asked the Secretary of State for Social Services what results she has so far received from her recent circular, designed to increase the number of kidneys available to transplant units.

No such circular has yet been issued by my Department. A guidance circular on the Human Tissue Act 1961 is due to be issued to National Health Service authorities on 12th June and this will be followed by a letter from the Chief Medical Officer to all hospital doctors which will stress the need for more kidneys for transplantation. I will send my hon. Friend a copy.

Following the delegation to the Department on 11th February, which included the Inner West London coroner, Dr. Thurston, and Professor Roy Calne, will my right hon. Friend confirm that in these circumstances there is no reason why surgeons or doctors should be reluctant to remove kidneys? Will the Government be sympathetic next Session to the introduction of a Bill contracting out along the lines of the Ten-Minute Bill which I introduced?

We have been considering the points raised by the delegation to the Minister of State to which my hon. Friend has referred and we shall be replying in detail very shortly. I stress that the effect of the circular which we are about to issue and of the Chief Medical Officer's letter should help us to get the increased donation and use of donated kidneys that we all want.

Will my right hon. Friend tell the House whether she has had any representations designed to increase the number of baboons available?

No.

Will my right hon. Friend bear in mind that there is increasing anxiety about kidney cases? To my knowledge, in the Northern Region there Is increasing anxiety about the lack of kidney machines both in hospitals and in the homes of patients. Will my right hon. Friend assure the House that her Department will evaluate the position and inform the House of what steps the Government might be able to take to remedy that side of the problem?

We keep the situation under review, and I share my hon. Friend's concern. We aim to double the present number of kidney transplants and to make a real attack on this problem. I shall give consideration to what my hon. Friend has asked.

asked the Secretary of State for Social Services if she will discuss the operation of the supplementary benefits appeal tribunals with the Supplementary Benefits Commission.

asked the Secretary of State for Social Services if she will discuss with the Supplementary Benefits Commission the operation of the supplementary appeals tribunal.

As my hon. Friends know, we hope shortly to receive Professor Bell's report on the operation of these tribunals, and it will, of course, be helpful in considering any suggested changes in the system to know the views of the Supplementary Benefits Commission on aspects which concern it.

Has my right hon. Friend received a copy of the report published the other day by the Child Poverty Action Group on its experience of taking complaints to the Council on Tribunals? If he has, will he agree that the quite appalling picture of delay and ineffectual follow-up which emerges in the report greatly strengthens the case for adding a further tier of independent adjudication to the present system?

I am aware of the document to which my hon. Friend has referred. It is best that we should consider all those matters in the context of the report which we expect to receive from Professor Bell on this subject.

Although I accept the Minister's claim that the supplementary benefit tribunals act in a very fair way, may I none the less ask him not to wait for the Bell Report before dealing with the very important matter of speeding up hearings before the appeal tribunals as this is a cause of considerable concern among a large number of claimants?

Any delays are of concern both to claimants and to my Department. It is essential that we should keep the length of waiting before a matter is considered as brief as possible. However, we expect to receive Professor Bell's report in the near future. In my view, it would be sensible to make a full examination of all these matters when we have received that report.

asked the Secretary of State for Social Services what plans she has for improving facilities for patients discharged from mental hospitals.

We believe that services for the mentally ill need to be jointly planned between the area health authorities and local authorities so as to link hospital and community care. We are doing everything we can to strengthen the work and effectiveness of the joint consultative committees.

I thank the hon. Gentleman for that reply. Is he aware, however, that there is growing concern throughout the country that community facilities are not developing as quickly as they will need to develop if the Government's policy of getting people out of hospitals is to be implemented? Is he aware that in one of the five hospitals in my constituency there are 160 patients awaiting discharge but that there is nowhere for them to go, and that in another hospital nearly 100 patients are in exactly the same position? From all over the country there is evidence that people are in hospitals who should not be there and that people are being discharged into unsuitable accommodation.

I am all too well aware of this. To some extent it is a reflection of the need to restrain public expenditure. Local authorities are doing their best to make facilities available, and they have done very well over the past few years. The possibilities for us now are to try to see whether we can make an arrangement of cross-financing between local authorities and health authorities, although it is very difficult.

Does my hon. Friend accept that many of the mentally ill and mentally handicapped patients in hospitals should not be there on clinical grounds, and that a far stronger initiative should be taken to devolve the responsibility for their care and maintenance on to the community, where it properly belongs? Can he assure the House that he will take energetic and positive steps in this direction?

I agree with my hon. Friend's analysis of the problem, one aspect of which is resources. There is also the problem that the health authorities are independent of the local authorities, which provide the personal social services. That is why to join them together and integrate their planning as much as possible is a high priority.

I think the Minister will accept that some of the evidence now coming forward is very disturbing. Does he realise that in Birmingham many ex-patients who have been discharged have simply been transferred to lodging houses, and in two cases to hotels, which are taking 50 or 60 ex-patients? Will he consider making an immediate review of community provision in this area?

We know the facts of the situation. The question is one of resources, although I agree that it is possible to be in so-called community care and to be extremely isolated. Therefore, there is still a case for the care and community feeling that can exist in psychiatric or mentally handicapped hospitals, although one of the problems is their size and isolation.

Is it not the case that a substantial minority of patients in mental hospitals could be discharged if they had somewhere to go and someone to care for them, and that it costs a great deal more to keep them in hospital than to assist both local authorities and private organisations, such as Guideposts, which want to care for them but do not have the money?

We are doing all we can to help voluntary organisations. This is one area in which we can with limited amounts of money undoubtedly produce considerable results. I shall certainly consider any specific proposals my hon. and learned Friend might put to me.

asked the Secretary of State for Social Services it she is aware that there is dissatisfaction in Mexborough and the surrounding districts at the conditions and lack of facilities at the casualty department at the Montagu Hospital; and if she will ensure that this department is improved as a matter of urgency.

The Rotherham Area Health Authority is considering with the Trent Regional Health Authority the report of an internal working party which they set up to consider the future of this department. The area health authority intends to consult the Barnsley and Doncaster Area Health Authorities and other local interests as soon as possible.

Can my hon. Friend say when we can have some results? Is he not aware that the hospital is surrounded by several collieries and other heavy industries, and that the conditions there are probably the worst in the country? The staff are extraordinary, doing their work in a box-like, so-called casualty department which is so small that it takes experts to manoeuvre trolleys. But for the staff, who are doing such an excellent job, there would be tremendous complaints from the public and from patients attending the casualty department.

I accept that the existing facilities are less than adequate. The hospital is not a designated accident and emergency centre, and it lacks back-up facilities, but medical staffing is also a problem with the hospital.

asked the Secretary of State for Social Services whether she will publish a Green Paper on a future programme for hospital building in England and Wales.

No, Sir. Hospital building is merely one facet in the development of health services. We hope to publish later this year a consultative document, which will provide background material for choosing priorities for the health and personal social services.

Will the Minister reconsider that reply? Is it not a fact that due to the cuts in public spending there are now likely to be substantial delays in hospital building which will affect, amongst others, the people in Mid-Sussex? Would it not be far better for area health authorities and regional health authorities to know where they stand in this matter, rather than for people to believe that there is a new hospital round the corner when there is not?

I very much agree with the hon. Gentleman that there is a need for more realism in the hospital building programme. I believe that we have to review the capital expenditure figures, as we have already done. But I am against looking at the hospital capital building programme in isolation from, for instance, the priorities we have just been discussing for mentally handicapped and mentally ill hospitals.

Mr. Raphael Tuck.

Hear, hear.

May I thank all hon. Members for the warm welcome home they have given me, and say how glad I am to be back home again.

Is my hon. Friend aware that at the Watford General Hospital there is a tremendous waiting list for operations, which is growing month by month? As the Government have not been able to implement the original plan to rebuild the hospital, will my hon. Friend at least consider providing an additional operating theatre, which would somewhat lighten the burden?

If my hon. Friend is right and an operating theatre would lighten the burden and reduce waiting lists, I hope that the area health authority will approach the regional health authority. For the first year ever, the Government have made available £5 million specially earmarked for the reduction of waiting lists, in the belief that such facilities as my hon. Friend described can do something considerable about waiting lists when we cannot build new hospitals.

Could the Minister produce an interim declaration of intent about vitally urgent hospital building? Is he aware that the radiotherapy unit at Queen Elizabeth Hospital in Birmingham daily constitutes a severe health hazard to patients and medical technicians, due to the cessation of development work in the hospital?

I think that the hon. Lady is not quite correct. I believe that because of stringent safety precautions taken in the hospital there is no threat, but the facilities in which those concerned operate are less than adequate. I am afraid that this is a fairly familiar picture. We have reviewed the expenditure implications for this year and next year. Regional health authorities are conducting a survey of all their hospital building programmes, and they hope before the end of the year to be able to present a plan on which we shall be able to make steady progress over the next few years.

May I draw my hon. Friend's attention to the need to explore some of the difficulties in the current hospital building programme, particularly as it relates to the Liverpool Teaching Hospital? Grave concern is being expressed because of the lack of information on the future of the hospital.

I shall gladly furnish my hon. Friend with details about that hospital building project. I share his concern. It is late, and it has been extremely expensive. It is one of the projects causing the most anxiety at present.

asked the Secretary of State for Social Services what is her policy towards the level of prescription charges.

Our policy is to phase out these charges as economic circumstances and the resources available for the health services permit, and we have already abolished prescription charges for women over 60 and for chilldren up to 16 years of age.

In view of the widespread concern shown in the previous questioning about the steady deterioration in hospital services, not least in the Chelmsford and Colchester districts, which concern the area that I represent, does the right hon. Lady agree that it is time she set her face firmly and finally against anything which will add to the starvation of resources from which the hospital service is now suffering? In the light of that starvation of resources, will she reconsider what she has just said and say that she has no intention of abolishing prescriptions charges and that she will review her policy about pay beds?

The answer to both those questions is "No. Sir." It is an integral part of our approach to the health service that it should be free at the point of use. People should be taxed in order to provide the services when they are healthy and not taxed or subjected to protion charges or anything else prescript when they are sick. That remains our policy. Only about 3 per cent. of the finances of the National Health Service comes from charges, so that even if we doubled them they would represent only a minute part of the budget that the National Health Service commands.

Will my right hon. Friend consider doing something for those who regularly receive prescriptions and have to pay the charges? Has she considered, for example, a diabetic person who might receive as many as seven individual prescriptions a week, which represents an immense burden on the average working man's budget? Cannot she do something to relieve the economic pressures in such circumstances?

It is because prescription charges weigh so heavily on the chronic sick that we are pledged progressively to phase them out. In the meantime I remind my hon. Friend of the prepayment certificate scheme which exists precisely to help people who have to incur a steady and continuing high expenditure on drugs. A certificate costs an average of about 1p a day. I suggest to my hon. Friend that he should draw this to the attention of the person he has in mind.

Does the right hon. Lady accept that the amount of money derived from prescription charges is not the main point? The real point is that the imposition of prescription charges helps to save an enormous amount of waste in the prescribing of drugs which are not always needed.

I do not accept that the levying of a charge at a level which any hon. Member would consider acceptable would have that kind of disincentive effect. Responsibility for prescribing wisely but economically rests with the general practitioner.

asked the Secretary of State for Social Services if she will make a statement on the priorities of her Department in the issue of free behind-the-car hearing aids.

As my hon. Friend will be aware, present priority groups include mothers with young children, people with additional handicaps or an exceptional medical need. By the end of April over 12,000 of the new aids had been issued to these groups. As regards future priorities, consultations are still not yet complete but my right hon. Friends the Secretaries of State for Scotland and Wales and I intend jointly to make a statement shortly.

Will my hon. Friend give due regard to the representations which have been made by the Scottish TUC, by myself and by at least one of my constituents that due priority be given to workers who require these behind-the-ear hearing aids for health, safety and efficiency at work? At present, workers who require such aids have to buy and maintain them at considerable personal expense.

We are still consulting the health service authorities. We have consulted the relevant professional and voluntary organisations. I cannot say who will be in the next priority groups, but it seems eminently likely to me that people in employment and those receiving education will be given a very high priority.

Is it correct to say that the Minister's priorities include not only hearing aids but the need to look at the delays in the provision of other aids, particularly for children, as was cited in a case yesterday? In that case a two-year-old child has had to wait for over a year for an appliance to assist him to walk. Will the Minister look into these delays? They are disastrous in some parts of the country, particularly for small children.

