Finance Bill

– in the House of Commons at 12:00 am on 5th June 1962.

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Considered in Committee [Progress 30th May.]

[Sir WILLIAM ANSTRUTHER-GRAY in the Chair]

New Clause.—(INCREASE OF INVESTMENT ALLOWANCES FOR EXPENDITURE IN DEVELOPMENT DISTRICTS.)

(1) In relation to expenditure incurred on or after the first day of August, nineteen hundred and sixty-two; in

  1. (a) any industrial building or structure in a development district; or
  2. (b) any machinery or plant which the claimant proves to be in use, or to be intended for use, in a development district;
subsections (2) to (5) of section sixteen of the Finance Act, 1954 (which provide for making investment allowances in respect of capital expenditure on certain new assets), shall have effect with the substitution for references to one-fifth and one-tenth (being the proportions of expenditure governing investment allowances) of references respectively to three-tenths and three-twentieths:

Provided that if such machinery or plant as aforesaid is not installed in or is removed from a development district (otherwise than into another development district for continuous use there) the claimant shall pay such amount of tax attributable to the machinery or plant as he has not paid, but would have paid if this paragraph had not been enacted:

So, however, that the last-mentioned amount shall be reduced by one-fifth thereof far each complete year since the making of the investment allowance, during which the machinery or plant has been in use in a development district.

(2) In this section the phrase "development district" has the same meaning as in the Local Employment Act, 1960.—[Mr. Callaghan.]

Brought up, and read the First time.

5.28 p.m.

Photo of Sir Harry Hylton-Foster Sir Harry Hylton-Foster , Cities of London and Westminster

It will be convenient to discuss with this new Clause the new Clause—Increase of investment allowances for investment in industries of special national importance—and to have a vote on both new Clauses if so desired.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

I am moving this new Clause rather later than I had hoped. It is an important proposal and, if the hon. Member for Ebbw Vale (Mr. M. Foot) wishes to make a speech on these events, he will find it very much to his taste. If the hon. Member for South Ayrshire (Mr. Emrys Hughes) wants to make a speedy on Scotland, I suggest that the hon. Member for Ebbw Vale should go and tell him of this discussion, because he does not have to wait until the Recess; he can do it this afternoon.

Photo of Mr Michael Foot Mr Michael Foot , Ebbw Vale

I thank my hon. Friend for his courteous invitation. Usually, the Opposition Front Bench's objection is that we are here too often. I am most grateful for the invitation.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

I am delighted to think that the hon. Gentleman thought that it was courteous. That is certainly more than can be said of some of the comments which he and some of his colleagues made during the last debate. Although I suppose it is his privilege to go on making slighting remarks about those of us who are trying to do our job fairly and well, he must not take it amiss if we feel slightly resentful of the tone which he adopts.

I move this new Clause because we regard increased investment allowances for expenditure in development districts as at least as important a matter as some of the other matters which have been raised this afternoon. Whatever cosmic view we may take of the universe, the fact remains that the day-to-day work of this country mist go on. Moving round the country, I find that it is in these fields that our constituents are betraying a great deal of interest.

15.30 p.m.

The simple proposal here is that in the development districts there should be an increase in investment allowances in respect of industrial buildings, machinery and plant in order to give a fiscal encouragement to industry situated there to develop there and to encourage new industries to go there. We believe that this is important for two reasons, firstly, to help the unemployment situation in those areas, and secondly, for the purpose suggested by my hon. Friend the Member for Edinburgh, East (Mr. Willis) in the Bill which he has just had permission to introduce, to get a better distribution and pattern of industry, and I would include office development, in the country.

I think it is true that up to the present most of our concern about the depressed areas and development districts has been because of the case for relieving unemployment. This is still important. It is of great importance in some areas, but there is also a growing case, of which the country is becoming more aware, for the need to ensure that industry and office development are equally spread throughout the country. Although this is in some ways a mutilated Clause, because we are unable to develop all the cases that we would like, this is one of the ways in which we should like to see this problem tackled.

My right hon. Friend the Member for Battersea, North (Mr. Jay) in his book Socialism and the New Society gave interesting figures showing what happened when there was a real policy for development areas, as they were then. He said that: for twenty years between 1919 and 1939, Conservatives had argued that it was beyond the wit of man to find useful work for the 600,000 or 700,000 men and women chronically unemployed in these areas. Yet as early as 1951 some 300,000 new jobs had been directly provided by new publicly or privately financed factories together.… This was achieved by raising the proportion of new factory space going to the newly designated Development Areas (which originally included 15 per cent. of the population of Great Britain) to 45 per cent. of total new factory development in 1945–47, and 30 per cent. for the whole six years from 1945 to 1951.…

My right hon. Friend pointed out that The London and S.-E. Region, which was getting nearly 50 per cent. of new factory building before 1939, had its proportion cut to only 12·3 per cent. He went on to say that: … Equally illuminating, however, were the effects of the relaxation of the policy after 1952, and its abandonment from 1957 to 1959.… The London and S.-E. Region, which had only 12·3 per cent. of total new factory space from 1945 to 1951, got as much as 18·4 per cent. of it from 1952 to 1958, and 20 per cent. in some parts of 1959. The areas needing employment, which had secured 30 per cent. in 1945 to 1951, got from 1953 to 1958 (though they had been enlarged and their share of national population raised from 15 per cent to 18 per cent.) only 18·6 per cent. This was a direct consequence of lifting controls and allowing Conservative freedom to work. The result, without doubt, has been a lopsided development in our economy, with the growth of London until it has reached practically the point of strangulation in terms of traffic at certain times of the day. London is becoming an impossible place to live in or to move in.

Although I do not claim that the fiscal measures proposed in this new Clause would wholly achieve the object, nevertheless we believe that the Government should take it as an example of a policy which is national in the sense that it would be good for the citizens of London and the South-East and for the areas in Wales, Scotland, Lancashire and Yorkshire where life is being drained away through industry crowding into the London region.

We know from the figures what is happening. The most dramatic figure I have seen is the simple one that during the last decade nearly one-half of the now jobs created in the country were within a radius of 40 miles from the centre of London. Therefore, what we suggest in the first new Clause is that here is one weapon which the Chancellor could use, which certainly would not be wholly effective, but at least would be another weapon in his armoury to enable the dispersal of industry to proceed on a broader basis and to be more evenly distributed throughout the country.

Unemployment, which is another reason for this proposal, varies between places like Oxford, where it is down to less than ½ per cent., to places like south-east Tyneside, where it is 5·5 per cent., The Hartlepools where it is 6·3 per cent., Greenock and Port Glasgow, 7 per cent., Ilfracombe over 8 per cent., Anglesey over 8 per cent., Milford Haven and Pembroke Dock 11·5 per cent., and of course Northern Ireland, which is notoriously bad in this respect.

These figures of unemployment are still a scandal to our community at a time when our resources are so heavily strained in so many fields of employment. It seems to me a blot on the Government's record that they should not have been able in 11 years of undisputed power to reduce unemployment in these areas down to the national level. On this ground alone I would submit a Clause of this sort for the consideration of the Committee in order that fiscal advantages should be given to industries which choose to set up in these areas.

Some may raise the question whether we ought to use fiscal methods of this sort. Before the war they certainly would not have been considered, but I think that we have passed from the era when it was a belief in most industrial and commercial policy than taxation must bear equally on anyone wherever he was situated. In individual taxation we certainly adhere to that, but in company taxation there is no reason in principle or theory why we should not give fiscal incentives of this sort to clear up unemployment in these areas.

As for the rest, I would mention the simple fact, which is known to every hon. Member who represents a provincial constituency or a constituency in Wales or Scotland, that when constituencies in the Midlands and in the London area are bursting at the seams, this is the time when many of our large towns, with their proud histories and with considerable industrial skills gathered within their boundaries and a great record of civic and community interests, are stationary where they are not actually declining. It is surprising that at the moment when some parts of the country are absolutely bursting at the seams we have well-known towns and cities in the north of England in particular and in Wales and Scotland where the population is hardly moving because in many cases the younger life is being drawn off to the London area.

I am opposed to this and I am sure that if the present Government have not the will to tackle it another Government will have to do so, and it will have to be an active policy of which this new Clause would form one part. What success it would have is a matter of judgment but at least we should be able to say to any new industry, "Go to these areas and we shall be able to ensure that you do not suffer financially and indeed that there will be substantial tax advantages to you if you choose to go."

I do not think that there is very much more I need say about the first new Clause. I turn now to the second one—Increase of investment allowances for investment in industries of special national importance—which raises a slightly different point.

I think that it would be difficult to define these industries. I want to face that issue and discuss how it should be done. I imagine that there will be no disagreement on either side of the Committee that the total level of capital investment in Britain today is much less than is desirable. I do not know whether this is disputed, but I hope that it is not. Reading the O.E.C.D. Report, it seems that, if there is one criticism which can be fairly levelled at this country, it is that not enough of our plant is 100 per cent. efficient, that too much is obsolete, and not enough is sufficiently up to date. Those were the strictures contained in the O.E.C.D. Report.

I should be out of order if I entered upon a discussion of the Government's incomes policy now, and I propose to say no more than this. The proposal that incomes should keep pace with production is an obvious platitude which has been uttered by, I think, every Chancellor of the Exchequer since the end of the war. It does not of itself constitute a policy. When I hear undue concentration on this aspect of the matter, I am worried that it means that not enough attention is being paid to some of the other major factors, of which the failure of British industry as a whole—not all of it, but substantial parts of it—to invest enough in new plant and machinery is one.

This new Clause is designed as an attempt to encourage this type of investment. How could it be done? I think that it would be difficult for the Board of Inland Revenue to do it. However, I do not think that, with the creation of new planning machinery, it should be impossible. I do not know how the National Economic Development Council will develop. I do not know how interested the Government still are in planning. I read an article the other day which suggested that their interest had waned somewhat in recent months. I should not be at all surprised. They have a reputation for securing gimmicks. Then, having played with them, they drop them and move on to the next one. I doubt that, even if they had some sort of conversion to the idea of planning, they are really prepared to take the steps necessary to make planning effective in this country.

If we did have an effective economic planning instrument in this country, one of its tasks would be to examine industries in turn and to see which were up to date, which were efficient, which were lagging behind, and to dissect each industry and to bring the inquiry down even to major firms in the industry and compare and contrast their performance in exports and many other directions. This is a task which the nation will have to face if it wants to fulfil the social objectives which we have set ourselves. We cannot go on mouthing plans and proposals for hospitals, schools, roads, homes and the rest, and expect to achieve them unless we are ready to make drastic changes.

These drastic changes will involve considerable dissection and much greater knowledge of the capacity and performance of industry in order that we may raise its output, performance and efficiency. All this will be necessary. What I propose here is merely a tiny weapon in the armoury.

An economic planning instrument such as the N.E.D.C., properly constituted and differently organised, I think —that is a subject for another debate —could examine these industries and companies within them. It could then take what would undoubtedly be an arbitrary decision as to whether there was a case, and if so where, for ensuring that particular industries or particular companies should have special benefits in this respect.

We do it regionally now. We do it for the development districts. If we can do it regionally, why not do it nationally? I can see no reason at all in fiscal terms why we should not. But it means reorganisation. It means effort and will. It means the Government getting a move on. I frankly see little prospect of this, just as I see little prospect of the new Clauses being accepted. All I do hope for is that, by this series of debates we have had in the Committee during the past few weeks, which will be continued in the country, we shall awaken people generally to the failure of the Government to face the tasks which lie ahead of the nation. We have two rôles here. One is to convince the country of the unfairness of the present tax system. The other is to convince it of the Government's utter failure to take the necessary measures which would attain the aims I have in mind here.

I am quite ready to hear the Chancellor or the Chief Secretary, or some other butcher on the Government side, rise to his feet to cut these Clauses to pieces. As is well known, the Opposition cannot draft Clauses of this sort because of the limitations which are placed upon us by the rules of order and many other things. What I want to hear is not an artificial or technical destruction of these Clauses, but some attempt to answer the indictment which is increasingly being mounted against the Government, the indictment that, though they may will the aim of growth, they do not will the means to achieve it.

I have seen nothing at all since the introduction of the pay pause last July which convinces me that the Government have any practical proposals at all for endeavouring to secure the growth we need combined with the other factors which they set out in their policy. It is on that basis that I put these Clauses before the Committee.

5.45 p.m.

Photo of Mr Archibald Manuel Mr Archibald Manuel , Central Ayrshire

It is with the greatest pleasure that I support the case made by my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan). The intention behind the two new Clauses is to spread the location of industry more evenly over the whole country. We can all agree on both sides that, because of the continued lack of proper incentives, or for other reasons, industry is not being located to meet the needs of the people. It is tragic that in many areas, particularly in Scotland, we are steadily losing many of our traditional skills because the traditional industries are fading out and nothing is coming in to replace them.

Members of the Government and Scottish Members have claimed sometimes during similar debates that the Local Employment Act, 1960, has been a big success. I cannot speak of what has happened in development districts in England. I have made a study of my own constituency and neighbouring constituencies, and of the position throughout Scotland as I know it. In Scotland the Local Employment Act has not measured up to present needs. It sadly lacks the incentives necessary for the retention of an even spread of industry to meet the needs of the people, and it is failing lamentably to retain the population in the development districts. Although the Government can point to certain new industries being located in some areas, they have to admit that, generally speaking, more of the traditional old heavy industries are fading out and we have not managed to retain in employment a sufficient number of people to compensate for their disappearance. Inevitably, this leads to depopulation.

Unless industry is assisted, the future for many of our development districts holds nothing but inevitable decay. There will be a greater drawing off of population from the rural areas and development districts into the larger aggregations of population around our bigger towns. Everyone will agree that the constant and inevitable attraction of people to the Midlands, to Glasgow, to London and other large towns is a bad thing. Nevertheless, although everyone will agree about this and pay lip-service to the principle, we still do not have from the Government a policy which will do anything worth while to arrest the trend which is now unmistakable and which is causing great problems to arise.

It is natural that a Scottish Member should speak of Scotland in this connection and discuss how these two new Clauses would affect problems in his own area and in Scotland as a whole. The problem is growing throughout Scotland, as we know. It is increasingly difficult in my own area where, although we have managed to attract some new industries, most of them small industries —I am pleased with that success—we have not been able to clear the numbers of unemployed off the books at the employment exchanges. There is still over 6 per cent. unemployment in a fairly large part of my constituency.

However, I think that it is wrong to spotlight just our own constituencies. I do not want to be led along that line. I am particularly impressed by what is happening in Scotland as a whole, where large parts of the country are rapidly becoming denuded of their best people. In the seven Highland counties, for instance, there are immense possibilities, the best traditional skills in weaving, textiles, net-making and a host of other crafts which are passed down from one generation to another; yet depopulation is continuing. Do not the Government ever consider that it would be a good thing to revitalise the Highland counties?

I would go further than these new Clauses. I welcome their intention to assist—

The Deputy-Chairman:

That is just what the hon. Member must not do. He must keep to these new Clauses.

Photo of Mr Archibald Manuel Mr Archibald Manuel , Central Ayrshire

I do not want to apologise, Sir Robert, since I have not committed the offence. I think that you are pulling me up too soon. I said that I should like to go much further, but I have not gone further. I do not want to ask for an apology from the Chair, but I feel that I should have been allowed to commit the mistake before being corrected. However, I have no wish to break any rules, and I will try to keep to the purpose of the two new Clauses so far as they relate to an increase in investment allowances. Sir Robert, I am sure that, being a lover of our Highland counties and streams and knowing the fishing and deer stalking possibilities, you will agree that it would be a very bad thing if the Highland counties were further denuded of their population.

The investment allowances suggested in the Clause could be used by the Government to induce industries to go to the Highland counties. The Government could themselves of their own volition help new industries over their teething troubles in the earlier years by taking action on the lines suggested in the Clause. The Government could assist these industries by placing orders for Government requirements. I see that the Minister of Works is very interested in what I am saying. He has a great Scottish background. His Department could offer many inducements. Scottish industry, with its traditional skill, by making things ordered by his Department, could be successful if industry went to these areas.

The best of the young people are leaving many areas of Scotland because industry is not going there. This applies to Wales with equal force. Industries are not going there because the areas cannot compete with areas nearer markets or nearer aggregations of labour. Because Scotland's traditional skills and crafts are not being used, there is no work for the young women. There is an inevitable flow of young women from the Highland counties down to Glasgow or into England. Many of them do very good work in nursing or school-teaching. When there is an exodus of young women, there will inevitably be an exodus of young men. One needs only to examine the population statistics of some Highland counties to see what is happening.

I hope that the Government will have some concern to try to develop a new policy. My hon. Friend the Member for Cardiff, South-East said that he did not have much hope of the Government accepting the proposals contained in the Clauses. I hope that the Government will at least be sympathetic and offer some alternatives, if they cannot accept what is in the Clauses.

In many areas—some of them in England, many in Wales and Scotland —there is a continuing high rate of unemployment. Where this exists over a long period it is inevitable that the craftsmen and skilled workers leave rather than go to the employment exchange. They leave the area, and within a year or two the area is left with a pool of unskilled labour. When industrialists are asked to go there, they refuse because there are not the skilled craftsmen there to enable the industrialists to carry on satisfactorily. A hard core of unskilled labour signs on steadily at the employment exchange, but it is not their fault.

6.0 p.m.

Despite what any hon. Member may say, skilled men will not draw unemployment relief. They will move. Even though it means uprooting themselves and their families, they will go to England or abroad to earn the wages which their skills entitle them to. Their long apprenticeship and other training entitles them to a much better reward than they would secure by unemployment benefit.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

Does my hon. Friend remember that the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) suggested in the House of Commons about a fortnight ago that the unemployed man was quite content to remain unemployed in Scotland because of the very generous dole payments?

Photo of Mr Archibald Manuel Mr Archibald Manuel , Central Ayrshire

I read something to that effect. I will merely say, in passing, that it is quite untrue. It is a terrible slight against Scottish craftsmen. There is an exodus of 30,000 people a year from Scotland seeking employment in other areas. This is inevitable. It has happened in my constituency. The skilled craftsman will not sign on for long at the employment exchange before he risks all the upheaval of shifting his home, if he can get a house elsewhere, taking his children away from school or from employment, going to another area where he can keep his family in comfort and using the skill he has gained in full-time employment.

For all these reasons, I emphatically support the case made by my hon. Friend the Member for Cardiff, South-East. I hope that the Government Front Bench will give some support and sympathy to the problems which exist in development areas.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

The hon. Members for Cardiff, South-East (Mr. Callaghan) and Central Ayrshire (Mr. Manuel) spoke fluently and forcibly. What I could not understand was that running through their remarks was a sort of sentiment that the Government have no desire to bring help to development districts. That seemed to be the mood and spirit of their speeches. That is completely at variance with the facts. In pressing for help for development districts the Opposition, are knocking at an open door. Successive Ministers and successive Governments have shown their desire to help these areas by various means. The Opposition have come forward today with a different method of assisting these areas. I certainly do not know what my hon. Friend will say about these Amendments.

Photo of Mr Frank Hayman Mr Frank Hayman , Falmouth and Camborne

The hon. Gentleman does know.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

The hon. Gentleman is quite wrong about that. I have not the slightest idea. If my hon. Friend takes the view that these methods are not the best methods, I do not see that the hon. Member will then be able to say that the Government have no desire to help these areas.

As the hon. Member for Cardiff, South-East has already admitted, there are many other methods of bringing assistance to these areas. They are embodied in the Local Employment Act, Which is mentioned in the first new Clause. They are being put into effect by the refusal of development certificates in certain parts of the country, a policy which has been rather forcibly applied in recent years. They are also applied in B.O.T.A.C. arrangements and the arrangements for advance factories being built in some parts of the country.

The Opposition, reasonably, have come forward with yet another method which they suggest would be of great benefit. I certainly do not object to the motive, but I do not believe that it is the right method. The investment allowance has a different purpose from the legislation which has been passed to steer industry into these areas. As I understand it, the investment allowance is designed ultimately to make our industry more efficient. It is designed to stimulate the improvement of industry by investment in capital equipment. That is a general aim. It is not designed to improve industry in a certain locality. On the other hand, the legislation to which I have referred, the policy of refusing development certificates, the B.O.T.A.C. arrangements, and the building of advance factories, are all designed expressly to help development districts. There is a definite and important difference.

The hon. Member for Central Ayrshire said that we could expect, if things were done properly, that industry would be evenly distributed over the whole of the United Kingdom. That was the inference behind his speech. I do not see how anybody can envisage such a prospect, because some of our great industries, such as steel and chemicals, are almost insatiable in their demands for labour.

Photo of Mr Archibald Manuel Mr Archibald Manuel , Central Ayrshire

I have a note of the words I used. I said that industry would be more evenly spread.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

I accept that correction. I thought that the hon. Gentleman went somewhat further. The large industries which have grown up since the First World War and, even more so, those which have grown up since the Second World War need large numbers of personnel. They need enormous labour forces. A new factory is shortly to be opened in Wales. The hon. Member for Cardiff, South-East is well acquainted with this, because it is in his constituency. A Rover factory is shortly to commence operations in Cardiff. It will require thousands of men. It is possible that some of the men will go there from other parts of the country. That is not necessarily a bad thing, because our industries, to compete with other countries, must include large units. I believe that that is accepted on both sides of the Committee.

Photo of Sir Frederick Burden Sir Frederick Burden , Gillingham

My hon. Friend is going a little wide of the subject by saying that there must be a great concentration in industry. We must not ever lose sight of the fact that there are a great number of small industries which are highly valuable and could be diversified.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

I was coming to that. I said that what we are trying to do is to steer as far as possible into the areas which have not these large industries and have no immediate prospect of getting them, industries which are consonant in size and in their labour demand with the labour force available in the areas. That has always been a very difficult job. It is a job which is never easy to solve, but it has been done. The hon. Member for Central Ayrshire asked whether this policy has had any success anywhere. It has been magnificently successful in South Wales.

Photo of Mr William Ross Mr William Ross , Kilmarnock

Who told the hon. Member that?

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

The hon. Member for Cardiff, South-East knows it.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

It has been successful under successive Governments and never so successful as in the past few years. South Wales, which was formerly a development district, is fast becoming one of the boom areas of Britain. I understand that to a lesser extent the policy is meeting with a good deal of success on Merseyside.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

I want the hon. Gentleman to face my argument. The core of my argument is that, whatever success has been achieved in South Wales, which is substantial, 45 per cent. of the new jobs created in this country during the last decade have been within a radius of forty miles from the centre of London. We ask for a more equitable distribution of industry, not necessarily to give employment, but so that we can get rid of the land-hungry world we are living in.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

I have said that this Government and their predecessors subscribed to that view. The hon. Member said that many jobs have been created in and around London, but I think he will accept that also many new jobs have been created in Wales and on Merseyside.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

The total number of people working in South Wales and on Merseyside today is very small, a matter of 2,000 or 3,000 more than ten years ago. The areas have full employment, but they are remaining stationary while the position is ballooning in the big area around London. That is the problem which the Government have not yet tackled.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

In mentioning a figure of 2,000, the hon. Member disregards the fact, of which he knows, that 8,000 will be employed at Llanwern, near Newport.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

So am I. The hon. Member knows that there will be 8,000 or 10,000 in the Newport area, a comparable figure in the Cardiff area, and a somewhat smaller figure in the Llanelly area.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

I will not interrupt the hon. Member again. I am not talking about individual firms, but about totals. According to the figure I have been given, the net loss of insured employees between 1951 and 1959 was 32,000 men, women, boys and girls. That number left for work either in the Midlands or around London. It is that pattern I have been talking about, not the creation of 8,000 jobs at Llanwern.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

The tendency before the war was for people to leave South Wales. but now the tendency is for them to come back. [HON. MEMBERS: "No."] I can assure hon. Members that a substantial number of people who have left are now coming back to take important posts in these new industries.

Photo of Mr Archibald Manuel Mr Archibald Manuel , Central Ayrshire

I wish the hon. Member would open his mind to the problem I posed, because he was replying to points I made and I think he has been replying mistakenly. In the whole of the seven Highland counties in Scotland, under present inducements we cannot get industry at all. Is the hon. Member prepared to write oft half Scotland completely? Should it just become depopulated, or is he prepared to give further inducements to industries to go there?

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

No one wants to write off any part of the country, but the hon. Member will admit that inducing factories to go to the north of Scotland becomes more difficult the further north one goes. We had a similar difficulty in North Wales as compared with South Wales, but now that problem is getting better. Four years ago we were not able to get industry to go to Caernarvon-shire, or Anglesey, but that is happening in some degree now. The benefits of this policy have been seen in some parts of the country. I sincerely hope that they will be seen increasingly in other parts of the country very shortly.

I do not think that the aid suggested in these new Clauses is the right way to deal with the matter, but that does not mean that I am not entirely in agreement with the objective. Successive Governments, including this one, have pursued this policy with marked success in some parts of the country and with less success in other parts because the conditions there have been more difficult.

6.15 p.m.

Photo of Mr Goronwy Roberts Mr Goronwy Roberts , Caernarvon

The hon. Member for Barry (Mr. Gower) referred to my constituency as one of the difficult areas which is now beginning to benefit from the application of the principle of the Distribution of Industry Act. Had we been in power in the last ten years I should not have had to talk about these industries as often as I have done.

The reply to the hon. Member is that the comparatively little success which has been obtained in places like Caernar- von—and no doubt my hon. Friend the Member for Anglesey (Mr. C. Hughes) will say the same of his district—has been due to the most extraordinary pressure during the past ten years on the Government who at last are beginning to move—not because they believe in the distribution of industry, but because the entire population, including their own supporters, are up in arms against them.

If the hon. Member had attended the Adjournment debate which I initiated the other night, he would have heard what the position in Caernarvonshire is. Apart from this single instance of industrial advance, the rest of the county is in dire need of the kind of fillip and inducement which these two Clauses would in part provide. I with to support what my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said. I thought his speech one of the best statements I have yet heard of the case for the distribution of industry, not only for rescuing provincial areas in danger of becoming socially and economically derelict, but also for trying to do something to solve the impossible situation which is growing up around London and other big towns.

The two Clauses refer to development districts. Those are areas of heavy and persistent unemployment. My hon. Friend gave a list. In my constituency now, at a time approaching mid-summer when seasonal employment is available, the unemployment rate is 6 per cent. or 7 per cent., and in winter-time it will be doubled. These are districts which in the past depended on one or two heavy industries. The only solution to this persistent problem of unemployment in such districts is to introduce new industries to take the place of the old and also to do what we can to sustain the old which in many cases have declined but ought not to disappear.

I do not apologise for introducing this argument in reference to my own county. The position there bears out word for word what my hon. Friend said when he was opening this debate. There there is a static population of about 120,000, and it was 120,000 40 years ago. There we have declining local government revenues. The rateable value is £1½ million today and it was £1½million five years ago. These are serious and dangerous trends. The reasons for this decline are largely that the old industries of agriculture and slate quarrying have declined and no new industries, or very few, have come in because insufficient inducement is given to now industry to come to such an area.

Reference has been made to the Local Employment Act, 1960. We have benefited very little from that Act. The new development in Caernarvon to which the hon. Member for Barry referred did not come under that Act. That was a factory which was introduced by a firm of international renown and resources. That firm did not have to depend on the Government for financial or other aid. What we have to address our minds to is the attracting of small and medium-sized new industries of a modern character to these districts. When we talk to such industrialists, we speedily find that the inducements already available administratively and fiscally are either not sufficiently forthcoming under the administration of this Government or they need to be added to on the lines suggested by these two Clauses.

I have spoken to an industrialist of a medium-sized industry who found that the capital cost of establishing his industry in a completely new area like Caernarvon was so great that at the end he had to withdraw. The kind of concession contained in these Clauses might well tip the scale in favour of such industrialists venturing to areas like ours. The other day the Parliamentary Secretary to the Board of Trade, when I raised these matters, gave some figures which might be of interest to the Committee. He said on 24th May: In existing circumstances it has been difficult to interest prospective industrialists in South Caemarvonshire, but I can tell the hon. Member that it is not for lack of trying. He will be interested to know—although it may not sound a great deal—that in Caernarvon-shire as a whole, in the last twelve months, 14 sites and five buildings were suggested to 26 industrialists, 16 of whom either came themselves or sent representatives to see them. Only one has within this period set up in the county."— [OFFICIAL REPORT, 24th May, 1962; Vol. 660, c. 831.] There were 26 industrialists examining possibilities in a development district and finding that under existing inducements they could not go to those districts. Clearly we must add to those inducements. In the experience of a great many of us the inducement which might turn the scale is an increase in invest- ment allowance to industrialists proposing to come to such a district.

I mentioned the way in which these Clauses might help to develop existing industries in these districts. For two centuries, thousands have been employed in the slate industry of Caernarvonshire and Merioneth. During the past quarter of a century the competition from cheaper and inferior roofing materials has meant that the number of jobs available in those quarries has declined steeply. In 1913 as many as 14,000 men were employed in the quarries in those two counties, but by 1938 the number had gone down to 8,000 and today the quarries employ barely 3,000.

There in microcosm we have the kind of thing which happened in South Wales and Durham where traditional heavy industry declined for various reasons and the employment provided by it contracted at a rapid rate. The consequences have been social and cultural as well as economic. It is tempting to some rather cold-blooded social observers to dismiss the slate industry and say that it ought to disappear because the economic facts are against it; but that is not so.

Hon. Members may remember that a few months ago great storms ravaged the north of England. Immediately there was a need for millions of pieces of slate to repair the roofs which had been damaged in that area. The condition of the industry, however, had been allowed to decline to such an extent, with no Government assistance whatever, that it found very great difficulty in meeting this emergency.

There are 5 million houses roofed with slates in Great Britain. If this industry, which is largely concentrated in one small corner of Wales, is allowed to disappear, whenever there is need for slates for those millions of houses the contractors will have to decide to re-roof at a colossal capital charge. It will cost the country in labour and finances far more than steps taken now to place this industry on a viable basis with a view to its being able to feed the repair market of that great section of the housing of the country would cost.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

Is my hon. Friend aware that many builders in the Sheffield area are still engaged in repairing roofs damaged in that storm? They are complaining about the shortage of slates.

Photo of Mr Goronwy Roberts Mr Goronwy Roberts , Caernarvon

That is the point I am making. This industry is typical of the kind of industry we ought to assist in a development district. Because the assistance in the past has been very small, or non-existent, the industry has great difficulties with which to contend. It has been allowed to decline. Only when a national calamity arises do we realise that it would have been in the national interest to have maintained the industry in such a state that it could fulfil sudden and extra demands made upon it in the way I have described.

I take it that these Clauses which refer to development districts, include industries and undertakings already operating in those districts. I can think of no industry in any development district which would benefit more from these provisions than the slate industry in North-West Wales. This is an industry where production costs are very high, unless automation is introduced on a large scale. Many hon. Members will know that in order to win slate in the open-cast quarries, it is necessary to remove from the quarry large quantities of over-burden, a completely unproductive task which adds to the aggregate cost of the slate. Excellent as the slate is, its cost must bear that burden.

Therefore, one way to assist this old and honourable industry, which is a nationally necessary industry, would be to give added support to those slate quarry owners who are trying to increase the amount of automation or mechanisation in their quarries. These two Clauses would immediately benefit the industry and the housing system as a whole. My hon. Friend the Member for Sheffield, Hillsborough (Mr. Darling) spoke to me the other day about the P.E.P. report which referred to the fact that since the war many houses have been built which have now been found to be seriously deficient in roofing and other respects. Let us use this kind of inducement to slate quarry owners to improve their production and reduce their costs and their prices, so that the houses of the future will not come under such criticism as that.

Photo of Mr John Robertson Mr John Robertson , Paisley

My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) was unduly pessimistic when he suggested that the Government would not accept the two new Clauses. I am sure that they will feel able to accept them, as in the many by-elections which are now taking place all over the country, particularly in Scotland, they are saying that their purpose is to get better distribution of industry. Here is a practical method of achieving their declared policy. I am aware from debates in Scottish Committees and in the Chamber and from answers to Scottish Questions that what the Government say and what the Government do do not always coincide.

The Committee will be aware of the great concern of the people of Scotland on the questions of employment and unemployment, particularly about the continuing and growing loss of population by migration. But Scotland is exporting not only its population and its skilled workers but its housing problems, especially to London, Birmingham and Coventry and other large industrial centres which already have their own housing problems. This is, therefore, a matter of concern to all hon. Members, not just to Members who represent development districts.

6.30 p.m.

I am one of those who believe that the problems of the development areas can be solved only by the direction of industry so that in each area we build up a complex of suitable industries of sufficient size to be able to continue to grow of their own volition. But the Government have said otherwise for many years. They have been saying that they are concerned to find remedies for the problems of the development districts. Here is a remedy.

All Members from Scottish constituencies know that the Local Employment Act has so far failed to achieve its purpose. Larger carrots are needed. The proposals of the new Clauses may not solve the problem, but they will help and will encourage firms in the areas to become more efficient— and we have been told that that is the purpose of the investment allowance— and they will also attract other industries into the areas.

The Local Employment Act applies only when there is unemployment in an area, but unemployment can be cured in many ways, and one of the ways in Scotland is by migration, by exporting the problem. When migration occurs, the problem no longer exists for the Government, but for Scotland it is aggravated. If the Government are serious about the distribution of industry and seeing that jobs are taken to the development districts, they should grasp this opportunity with both hands. They should take the chance of making Government policy much more effective than it has been for the last ten years.

Photo of Mr Harry Randall Mr Harry Randall , Gateshead West

The new Clauses aim to increase the investment allowance for expenditure in development districts. Their purpose is to attract new industries to the areas in which they are needed. There is no doubt that in areas such as the North-East further incentives are needed. I will give some examples. In March, this year, I asked the Minister of Labour for some figures of unemployment in the years 1951 and 1961. I wanted to make a comparison. I was told that unemployment in the North-East in 1951 was 29,360, while in 1961 the figure was 40,245— ten years of Toryism. That represents an increase of no less than 37·1 per cent.

The North-East is an area where every effort ought to be made to encourage new industries. It went through difficult times before the war, a war in which it played a tremendous part in order that the nation might survive. It had every right to expect that the country would look after it after the war. But, in the event, unemployment has risen by no less than 37·1 per cent. in ten years.

How has it fared under the Local Employment Act? One would have thought that such an area was entitled to its share of new factories and new extensions under the Act. The hon. Member for Barry (Mr. Gower), who has now left the Chamber, having made his speech, may have been right when he said that a larger percentage had been given to Wales.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

On a point of order. May I draw your attention to the fact, Sir Samuel, that there is not a single back bencher on the Tory side of the Committee? May I also draw your attention to the fact that there is not a quorum?

Notice taken that 40 Members were not present:

Committee counted, and, 40 Members being present—

Photo of Mr Harry Randall Mr Harry Randall , Gateshead West

I was hoping that as a result of that urgent call we would have had hon. Members filling the benches opposite in order to listen to what I regard as a strong argument in favour of the new Clause, saying that in all modesty. At least I have the satisfaction of seeing that the hon. Member for Barry has returned.

I was saying that I would not disagree with some of the things he said about new jobs, new factories and new extensions having gone to Wales, but he was quite wrong in what he said about the rest of the country, although he may have been somewhat right about the North-West.

I want to quote the figures from the Board of Trade's annual report on the working of the Local Employment Act, 1960. Table II of Appendix 6 gives regional proportions of new factories and extensions in the manufacturing industries. For the area from which I come and a constituency in which I have the honour to represent, the North-East, it is estimated that additional employment created under the Act from 1st April, 1960, to 31st March, 1961, was 4·7 per cent. compared with an increase in the number of insured workers of 9·7 per cent. My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) was right in what he said about the tendency in the South-East, for in London and the South-East there has been an increase in new jobs of 14·2 per cent. while the number of insured workers has increased by 21·2 per cent. In other words, the same ratio of jobs has gone to London as to the North-East. Unemployment in the North-East since 1951 has risen by about 37·1 per cent. There is a real need for something to be done. If the President of the Board of Trade were here and were asked whether he was satisfied that the maximum employment had been provided under the Local Employment Act, he would say that he was dissatisfied. That being so, there is a strong case for the new Clause.

As I said, we have an unemployment figure in the North-East of about 40,000. There are only 22,000 jobs in prospect, which makes a strong case for the encouragement of firms to go to the North-East.

Photo of Mr Norman Pentland Mr Norman Pentland , Chester-le-Street

On 21st May the Parliamentary Secretary to the Ministry of Labour told me at Question Time that 22,000 jobs were in prospect in the North-East Region, but on 28th May the Parliamentary Secretary to the Board of Trade informed me in a Written Reply that 21,000 jobs were in prospect. From one week to another we had lost 1,000 jobs. In our view, the Government are indulging in guesswork about the jobs in prospect in the North-East to cover the serious unemployment prevailing there.

Photo of Mr Harry Randall Mr Harry Randall , Gateshead West

I accept that, and it looks as though the right hand does not know what the left hand is doing.

I wonder what the 22,000 jobs will represent when they reach the register of the employment exchange. I feel that it does not mean that unemployment will fall by 22,000. I suspect that it will fall by only about 11,000.

There is a good case for the new Clause, and I hope that the Committee will respond to the arguments and give real encouragement to the unemployed workers of this country. It is difficult to get figures over in the House, but in my constituency I have 2,400 unemployed. If we lined them up four in a row, how long a procession would that make walking through Gateshead? I suggest that it would be 600 yards, four men a breast, walking along the streets of Gateshead like an army. In the North-East as a whole, the figure is about 40,000. Something should be done about this, and the new Clause gives us an opportunity to do it.

6.45 p.m.

Photo of Miss Peggy Herbison Miss Peggy Herbison , Lanarkshire North

I support these new Clauses, but, like most hon. Members, I wish to talk mainly about the first. My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) thought that the Government's reply would be a refusal. Having listened to the debate and watched back-bench Members on the Government side, I have no doubt that the reply will be a refusal.

When my hon. Friend the Member for Fife, West (Mr. W. Hamilton) drew attention to the fact that we had no quorum, there was only one Government back-bencher present. In a debate of this kind, which in a very small way might help to ease unemployment, surely we should have on the Government back benches hon. Members from the north-east of England and certainly from Scotland, all vying with each other to try to get the Government to accept this modest new Clause. Far from having their speeches, we have failed even to get their presence. At the moment we have only one Conservative back-bencher present from Scotland.

The first new Clause asks for an increase in the investment allowance. It asks for a very modest increase in investment allowances for industrial buildings, machinery and plant. It is an attempt to give another incentive and to attract more industry to the development districts. We know that even if the Government accepted the new Clause it would not work wonders, but in the present situation in many development districts, we on this side of the Committee are willing to try almost anything to attract these industrialists into those areas.

After nine or ten years of Tory Government, they introduced the Local Employment Act, which has attracted some industry to some of the development districts, but it has not done very much for my county and my country. Taking the country as a whole, our unemployment position is still the worst of any region in the United Kingdom, and for that reason I support the new Clause. Today we have almost 80,000 people unemployed. When he makes speeches in the House and outside, the Chancellor always asks the workers to produce more. If we could get those 80,000 people in jobs, they would be delighted to produce, but many of them are longterm unemployed lying on a scrap heap with no chance or hope of producing at all.

The coal industry in Scotland has been badly hit,and my county,Lanarkshire,has been particularly badly hit. The United Kingdom steel industry is not working anywhere near capacity, but in Scotland it is working only between 55 and 60 per cent. of capacity. That is a very serious matter for us. In Smith and McLean's steel works, part of the Colvilles group, a few years ago we had 1,100 men working happily and producing. There is not one man in it today. It is true that the cold rolling part of the new steel strip mill is next door, but it started only a comparatively short while ago to recruit labour, and I am informed that when it has fully recruited it might take only 50 per cent. of the workers who were employed in the old steel rolling mills. That position can be multiplied in many parts of the country.

This year the shale mines in West Lothian will close. The Government will be aware that there is an important matter to be decided in West Lothian in the very near future. In the Glasgow Herald today I read, Many Question Marks in West Lothian. Another heading is, Economic Shake-up. I read: The county, one of the smallest in Scotland "— the whole county forms one con-stituency— is in the throes of probably its most severe economic shake-up since the industrial revolution. Topographically more rural than urban. and delightfully so in some parts, it has at the same time sustained about two-thirds of its population on a tradition of mining which goes as far back as the reign of Alexander III, and of heavy engineering. But heavy engineering tends not to grow, and mining to fail. That is the case. Quite a number of pits have been closed there. It continues: In April the shale industry died". — and the Government have to take some blame for that because of their fiscal policies and their unwillingness to help this industry to try to survive. The paper says that the shale industry died, and with it the sole reason for keeping Baads Colliery in operation. Probably 1,500 men lost their jobs. The fear of further pit closures remains. Bo'ness docks were closed and so were timber yards and some boat-building by the Forth shore. What a picture that is in the industrial part of West Lothian. On the back page we are told about some of the jobs in the pipeline in that area, but we are tired of hearing about these jobs year after year which are in the pipeline for our Scottish people.

Mine is the next county— the biggest industrial county in Scotland. Areas such as Coatbridge and Airdrie have very high unemployment. Some of the other mining villages are almost derelict in respect of employment. We on this side of the Committee have always felt that the Government have failed to use the industrial development certificate as it should have been used. If they had used that certificate there would have been a real chance for the area, in which pits have been closing since 1947, to have had new industries brought there. We hope that there will be a strengthening of the industrial development certificate, but we have seen that the provisions of the Local Employment Act are not sufficient to attract the number of industries which we desperately need.

A fortnight ago I asked a Question about the unemployment rate amongst youths in Lanarkshire, and from the answer I found that for every three people under 18 years of age without a job, there was one job. In other words, three young people in that industrial county are chasing every vacant job. What a difference when we look at the position in London, the South-East or the Midlands. In Warwickshire, which I listed in my Question, there are three jobs for every one young person unemployed. The Government should be extremely concerned about these things, and particularly about the lack of job opportunities for young people, not only in Scotland but in the North-East and other areas where unemployment is high.

I do not think that the new Clause will work miracles, but at least it will be an earnest of the Government's desire to give another incentive, if they accept the new Clause, and to create some chance of attracting perhaps a little more industry into the areas which so badly need it.

Photo of Mr Cledwyn Hughes Mr Cledwyn Hughes , Anglesey

I have come to the conclusion that the hon. Member for Barry (Mr. Gower), who is not at the moment in his place, is unique in that he must be the only living Welshman who is completely satisfied with the present Government. In the course of his speech, he omitted to describe the record of the present Government since 1951. He forgot to mention that round about 1953 the Conservative Government neutralised the Distribution of Industry Act and that between 1953 and 1960 there was hardly any distribution of industry at all. In 1960 that Act was dismantled and the policy of distributing industry to those places where it was needed was abandoned. The Local Employment Act took its place.

What must be faced by the Committee and by the hon. Member for Barry is that for seven years no action was taken by the Government to alleviate the problem in areas of acute and chronic unemployment and that even today, after the Local Employment Act has been operating for two years, in most of the affected areas unemployment is higher than it was in 1951 when the Labour Government left office. That is the situation. After 11 years of Conservative Government and of so-called Conservative prosperity, we are worse off than we were in 1951, six years after the end of the war.

When one studies the growth of industry— my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) described this in his excellent speech— particularly in London, where its growth increases the traffic and housing problems, and when one studies the position in Scotland, Wales, Cornwall and other areas, one realises— this is the crucial fact— that the Government have completely lost control of the distribution of industry situation. The reins are in the hands of the industrialists, not the Government. We want a change of Government so that the reins may be placed in the hands of the representatives of the people, so that industry may be guided to the areas where it is needed, not only to the areas of high unemployment but to districts of acute depopulation, such as Mid-Wales.

The central question in relation to the proposed new Clause is whether or not the provisions of the Local Employment Act are enough and whether the inducements offered to industrialists under that Act are adequate. The principal powers that no doubt the Financial Secretary will outline to us— conferred on the Board of Trade Advisory Committee by Part I of the Act— are, first, to acquire land and buildings and to build factories and other premises for sale to suitable undertakings; secondly, to make building grants to undertakings providing their own premises; and thirdly to make grants or loans to undertakings for their general purposes. These are useful powers if used effectively. My criticism of the Government is that so far they have failed even to use the powers of the Local Employment Act to the full effect.

The Local Employment Act has one considerable drawback, namely, that there is a considerable delay between the date of the application for assistance and the date when the decision of B.O.T.A.C. is made known to the applicant. There is a lapse of three or four months. One accepts, of course, that there should be a reasonable delay. After all, public money is being spent. But I feel strongly that some more immediate inducements to the industrialist are needed, something which will help the industrialist at once so that he can say "If I decided to go to Anglesey, Falmouth, Stranraer or some other area of high unemployment, I can count on this assistance whatever happens to my application to B.O.T.A.C." After three or more months of long and frustrating delays and after meeting representatives of B.O.T.A.C., he may be told that his application is rejected. If he is undecided what to do, the Clause may turn the scale.

7.0 p.m.

There are other industrialists who may for some reason or another decide not to make an application under the Local Employment Act but nevertheless to enter an area of high unemployment. It may be that because of frustration or other reasons they may decide to proceed on their own resources. I know one firm which decided to come to a development area in North Wales. After long negotiations it decided to abandon its application to B.O.T.A.C. but to go to the area anyway. Such industrialists should be encouraged.

I do not think that the problem of our unemployment areas will be solved by the Local Employment Act— certainly not by the present Government. There must be some positive, immediate assistance to industrialists. This is one way of doing it. The Clause represents the type of prompt assistance that can be given to suitable industries to go to such areas. I do not know what the Financial Secretary will say, but I hope he will be mare forthcoming than he was in regard to apprentices last Tuesday. We need the kind of inducement this Clause envisages, and I hope the hon. Gentleman will give us an encouraging reply.

Photo of Mr Frank Hayman Mr Frank Hayman , Falmouth and Camborne

Unlike my hon. Friend the Member for Anglesey (Mr. C. Hughes), I am fairly sure what the Financial Secretary's reply will be. Last year we discussed help for the tin mines. The tin mining industry of Cornwall was important, and it may still be important. The Financial Secretary came to the Committee with a speech already prepared. The Chancellor of the Exchequer was, however, more receptive to the arguments put forward from this side of the Committee. But the result was the same. On Report stage the Chancellor delivered the speech which his hon. Friend had prepared for the Committee stage.

I make no bones about restating the need for some incentives for new industries in the development districts. The whole of west Cornwall is such an area. There are at the moment signs of a revival of interest in tin mining. Surely this is one small concession which the Government might make to bring about a revival of this once important industry. I beg the Financial Secretary to consider this point because it is a vital matter to west Cornwall.

Like many of my hon. Friends, I am very unhappy about the operation of the Local Employment Act, 1960. I think I am right in saying that not a single new industry has come into the Falmouth and Penrhyn area of my constituency. Many applications for B.O.T.A.C. have been made, but they have been turned down. Because of the seasonal or casual nature of employment at Falmouth docks, at times the rate of unemployment is extremely high, and the area looks to the introduction of new industries to help those who would prefer a smaller rate of pay but security of tenure. I know many men who worked in Falmouth docks but have gone into other less well paid industries because of the need for security in employment. I beg the Financial Secretary to appreciate that this is a serious matter.

I would point out that the great firm of I.C.I. took completely away an industry from the part of my constituency in which I live— Camborne and Redruth—an industry which five years ago was employing 500 people. Many of those then employed have perhaps retired or, being married women, have left employment, and so they are not registered as unemployed. But what has B.O.T.A.C. done to help any new industries which might come to occupy the factory which I.C.I. deserted, so shamefully, as I think — because this was an industry which had grown up in my town for 130 years?

I ask the Financial Secretary and the Chancellor to bear in mind that these areas of high unemployment still have to carry very high interest charges because of very heavy investment in social services— such as housing, drainage, water supply, schools and so on in Camborne and Redruth. The present figure is more than £ 2 million for a population of 35,000, and that is likely to increase by £ 750,000 or more. There is a need for a new sewerage scheme in one part of the district and a need for additional water supplies for the whole district.

The extraordinary thing is that at the very moment that the Government are refusing to help us very much they are giving a subsidy for the building of vessels in foreign shipyards. That is an extraordinary thing to do. Here is one small way in which the Chancellor can help west Cornwall. We have known very severe unemployment in the past. In my constituency in the 'thirties the average unemployment was 25 per cent. — one in every four of the workers was unemployed.

My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) has already drawn attention to the fact, and I want to emphasise it, that 45 per cent. of the new jobs created in the last 10 years have been within a radius of 40 miles from the centre of London. On many occasions during the 12 years I have been in the House I have asked Treasury Ministers to pay more attention to the outlying areas of the country and less to the area around London regarding the building of new factories. Always I have had the same sort of excuse why more is not done for the outlying areas, and I hope that tonight the Financial Secretary will not turn down these proposals but will, for a change, accept them.

Photo of Dr Alan Thompson Dr Alan Thompson , Dunfermline Burghs

The problem which we hope the proposed new Clause will go some way to solving has been with us for a long time. It has been with us since the 'thirties, and it is a serious one. It is simply that the geographical distribution of manpower in Britain has become distorted. Since the 'thirties it has involved a steady flow of economic activity from the parts we are seeking to assist to London and the Midlands.

The reasons why industries were attracted in the 'thirties to certain areas, are understandable. First, it was that the basic industries were contracting during a period of deflation. Today, history seems to be repeating itself. No one is suggesting that the deflationary situation today is the same as the 'twenties and 'thirties but it is true that the problem of the contraction of basic industries is intensified if at the same time as we are trying to solve this problem, the economy is given a deflationary twist. The replanning and reorganising of our basic industries can be done more easily if the Government are not giving this deflationary twist at the same time.

Regarding the longer-term problem, we must recall that in the 'thirties there was the release of new industries from their traditional need to cluster around the coalfields. It made industry more mobile and less dependent on the coalfields and, as a result, industry gravitated to the bigger markets. The whole question of industrial gravitation to these bigger markets is a vicious circle, because the bigger the market the bigger the gravitation of industry. As the markets today still more enlarge, more manpower goes to them That makes them even bigger, and the spiral continues. The market goes on expanding because of the obsession on the part of many industrialists that they must place their factories near to these big markets.

One hundred years ago it was the position of the coalfield which decided a factory's location, but today it is the size of the market— and the market gets bigger, manpower increases and the problems of housing and transport become intensified. The Labour Government made a bold effort, with their policy for new towns, to stop this trend. This was a great experiment and one which we wish to see continued.

I agree that the drift was halted to some extent during the war. In wartime conditions industry sorts itself out again and spreads itself more evenly through the country and to the periphery, for two good reasons; first, because of the state of full employment and a buoyant economy required in order to wage total war— a lesson which we might apply to peaceful uses in these days— and because industry was planned and, secondly, because of the need for the strategic dispersal of our factories. There is still good reason for giving incentives for industries to spread in order to make ourself less vulnerable to attack during war.

I said earlier that the drift back to the pre-war pattern was halted by the Labour Government. That Government's methods of tackling this problem were wider than the proposals in the proposed new Clause. However, the present proposals form part of the same pattern to which the Labour Government worked. That Government placed emphasis on the planned location of industry and my hon. Friends— and I believe a number of hon. Gentlemen opposite— will agree that the unscrambling of this planning must be laid firmly at the door of the present Government. We consider that policy of dismantling our planning machinery to have been disastrous.

I have said enough to indicate the type of problem we must tackle and, indeed, that the problem exists. It is ridiculous that, in this island, we should not make a determined effort to reallocate industry and manpower more widely for the reasons I have explained. For instance, in my part of the world, Fife is being drained of its population— yet it is a county with great economic potential. It has access to ports. In recent years this area has spent £ 30 million of what we might call social capital on water supplies, housing, communications and education. It is now spending a great deal of money on beautifying the area to remove the ravages of the industrial revolution so that when industry comes, if it does come, it will be in an area of beauty with a pleasant environment. After all, there is no reason why we should retain that nineteenth century attitude that industries and factories must be ugly. My constituency, with its disused colliery areas, aften swamped and derelict, suffered particularly in the past. Fife County Council is planning to do a splendid job repairing this damage.

Few parts of this area are more than a few minutes from Edinburgh Airport, which in turn is only a short journey, in space of time, from London. The transport difficulties which are often raised in connection with development areas are often exaggerated. It took me longer recently to get from Westminster to Ealing Broadway than it did to get from London Airport to Edinburgh Airport. Indeed, we often exaggerate the transport difficulties for executives who come to serve in firms in these areas, and the costs involved in distributing the products of these firms.

7.15 p.m.

This is a small island and if countries like America and Russia can spread their industries and still produce efficiently and get their goods to the markets, there is no reason why we should continue with this perpetual obsession of having our factories on the doorsteps of the biggest markets, especially the London one.

I know that the Financial Secretary is not only an economist but has aesthetic tastes, and I am sure that he will agree that there is something to be said for diversifying the industry and our economy on aesthetic grounds. My own constituency is set in beautiful scenery and it is only right that the factories and those who work in them should have congenial and beautiful surroundings. Instead of industries going to the smoke and diesel-filled streets of the London and Midlands districts they should be encouraged to come to these areas.

I often feel that the Financial Secretary is unsuited to reply on questions dealing with the decline or stagnation of the economy. He is so vigorous, expansive and booming that he should deal with economic expansion and leave the Economic Secretary to deal with conditions of depression and the more astringent conditions of the economy. Perhaps the Government might consider allowing the two hon. Members to have dual rôles.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

Would my hon. Friend care to say to which subjects the Chancellor of the Exchequer might reply?

Photo of Dr Alan Thompson Dr Alan Thompson , Dunfermline Burghs

That would lead me too far afield. However, reverting to the two Secretaries, the Government might consider allowing one of them to be a spokesman of boom and the other to be a spokesman of slump, like character in some mediaeval morality play.

The Government can no longer shelter, as they did in the 'thirties, behind the difficulties of finding out the different problems of the regions. The proposed new Clause is designed to give preference and to admit the special problems of the regions within the economy as a whole. In the 'thirties it was difficult to do this. The figures regarding manpower, employment in industry, occupations, and so on, were not available region by region or, Where they were available, the Board of Trade, the Ministry of Labour and the Registrar-General all had different methods by which they calculated their regional figures. That made planning virtually impossible.

These problems no longer exist and I urge the Treasury to think more regionally. Their sights are sometimes so fixed on the national criteria—the national income and the gross national product— that they overlook the regional picture in the national whole. The Treasury must get rid of its national obsessions and look a bit more at these regional problems.

I was impressed by a metaphor used by my hon. Friend the Member for Gateshead, West (Mr. Randall) when he said that he would rather see unemployment spoken about in a different way. Rather than have the figures of unemployed listed in a register, my hon. Friend would rather see the people concerned lined up in twos or fours, as human beings. That was an impressive metaphor because, after all, once we have gone through all the elaborate statistical arguments we are essentially dealing with a human problem. It may not be as tragic as it was in the 'thirties, but it is, nevertheless, extremely disturbing. Regional figures should not be lost or obscured in the propaganda about national affluence or prosperity. I hope that our proposals today will jerk the Treasury into looking at the problems of the regions, and, more important, galvanise them into accepting the new Clause, so that they may not only study the problems, but go some way towards solving them.

Photo of Mr Edward Milne Mr Edward Milne , Blyth

I do not want to follow my hon. Friend the Member for Dunfermline Burghs (Dr. A. Thompson) too closely on the comparison between the Financial Secretary to the Treasury and the Economic Secretary— this idea of having around one men who are fat only on certain occasions, for it is Antony who has the "lean and hungry look", and who is supposed to be the disciple of depression.

I hope the Financial Secretary will look very closely at this proposed new Clause, because while most of us who have spoken today have spoken on the basis of the experience of our own constituencics and the lack of employment in the parts of the country which we represent, this is, after all, in effect, a national problem. The manner in which the Government, from 1951, have neglected their duties and their opportunities in this matter has led to the situation in which we find ourselves today.

Between 1955 and 1959, about 340,000 new jobs were created in Britain, but only 20,000 of those jobs were found for the areas of high unemployment— the areas of Britain outside the Midlands and the London area. We are becoming a little despondent and dispirited at the repeated references to the figures that are given us, both for the regions in which we operate and the constituencies we represent, when we find that the figures promised fall far short when the performance is examined.

This new Clause gives a chance to the Financial Secretary and the Government to bring into operation some of the planning in which they now profess to believe. It suggests that they should have a look at the country as a whole and at these problems as a whole, and decide that this unemployment problem is a social and human factor as well as a statistical one. It is absolutely wrong to talk about an affluent society and to use expressions of that description unless the Government are to translate their efforts to create employment into a reality.

There is another aspect of the problem with which I want to deal very briefly. There is a feeling in the areas where pit closures have been taking effect, in my own constituency and in other mining constituencies as well, that there is a reluctance at the moment on the part of the Government to attract alternative industries into these areas, because of the fact that they need miners in the expanding areas of the Midlands, Yorkshire and Nottinghamshire. I think that this shows a wrong sense of social values if this is the case.

I hope that not only will the Financial Secretary be able to accept the new Clause, but that he will be able to repudiate the outlook and the opinion which is growing very rapidly indeed; that is to say, that to bring new industry to the Blyth constituency, to Scotland and Northumberland, where pit closures are taking effect, is in some way to restrict the recruitment of miners in the flourishing mining areas of Britain. I hope that this will be repudiated, because it is precisely the areas of which I have spoken that are needing the type of assistance envisaged in this Clause. I make that appeal in this very brief form to the Financial Secretary at this stage.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

It is a very grave commentary on the Government that they cannot muster their own supporters in a debate of this importance. We have had a debate lasting very nearly two hours— I am not quite sure when it started— and we have had one Scottish Conservative Member of Parliament present for rather less than half an hour. For the rest of the debate, we have not even had the presence, let alone the speeches, of Scottish hon. Members opposite. I mention the hon. Gentle. man the Member for Fife, East (Sir J. Gilmour), who has in his constituency at least two development districts, and who has not been here for a single minute, while these areas of East Fife are crying out for new industry. They are without hope, their morale is lower than at any time I can remember, and they expect their own Member to support them, but he does not even attend the debate. The same applies to other hon. Gentlemen who pretend to represent Scottish divisions.

In debates of this kind, I try to anticipate what the Government's reply might be, always a hazardous operation, but in this case I think we can forecast reasonably accurately what the hon. Gentleman might say. He might, for instance, say that it is very difficult to operate a differential fiscal policy as between one region of the country and another. That might be one suggestion, or one loophole, for the Government— the administrative difficulties. Secondly, he might argue that the wording of the new Clauses is faulty and that they will not achieve what they set out to achieve. In other words, I rather gather that we will get a purely negative reply, in true Treasury style and spirit.

We have had one speech from the benches opposite from the hon. Member for Barry (Mr. Gower), who has just come back into the Chamber. He is in and out like a yo-yo in a horizontal direction. We can guarantee that, no matter what the case for the Government, he will support it. Sure enough, the hon. Gentleman got to his feet, as a loyal and dutiful supporter of the Government, and said that the Government are doing all they can. He said that we were knocking at an open door, that the Government were only too anxious to help, and that they had any amount of good intentions; but the road to hell is paved with them, and we in Scotland are not interested in the intentions of the Government. We are interested in their achievements. The hon. Gentleman must know that the morale of the Scottish people is at a very low ebb at this moment, and that they will register their protest, I have no doubt, in the West Lothian by-election very soon, when the Tory candidate there will be pleased to save his deposit.

7.30 p.m.

I start with a fundamental dislike of bribing private industry. One of the arguments in favour of public ownership of an industry is that we do not have to do this. But we must consider the problem within the context of an economy which is predominantly a private enterprise economy, in which industry will not go of its own volition to areas like the Highlands of Scotland and other areas which are now scheduled as development districts. That being so, we must offer incentives of one kind or another.

There can be no denying that since the operation of the Local Employment Act something has been achieved in Scotland. We have never denied that. My hon. Friend the Member for Lanarkshire, North (Miss Herbison) has never denied it; nor has any Member representing a Scottish constituency. I repeat what I have said in the House before, that over the last five years Scotland has lost 85,000 jobs and has gained 50,000, in round figures. Scotland lost another 5,000 in the first few months of this year, and there is no doubt that she will lose many thousands more before the year is out.

A few weeks ago the Parliamentary Secretary to the Ministry of Labour visited Fife. After being taken on a conducted tour of the area, he said that in one small part of my constituency— the central West Fife area-5,000 new jobs were needed. Official figures issued by the Government indicate that the net gain in new jobs for the whole of Scotland in each of the two years of the operation of the Local Employment Act has been 5,000. In other words, each year the whole of Scotland has gained 5,000 jobs, just the number required in one small part of one constituency alone.

We have had discussions about the development of the motor car industry in Scotland. There is a little hope there. The jobs in the pipeline about which we hear so much are in connection with that industry. But it is very unlikely that this big industrial development will repeat itself year by year. We would welcome it if it were to do so, and we are anxious to do all we can to bring it about, but it is very unlikely.

The new Clauses suggest one way by which this process might be helped, and I hope that the Financial Secretary will not give the negative kind of reply that I have suggested, but will tell us what the Government intend to do in addition to the provisions of the Local Employment Act, which are demonstrably inadequate to do the job that they are supposed to do.

Photo of Mr Joseph Slater Mr Joseph Slater , Sedgefield

We have listened to some very interesting speeches in this debate. My hon. Friend the Member for Fife, West (Mr. W. Hamilton) has expressed concern about the movement of population from Scotland. I would point out that hon. Members representing constituencies in Durham are also very concerned about this problem, which arises because of the lack of employment facilities. No one knows better than yourself, Sir Samuel, that there is a run-down in manpower in the mining industry of Durham. My constituency is seriously affected. The result is that my constituents art faced with two alternatives— either they must uproot themselves from the area in which they now live and go to the Midlands to find employment, or they must sign on the unemployment register. To my mind, this is a form of direction of people in one of our basic industries.

But there has been a movement of population in other parts of the county. This has left the greater part of the west side of the county minus those industries which could provide employment for the people who need it. That is why, together with other hon. Members representing the northern group of counties, I have been agitating for the President of the Board of Trade to give greater consideration to this area, in order to see whether there can be an extension of industry there.

My constituency is growing tremendously, and we are very concerned about the employment prospects for the younger generation leaving school. Not enough consideration is given to what will be the employment position for these young members of the population in a few years' time. The Government must take that point into account.

I now turn to the other side of my constituency— Tees-side. The unemployment figure for The Hartlepools, in March of this year, was 6·6 per cent. It has not improved since then. In Guisborough it was 9·7 per cent., and in Salt-burn it was 9·4 per cent. For the whole of Tees-side, which takes in the greater part of the east side of my constituency, it was 4·5 per cent. Some people think that we are all right because I.C.I. is at Billingham and that that is the answer to all our employment problems. That is not so. At the moment 6,863 people are unemployed on Teas-side. There is a by-election in Middlesbrough tomorrow, and I hope that the people there will take note of the figures presented to the House today. I hope that the Minister will give an adequate reply to these figures. The number of people unemployed in Cleveland is 969, and in The Hartlepools 2,344. Taken with Teesside, this gives a total of 10,176. That is only for the Tees-side and The Hartle-pools.

The people of this area do not shout for employment alone. They realise their responsibilities not only to themselves but to their wives and Children. Many of us can look back to the time when we used to leave the pits and see long lines of men waiting at the colliery offices to see whether the management would be able to find them employment. People in the North-East are very disturbed about the situation. They are afraid that there may be a repetition of what they experienced in 1921 and 1926. As I said before in the House of Commons, we do not want to go back to those days. They belong to the past. The Government must accept their responsibility for the future of the people in our constituencies.

Photo of Mr James Bennett Mr James Bennett , Glasgow Bridgeton

Much has been said about Scotland in this debate, and I make no apology for mentioning it again. In view of the extent of the problem in Scotland, which is being rapidly aggravated by pit closures and railway withdrawals, it is obvious that the contination of the Government's policy will ultimately lead to the whole of Scotland being a depressed area and being populated by a very depressed people. The ultimate result of such a policy is that people not merely will have lost faith in the Government but, more important still, will have lost faith in themselves.

We are told continuously that there are jobs in the pipeline. We all know that the pipeline has become a pipe-dream. The jobs in the pipeline would not deal with the wastage which is taking place today. It seems downright criminal to keep people in idleness rather than to use their undoubted skills and energies which are in abundance in Scotland. These new Clauses do not profess to solve the problem, but their acceptance would go some way towards rekindling hope where hope has almost died.

Even on the question of overspill, which is bound up with the provision of industry, Glasgow is well behind in its programme. A measure such as this new Clause may provide the necessary stimulus and may speed up the removal of families from congested areas to places where there is guaranteed employment. I confess that I find it slightly ironical that the tenor of this debate has centred round growing unemployment in so many areas when we are constantly reminded that we are living in an affluent society. It may be affluent for some, but for far too many it is a time of worry and despair, a time when people tear up their roots and families divide in an effort to live in dignity and with some self-respect.

I sincerely hope that the Government will take note of the pleas which have been made from this side of the Committee, and will show some humanity in the problem which faces so many parts of this country.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

The Committee, quite rightly, has been discussing this new Clause for about 2½ hours.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

Two and a quarter then. We have been discussing matters of great importance to hon. Members' constituencies, but as there is quite a lot of business to be done, perhaps the Committee will feel it possible to come to a conclusion on this matter fairly soon after I have sat down.

The hon. Member for Cardiff, South-East (Mr. Callaghan) introduced the new Clause with a most interesting speech. I agree entirely with what he said about the importance of regional planning. My right hon. Friend the Chief Secretary, who was here when the hon. Gentleman spoke but who, unfortunately, has had to leave for another engagement, would be the first to wish me to say how much he can sympathise with the hon. Gentleman's remarks about the importance of having balanced economic development and not too high a concentration of economic development in the Midlands and South-East.

7.45 p.m.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

I said that we should not have too much development in the Midlands and South-East compared with the rest of the country. That is obviously important from the social point of view and from the point of view of economic costs. Very few economists in this country have devoted much attention to the interesting question of comparative costs of production in various parts of the country.

I entirely agree with what hon. Members have said about the importance of the objective of creating new jobs in development areas and certainly— this is my third preliminary point— I would not rule out in principle the idea of making a more discriminatory use of our system of capital allowances. None the less, for a number of reasons which I will explain, I cannot advise the Committee to accept the two new Clauses. Hon. Members will not be surprised to hear me say that. However, I hope that I shall not take a purely negative line but will give some good reasons for thinking that, whereas the capital allowance, particularly the investment allowance, is an important aspect of our fiscal system, it is not well designed to create new jobs in development areas.

The investment allowance, which we had from 1954 to 1956 and which we have had again from 1959 onwards, is of particular value in dealing with an established industry which is carrying out an investment programme in a number of stages. That is particularly true of a large industry like the steel industry or the motor industry carrying out a continuing investment programme in phases. But I am doubtful, for a number of reasons which I shall give, just how effective the use of the investment allowance could be as a means of creating new jobs in development areas.

One point which strikes me straight away is that investment allowances confer their full benefit only where there are profits sufficient for them to be set against, and that is often not the case with new or small firms. I think that it is generally recognised in the Committee that, where there is depopulation, it is a multiplicity of small projects rather than one very large project which are the most important. Do not let us forget that the cash benefit from the investment allowances follows the investment, so that it cannot usually help to finance it. The difficulty in a development area, to use a familiar phrase these days, is the difficulty of securing take-off. I am very doubtful whether the use of the investment allowance could ever be a good way of securing take-off in a development area.

There are, however, a number of other points. Investment allowances affect not only what I might call job-creating investment but other investment as well. The hon. Lady the Member for Lanarkshire, North (Miss Herbison), who made a particularly thoughtful speech, rightly talked a5out the problem of unemployment in her area. I hope that the Committee will not think that I am being flippant or that I am making a cheap debating point when I say that it may not be the best means to deal with unemployment to give a discriminatory investment allowance for labour-saving investment. The investment allowance would affect investment which would have been undertaken in any case.

There are one or two purely administrative points which are relevant to this proposal. First, there is the problem of what happens when an area is delisted. It is essential to the Government's plan for dealing with the problem of local unemployment that places should come on to and go off the list. It would not be to the advantage of the areas most affected if the same places were on the list all the time. It would probably be possible to do more for the areas most affected if fairly regular changes were made. But under this proposal it would obviously be more difficult because individual firms would not know where they stood. In the case of some area which is just on the fringe of being on the list, individual firms would not know what rate of investment allowance might be payable in six or nine months' time. I think that this proposal would result in a degree of uncertainty that would not be helpful to economic expansion.

The final administrative point is this. It is fair to say that the Inland Revenue is not well equipped to ascertain the location of new investment. It is not just a problem here of discrimination, which I shall come to in a moment. I am making the point that the whole system of taxation is not equipped to give people capital allowances in accordance with the location of new items of investment. Therefore, for all the reasons I have given, I do not believe that the use of the investment allowance is well designed for creating new jobs in development areas, and I think that the administrative difficulties of the Opposition proposals would be very great indeed.

Coming to what we are actually doing now, I believe that the use by the Board of Trade of its powers under the Local Employment Act constitutes a superior means of dealing with local unemployment in a number of important respects. The first is that applications for assistance are considered absolutely on their merits, that is to say, in accordance with a strict principle of selectivity so that £ for £ far more can be achieved than could ever be achieved by some system of special tax assistance. I pointed out the disadvantages of the one method and I think it is fair to point out that the Government's own policy under the Local Employment Act results in what I believe to be a wisely discriminating approach to this question. I take the point made by the hon. Member for Anglesey (Mr. C. Hughes) about the delays, but that is inseparable from a well-designed selective approach. It is the essence of selection that if any system of selective assistance is to work well one must take trouble over how the selection is done.

Photo of Mr Archibald Manuel Mr Archibald Manuel , Central Ayrshire

I indicated in my speech that we have quite large areas scheduled as development areas but that they have attracted no industry. For how many years is that to continue before the hon. Gentleman devises some method that will attract industry to these areas? Has he a completely closed mind and is he prepared to depopulate these areas completely of workers?

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

Depopulation and under-employment are a real social problem as well as the problem of unemployment with which in the past we have been unfortunately more familiar. But what I suggested, and I suggest again, is that if our existing local employment procedures have not coped with that quite successfully, I am not convinced by anything that the hon. Member or other hon. Members have said that the use of the investment allowance would solve the problem.

Under the Local Employment Act the grants and loans provide help how and when it is needed. The administration is by a special department which has been charged with the responsibility of looking after these areas. I draw that contrast deliberately. Whereas our tax system is not equipped to ascertain the location of new investment, the whole administration of the Local Employment Act is precisely by a department which understands the problems of location very well, and one ought not to underestimate what has been achieved since the Act came into operation.

In the first two years of the operation of the Act, up to 31st March, 1962, the Board of Trade has offered assistance totalling £ 73·4 million for projects estimated to provide 75,000 new jobs. Of that total, £ 25·3 million was for factories or extensions to be built by the Board of Trade under Section 2 of the Act. In view of the number of Scottish Members who have spoken, I have looked particularly at the Scottish figures. Of the total assistance of £ 73·4 million, £ 43·8 million was spent in Scotland, and of the Section 2 total of £ 25·3 million for factories or extensions £ 13·5 million was spent in Scotland. I certainly recognise the very special problems of Scotland. I should like to assure those from Scotland who read this debate that, though I represent the Midlands and work in London, I am a fairly frequent visitor to Scotland and I fully realise the great difficulties in that country, not least where mines are being closed down. But it is fair to say that Scotland has had a reasonable share of offers made under the Act.

If one looks at the total amount of money spent in the Estimates, one finds that in 1960–61 the total amount spent on local employment policies was £ 11·8 million. In 1961–62 the total was £ 32·9 million— and hon. Members will remember that there was a big supplementary estimate at the end of last year— and of that total the outturn for Scotland was £ 18·5 million. The estimated figure for the current financial year, 1962–63, is £ 41 million, of which £ 19 million will be spent in Scotland.

Photo of Miss Peggy Herbison Miss Peggy Herbison , Lanarkshire North

The hon. Gentleman has given most interesting figures, but I wonder whether, in looking at these figures, he found that the unemployment rate in Scotland at the moment, or the number who are unemployed, is far higher than it was this time last year. When the hon. Gentleman gives the proportion spent in Scotland, is he quite certain that sufficient is being spent altogether under the Local Employment Act? That is the point and not just the proportion which Scotland is taking of what is being spent. Is the amount spent sufficiently large to deal with this immense problem?

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

To take the hon. Lady's last point first, about the total amount being spent, obviously it is extremely difficult to answer that question with a "yes" or "no" straight away without looking at the figures carefully and at all the claims that are in. When the Local Employment Act was being debated early in this Parliament, I should have thought that if the House had known at that time that we were going to spend at the rate of a little over £ 40 million a year in two years, that would have been quite as much as the great majority of hon. Members on either side would have expected.

On the hon. Lady's point about local employment, I recognise the problem. This shows clearly how important it is that the resources of the Local Employment Act should be concentrated on creating new jobs in those areas where there is really a need, but I have given reasons to doubt whether the proposal in the first new Clause, to have a discriminatory investment allowance, is well designed to help development areas.

I have spoken for some time on the first Clause and I should like to say something about the other new Clause which has not been discussed at all since the original speech of the hon. Member for Cardiff, South-East. First, the hon. Member is quite right when he talks about the importance of capital investment to the economy. I have no doubt that that is exactly one of the subjects which the N.E.D.C. will be considering, now that it is doting its study of the implications of a 4 per cent. growth rate for the country over five years. There will no doubt be a good dead of industry by industry study as well. One ought not to underrate the extent to which fixed investment by manufacturing industry alone hats gone up in recent years.

I should like to repeat some figures which I quoted in my speech in the Budget debate. In 1961 it was 20 per cent. higher than in 1960, 40 per cent. higher than in 1959, and about 70 per cent. higher than in 1951. I agree that there will be some fall in 1962 but, even so, by the end of the year it should be higher than it was in 1960. I think that the hon. Member for Cardiff, South-East will grant that it is particularly difficult in the case of fixed investments to have a steady gradation over the years, because there are particular industries which invest a good deal whose peaks of expenditure came in different years. I agree that the very high figure for the last year was broadly the result of a considerable burst of investment in steel and it would not be reasonable to expect that rate of investment to continue at exactly the same figure over a period of years.

8.0 p.m.

Naturally, we shall take into account all that is told us by the N.E.D.C. and all that we can learn from the general progress of the economy when considering what the future of the capital allowances should be. But, here again, I must put what seem to me to be certain real objections to the suggestion behind the second new Clause— Increase of investment allowances for investment in industries of special national importance. I last replied to a new Clause on these lines in 1956. I shall endeavour not to make the same speech again, but some of the arguments inevitably must recur.

The new Clause defines special national importance under three heads; first, investment to increase exports and save imports; second, investment to promote technical development; third, investment to promote better use of the national resources.

Investment allowances designed to increase exports and save imports encounter this difficulty. First, on the export side, this is just the sort of thing which is contrary to our international obligations and against which the F.B.I. Report recommended. A discriminatory investment allowance designed to promote exports would not be in accordance with our international obligations.

On the import saving side, I think that the hon. Member for Cardiff, South-East realises all the difficulties. This is a fairly inclusive category. I think that investment for agriculture, for instance, would come under this head. I am quite prepared to go this far with Scottish Members, that I myself would prefer at any time an increase of investment for Scotland financed above the line in the Budget rather than have what would, in effect, be a blanket provision to give special discrimination in favour of all agricultural investment in this country, which would not, I think, be justified.

I came now to the second head, the promotion of technical development. Again, the meaning seems to be fairly vague. I think it worth remembering here that much of the total of Government expenditure on research and development, altogether £ 315 million, is of direct benefit to industry; £ 228 million spent through the Ministry of Aviation and £ 20 million through the D.S.I.R. There are 52 research associations grant-aided by the D.S.I.R. In my view, it is very arguable that that is the way to help technical development rather than by giving a discriminatory allowance.

As regards the last category, the promotion of better use of national resources, I should not envy any Government, Commissioners of Inland Revenue or anyone else who had the administrative problem of practising this sort of discrimination. I think that the hon. Gentleman fully realises the difficulties which would be involved in so general a term as that.

Hon. Members will, I believe, appreciate the difficulties inherent in the second new Clause. I appreciate the importance which all hon. Members who have spoken attach to local employment policies and the social and economic problems which they have raised regarding development districts. I have explained why I do not think that the Committee should accept these two new Clauses, but, equally, I assure the Committee that we do attach real importance to regional planning and ensuring balanced economic development throughout the country. This is partly a matter of influencing that sector of the economy where the Government have direct control, and partly a matter, I agree, of the relations between the Government and private industry.

Hon. Members should realise that if they want to achieve a high growth rate steadily, year by year, this cannot be done by putting too much pressure on private industry. I well remember what one hon. Member for whom I had a profound respect, the late Sir Peter Bennett, later Lord Bennett of Edgbaston, said to me. He told me of the problems faced by businessmen who had made a success of their undertakings, who really were contributing to the national welfare, when they had suddenly to increase their average costs of production in falling in with the Government's employment policy. This is not an easy matter. It must be a matter for co-operation between Government and industry.

If I advise the Committee, as I do, to reject the new Clauses, I do so not because I am unsympathetic to much of what hon. Members have said but because I think that we have to realise both the limitations of our tax system and the fact that we can achieve economic progress only by co-operation between the Government and the whole of industry.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

We on these benches make no apology for taking up the time of the Committee, even for two and a half hours, on these important new Clauses. With great respect to some of the business which is to follow, we think that this matter has a prior claim upon the time of the Committee, a greater claim than tax relief on medical expenses, on school fees, and matters of that kind. Therefore, even though we have held up progress on the Bill for a little time, we feel that this has been fully justified.

I am, I think, entitled to join in the criticism of the poor attendance of hon. Members opposite and the complete absence for all the debate of the Liberal Party. Those who claim the confidence and support of the electorate today should at least put in an appearance when matters pertaining to the interests of the electorate are being discussed. It is not too late for the electorate of Middlesbrough to take note of the callous indifference of hon. Members on the benches opposite and on the Liberal bench today.

The Financial Secretary has courteously listened to many speeches from my hon. Friends. They have been thoughtful, constructive and moving speeches on problems of intense local interest and importance. I associate myself with my hon. Friend the Member for Dunfermline Burghs (Dr. A. Thompson), who urged that we should sometimes look away from national figures, national averages and the overall state of the economy and examine a little more closely what is happening in particular areas where there may be decline, decay, loss of morale, and unemployment.

The Financial Secretary has heard very little, perhaps, about tax reliefs, but he has heard a good deal -about localities where all is not well with the people. It seems that the hon. Gentleman is with us on aims but he has laid all the traps for us on means, describing in great detail some of the difficulties we are up against. On the general proposition of the need for balanced economic development, the Financial Secretary agrees with our purpose.

I am sure that the whole Committee will agree that it is fantastic how we in this country are now crowding into the south-east of England and into the west Midlands, pressing upon transport, housing and services of all kinds. The conditions in which many thousands of people travel to and from work in the London area today are absolutely disgraceful. They are certainly undignified, if not positively indecent. This is something of which any Government should take immediate note. We have traffic congestion, street parking, and the strangulation of a whole city to witness every day. The price of property is soaring. Rents are high. Those who come to London find a very big difference in their standard of living.

According to the Government, there are, apparently, two remedies for this problem when more and more jobs are being created in some areas and there is a net loss of jobs in other parts of the country. The first is the Local Employment Act, 1960, of which we have heard a good deal. The other is the system of industrial development certificates established under earlier distribution of industry legislation. In our view, the first new Claruse— Increase of investment allowances for expenditure in development districts— would reinforce the Local Employment Act, and the second new ClauseIncrease of investment allowances for investment in industries of special national importance— would reinforce the system of granting industrial development certificates. We must remember the fact that the Local Employment Act operates only in relation to a high and persistent level of unemployment. This problem goes far beyond that, important though that is. There are areas outside the scope of the Local Employment Act at present which are nevertheless in a stagnant condition, where a gradual decline has already set in and where, unless the trend is reversed, the terms of the Act will eventually apply.

My hon. Friends have mentioned many areas which they know well. We have heard of the special problems of Scotland, of Wales, of Northern Ireland and of the north-east corner of England. They are areas with special problems more acute than elsewhere. Nevertheless, there are towns— I have one in my constituency, Todmorden, and I hope I shall be forgiven for mentioning it— which are afflicted by, for example, the blight of the declining cotton textile industry. Todmorden is hovering on the 4 per cent. unemployment level. It is not a high level, or, at least, it is not persistent enough to be brought within the scope of the Local Employment Act, yet there are the first signs of social, industrial and municipal decline. The young people are leaving. The proportion of old-age pensioners is greater than usual.

If the thriving industrial towns of the past are to become derelict and neglected, left to the parents, the grandparents and the aged, there is something very unhealthy in the distribution of industry and of the population. The whole country cannot be in a healthy social and economic condition so long as affluence is created only in two monstrous areas where, if conditions go unchecked, affluence itself will be in danger. Municipal enterprise in the declining towns of which we have spoken is threatened by loss of rateable value, and all the disheartening conditions which we know so well are to be found there.

The new Clauses are intended to provide inducements. I say at once that inducement will not, in my view, he enough. The Government will have to take a firmer hand in organising the distribution of industry in this country. The fate of communities must not be left to the caprice of private industry, not even of the National Coal Board. There must be some Government oversight of how the health of the nation is being promoted in these areas. But, dealing with the matter in the context of the present economic and political situation, these new Clauses are intended to offer an additional incentive to industry to go to particular areas.

The Financial Secretary agrees that the intention is good, but he tells us, of course, that there are difficulties. Will the new Clauses achieve our aim? I am as conscious as anyone of the problem of the Inland Revenue in deciding what is an industry of special national importance and dealing with discriminatory investment allowances of this kind. It was not our intention that the matter should rest with the Inland Revenue. Under the second new Clause, for instance, we contemplated that a certificate would be given by the very Department which the Financial Secretary says is in close touch with the needs of particular areas. When the certificate was given, the Inland Revenue would make the necessary capital allowance. I know that even so this has problems of uncertainty and difficulty of definition, which the Financial Secretary mentioned. But there is uncertainty at present in the administration of the Local Employment Act. One month you are in, and another month you are out. There are difficulties about attracting new industries when they are not certain that when they have made their decisions the facilities will be open to them.

8.15 p.m.

The problem we are always up against on these matters is this. We make proposals, we try to help, and we have a purpose which we pursue the whole time. What we get from right hon. and hon. Members opposite is nothing but a recital of all the difficulties in the way of what we want to do. Will they ever produce something of their own? They have had all this time to work something out for themselves, but now the alibi is the National Economic Development Council. That is the magic box out of which all the solutions are to come.

Could not the Government anticipate the National Economic Development Council by a few months on some matters? Cannot they show some initiative of their own? Has the country put its fate in the hands of the Council? Are the Government just waiting for something to come out of it? Important as the Council is, it does not relieve the Government of their responsibilities.

We are as conscious as anyone of the potential of the Council, but that does not discourage us from putting forward proposals which we wish to see operated, probably much earlier than any recommendations of the Council.

We are disappointed with what the Financial Secretary said. We acknowledge the work which the Local Employment Act is doing. The first new Clause would reinforce that. The second new Clause would make provision for investment of special importance outside the Local Employment Act areas, which may be just as important. On all these grounds we feel that we must register our dissatisfaction with the Government's reply.

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

The Committee divided Ayes 165, Noes 221.

Division No. 214.]AYES[8.17 p.m.
Abse, LeoHall, Rt. Hn. Glenvil (Colne Valley)Noel-Baker,Rt.Hn.Philip(Derby,S.)
Allaun, Frank (Salford, E.)Hamilton, William (West Fife)Oram, A. E.
Allen, Scholefield (Crewe)Harper, JosephOswald, Thomas
Awbery, StanHart, Mrs. JudithOwen, Will
Bacon, Miss AliceHayman, F. H.Padley, W. E.
Baxter, William (Stirlingshire, W.)Henderson, Rt.Hn.Arthur(RwlyRegis)Pannell, Charles (Leeds, W.)
Beaney, AlanHerbison, Miss MargaretParker, John
Bellenger, Rt. Hon. F. J.Holman, PercyPaton, John
Bennett, J. (Glasgow, Bridgeton)Holt, ArthurPearson, Arthur (Pontypridd)
Benson, Sir GeorgeHooson, H. E.Peart, Frederick
Blackburn, F.Houghton, DouglasPentland, Norman
Blyton, WilliamHowell, Charles A. (Perry Barr)Plummer, Sir Leslie
Boardman, H.Howell, Denis (Small Heath)Popplewell, Ernest
Bowden, Rt. Hn. H. W. (Leics.S.W.)Hughes, Emrys (S. Ayrshire)Prentice, R. E.
Bowles, FrankHughes, Hector (Aberdeen, N.)Price, J. T. (Westhoughton)
Boyden, JamesHunter, A. E.Proctor, W. T.
Brockway, A. FennerHynd H. (Accrington)Pursey, Cmdr. Harry
Broughton, Dr. A. D. D.Hynd, John (Attercllffe)Randall, Harry
Butler, Herbert (Hackney, S.)Irving, Sydney (Dartford)Rankin, John
Callaghan, JamesJeger, GeorgeRedhead, E. C.
Castle, Mrs. BarbaraJones, Dan (Burnley)Rhodes, H.
Chapman, DonaldJones, Elwyn (West Ham, S.)Roberts, Albert (Normanton)
Collick, PercyJones, Jack (Rotherham)Roberts, Goronwy (Caernarvon)
Corbet, Mrs. FredaKelley, RichardRobertson, John (Paisley)
Craddock, George (Bradford, S.)Kenyon, CliffordRoss, William
Cronin, JohnKey, Rt. Hon. C. W.Royle, Charles (Salford, West)
Crosland, AnthonyKing, Dr. HoraceShinwell, Rt. Hon. E.
Darling, GeorgeLawson, GeorgeShort, Edward
Davies, G. Elfed (Rhondda, E.)Lee, Miss Jennie (Cannock)Silverman, Julius (Aston)
Davies, Harold (Leek)Lever, L. M. (Ardwick)Silverman, Sydney (Nelson)
Davies, S. O. (Merthyr)Lubbock, EricSlater, Mrs. Harriet (Stoke, N.)
Deer, GeorgeMabon, Dr. J. DicksonSlater, Joseph (Sedgefleld)
Delargy, HughMcCann, JohnSmith, Ellis (Stoke, S.)
Dodds, NormanMacDermot, NiallSnow, Julian
Dugdale, Rt. Hon. JohnMclnnes, JamesSorensen, R. W.
Ede, Rt. Hon. C.McKay, John (Wallsend)Soskice, Rt. Hon. Sir Frank
Edwards, Rt. Hon. Ness (Caerphilly)MacMillan, Malcolm (Western Isles)Spriggs, Leslie
Edwards, Walter (Stepney)MacPherson, Malcolm (Stirling)Steele, Thomas
Evans, AlbertMallalieu, J.P.W. (Huddersfield.E.)Stewart, Michael (Fulham)
Finch, HaroldManuel, ArchieStones, William
Fletcher, EricMapp, CharlesStrachey, Rt. Hon. John
Foot, Michael (Ebbw Vale)Marsh, RichardSwingler, Stephen
Forman, J. C.Mason, RoyTaylor, Bernard (Mansfield)
Fraser, Thomas (Hamilton)Mellish, R. J.Thomas, George (Cardiff, W.)
Galpern, Sir MyerMendelson, J. J.Thomas, