would achieve a substantial saving in fatal and serious injuries by discouraging the youngest and most vulnerable drivers from starting their driving careers on the vehicle which involves a greater risk. Further dramatic savings can be expected from the Government's large-scale campaign to encourage the wearing of seat belts. All these steps were taken as a result of a very careful consideration of the effort in manpower and money resources which they required. The question which has to be asked in relation to any proposals for changes in the procedures relating to eyesight testing is whether such proposals can be similarly justified— whether, in the current rather awful jargon they are cost-effective. The hon. Gentleman has outlined accurately the present arrangements. The statutory minimum eyesight requirement for drivers is the ability to read a clean six-figure number plate at a distance of 25 yards. It is an offence to drive when unable to meet the minimum standard of vision, and the police have powers to check the eyesight of any driver whom they have reason to suspect is driving with defective eyesight. Regarding the gentleman from Hull, I remind the hon. Gentleman that he signs a declaration on his driving licence application form every three years. As to the gentleman from Sidmouth, I will draw the attention of my right hon. Friend to what has been said. I have not seen that particular letter. At the moment there is no evidence, notwithstanding what the hon. Gentleman said, that there is a significant number of drivers who cannot meet the legal minimum requirement. As the hon. Gentleman rightly said, the ability of drivers to pass the eyesight test, which is a simple one, is checked by driving examiners as part of the driving test itself, and at each three-yearly renewal of licence the driver must state whether his eyesight is still up to the legal minimum standard. If the debate does nothing else, I hope that it will emphasise that point, because it is a proper declaration and I hope that people take it seriously. The hon. Gentleman voiced a number of criticisms against the present procedures, and there have been criticisms from the Association of Optical Practitioners, supported from time to time by other bodies such as the British School of Motoring and RoSPA. What do they recommend? They recommend that there should be a raising of the present minimum eyesight standards for drivers, and they say that there should be regular checks on drivers' eyesight. They demand not only higher standards of visual acuity but the inclusion of checks for all sorts of other visual characteristics, some of which the hon. Gentleman mentioned. They include field of view, muscle balance and colour vision. They back up their case by referring to some of their own tests carried out at motor shows and elsewhere over a number of years. These tests are alleged to have shown a high failure rate among members of the public who have taken them. This, of course, shows only that the standards used are higher than those on which the statutory eyesight test is based. It does not necessarily show that the statutory standard is too low. The Association of Optical Practitioners also claims that a small percentage of its sample—about 2 per cent.—would also have failed the statutory number plate test, and that is where the hon. Gentleman got his 300,000 figure. This, if true, says something about the problems of enforcing medical requirements, but nothing in itself about the need for higher standards. Some may even argue, although I should not, that unless these 2 per cent. are having accidents, which is not true, the current standard may be too high. Some searching questions were asked by the hon. Gentleman about the fact that a number of countries have a much stricter legal eyesight requirement than ours. As far as I am aware—I have done quite considerable researches into this— none of these foreign standards is based on scientific evidence; they originated from intuitive guesses as to what the standard should be, as I believe is fairly common in this field. Be that as it may, one of the tests, though not the only one, is whether they have a better road safety record than we have. Of all the countries which the hon. Gentleman listed, with the possible exception of Sweden whose accident record, by and large, is equivalent to ours, none has a better record. I am sure that it has not escaped the hon. Gentleman's notice that the EEC Commission has published a draft directive on the harmonisation of driver licensing legislation. This proposes periodic medical examination for drivers, with special emphasis on eyesight. We believe that these proposed medical requirements are excessive and unrealistic, and there would be a huge cost there which we do not think could be justified by the meagre prospect of accidents which they might save. Another criticism made by the hon. Gentleman, and by a number of people outside, is on the proposal to introduce driving licences which are valid until the 70th year, with the consequent loss of the three-yearly declaration of medical fitness by the driver on the renewal of his licence. I accept that there is some force in this criticism, and the hon. Gentleman mentioned the views of coroners, but I should point out that in place of the three-yearly declaration the new legislation would impose on drivers a statutory obligation to notify the Secretary of State of any change in their medical condition which is likely to affect their ability to drive safely. More than that, the Secretary of State will be given much more effective powers to investigate any alleged case of medical unfit-ness brought to his notice. But that is a matter that we can debate as and when the legislation comes before the House. The present statutory requirement has the great merit of being easily understood by drivers generally and of being simple and quick to administer by the police and by driving examiners. The driver himself can quickly check at any time whether there has been any significant deterioration in his eyesight, as presumably the gentleman in Sidmouth did. These are substantial advantages which we should not lightly abandon. They would be outweighed only by evidence that the present arrangements contributed noticeably to the toll of road casualties. Here we come to the nub of the debate. Is there any evidence that the changes in current practice recommended not only by the hon. Gentleman but by various organisations would be worth while in terms of the likely contribution to accident prevention? The main research on this subject was a large-scale study carried out in California between 1962 and 1966, during which more than 17,000 drivers were tested. I am told by the Transport and Road Research Laboratory that the test conditions and the way the tests were carried out were as near ideal as possible. The conclusion reached was that there is no correlation between poor performance in eyesight tests and a tendency to have accidents. To put it bluntly, drivers with very good eyesight are just as liable to have accidents as those with eyesight which meets only the lower standard we require. To most people this is a somewhat surprising result. One explanation is that driving habits change as vision deteriorates. As people get older there may be a compensating tendency, for example, to avoid night driving, but we do not know. Our own Transport and Road Research Laboratory keeps abreast of all the research in this field, and, indeed, is constantly in touch with the California tests and other tests. None of the subsequent research projects reports a significant correlation between defective eyesight and road accidents. The Government would look most carefully at any new research results or sug- gestions for new lines of research brought to their notice. I do not wish the hon. Gentleman to feel that we are complacent and have a completely closed mind on the subject. But I stress that it would have to be new research results or suggestions for new lines of research not currently being covered by our experts at TRRL. In the meantime, I believe that, unless we get this sort of information, research resources could be better employed in other areas which have a greater potential for accident prevention. It is estimated—again these figures are well correlated—that medical factors of any kind, including eyesight, contribute to less than 1 per cent. of road accidents. In view of this and the results of the relevant research studies to date, the Government take the view that higher eyesight standards and more elaborate testing procedures would produce no worthwhile casualty savings. They could exclude from driving large numbers of people who can, and do, in practice drive quite safely. Periodic checks, whether for 17 million drivers or for drivers over 40 as suggested by AOP, would be a wasteful use of resources in the light of the accident statistics. I began by referring to three or four road safety measures which have been, or are about to be, introduced and whose net benefits were confidently predicted. There is still much to be done, and many other ideas are under consideration within my Department and are being worked on by the TRRL, ideas which it is hoped will help to check the appalling annual slaughter on our roads. But we are determined first to concentrate on those measures where we are convinced that their inevitable cost and inconvenience are matched by a worthwhile saving of life and limb. Not to do so would be wasteful, and when resources are limited, no matter how much we would wish it otherwise, to be wasteful where safety of life is concerned would be inexcusable.Question put and agreed to.
Adjourned accordingly at nine minutes past Twelve o'clock.