The hon. Member has raised an entirely different matter. She is referring to orthopaedic appliances. I was dealing in my reply with the new behind-the-ear hearing aid. I have, however, noted her point and I am making detailed inquiries.

Will my hon. Friend explain to my hon. Friend the Member for West Stirlingshire (Mr. Canavan) that he came to the Hamilton constituency not so long ago to open the only factory in Scotland which manufactures these much-improved hearing aids? Will he ensure that the hearing aid centres in Britain are allowed to move as fast as their capabilities permit on the question of the priority groups?

I am grateful to my hon. Friend for making that point, and I pay tribute to his constituents who produce the new cosmetic hearing aid for the National Health Service. My hon. Friend has raised an extremely important point. It is likely that some hearing aid centres will be able to move more quickly than others in dealing with priority groups. I shall see that all our resources are used to the best possible effect.

asked the Secretary of State for Social Services what she estimates to be the element of subsidy involved in the training of doctors within the NHS who subsequently practise in the private sector.

The current identifiable revenue cost of training a doctor to qualification is about £28,000 of which rather more than half is for training in the medical school as distinct from the NHS. The capital cost of providing a new medical school place is about £12,500, not counting the NHS hospital facilities. Training within the NHS continues after qualification, but the cost is difficult to identify: it depends on how long training continues, and at this stage the doctor is providing services.

Does my right hon. Friend accept that on the basis of those staggering figures those who argue for an extension of private practice, on the whole to benefit the better-off, should admit honestly that it would involve an enormous hidden subsidy from the NHS in terms of the contribution of the ordinary taxpayer?

The figures certainly justify our determination to put first and foremost the strengthening and the interests of the National Health Service rather than of private practice. They indicate how much on health matters we are as a society interdependent, and we should behave with a consciousness of that fact.

Does the Secretary of State accept that the most serious loss to this country is not from doctors going into private medicine but from doctors emigrating? What does she intend to do to encourage doctors to stay in this country?

I am surprised that the hon. Member is so anxious to expose the lack of patriotism among certain doctors. That is a matter on which I should have thought he would do better to keep quiet and instead call on doctors to discharge the debt they owe to this country in terms of the training it has given them.

Does my right hon. Friend realise that the Secretary of the BMA has said that the Common Market will be a device to remove the shackles of the National Health Service from doctors in this country? Will she resist any attempt to make easier the movement of doctors throughout the Common Market, thus preventing doctors going into private practice in other Common Market countries on the basis of greed instead of need until there is established throughout the EEC the sort of National Health Service that exists in Britain?

I am aware of the statement by the Secretary of the BMA. However, I must inform my hon. Friend that under the free movement of labour and the free right of establishment provisions of the Treaty of Rome, a directive allow- ing the free movement of doctors has already been agreed.

Will the Secretary of State accept that her argument cannot logically apply only to doctors? The end of the road must be that every graduate who at any time has had public help with his education must work for the State. Is that not a ludicrous proposition?

Of course the hon. Gentleman is right that any question of, for instance, forced recovery of training fees would raise far-reaching principles and would affect not only the medical profession. Nevertheless, it is worth bringing into the light of day the sort of figures I have given this afternoon in the hope of inculcating a sense of debt towards one's country.

asked the Secretary of State for Social Services whether she will list those professions in the health and social services whose remuneration is determined as a result of recommendations of a review body rather than by collective bargaining.

The independent Doctors' and Dentists' Review Body advises the Prime Minister on the remuneration of doctors and dentists taking any part in the National Health Service.

Does the right hon. Lady recall the comments she made when the doctors' settlement—which for family doctors was over 38 per cent.—was announced? Does she recognise that, in saying that when collective bargaining does not occur the social contract cannot apply, she makes a gaping hole in the Government's pay policy by applying no restraint to those professions which are the subject of review bodies, which is grossly unfair to those who settle within the social contract?

It has always been the policy, certainly of the present Government, not to operate any incomes policy, voluntary or otherwise, at the expense purely of the public sector. That is the point, and it is on that basis that the principle of fair comparison has always guided the review bodies which have fixed the remuneration of doctors and dentists and, indeed, of other groups in our society. That is a fair principle. Where there is no free collective bargaining, as with doctors and dentists, there must be some criterion, and the criterion is the movement of wages and salaries in outside industry.

Does my right hon. Friend recognise that there are some areas within the National Health Service in which collective bargaining operates and that the fact that we have needed to appoint review bodies is symptomatic of the need for the total review of the Whitley Council machinery, which although it served us well in the past is today perhaps not the most appropriate form of collective bargaining?

I am well aware of the point of view expressed by my hon. Friend. Indeed, I expressed it myself following, for instance, the difficulty we had over nurses' pay last year. It was revealed that nurses had fallen badly behind under the Whitley machinery and, therefore, the Prime Minister set up the special ad hoc Halsbury Review Body to bring nurses' pay into line. That was followed by other ad hoc reviews for other groups in the National Health Service. At that time I said that I was only too willing to consider the Whitley Council machinery, and, indeed, I have already set that operation on foot. I have invited the staff representatives concerned to let me have their ideas on how they think the machinery might be improved. I met the general purposes committee of the general Whitley Council as recently as 28th May but I made clear that it is for the staff to decide on the nature of the representative and negotiating machinery they want and that it is not for me to impose changes from above.

Has the Secretary of State any idea of the catastrophic situation that is developing in some schools where for identical work school nurses without health visitors' certificates are earning up to £1,000 a year less than is earned by school nurses with health visitors' certificates? Is the right hon. Lady aware that this anomaly is caused by the failure of the negotiating machinery, and will she take steps to do something about it right away?

I repeat that first and foremost it is a matter for the staff repre- sentatives to initiate changes to improve the negotiating machinery. I am perfectly receptive to considering any changes. That is why I have invited consideration of the whole Whitley Council machinery. I have appointed Dr. McCarthy, a Fellow of Nuffield College, Oxford, on a part-time basis as my adviser on industrial relations. He is helping us with the review of the Whitley machinery, but the initiative must come from the staff.

asked the Secretary of State for Social Services how many mineworkers are drawing social security benefits in respect of pneumoconiosis, emphysema and bronchitis, respectively.

The latest estimate is that about 38,000 people are receiving benefit for pneumoconiosis attributed to mining. Comparable figures are not available for emphysema or bronchitis.

Is it not important that the Minister should obtain the figures for emphysema and bronchitis, because with the pneumoconiosis figures they would indicate the true cost of getting coal? Is it not time that he took steps to prescribe emphysema and bronchitis as industrial diseases, not only for mine workers but also for pottery workers, foundrymen and slate workers?

I understand that some studies indicate that miners suffer more from bronchitis and emphysema than does the population as a whole. However, many factors other than occupation are involved. For example, testimony of the link with occupation is not significant enough to satisfy the prescription conditions.

Is the right hon. Gentleman aware of the great and continuing dissatisfaction among slate-quarrying communities about the use of radiographic evidence in assessment for benefit? Will he institute an inquiry into this matter? I am aware that there was an inquiry in 1973, but there is now need for a new inquiry into the way assessment is made for benefit.

Part of the hon. Gentleman's supplementary question hardly arises out of this Question. As I come from a coal mining area, I fully understand and appreciate the strong views which are held in mining areas on the subject raised in the Question. The difficulty is that before one can prescribe a disease as an industrial disease attracting benefit under the Industrial Injuries Scheme, one has to have significant evidence of a direct link between the occupation and the disease. Unsatisfactory though it may be in mining areas, the situation is that at this time the evidence does not provide precisely the link that is required before prescription can be made.

Does my right hon. Friend accept that many Government supporters with long connections with the mining industry have long been concerned about the high incidence of emphysema and bronchitis? Will he press his right hon. Friend the Secretary of State to authorise an investigation into the connection between these two diseases and mining with a view to listing the two diseases?

I know that there is strong feeling on this matter among Government supporters, of which I am one, and my hon. Friend is right in saying that there is need for detailed studies. Studies on bronchitis and emphysema have been and are being conducted in the mining industry, and my Department's advisers are keeping a close watch on all those studies.

asked the Secretary of State for Social Services when next she proposes to meet Health and Social Services Ministers in the other EEC countries.

I hope to do so as opportunity offers in the course of Community business or otherwise.

Will the right hon. Lady take specific steps to exchange information with the other eight members of the EEC so that we can discover from them their great advances and disclose to them some of our benefits? We know how much this country needs help, and the EEC would benefit from our experience.

I agree with the hon. Lady that the EEC needs some of our policies, notably in the health service sphere, because there is no complete coverage of health service provision in the Community countries, as there is here. That is why I have already in past months been exchanging information with these countries. For instance, in November I went to Bonn to sign a reciprocal health agreement with the Federal Republic of Germany which is designed to give our self-employed when they visit the Federal Republic the same kind of health treatment that the self-employed from that country get when they come here. Therefore, I agree that it is important that we should learn from each other. While I was in Bonn, I was glad to study the many advances which the Social Democratic Government of the Federal Republic had made in the social security sector, and they were interested to share in our advances.

Is the right hon. Lady satisfied with the equality of the reciprocal arrangements made for United Kingdom citizens and citizens of member States? Will she tell the House in which countries the position is not equal for citizens of the United Kingdom and what she proposes to do about it?

The hon. Lady has mentioned a very wide area indeed. We have reciprocal arrangements under the EEC regulations over a considerable area, but there are gaps to which I have referred, notably concerning non-employed and self-employed persons. These categories get far more comprehensive and automatic coverage under our health service and social security system than in the Community. We have signed a health agreement with Denmark and we are waiting for the agreement which I signed with Bonn to be ratified shortly.

Is my right hon. Friend aware that we get greater value at less cost from the health and social services of this country than is obtained in any other country in the world, including the other EEC countries? Will she show those countries how they can reach our high standards?

I think my hon. Friend is right in saying that we get greater value for money from our expenditure on health care in this country, thanks to the existence of our comprehensive and centrally administered, organised and planned health service. Certainly there is a marked difference in this respect between the United Kingdom and the United States, which I visited recently.

asked the Secretary of State for Social Services if she will list the bodies which have made representations to her about the labelling and the sterilisation of bonemeal.

The only representations my Department has received in 1974 and 1975 are from the Housewives' Trust.

Is my hon. Friend aware that since the death of one of my constituents last year from anthrax, after handling an ordinary packet of bonemeal bought in the shops, his Department and the Ministry of Agriculture, Fisheries and Food have been extremely dilatory in taking more appropriate measures to ensure that this sort of thing does not happen again? Has my hon. Friend ever seen the warning notices on packets of unsterilised bonemeal? Short of a complete ban on the sale of bonemeal, will he take steps to ensure that the warning notices are immediately made very much larger?

As my hon. Friend knows, I share his concern. As a result of the tragic death of one of his constituents I asked the Ministry of Agriculture, Fisheries and Food and my Department to set up a working group to consider this matter. The working group has met twice and it has asked about the experience of other European countries. It has not had replies to all the questionnaires, but some countries require sterilisation of bonemeal. I agree with my hon. Friend that this is an issue that must be seriously considered.

asked the Secretary of State for Social Services if she has any plans for obtaining additional finance for the NHS.

Plans for the NHS will be carefully reassessed in the 1975 public expenditure review, in which our aim will be to ensure in the light of the latest assessment of economic prospects that the most essential needs are met as far as possible. As I told the House on 2nd December last, additional sums have been provided in 1975–76 in order to restore some of the cuts made by the previous Government. Planned expenditure will be about 4 per cent. higher in real terms than in 1974–75.

Is the right hon. Lady aware that she is cutting the income of the National Health Service at a stroke by £50 million by banning pay beds? Does she not realise that there is a need for extra finance for the health service and that it is not likely to come from the Exchequer? Will she investigate a scheme for making a modest charge for all hospital beds for those who can afford it or for those who have insurance? Does she agree that this would bring in the extra money which is so desperately needed for the service?

The hon. Gentleman is quite wrong in what he has said about pay beds. We are making up to 4,000 additional hospital beds available for National Health Service patients. That is a very good return for the loss of the pay bed revenue, which has never completely economically covered the cost.

Will my right hon. Friend accept my advice that if she is looking for extra finance for the National Health Service, as we all are, she can start by selling the monstrosities that we have in Scotland at Holy Loch—namely, the Polaris submarines—so that she will have enough money for National Health Service centres?

I am well aware of my hon. Friend's views on that matter. Of course, the Government have reviewed defence expenditure and have included it in the public expenditure reductions and restraints that we have had to make. It is a question of balancing all the different demands in our society for all the forms of expenditure that we could all press to see increased. I have noticed how very often Conservative Members are in favour of public expenditure cuts in general but are in favour of public expenditure increases on every political item.

Is not my hon. Friend the Member for Surrey, North-West (Mr. Grylls) correct? Given a situation in which the National Health Service is desperately short of resources, how can the right hon. Lady justify throwing away millions of pounds by abolishing pay beds? How does she reconcile her policy with the calls from her Cabinet colleagues for cuts in public expenditure?

And how can the hon. Gentleman possibly describe a policy which makes available up to 4,000 more beds for National Health Service patients as the throwing away of millions of pounds? Indeed, in the letter which has gone out from my Department to the regional health authorities about the reduction of pay bed authorisations through the under-utilisation exercise, we are asking the authorities to bear in mind in their future spending plans that these additional beds will be available. We are asking them to let us know how they intend to use them in the interests of the National Health Service.

asked the Prime Minister when he next plans to meet the EEC Heads of Government.

Arrangements are being made for a meeting of Heads of Community Governments in Brussels on 16th–17th July.

At that meeting in July, how does the Prime Minister hope to convince his European counterparts of his intention to play a full and constructive part in Community policies when at least three of his Secretaries of State most directly involved—namely, those of Trade, Energy and Industry—have made public their hostility to the Community? Surely, for the right hon. Gentleman's Government to be credible in Europe at least the pack needs to be shuffled and re-dealt.

Unfortunately for the arguments of the hon. Gentleman, which describes a situation which ended last Thursday, the Heads of Government of the Community countries do not agree with his assessment of the position in this country. I think they have got it rather more clear in their minds than he has in his.

Will my right hon. Friend raise with the French President the question of his recent speech in which he advocated a two-tier structure in the EEC, echoing the comments of ex-Chancellor Brandt? What is the Government's attitude to this policy line of the French President? Will my right hon. Friend say that he is opposed to it?

I have made clear all along that decisions are taken in the EEC at the Council of Ministers or at Heads of Government summits. There are no two-tier arrangements. Should the question of any speech of a Head of Government appear on the agenda, I shall make appropriate comments on it.

When the Prime Minister next meets the EEC Heads of Government, will he confer with them about how they have been able to reduce the rate of inflation in their countries, whereas under this Government the value of the Wilson pound in the pocket has fallen faster than ever before and is now worth less than 80p in the pound?

Yes, Sir, and I think they will probably tell me that they do not have Oppositions which put forward inflationary policies every day of the week.

Is it not more likely that they will tell the Prime Minister that they have effective Heads of Government who can take action?

No, Sir. If I were to press them further, as the right hon. Lady suggests, they would say first that unemployment had risen a great deal more in their countries than in ours and that the level of national production had fallen more in the world depression than in this country. They would also note that the policies of the right hon. Lady are directed to more unemployment.

asked the Prime Minister what recent discussions he has had with the Heads of Government of EEC countries.

The last meeting of EEC Heads of Government was in March, but I met most of them at the ministerial meeting of the North Atlantic Council in Brussels on 29th and 30th May. This meeting enabled members of the Alliance to reaffirm convincingly their commitment to NATO. We had a valuable discussion on a wide range of current issues. My visit also provided a welcome opportunity for bilateral talks with a number of allied leaders. Copies of the communiqué issued after the meeting had been placed in the Library of the House.

Turning perhaps a little more to the future, is not the Prime Minister dismissing all too airily the need, after last Thursday's vote, to reassure our European partners of our determination to play a full part in Europe? Is it not desirable that we should now be encouraging British firms to invest in Europe and vice versa? How can three of his Secretaries of State—who were, to say the least, unenthusiastic about the policy endorsed by the British people—continue to play a leading part in the Labour administration? Does not this indicate that the Prime Minister is seeking to placate the Left in his party rather than to reassure our friends in Europe about our future intentions?

To take the serious parts of what the hon. Gentleman put before the House—namely, the first two of his three points—it is certainly the fact, as I emphasised yesterday, that we intend to play a very full part in the co-operation within the Community, and we are strengthened in so doing by the historic vote last Thursday.

I referred to the question of investment in a statement on Saturday to the Nottinghamshire miners and I referred to that matter again yeserday in the House. I agree that it is a serious point, and there will be a two-way investment process. We look forward to a great increase in investment in this country by the EEC and by third country investors.

So that Europe may now expand and not stagnate, will my right hon. Friend take up, if he has not already done so, with the other EEC Heads of Government the question of the admission of Portugal to the EEC, since that is the expressed wish of the democratic parties of Europe and would be the best protection for the Portuguese people against totalitarianism on the Left or on the Right?

When my hon. Friend refers to stagnation in Europe, I would remind him that the stagnation in industry has occurred more seriously across the Channel than here. This is due to the biggest world depression—a depression caused largely by the oil crisis—since the 1930s. We are discussing within Europe and more widely how we can act internationally to deal with these questions.

Will the Prime Minister confirm that at his previous meetings with Heads of Government his reservations about direct elections to the European Parliament were related solely to the fact that at that time the referendum had not taken place, and that the Government have no other reservations on this question?

I dealt with this question yesterday and intimated that while the Parliamentary Labour Party had reservations about membership of the European Assembly, that is now over and the matter will be decided very quickly by a democratic vote of the Parliamentary Labour Party, as I made clear yesterday.

The question of direct elections is an entirely separate matter and must be considered. I was interested in the remarks of the hon. Member for Saffron Walden (Mr. Kirk), who leads the Conservative delegation to the European Parliament, in his broadcast this morning, but this will be a matter for the House as a whole to decide.

asked the Prime Minister if the group of Commonwealth experts examining the proposals for a general agreement on commodities have yet reported.

The group of Commonwealth experts have not yet reported. They are meeting for the first time today. They are expected to submit an interim report in time for a meeting of Commonwealth Ministers in August.

Is my right hon. Friend aware that there is a widespread welcome for the initiative in the communiqué to transfer real resources from the developed to the developing countries by international co-operation in trade and in primary commodities? Since, despite our present difficulties, we have remained one of the richest nations in the world, will he be assured that Labour Members will give widespread support for this type of programme? With which other international groups is he pursuing such initiatives on commodities?

I am grateful to my hon. Friend. As he knows, this initiative was warmly welcomed by the Commonwealth and has been referred to the study group to which I referred in my main answer. It has also been warmly welcomed by the United States, and particularly by the United States Secretary of State. The French and other Governments have given it a fair wind and it has been warmly received by the OECD. This is an important initiative—indeed, one of the most important for a very long time—in terms of world trade and the relations between developed and developing countries. I hope that before long there will be a chance to debate the matter in the House. I hope that we shall get a similarly warm reception from the Opposition in favour of a scheme which has been so widely adopted and supported throughout the world.

Is not the new economic international order, with its galaxy of commodity agreements to which the Prime Miinster committed this country in Jamaica, far more far-reaching in its economic effects on the United Kingdom than anything the Commonwealth is likely to do? How soon will the House have the chance to discuss this matter in detail?

The hon. Gentleman is right to say that the matter is of fundamental importance. It is important to us as consumers of imported commodities because we have not gained any more than have the primary countries from boom and bust in commodity affairs. This is a very important matter for this country, but I hope the hon. Gentleman will recognise that this initiative has been warmly supported by advanced as well as by developing countries.

asked the Prime Minister if he will make a statement on the result of the Common Market referendum.

I did so yesterday, Sir.

Will the Prime Minister re-emphasise that the referendum was on Common Market membership only and that the result cannot in any way be interpreted as a victory for certain minority factions who are now demanding various insane policies—such as coalition, a statutory wage freeze and separatism—as well as conducting a disgraceful witch-hunt against some of our most successful Socialist Ministers simply because they were anti-Market?

I am happy to find myself in agreement with my hon. Friend. The ballot paper which I completed, after due consideration and study of the arguments and speeches, including my own, contained a simple question requiring a "Yes" or "No" to our remaining in the Common Market. That was all the country voted on. Those who have read into it other things are quite wrong, although my hon. Friend might be forgiven a little for taking the view that it was repudiation of one very noisy faction north of the border.

In view of the fact that reference has been made to separatism, will the Prime Minister agree that many people in Scotland seek separate representation for the people of Scotland in any European body since it will affect the welfare of the Scottish people? Will he accept that in the absence of a head of Government of Scotland, the people regard him, at least on a pro tem basis, as the head of such a Government? Will he therefore concede the policy of the Scottish National Party involving direct representation by the people of Scotland in Europe?

Flattery will get the hon. Lady nowhere, but I am happy to feel that I made two speeches, in Aberdeen and Glasgow—

Not many came, Harold.

It seemed to me that the general vote in Scotland was in favour of what I was advocating there. With regard to separatism, the hon. Lady will be aware—and I am surprised she has not made more of the point—that two Scottish regions voted against membership. However, it seems to me—and others take this view—that this was more a repudiation of the desire to be linked with an independent Scotland than with anybody else.

Come up to Stornoway.

Now that the referendum is over, when can we expect the Prime Minister and the Government to take action to deal with our serious economic situation? Does the Prime Minister appreciate that it is a question not only of replacing those Ministers whose attitude towards the EEC was a contrary one but of their competence in dealing with these economic matters? Does he agree with the Home Secretary that it is difficult to understand how the Secretary of State for Industry can be taken seriously as a Minister dealing with economic affairs?

As to the last part of that question, I am sure that the hon. Gentleman would not wish to become more of a bore than the Almighty originally made him.

With regard to the serious part of the hon. Gentleman's question—I always try to deal with the serious parts of these matters—this action is going on all the time. He will know that it was fully set out by the Chancellor and myself in a recent economic affairs debate. If he was present on that occasion, as I think he was, he knows that not a scintilla of a new policy emerged from the Opposition Front Bench on that occasion.

In view of the decisive referendum result and the probability that the Parliamentary Labour Party might take a reasonable decision and agree to full and enthusiastic participation in the European Parliament, will my right hon. Friend ensure that mercy is tempered with justice by arranging for a fair proportion of ex-anti-Marketeers to be consigned to the European Parliament?

I am not quite sure about the use of the word "consigned". I said yesterday that I hoped there would be a decision now so that the House could be fully represented at the Assembly. I also expressed our hope that those responsible for the selection of Members would ensure that they represented all points of view. Yesterday I paid a tribute to the Conservative Party. In selecting its representatives, the Conservative Party did not confine itself to those who were wholeheartedly in favour of membership of the Community.

In view of the desire of the Prime Minister for the people of Wales and Scotland to play a constructive part within the EEC, will he say specifically what steps he intends taking to give Wales and Scotland representation on bodies within the EEC, such as the Commission, the European Parliament and the Economic and Social Committee?

I am not quite sure what the hon. Gentleman means when he refers to these institutions, the Commission or other bodies. If he refers to the Assembly, these are obviously matters which must be considered. I want that body to be representative of the House as a whole. We must take account of the fact that the membership of the House as elected is very largely distributed between the two major parties, which must be adequately represented.

I beg to move Amendment No. 69, in page 18, line 37, at end insert—

'(c) after subsection (1) there shall be added the following subsection:—

"(1A) If the claimant is liable to Class 2 and Class 4 contributions under the Social Security Act 1973, the deduction to be allowed under this section shall be increased by an amount equal to income tax at the standard rate on that part of his contributions which corresponds to the contribution payable by an employer in respect of an employed earner."'.

With this we may also discuss the following amendments:

This group of amendments gives the Committee an opportunity to discuss certain policies of the Government which have caused widespread resentment throughout the country amongst the many people who are self-employed and work for themselves and, hopefully, an opportunity to do something to correct the injustice from which these people now suffer. I refer to the large and increasingly intolerable burdens that the Government have been heaping, in a way that can only be described as vindictive, on all those who work for themselves and make up the self-employed.

The Committee ought to acknowledge that the self-employed represent an important section of our community—about 2 million people—and, what is more, a dynamic section from whose endeavours new businesses, jobs and prosperity can, and often do, grow, even in these hard times.

The entire concept of individual enterprise does not, and never will, fit easily into the kind of Socialist society to which this Government are committed. That is why the self-employed—those who run the small businesses of this country and employ about 6 million people or a quarter of our work force—are, and feel themselves to be, facing a combination of burdens which they regard as profoundly unfair: hugely increased local government business rates, increased income and corporation taxes, high interest rates, capital transfer tax and the prospect of a wealth tax. They also see a particular injustice in the decision by the Government to extract from them, in the form of national insurance contributions, a further £21 million, apparently for no benefit whatsoever.

In the many debates that we have had on this subject, both sides of the Committee have recognised—I have always made this clear—that improvements in pensions have to be paid for. So have improvements in other social benefits. Each class in the community must pay its fair share for those improvements. Even so, we must recognise that the self-employed are not eligible for unemployment benefit, industrial injury benefit, redundancy payments, graduated pensions or earnings-related benefits of various kinds.

In order to pay for the whole structure of social security benefits, with pensions taking the lion's share, the Conservative Government designed and introduced the principle of earnings-related contributions to the basic cost. We proposed, as was right, that the self-employed should play their part in paying those earnings-related contributions. The proposals that we put forward, which were placed on the statute book in the Social Security Act 1973, were, as we believed, fair and sensible. They were new. They would have aroused some misunderstanding and anxiety even if they had come into force in that form, but they represented our best judgment of what was a fair and sensible way of distributing the burden of paying for improved benefits.

We proposed that the self-employed above a certain income limit should pay a contribution related to their earnings at the rate of 5 per cent. on a specified band. This Government have made a substantial swingeing increase in that percentage rate of contribution by raising it from 5 per cent. to 8 per cent. The important point for the purpose of this debate is that that contribution is not tax-deductible. No part of the 8 per cent. contribution payable by the self-employed can be offset against tax liability.

The effect on the figures now on the statute book is that every self-employed person with an income at or above £69 a week will be obliged to pay for this year a lump sum of £160 on top of his Schedule D liability—in other words, on top of his liability to pay income tax. As no tax relief is available, in order to raise the £160 each self-employed with an income above that figure will have to find an extra £238 out of taxed income simply to maintain the cash value of his income without making any allowance for inflation. That represents a significantly increased burden upon that which would have arisen under our proposals.

It is no wonder that the news of this impost has given rise to a blaze of anger throughout the country, and it is no wonder that the National Federation of Self-Employed sprang into existence. It was largely because of this proposal. I was acquainted early with the sense of anger felt by the self-employed because I had the privilege of speaking at the inaugural meeting of the NFSE in Manchester on 6th October last year.

This burden, against which we are now complaining and about which we propose some relief if the Committee accepts our amendments, will fall upon everyone who works on his own account and earns more than a modest weekly sum in this great and diverse army of self-employed people—from barbers to bookbinders, from shopkeepers to solicitors, from doctors to dentists, from writers to window cleaners, from pharmacists to farmers. Incidentally, all these people, who have effectively been excluded from the negotiation of the social contract, have had no powerful union to represent them during the last two or three difficult years.

The self-employed notice a sharp contrast between the burdens that they will have to bear and the burdens which will fall on employed people who, for the most part, are represented by parties to the social contract. The contributions of most employed people during the current year will in many cases have gone down. However, for the self-employed they will almost always have gone up sharply. If we compare the position of an employed person and a self-employed person earning £60 a week, the liability of the employed person will have increased by 6·8 per cent. and for the self-employed person it will have gone up by 138·7 per cent.—about 20 times as much.

Therefore, the self-employed, rightly, feel themselves to have been heavily penalised and regard the change, as it is now taking place, as grossly unfair. It is for that reason that the Conservative Party in Parliament and outside has opposed and challenged the changes proposed by the Government at every stage. On four separate occasions we have challenged in Parliament the proposals, and sought to defeat them. On at least one occasion in another place we have mounted a similar challenge, and in the other place the challenge was indeed, as the whole Committee will remember, successful, because it secured the support not just of the Conservative Opposition and of Members of other parties, but of Members of the Labour Party, including such distinguished spokesmen as Lord George-Brown and Lord Houghton. Baroness Burton described the changes then being made as an attack on a section of the community that was unable to fight back.

However, the Government, notwithstanding their defeat at the hands of their own supporters, among others, in another place, came back to this House adamant in their determination, and used their majority on 11th December last year to reverse the decision and to restore the impost that they were seeking to impose.

I wish to make it clear that we are not seeking special treatment for the self-employed. We are asking only that they should be given a fair deal. It is to that that this amendment is directed.

The Committee will remember that until 1965 contributions by the self-employed as well as by employed people were tax-deductible. In 1965 under the last Labour administration that position was changed. The employer's contribution remained tax-deductible, but the employee's contribution and the self-employed person's contribution ceased to be deductible from income tax liability. That represented a substantial change to the disadvantage of the self-employed compared with an alternative—an employer employing people directly. If we assume a tax rate of, for the sake of argument, 50 per cent., the position is that the employer's contribution in respect of a person whom he employs at a figure of 7½ per cent. is reduced to 3¾. per cent.; but the self-employed have to find the whole of their 8 per cent. contribution out of their taxed income.

Many self-employed people have to bear a dual burden because they are themselves employers. They pay an employer's contribution in respect of their own employees, and they pay their own self-employed contribution. It is particularly galling for people in that position to see that one is deductible from tax liability and the other is not.

The feature about which we complain has, we would contend, an important and unfair effect upon the position of those who are self-employed. It was discussed by the hon. Member for Islington, South and Finsbury (Mr. Cunningham) in the Standing Committee on the Social Security Amendment Bill on 19th November last year. The hon. Gentleman put the example of a case where national insurance contributions go up by £1 in a situation where tax is deductible at the rate of 50 per cent. He compared the position of an employer-employee establishment with that of a self-employed establishment. He spelt it out—and I am grateful to him for his example—as follows.

If the price of the service or goods being sold by those two establishments is raised to take account of the £1 increase in national insurance liability, in the case of the employer-employee establishment the tax-deductible costs go up from £100 to £101 and the prices go up from £110 to £111, so that the taxable profits remain the same at £10 and the post-tax profit remains the same at £5. However, in the self-employed establishment the tax-deductible costs remain at £100 because the extra £1 national insurance contribution cannot be counted as tax deductible. Even if prices are raised by £ 1 to £111 to offset the increased contribution, the taxable profit goes up to £11. If we take away tax at 50 per cent., the post-tax profit is £5·50; if we deduct from that the national insurance contribution, the net post-tax profit is £4·50 rather than £5.

It is clear from that example that the self-employed establishment can cope with the additional liability of an increase in National Insurance contribution only by raising its prices by £2 instead of by £1. As the hon. Member for Islington, South and Finsbury pointed out, this poses a severe competitive disadvantage for the self-employed and is grossly unfair.

Our amendments—and it is Amendment No. 69 which is in the most appropriate form—would have the following effect to meet that situation. They would give the self-employed person tax relief on a portion of his contribution, a portion calculated by the fraction of 8·5/14 of the total contributions payable by the self-employed person. There is no need to set any limit to the relief because that is set by the limits of liability to contribute under the Social Security Act. But the amendments, if accepted, would have the effect of restoring broad and simple justice to the position.

This proposal should commend itself to the entire Committee, indeed to anyone with common sense and sensibility in his approach to this problem.

During the Report stage of the Social Security Amendment Bill the hon. Member for Islington, South and Finsbury said that the first argument advanced in that debate:

"…with which I agree completely, is that the self-employed are disadvantaged by comparison with the employed person in that they do not receive tax relief in respect of any part of their contribution. I have said before, I am prepared to say again, and I am ready to vote accordingly, that that should be corrected. However, it cannot be corrected in this Bill.…But at some time it should be corrected."—[Official Report, 11th December 1974; Vol. 883, c. 662.]

The opportunity presents itself today. I look for his support and for the support of others of his hon. Friends, because the self-employed are as significant and as vital figures in their constituencies as they are in our own.

Although I entirely agree with the excellent arguments which my right hon. and learned Friend has produced to the Committee, would he direct his argument, before he completes moving the amendment, to the position of the self-employed who work alone? When they fall ill or fall on hard times their income drops to nil, or considerably. They are not entitled to unemployment benefit. Surely these factors should feature strongly in the argument which my right hon. and learned Friend is putting forward.

I am grateful to my hon. Friend. During the opening part of my speech I pointed out that the self-employed do not receive unemployment benefit, nor do they receive earnings-related sickness benefit. That is one of the reasons why they feel so unfairly treated by the present provisions. It is only right to point out that the rate of contribution which they pay is adjusted to a significant extent to take account of that.

The point to which I am addressing myself is the point made by the hon. Member for Islington, South and Finsbury; namely, that the contributions of the self-employed are not tax-deductible in the same way as the contributions of the employed are. We in the Conservative Party do not intend to allow this issue to rest. We have established, as my hon. Friend the Member for Sutton Coldfield (Mr. Fowler) announced on 19th May, a watchdog group to guard the interests of the self-employed. That group is under the chairmanship of my hon. Friend the Member for Somerset, North (Mr. Dean), and it will have as one of its main tasks the examination of the ways in which the present burden of national insurance contributions on the self-employed can be reduced.

We gave a pledge in our manifesto at the last General Election that we would take steps to remedy the present injustice. My hon. Friend the Member for Sutton Coldfield, in a speech to the National Federation of Self-Employed in March of this year, said that

"A new Conservative Government would not be content to see the provisions of the Labour Government's Act remaining on the statute book. We will take steps to ensure that the burden of improved pensions is fairly shared. Above all we will end the undoubted discrimination against the self-employed."

I am happy to renew that pledge now. I hope that the Committee will take this opportunity of doing at least something to fulfil it by supporting the amendment.

I am flattered, I suppose, to feel that my remarks in Committee and on Report on the Social Security Amendment Act have assisted the Opposition in doing the homework which until then they had so clearly failed to do on the relationship between tax deductibility of contributions to the National Insurance Fund and the proper level of contributions. It would be fair to say that until that point in the discussion on the Social Security Amendment Act last year the Opposition had not referred to this point of tax deductibility except by a few sentences on the Floor of the House and the Committee. What they have now done is to latch on to an aspect of the subject to which they previously gave very little attention.

I said previously that I certainly think it was a mistake in 1965 to remove tax deductibility for contributions to the National Insurance Fund, whether those be contributions of the self-employed or of anyone else. But, in fairness to the Government of the time, there was a quid pro quo provided in the form of a £20 increase in the personal allowance for all contributors, which at that time was, give or take a few pounds, a reasonable quid pro quo to provide for the loss of tax relief.

The argument, however, that such a fixed addition to the personal allowance is a suitable means of compensating for the absence of tax deductibility no longer applies, because the amount which people are contributing will now be not a fixed amount but one varying very greatly according to earnings, and therefore, the tax relief ought similarly to vary according to earnings.

I would, therefore, welcome a reversion to our previous system, under which not only the employer's contribution but the employee's contribution and the self-employed contribution were all deductible for taxation purposes.

If that were as far as the argument needed to go, we could stop there and accept the point in principle, putting up against it only those arguments of practicability and administration, and the cost of administration, which quite naturally have to be advanced on these occasions. But there is another side to the argument, which the right hon. and learned Member for Surrey, East (Sir G. Howe) referred to only most obliquely and briefly in the closing minute or two of his remarks. The truth is that the self-employed contributor gets in return for his contribution benefits in excess of those for which he is paying. There is no one in the House of Commons who has looked into the matter who does not agree with that as a statement of fact.

People may decide that the self-employed are such a worthy group in the community and that their economic activities are of such value to the country that they ought to be subsidised in this manner or in some other. But let them come out frankly and say that what they are proposing is a subsidy and that what they want is that the self-employed should obtain their pension—because that is the main element in the outgoings of the National Insurance Fund—at something less than the cost it takes to provide.

It is commonly said that self-employed people are entitled to benefits which represent about 85 per cent. or 90 per cent. of the outgoings of the National Insurance Fund. I think that 85 per cent. is nearer the mark than is 90 per cent. Therefore, I shall take the figure of 85 per cent., in relation to unemployment benefit and the earnings related benefits. The one or two other little benefits to which the self-employed are not entitled constitute only, in each year, less than 15 per cent. of the outgoings of the fund.

Therefore, a self-employed contributor ought to pay into the fund or to have paid into the fund for him a contribution which equals 85 per cent. of the contribution paid into the fund for and on behalf of an employee. We all know that the amount of money paid into the fund on behalf of an employee is a total of 14 per cent. of his earnings—5½ per cent. paid directly by himself and 8½ per cent. by his employer. As 85 per cent. of 14 per cent. is about 12 per cent., the proper contribution for the self-employed to make to the fund for the benefits to which they are entitled is therefore about 12 per cent.

Most self-employed people will be required to pay and are required to pay now under the legislation as it stands, 8 per cent. of their earnings. The only self-employed contributors who will pay more than that will be those with incomes of less than £1,600 a year. Here is a genuine absurdity. The self-employed people with the lowest incomes will be paying the highest percentage contribution.

This is not the forum in which to debate at length that anomaly or to correct it. I have suggested a way in which it could be corrected, quite easily—by treating the standard fixed payment of £2·41 as an advance upon a contribution to be expressed as 8 per cent. of total earnings. But that can be looked at in another quarter.

Does not the hon. Gentleman agree that another anomaly is that many people who have self-employed earnings from several sources, or who have employed earnings and self-employed earnings at the same time, will be asked to make interest-free loans to the Government, as well as in many cases exceeding the 8 per cent. which he has mentioned?

I do not think that I agree with that. I should have thought that self-employed people, both in respect of national insurance contributions and in respect of their tax, are normally in the opposite position, of having interest-free loans from the Government, in that they are required to account for what they owe only at a much later stage than are those who are subject to pay-as-you-earn, in respect of either taxation or National Insurance contributions.

Leaving aside those self-employed people with incomes of less than £1,600 a year, the situation, therefore, is that self-employed contributors will be paying 8 per cent. for benefits which, as far as can be actuarially calculated, ought to demand a contribution of 12 per cent.

If self-employed people were being asked to pay the proper full amount equivalent to the benefits to which they are entitled, certainly it would be right that they should receive relief in respect of that proportion of the 12 per cent. which was equivalent to the employer's contribution. But as long as we are giving them a one-third reduction in the gross amount which they are required to pay, it would be to add anomaly to anomaly to give at the same time the tax relief which is normally given to employers only.

The hon. Member himself argued when we were discussing the measure lying at the back of this—the social security legislation—that the absence of tax relief made it more equitable to advance the proposals which he wanted to support and, indeed, did ultimately support. When can we hope to get out of this dilemma that on any future occasion when we discuss the social security contributions, the remaining tax injustices and anomalies will cast a shadow over our discussions?

I take the point that the two must go together, and that on each occasion we would not go for the one until the other had been dealt with, and so on. I am perfectly prepared to vote for tax relief on the contributions if, at the same time, we are deciding, but not necessarily executing, a change in the gross amount of the contributions. It would be normal for a Government announcing an intention in respect of one of those changes to announce an intention in respect of the other. I do not think we are in practice faced with a practical difficulty there. The two go together, and if the Opposition are prepared to say that they accept the case that the self-employed people ought to pay the full actuarial gross contribution, I am sure the Government would say that on that basis they would be perfectly happy to give the proper degree of tax relief. But the two must either go together or not at all.

There is only one qualification that I make to this. There are several other respects in which the actuarial calculation of what the self-employed draw out of the fund would produce a different figure from the calculation in respect of what employed people draw out of the fund. Once again, I do not know why I should do the Opposition's job for them. I have suggested to them avenues which they ought to explore. The self-employed lobby, which argues a lot but does not go into the facts very much, ought to explore them too.

It is unassailable that self-employed people retire later than employed people. I have a figure from the Department of Health and Social Security on this. Speaking from memory, I think it showed an average deferment of retirement of about a year and a half longer in the case of self-employed people than in the case of employees. That is a very important consideration. If the self-employed are drawing their pensions for a year and a half less of their pensionable age than are employees, that is a perfectly respectable basis for making an adjustment to the contribution which would otherwise be due from the self-employed, and there may be other respects in which one could justify a lower contribution. But, whatever it turned out to be, it would not be 8 per cent. It would be between 8 and 12 per cent. When we have done all that, and worked out what is the proper gross contribution for self-employed people to make to this fund, that will be the time, I suggest, at which to correct this partner anomaly of the absence of tax relief.

Finally, both these forms of relief are thrown upon the shoulders of employees. Because the self-employed do not pay the gross contribution which they ought to pay, the contribution which falls upon employees and their employers has to be that fractional amount higher. It is very small but it is notionally there. Similarly, if we were to reduce the taxation burden of self-employed contributors, that amount of taxation would be thrown on the shoulders of employees, and so at the same time, we would be duplicating the gross subsidy from employees to the self-employed which we already have, and that is not a duplication of anomaly for which I am prepared to vote.

The hon. Member for Islington, South and Finsbury (Mr. Cunningham), in a fluent and knowledgeable speech, could be faulted, I think, on only two matters. First of all, I do not think he got the force of the intervention of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) who put to him that the self-employed person, who in future will pay two stamps a week—because he is both employed and selfemployed—will thereby be giving an interest-free loan to the fund, because he does not get back his contributions as an employee for a considerable amount of time. But that is rather on the periphery of the argument.

It seemed to me that his chief point came at the end of his excellent contribution. This 12 per cent. figure, which he adopts as being the figure that the self-employed should pay if they are to contribute the actuarial sum necessary for the benefits they receive, is a highly notional figure, founded on some very dubious calculations, and in particular upon the two matters that he mentioned, namely, that the benefits they receive are, even within those categories of benefits that they do receive, much less than those of the employee. This is owing very largely to the fact that they have to work harder and longer, and in sickness as well as in health. It is this that lies at the depth of the grievance felt by the self-employed. It is not taken into account, when these very complicated calculations are made, that the one-man business or the one-man profession has to be kept going even though the man ought to be in bed; that the one-man business or the one-man profession is kept going well over the age of 65, even though the one man would like to retire.

In all these matters, it is clear that the self-employed make far fewer demands pro rata than the employed upon the expensive services of the State. I quite agree with the hon. Member that this has not been sufficiently quantified, but I do not see why the self-employed should be blamed for that. I do not see why the self-employed should be penalised for that. This is a difficult calculation and one which only the State, and those who command the services of the State's statistical machine, could possibly do.

Until that is done, it seems to me that the self-employed are entitled to the sort of relief which these amendments suggest, because it is only in that rough way that they can get the justice which I think both he and I know they ought to have, one way or the other. I should like to see it done in the way that he suggested. It is too late to do it in this Finance Bill, but contributions, whether of the employed or the self-employed, ought to be tax deductible, as they always were up to 1965. The compensation for the loss of that right—it is not a privilege—namely, the £20 increase in the personal allowance is now derisory with the value of money as it is today. They have virtually no compensation at all, and until the whole system of tax allowance for contributions is corrected, I do not think we shall get this matter right.

I hope that the Minister of State, when he replies, will not again throw at us the argument, "You were going to do a bit of this—5 per cent. We have only increased the percentage. We have not in any way altered the principle. Therefore you are not entitled to criticise." There might have been some force in that argument in the previous times in which these encounters have taken place on the Social Security Bill, but as far as tax relief is concerned, it is surely by now an axiom of fiscal policy that one is entitled to use the tax weapon—God knows it is used frequently enough—to temper the wind to the shorn lamb, even at the expense of logic.

This is surely an occasion on which the Government should temper the wind to the shorn lamb. The self-employed are to accept an enormous increase in their burden. According to the hon. Member for Islington, South and Finsbury, it is not enough, but it is an enormous increase in burden over what they have previously borne. The Government should give them some relief by means of the fiscal weapon, since this is the only way in which it can be done in time to have any effect in the present circumstances. I do not know how much it would cost. I should be interested to hear. I cannot believe that it would cost all that much.

Unless the Chancellor of the Exchequer does something on these lines, there will be a great flight from the self-employed into the employed category. That may seem strange in a world in which we hear that "the lump" is growing. But in more respectable areas than "the lump" the reverse process is in operation. I know from my own profession the number of one-man and two-man solicitors' firms which are breaking up, with applications being made by self-employed solicitors either for Government service or service in one of the big corporations. I know the number of small solicitors' firms going out of action almost every day of the week. I dare say it is the same in accounting firms and in other professions. I am sure that the same is true of small one-man self-employed businesses.

Their burden is both financial and psychological. We have been into all that before over the National Insurance Bill and over VAT. The self-employed person running a business by himself has to fill up all the forms himself. He spends his Sundays doing it. He has to go on and on when he is not feeling up to the mark, because he cannot afford to take time off.

All this in mercy the Government should do, and do now. Having done it for this year, they should undertake to look at the 1965 alteration in the law to see whether the best, most logical and most universal way of dealing with the problem would not be to revert to the system whereby all national insurance contributions were expenses for the purpose of the Act.

I hesitate to intervene in the debate. However, one or two points need to be made which have not been made so far.

I was surprised to hear the right hon. and learned Member for Surrey, East (Sir G. Howe) open the debate in such a way. Having spoken extensively at the tail end of last week and over the weekend about the virtues of moderation, he began his remarks in moving a very serious amendment with some extremely immoderate comments which did no credit to his public speeches in recent days.

Suddenly the right hon. and learned Gentleman is blaming this Government for heaping on the self-employed many of the problems which he listed. He tried to blame this Government, for example, for the rate burdens falling on the self-employed. However, it was the Government of whom he was a loyal and devoted member who introduced local government reorganisation which was primarily responsible for many of these increased charges. The right hon. and learned Gentleman went on to list a number of other items which would increase the burden on the self-employed. However, he ought to recall the record of his own Government in inflicting many of these increased charges on the self-employed as a result of the actions which they took.

The right hon. and learned Gentleman spoke about the impact of inflation. If we want to argue about that, let us be clear about the beginning of the inflationary processes that we are experiencing today. It was when the money supply was allowed to get out of control under the previous administration. Before listing the burdens heaped upon the self-employed by this Government, the right hon. and learned Gentleman should go back to where it all began.

I come to the amendment. My hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) outlined in his admirable speech the relationship between contribution and the benefit which the self-employed get. In this amendment, we are invited to revert to the tax allowance system when what this Government are pursuing is how best to promote equity of benefits rather than trying to give a tax offset advantage.

The Committee should be reminded that the Department of Health and Social Security has a working party which I understand is looking seriously at possible ways of promoting equity of benefit, especially in relation to earnings-related benefits. I believe that the Committee would be ill-advised at this stage to adopt an amendment of this kind when there is a serious attempt being made to remedy the anomaly of the lack of earnings-related benefit in areas of benefit. A serious attempt is being made to overcome the problem. We should be building in a further anomaly if we accepted the amendment when we might be able to resolve the original cause.

The Government are seeking to promote equity of benefit in a way that previous Governments never did. This attempt to give an earnings-related benefit to the self-employed is a more serious approach to the problem than any previous Government have taken. I think that the Committee would be well advised to await the outcome of these investigations to see whether we can promote equity of benefit rather than perpetuate the anomalies by having tax advantages.

I hope that the Committee will reject the amendment on the basis that a serious attempt is being made to look at the discrimination which undoubtedly exists against many self-employed people who do not get equality of benefits from the contributions that they make.

I accept that there is a sound case which can be made to the effect that the percentage of the earnings-related contribution of a self-employed person has been fixed too high or, alternatively, as the hon. Member for Islington, South and Finsbury (Mr. Cunningham) suggested, fixed too low. I think that the exchanges so far have brought out the fact that at this stage the Committee lacks the full factual material in order to be able to decide where the point of equity in this matter lies.

However, that is not the subject that the amendment has brought before the Committee. If that were the question, we would not be and could not be dealing with it under this Bill. The right hon. and learned Member for Surrey, East (Sir G. Howe) tacitly admitted that he was proposing in a Finance Bill amendments designed to deal with a matter which could properly be dealt with only in a different kind of legislation, namely, that on social security. The result of attempting to do this in a Finance Bill is highly inequitable and illogical.

The amendment will have the effect of reducing the contribution of the self-employed contributor not by a flat rate percentage, which would be the natural way of remedying an inequity in the fixing of a percentage, but by a sum related to his top rate of taxation. If the amendment were accepted, the inequity, such as it is, imposed on the self-employed contributor would be minimised for the self-employed contributor with the largest income. But it would hardly be affected for the self-employed contributor with a small income. I cannot think that that is a proper approach to dealing with this problem.

I recognise, as the hon. Member for Islington, South and Finsbury reminded us, that in 1965 when these contributions ceased to be allowable against tax a quid pro quo was provided by the increase in the personal allowance. That was perfectly logical because the contributions had themselves previously been an allowance for tax. When they were then made taxable, it was the equitable counterpart of that to increase the personal allowance. But where as in this case we are arguing not that all the contributions should be allowable for tax but that one of the contributions has been fixed at too high a percentage, it is inevitably illogical to attempt to remedy that by the method of tax allowance.

4.30 p.m.

The hon. Member for Islington, South and Finsbury suggested that he had regretted the change which was made in 1965. On that matter I personally take the opposite point of view. Long ago the contributions under the National Insurance Scheme were regarded as genuine insurance contributions and the public were encouraged so to view them. But we have long moved out of that era. Indeed, the very principle of a graduated contribution is a repudiation of the insurance principle. Therefore, I believe that it is now generally recognised that the so-called insurance contributions are really taxes and that we should all do better—contributors and legislators—if we treated them as taxes, which is what they really are.

Does the right hon. Gentleman not also think the present position inequitable whereby an employed person's contributions paid by the employer are allowable for tax but the employer's own contributions as a self-employed person are not? Even the part he pays for his own employees is allowable, at higher rates if he is in higher rates of tax or at lower rates if he is in lower rates, in the way that the right hon. Gentleman suggested.

Perhaps I may respond to the intervention but not immediately. If the hon. Gentleman will permit me, I shall complete the observation I was making, and then add a brief appendix to my speach dealing with his point.

The change made in 1965 was correct, because it recognised all these contributions as what they really are, namely, taxes and not individual insurance premiums. There is nothing more absurd than tax relief on a tax. It was therefore logical and right in my view that these contributions should have ceased to be allowable for tax.

I shall now respond to the intervention by the hon. Member for Gloucestershire, South (Mr. Cope). The point he raised was the same as that raised by the right hon. and learned Member for Surrey, East, namely, that there is an inequity between, on the one hand, the employer being able to claim as a deduction from his profits before tax the cost, including the compulsory contribution of employing a person to help him make those profits, and, on the other hand, the tax paid by an individual, whether an employee or a self-employed person, towards his own social service benefits. The fallacy lies in equating these two processes. One might as well argue from the fact that the cost of materials or any other factor of production is for an employer allowable against tax.

There is no analogy between the allowance for tax, in the calculation of profit, of the cost of employing an employee and the allowance for tax which is now proposed, which is an allowance of part of personal tax which we all pay. Therefore we come back, even via the intervention, to the point which I believe cannot be remedied in the course of the Bill, nor a fortiori by these amendments, namely, the question whether the ratio between the employee's tax and the self-employed's tax is justly fixed. Maybe it is not; but I believe that the inequity, whatever it may be, will be magnified, and magnified not only as between the two classes of contributors but as between individuals in the same class, if we proceed by way of the proposed amendment.

The debate this afternoon can be reviewed only against the background of the general attack on the small business man which has characterised the activities of this Government throughout their period in office. If we take small business men as a group and refer to them, as they have been referred to, as the seed corn of our future business activities, right at the heart—the very germ or beginning—are the self-employed.

People start as self-employed before they turn themselves into a small limited company. These people have been having a very difficult time, partly because of inflation. For example, a man running a village shop has to deal with inflation. He may have £2,000 or £4,000 worth of stock on his shelves. With inflation, in 12 months' time he will require another £400 or £800 worth of stock to carry the same number of lines. That is one example of the way in which inflation means that the self-employed or very small business man is under acute financial pressure at present. Therefore, it is particularly appalling to him to find that the burden of the increased cost of national insurance is unfairly shared between the various contributors.

We all knew, when the Government announced that they were to increase old-age pensions, that the increase would have to be paid for. I do not think that any of us would be right to argue with the proposition that it must be paid for. However, it should be paid for by all the contributors. The reason that so many people are angry about the present situation is that instead of sharing the burden fairly, the Government put an increased contribution on the employer, reduced the contribution for most employees, and at the same time put a savage increase on the contribution by the self-employed. There is a contrast in the way in which they have been handled. The savage increase was imposed on the self-employed at the same time as most employees have had a reduction in their contribution. There is an opportunity for the Government today to redress the wrong which was done in the National Insurance Act last year.

It has been said of every second marriage that it is

"the triumph of hope over experience".

In debating this process again under the taxation element, rather than under the national insurance element, one is hoping, perhaps against experience, that the Government will give a fair deal to the self-employed.

I agree with my right hon. Friend the Member for Down, South (Mr. Powell) that this is not the ideal way in which to deal with this problem, but we do not live in an ideal world. We live in a world in which there is an opportunity for the Government to redress some of the damage they have done without the loss of face which would be involved if they were to go back and amend their own National Insurance Act, 1974.

The whole area of unfairness which is involved in this legislation is underlined by the fact that the money that the small business man or the self-employed man takes out of his business—the wages of his business—is also the return on his investments. In effect he is being asked to pay an extra 8 per cent. tax on the return on his investment as well as on his wages. The truth of the matter is that the self-employed draw less money than do the employed.

It may be true, as the hon. Member for Islington, South and Finsbury (Mr. Cunningham) mentioned in his interesting contribution during the Committee stage of the Social Security Bill, that statistically in terms of the proportion of benefit to which they are entitled, the self-employed ought not to have a deduction, but it is not the entitlement which is the important factor. The important factor is, how much do they draw and when do they utilise that entitlement? For example, the self-employed may be entitled to retire at the age of 65—for a woman at the age of 60—but how many do? How many continue working? We see the small business men, one after another, go on working until they die. They die in harness. That is true time after time of the small shop keeper, the man who sells wood, the man who does the newspaper round, the owner of the little sweet shop and so on. Many people engaged in small, generally service industries, make an important contribution to the economy, and time and time again they do not retire at normal retiring age.

As I was the person who suggested that the Opposition might pick up this point, may I try to prevent them running too hard with it? Until April this year it was a tremendously valuable point. As from April, it is not quite so valuable, because those who defer their retirement will receive an increased pension, the increase being nearer to that which is actuarially proper than has been given in the past. It is still not enough. It should be a 10 per cent. per annum increase, and it will be only 6 per cent. per annum, but the person who defers his retirement will get back a goad part of the value of that deferment in the form of an increased pension when he takes it.

I should not like the hon. Gentleman to think that he had inspired the notes for my speech, when the matter was drawn to my attention by a number of my constituents and not by the hon. Gentleman.

There are other factors besides that of retirement age. There is entitlement to sickness benefit. But the self-employed do not go sick. They go on working when they do not feel well, though they could easily go to their doctor, and probably would have done so as employees. The doctor might take a patient's temperature and say "You have 'flu. Go to bed and stay there for a week. Come back in a week's time, and if you are all right I shall send you back to work." But the self-employed go on working in those conditions. The small shopkeeper cannot suddenly say "I shall put up the shutters today because I am not feeling well." Customers rely on the small man for the milk round, the newspaper round, or whatever it may be. Many self-employed people cannot even take a holiday.

It is a question not of what proportion of the benefits the self-employed are actuarially entitled to but of what proportion they draw, and they draw substantially less. Therefore, their contributions should be less. We cannot make their contributions less under the Bill. What we can and should do is to save the Government's face on the national insurance side and make the contributions allowable against tax, which would give some saving to the self-employed.

Perhaps I may take this opportunity to make clear the effective relief proposed in the amendment, because I may have misled the Committee with the figure I gave previously. The effective relief will be in relation to 8·5/14. I am not sure that I gave the correct fraction earlier. That is the effective relief in terms of the figures under the 1974 Act. I hope that this intervention may enable the figure to be corrected if I inadvertently misled the Committee in my speech.

I am grateful to my right hon. and learned Friend for that clarification. I was going to suggest that the amendment, which he moved so ably, was very meagre, very temperate. I am constantly astonished by my right hon. and learned Friend's moderation, shown not only in speeches at the weekend but in his amendments. I should have much preferred to see the whole of the contribution of the self-employed allowed for tax. That would have restored the position. [Interruption.] An hon. Member speaking from a sedentary position refers to public expenditure. I find it fascinating that the Government are spending money to encourage the arts, the crafts and rural industries, but at the same time are clobbering them by taking the money hack in this way. It beats cockfighting to have this complete contradiction of Government operations in this area.

rose—

I have given way three times, and I think that I should now complete my speech. I am sure that the hon. Gentleman will be able to enter the debate later.

The self-employed, more than any other small businessmen, suffer from the overhead of Government interference, of having to do Government work for which they are not paid. If they had a trade union they would never have been saddled with their present situation, in which they have to work out PAYE and value added tax for the Government without payment. If they happen to be on two rates of VAT, they have a nightmare of work. They have to put in extra work over the weekends and often on Sundays to deal with this Government overhead.

In addition to all the other arguments, the Minister should take into account that if he accepts the amendment it will be one small step towards giving the self-employed a small contribution towards the high expenditure they incur in providing free services to his Department.

It is a great good fortune that my support for this modest amendment has managed to withstand the storm of Conservative speeches so far. Otherwise, I would undoubtedly have changed my mind. Rarely have I heard poorer arguments for the extremely strong case that the self-employed probably, but not certainly, have. I say "probably" and not "certainly", because, as the right hon. Member for Down, South (Mr. Powell) said, no one in the Chamber has the foggiest idea whether their case is strong. The self-employed do not know either, because we do not have the actuarial figures, and we shall not have them for a long time, if ever.

We had a curious speech from the right hon. and learned Member for Surrey, East (Sir G. Howe), speaking from the Conservative Front Bench. I took it to be a past or future circular to the self-employed from Conservative Central Office. He announced—and it was a very odd thing to announce in a parliamentary debate—that he had set up a watchdog group of Conservative Members of Parliament to look after the interests of the self-employed. I have long been a member of a watchdog group looking after the interests of the self-employed—the whole Liberal Party. It is to encourage sectionalism to set up bodies of this sort, the right hon. and learned Gentleman announced. It does not further the aims of any group to announce the setting up of such a body in that way.

The whole matter of the self-employed insurance benefits is much more complicated than some politicians seem to think, though this was conceded by the right hon. Member for Down, South. It might be helpful to quote from an entirely non-political source, the notes in the British Tax Review, which says:

"Much publicity has been given to the view that the earnings-related part of the contributions of the self-employed is a weapon aimed at their destruction by the present Government. It must be pointed out that the new scheme was introduced by the last Government. The present one increased the rates of contribution across the board. The change is one of degree, not principle."

That is the general point that should be made.

The problem is that we do not know whether the case being advanced on behalf of the self-employed is actuarially a proper case, because the Government Actuary has admitted not only that he does not know quite how many millions of people are involved but that he does not know the cost of the benefits likely to accrue to them.

It is as well to be sure exactly what Parliament is asking the self employed to pay. It is not a general levy of 8 per cent. right across their earnings. It is 8 per cent. of the excess over £1,600, up to a maximum of £3,600. Therefore the most that could be paid is £160, or 4·44 per cent. That is not an astronomical amount at certain levels of income. There are substantial differences between the proportion that will be paid by one self-employed person and that paid by another.

I agree with the right hon. Member for Down, South on one point. I am delighted to have his support on this point, which I have argued several times in insurance debates in the House. We are in this mess because we stick to the ludicrous fiction of insurance. To the average man, and certainly to me, the word "insurance" implies that there is some relation between what is paid and what is received. In this case there is no relation. There is no actuarial relation to the benefits to which I would be entitled, let alone to what I would actually receive, if I were self-employed. We should abandon the insurance fiction and finance the whole national insurance expenditure out of taxation and make an honest man of the system. The right hon. Gentleman has indicated that we do not know what the cost of self-employed benefits are, and this simplification makes it possible, for instance, for the Federation of the Self-Employed to say in a circular,

"This would have resulted in a fairer splitting of the total cost"

Neither they nor we can say what "fair" means in that context, which is the problem that we face.

What do self-employed benefits cost and how much should be charged for them? No one is prepared to tell us. That is the whole point of the difficulty. Frankly, unless the Government Actuary can come to our aid—and I very much doubt whether he can—the only two ways out of the difficulty would seem to be either that the self-employed are to go on receiving benefit through a national insurance scheme or that we should have a separate fund for the self-employed. At least we could then produce an annual accounting, making clear how much had been paid in and how much had gone out and, working on an annual-pay-as-you-go basis, we could say that "That is what it costs and this is what is paid in, so that there is nothing unfair about it". If we found that they had not paid enough, we should have to tell them that they had to pay more.

Alternatively, the self-employed could opt out of the national insurance scheme completely. They cannot do so under present legislation, but it is something that they might well start talking to the Government about. Since there is such great feeling among their members about the unfairness of what they are asked to pay, perhaps they should investigate the possibility of opting out of the scheme altogether and providing themselves with some kind of private insurance. However, in the light of experience of national insurance over the last 30 years or so they would probably get a raw deal, with the rate of inflation that I, for one, expect to see in the country, if they were to try to get from any private scheme the benefits they receive under the national insurance scheme.

I consider that this amendment, despite the endeavour of the Conservative Party to persuade me not to vote for it, is a very modest one which will go some way to meet the considerable grievance felt by the self-employed. For that reason support it.

This debate has reflected the dichotomy that there is on this question of national insurance, in that it has grown from an insurance scheme to something that is approaching an element of taxation. At the moment we are half way between the two processes, and it would be for the benefit of everyone, and certainly for Finance Bill discussions, if this trend were to continue and we were to see the development of either integrated taxation which is to look after raising revenue for these matters or at least a self-employment tax explicitly described as a tax and not as insurance.

In this debate so far we have talked very much about some technicalities. We have talked about an actuarial basis and whether it should be 8 per cent. or 12 per cent. These are figures of which we have very little knowledge enabling us to judge whether one set or another is right. We have had arguments also whether one side of the House or the other were responsible for this tremendous increase in cost falling on the self-employed. It has been acknowledged by hon. Members opposite that that increase has taken place even though there may be argument over where it originated.

I should like to take a more pragmatic line. As it is acknowledged by both sides that there has been a tremendous rise in the cost falling on the self-employed, and since at this time, with ever-increasing unemployment, it must be in the general interest to stimulate as much self-employment as possible, in addition to stimulating as much employment for employees as possible, we should use every means at our disposal to encourage this result rather than the opposite.

At this time it may not be possible to take what would be the idealistically right step to help the self-employed in line with the practice of Finance Bills. I should have thought it necessary to look at two or three elements, one being the fact that a threshold of £1,600, set 12 or 18 months ago when the concept was developed, has changed in value today. I would have thought it necessary to think in terms of a reversion to something that was acceptable before 65, whether or not as part of an insurance or a taxation concept, on the pragmatic basis of helping these people in the only possible way at this time, through this Finance Bill.

I should like to take up a point made by the hon. and learned Member for Surrey, East (Sir G. Howe), who opened the debate, and to look at a point made by the right hon. Member for Down, South (Mr. Powell). A question arose whether we are discussing a value of 7·5 over 12 or 8·5 over 14. The right hon. Member for Down, South said that this would be worth much more for people at the higher end of the scale. As I read this amendment, reference is made to the increase being an amount equal to income tax at the standard rate, in which case would there not be a cut-off at the standard rate, so that whereas there may be discrepancy for those from zero up to the standard rate, there is not an inequality beyond the standard rate.

I represent an area where the self-employed represent a very large part of the work force. Not only are they self-employed but very often they are self-employed and not also employing other persons. They suffer an additional work load falling on them by such matters as VAT, from whichever Government, and therefore they are the people suffering most. They are the people most likely at this time to be throwing everything in the air and asking, "Is it worth it?" at a time when unemployment in my area is running at 14 per cent. for men. If we are to overcome unemployment we need to create more jobs, whether for the self-employed or for employees. Therefore, on a purely pragmatic basis I urge the Committee to support this amendment as being at least a step towards encouraging people to become self-employed.

This debate has uncovered a small part of a considerable problem—the problem of the self-employed in a period of rapid inflation, a period of increasing administrative complexity and a period of low profitability. It is a problem of which this Government seem sublimely unaware. This Government are very close—some would think too close—to the major unions but they are not yet receptive to the justified anxieties of the self-employed. It may well be that they will soon have to listen to the insistent, justified clamour of the Federation of the Self-Employed.

One of the complaints of the self-employed is the increase in their national insurance contribution. This amendment—and I congratulate my hon. and learned Friend the Member for Surrey, East (Sir G. Howe), who moved it—is designed to provide some relief, perhaps not an exact measure, perhaps not precisely symmetrical relief in this field. The right hon. Member for Down, South (Mr. Powell), with his remorseless logic, has attempted to assert that there is nothing more absurd than a tax relief for a tax.

On a point of order. I should like to apologise to the hon. and learned Member for Dover and Deal (Mr. Rees), but this is a matter of great concern to the House and perhaps it will mean that you, Mr. Murton, will have to ask Mr. Speaker to come to the Chamber.

At this moment the Standing Committee on the Industry Bill is in a state of suspension because all the members of that Committee have walked out, on the basis that a statement was made in the House yesterday by the Secretary of State for Industry—and there is no personal criticism of him at all—that there would be a White Paper. We have demanded that there must be given to us, as members of the Committee, the fullest information of what is likely to be in that White Paper.

Hon. Members on this side of the Committee are particularly concerned because they know that we are working under a guillotine and that there are to be meetings outside this House with interested bodies such as the Confederation of British Industry and the Trades Union Congress, and that amendments may be put forward which may never reach the Floor of the House because they could be carried with the guillotine.

On that basis, we believe that this is a very serious inroad into the rights of hon. Members. On that basis we should like Mr. Speaker to be asked to come to the Chamber and to give us a ruling as to what the position is now. We should like to be told whether we are likely to get a statement so that we may proceed with the work of the Committee in the proper parliamentary way and consider all the amendments which have been tabled. This is a matter of the greatest importance and, Mr. Murton, we should like your assistance and guidance in dealing with it.

I have listened to what the hon. Gentleman said. His remarks are a matter not for the occupant of the Chair of this Committee but for the Chairman of the Standing Committee.

Further to that point of order, Mr. Murton. Where else can we go? This is the Chamber of the House of Commons. It so happens that a Committee is meeting here at the moment. I am asking the Chairman of this Committee whether he is prepared to ask Mr. Speaker to come to the Chamber.

I must make my ruling quite clear. The House is in Committee on the Finance Bill. The matter about which the hon. Gentleman complains should be dealt with by the Chair in the Standing Committee in question.

Obviously we do not want to hold up the work of this Committee. We shall make our representations to Mr. Speaker direct.

The intervention by the hon. Member for Liverpool, Walton (Mr. Heffer) demonstrates that industry as a whole is in as much confusion and distress as are the self-employed, but perhaps it would be out of order if I were to divert to that theme. Instead I shall try to confine my remarks to the plight of the self-employed.

Before that interruption I was saying that the right hon. Member for Down South, with his characteristic and remorseless logic, had endeavoured to assert that nothing was more absurd than tax relief for a tax. In the days when he was at the Treasury there was a relief for profits tax for companies against the income tax which those companies had to pay, but perhaps that situation was corrected during the right hon. Gentleman's tenure of office as Financial Secretary. There are respectable precedents for tax relief for a tax.

This is perhaps a slightly technical way of looking at the amendment. I remind the right hon. Gentleman that in personal taxation matters there is tax relief for premiums designed to secure retirement benefits for the self-employed, and I commend these to the Minister. I suggest that he has a further look at them since the limits are far too restrictively drawn in the light of current rates of inflation. The employee obtains part of his pension from contributions which are not derived from his taxed income, and this amendment is designed to put the self-employed on the same basis.

The hon. Member for Islington, South and Finsbury (Mr. Cunningham) has with his usual assiduity led us into the field of actuarial calculations, and I shall not attempt to follow him there. In the whole field of social security benefits the self-employed are possibly, if not certainly, in a worse position than those who are employed. There is not only the question of later retirement to which my hon. Friend the Member for Basingstoke (Mr. Mitchell) drew attention. There is the question of unemployment benefit when his business languishes, the question of when he chooses to enjoy the benefits of his business and the small but annoying anomaly that when he travels on the Continent he is not entitled to the same reciprocal benefits as is the employed person.

I have asked one of the Treasury Ministers for a breakdown of social security benefits as between the employed and the self-employed, and he has told me that they are not available. I suggest that it is time to take a deeper look at this matter, and as an interim measure of relief I hope that the Minister will be able to accept this modest amendment which is designed to achieve a rough measure of justice in a very difficult field.

We have had an interesting debate, but it is a pity that such a high degree of immoderation should have been displayed in the assertions of many hon. Members on a question as important as this. The intention of the amendment, as I understand it, is that there should be tax relief for the self-employed for the part of their national insurance contributions which corresponds to the employer's share of an employee's total insurance contribution. There is in the amendment a technical defect with which we need not be concerned because what really matters is the substance of the amendment. I only mention the defect because it was drawn to my attention and it was felt right that the fact should go on the record.

Perhaps I should explain the relationship between the Government and the self-employed as I and the Treasury see it. I spent a large part of my previous existence before becoming a Minister as a self-employed person, and self-employment is undoubtedly one of the most valuable ways in which ideas, entrepreneurs and managers can get launched. Through it the determined and the individualist can find a particular niche which might not be available in ordinary employment. I am reminded of the comment of the original Ferranti, the electronics engineer, who is reputed to have said, "If you are tall, good looking and clever all you need is luck". If, like him, "You are short and Italian you have to have 51 per cent.". We know full well the rôle of the individualist and how in so many cases they have been able to achieve success by their own independence. There are many examples of this. Of course, self-employment provides a road to the top as well as a way of life for a wide range of people and their abilities.

The Class 4 contributions of the self-employed are to be calculated on the basis of 8 per cent. of the assessed profits lying in the band between £1,600 and £3.600. The maximum extra contribution is, therefore, £160 which will be administered by the Inland Revenue with the tax on business profits.

I do not want to get involved in "yahboo" politics because that is not particularly helpful, but what we are proposing is not all that dissimilar from the Conservative scheme. That involved uprating for inflation, and we all know what that means. What we are proposing obviously derives front that scheme. The excess of antagonism by Conservative Members is, therefore, very hard to understand, except in terms of the political pressure which is being exerted from certain people within the Conservative Party. This seems to fit in with the setting up of the so-called "watchdog group". I am not sure what this group will watch over in this canine manner, but we look forward to seeing what it does in due course.

The 8 per cent. contribution has been described as a tax on the self-employed. Of course, we all know—and this has emerged during our debate—that it is no more of a tax than the 8½ per cent. tax on the employers and the 5½ per cent. tax on employees. The top and bottom of it all is that social security benefits, and in particular the retirement pension, have to be paid for. This is a very large element in the social security benefit. It has to be paid for largely by contributions, and the whole question that we should be concerning ourselves with, the question which was referred to by my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham), is what is a fair and reasonable contribution for the self-employed. That is what we are talking about. There is no dogma, there are no politics: nothing but what is a fair and reasonable contribution for the self-employed to make.

If we had all the figures available the matter would be very simple. In the way that has been described, we would just consult these figures, see what the self-employed were getting and be able to provide a fairly precise relationship between contributions and benefits and make a much better approximation to relief. Unfortunately we cannot have these, and I shall come to the reasons for that in a moment.

These national insurance contributions have to be made by each individual to the State for the benefits he is going to receive. The self-employed get the benefits, they get very direct benefits, and it is very hard to see why they should get tax relief on the payments which they make before they derive those benefits. The employee also provides money for the benefits he receives, and it is very hard to see why he should be entitled to tax relief on the benefits he is going to get. As for the employer, he is in a rather different situation. He is not getting any benefits. By law, he has to pay part of these contributions in order to run his office; it is a business expense and it is wholly and exclusively paid for the running of his business, and is so allowable.

I view it with suspicion always when people ask for extra tax reliefs of any kind—and we shall be going over this in a number of ways in our further debates on the Finance Bill—because the cardinal fact about all tax relief is that those who earn the most gain the most. No matter what the system by which we are trying to operate a progressive method of providing taxation and benefits, this is not the best way in which to handle these matters. I understand the way in which the proposers of this amendment have tried to overcome that by talking about a standard rate, which does not, however, fit in with the unified tax system, but, nevertheless, the general principle remains.

This general principle is a very important one. If the Minister is saying that no relief is possible because those who earn the most gain the most he is saying that there is no possibility under a Government of which he is a member of there ever being a reduction in the rate of income tax.

That is not what I am saying at all. I would have thought it pretty obvious that if we try to give relief by means of income tax we give most to those who have most. There are certain situations in which that is what one intends to do, but there are other situations in which that is a byproduct of one's other intentions. I am only drawing the attention of the Committee to what I regard as a fairly obvious point.

Does the hon. Gentleman's evident distaste for personal tax relief possibly lead him now to reconsider his position on negative income tax?

Negative income tax is something I should have been very happy to have seen had it dealt with the wide range of benefits that could be fitted in if another system were devised.

rose—

Before the hon. Gentleman seeks to turn this debate into one on tax credits, let me say that the main argument against the tax credit system was the element that these were only a few of those benefits that could be paid under the tax credit system, which was the point I particularly did not like.

As Chairman of the Select Committee of which the hon. Gentleman was a distinguished member and put in a minority report, I would remind him that in that report he did not indicate that the reason he did not agree with the tax credit system was that it did not cover all the possible allowances. He will recall that in the main report, which the Conservative Government would have implemented had we won the General Election, the principal point was that this was a start and that eventually more and more of the benefits could be phased in. It is no good the Minister shaking his head. He knows this is perfectly true.

The hon. Gentleman knows perfectly well that we debated this furiously for six months. We did not con- vince him and he did not convince us, and the argument continues, but I do not think it should continue in this particular forum.

If one looks at the actual benefits of the self-employed the thing that strikes one most forcefully is that to the ordinary employee only 70 per cent. of the benefits in terms of total payments comes through the retirement pension, while the proportion that goes to the self-employed is over three-quarters. More than three-quarters of the benefits going to the self-employed lie in the retirement pension, and this is the factor that makes it so very difficult to obtain any system that does not deal with this particular issue.

In order that the Committee may not be misled could the hon. Gentleman clarify his meaning? He is talking about nearly 75 per cent. of the benefits going to the self-employed. I think he means 75 per cent. of what the self-employed would be entitled to if they were to claim it, not the cost of the benefits the self-employed actually receive, because he does not know what that is.

The hon. Gentleman is obviously right, but this three-quarters of the benefits to which the self-employed are entitled actually consists of the retirement pension.

I now come to the point made repeatedly by my hon. Friend the Member for Islington, South and Finsbury in a very fine speech on the difficulty of getting the figures relating to the self-employed in isolation. It is going to be very difficult ever to overcome this inherent difficulty, which lies in the fact that, despite the common assumption that the self-employed are self-employed all their lives, in fact very many of them start life not self-employed and later become self-employed. There are relatively few, who from the moment they leave school until the day of their retirement, are self-employed. It is going to be extraordinarily difficult to obtain the actuarial figures because of this inherent complication.

Having said that, and having noted the argument used by my hon. Friend the Member for Islington, South and Finsbury about the factor of early retirement and the importance of that because of the changes in the scheme, I would say that the benefits to which they are entitled are about 90 per cent. of those which the employees obtain. If one multiplies the 90 per cent. by the 14 per cent. one comes to the 12½ per cent. or 12 per cent. that has been mentioned. This is really what we are talking about: what should be the relationship between the national insurance contributions of the employee and that of the self-employed?

A week or two ago I was in the constituency of the hon. Member for St. Ives (Mr. Nott) and I noticed one or two window stickers for the self-employed. One I saw was in a shop very similar to that of a chain store a few doors down. One was a multiple shop and one looked to me as if it was owned by a self-employed person. I tried to compare the two shops. They both had three or four people in them. In one there was a manager; in the other there was somebody who seemed to me to be a self-employed person. In the case of the manager, he would be paying 5½ per cent. of his salary and his employer would be paying 8½ per cent. making 14 per cent. The self-employed person would be paying 8 per cent. The charge on the manager would be about 10 per cent., taking into account corporation tax at 52 per cent.

The question we have to ask ourselves is whether that 8 per cent. should, as a result of the amendment, be reduced to 5·2 per cent. Is that the right relationship? I do not believe that it is, bearing in mind the benefits available for the self-employed person.

My right hon. Friend the Secretary of State for Social Services has announced an inquiry into national insurance and the self-employed. It is hoped that an interim report will be available by about the autumn. Meanwhile, the present contribution rates are believed to be reasonable and fair, and I ask the Committee to reject the amendment.

When I reread the excellent debate on the Social Security Amendment Bill on 26th November 1974 which dealt with the general subject of contributions by the self-employed, I was struck by a quotation which was made by my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith). He reminded us that it was said of Sir Robert Peel in the matter of the Corn Laws:

"He has convinced others. How comes it that he has failed to convince himself?"—[Official Report, 26th November, 1974; Vol. 882, c. 328.]

When I re-read that quotation I thought of a more topical example—the Secretary of State for Industry. How was it that he could so convince the country that we should remain a member of the Community when he so signally failed to convince himself?

Perhaps the quotation more aptly applies to what was said by the hon. Member for Islington, South and Finsbury (Mr. Cunningham). When the Social Security Amendment Bill was proceeding through the House he convinced many of his hon. Friends—and he may have convinced one or two of my hon. Friends—that the way to handle the discrepancy between contributions and benefits was by means of tax relief. He argued in Committee against reducing the percentage to 5 per cent. Now he says that he would be prepared to go back to the pre-1965 position, but he does not like what we propose in our amendment. The words he used on 11th December 1974 cannot bear that interpretation. He said:

"the self-employed are disadvantaged by comparison with the employed person in that they do not receive tax relief in respect of any part of their contribution."—[OFFICIAL REPORT, 11th December 1974; Vol. 882, c. 662.]

He was making a clear distinction between the employed person and the self-employed person, and pre-1965 the relief was surely available for all contributions.

Again, when the Bill came back to the House—which it did because Lord George-Brown and many other senior and highly respected members of the Labour Party had agreed that the scale of the increase for the self-employed was entirely outside the laws of equity—the hon. Member for Islington, South and Finsbury said:

"Therefore, the self-employed person should not get tax relief on the notional equivalent of the employee's contribution but should get tax relief on the notional equivalent of the employer's contribution.—[OFFICIAL REPORT, 26th November 1974; Vol. 882, c. 326.]

If he is paying it.

We all appreciate the difficulty of the hon. Gentleman's position, but the interpretation which one puts on those remarks can only allow us to feel that he meant all along that he was happy to go back to pre-1965 but not to go along with what we propose today.

I am touched by those generous references to my remarks, but I should like to get this perfectly straight. I made clear all along that what I wanted was for the gross amount of the self-employed contribution to be raised above 8 per cent., to 12 per cent. or thereabouts, and, as part of that, for tax relief to be available on that part of the 12 per cent. which represented the equivalent of the employer's contribution, and that no one of those things should be done without the other being done.

As I was not a member of the Committee I must confess that I have not read every word the hon. Gentleman said in Committee and I would not wish to claim that in these remarks he was saying something less than the whole of what he wanted to say. If he were coupling his remarks always with the point that he would be prepared to see this tax relief only if it were combined with a contribution higher than 8 per cent., I accept what he says, but on rereading those remarks I cannot see that he coupled them with the suggestion that the contribution should go higher.

The right hon. Member for Down, South (Mr. Powell) made an interesting intervention, but I am not quite sure that he had the amendment right. If he says that a national insurance contribution is a tax, I wholly agree with him. The new national insurance contribution is in the nature of a progressive tax because it is earnings related. Any tax relief in a progressive tax system will obviously benefit the better-off rather than the worse-off. For a person receiving tax relief, the more tax he pays the more benefit he will receive in a progressive system. But our amendment, contrary to what the right hon. Gentleman implies, is not to give relief at the higher rates of tax, although the right hon. Gentleman said that it would give relief at the higher marginal rate. The proposal is that there should be an amendment purely of the basic rate of 35 per cent. just as the employer's contribution would be at the basic rate of corporation tax of 52 per cent.

We are talking here primarily about sole traders and Schedule D taxpayers. If we were to give any relief it could only be relief based on Schedule D. I have to repeat what my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) said. There are many tax reliefs on the statute book, and if we are seeking to help the self-employed this is the only way we can do so. As he said—and I put this rhetorically because these are complicated matters—it is surely right that the employee benefits f the employer's contribution which is relieved from tax. Therefore, it is not unreasonable that we should put forward tax relief of the type proposed in the amendment.

The hon. Member for Cornwall, North (Mr. Pardoe) on every debate on every amendment casts unjustified aspersions upon the attitude of every party but his own. His curious habit, after casting those aspersions about the Labour Party or the Conservative Party, is to follow in almost the next sentence by appealing for an end to sectionalism. The two go almost side by side. I cannot remember—and I am trying to be generous to the hon. Gentleman who is not quite a neighbour but nearly so—any idea, any constructive project, any attempt at reconciling interests which has ever taken place in the House of Commons which the hon. Gentleman does not claim in the course of his speech to stem originally from himself.

Absolutely right.

Shall I say that the hon. Gentleman's modesty is not always prominent in our debates. If any agreement is possible amongst the parties in the House of Commons, I am afraid that the hon. Gentleman is always in the vanguard to destroy it. Today he ended his remarks by saying, "In spite of what the Conservative Party has done to persuade me not to vote for the amendment, I shall do so." That is precisely the attitude that the hon. Gentleman adopts in all our debates.

5.30 p.m.

In the Minister's reply we have seen the Labour Party clothed in its freshly laundered garb of seeking to be reasonable and of seeking to reconcile interests. It was pleasant to hear the Minister of State say certain things. However, I fear that by the end of the week we shall need a bit of relaundering. Anyhow, the Minister of State expressed his point of view in moderate language.

This would not be an expensive amendment. I think that it must seem overwhelmingly fair to all responsible men and not just to Lord George-Brown in another place and to other members of the Labour Party such as Baroness Burton and Lord Houghton, who was until recently the Chairman of the Parliamentary Labour Party. If it seems fair to them, why does it seem so unfair to Labour Members? After all, Lord Houghton was a repected Member of Parliament.

One argument that has been raised this afternoon has been about the relative size of the contributions to the National Insurance Fund. As my hon. and learned friend the Member for Darwen (Mr. Fletcher-Cooke) said, an assessment of true costs and benefits—and I emphasise the word "true"—could not ignore the fact that the self-employed generally make fewer demands on the State than the employed. The self-employed make no contribution for sickness and they receive no benefit from the fund in that respect, but their services are available to the community in sickness and in health.

The self-employed get sickness benefit.

I apologise, I had in mind a number of other benefits to which references was made by hon. and learned Friends. I should have been more precise and have referred to earnings related sickness benefit.

My hon. Friend the Member for Basingstoke (Mr. Mitchell) raised some wider questions. I was glad to hear the Minister of State support the argument that our society would be poorer, duller and a less happy place without our small firms and farms. He was kind enough to say that he had spent some time in my constituency a short while ago. He must realise that the major proportion of the high level of unemployment in that part of the world, and in many other areas, is attributable directly to the redundancies occurring among people who run their own small firms.

I do not wish to go into the whole question of rates, capital transfer tax and everything else, but the community must understand how it is that a self-employed man is full of fury at the fact that he is having to pay an extra £238 this year in pre-tax terms for no extra benefits. It must appear to the self-employed man that he is being greatly exploited. If the hon. Member for Islington, South and Finsbury were asked suddenly in one year to give up the additional amount of £238 for no extra benefit, and if he had not spent all his days and nights ploughing his way through actuarial reports on these matters, which I understand he does, I am sure that he would be very angry.

We must be seriously concerned about the difficulties which small firms are facing. Their difficulties are severe and it is against that background that the Conservative Party feels strongly about the amendment. The big battalions of the CBI and the TUC will have to learn that it is not primarily big business which is the ultimate bastion of liberty and freedom but the small man. The small man may be working in a large firm, but it will not be the large bureaucracies, whether in business or in trade associations, that will maintain the real freedoms and liberties of this country in the last resort. Those elements will be maintained by individuals and by small business men.

The Minister of State said that those who earn the most gain the most. He said that as if it were some truism that had never occurred to anyone before. Is he suggesting that those who earn the most should gain the least? The people who earn the most clearly earn it by their own efforts. It is also clear that those who earn the most pay the most. It follows that those who pay the most will receive the most by means of tax relief. That must be the case.

No.

The justification for the amendment is the unfairness that we be-lieve prevails as regards the proportion of benefit to contribution. However, I rest our case with the amendment and with the tax relief that we are seeking, given the size and the suddenness of the increase which has arisen. Let me repeat the situation once again. I refer to the facts which my right hon. and learned Friend the Member for Surrey, East has mentioned. The increases are of such a size that it is impossible for the self-employed not to imagine that the Government are deliberately out to discriminate against them. As regards the £40-a-week man, his contribution has increased by 58 per cent. from February 1974 to April 1975, whereas the £40-a-week man who is employed has seen his contribution fall by 8 per cent. The contribution of the £50-a-week man who is employed has increased by nearly 5 per cent. whereas the self-employed man earning that amount has seen his contribution increased by 98 per cent. Finally, the contribution of the £60-a-week employee has increased by 6·8 per cent. whereas the self-employed man's contribution has increased by 138·7 per cent. It is the scale and the suddeness of the increase which has no foundation in equity.

In the amendment we are seeking not to change the contributions to the National Insurance Fund but to go some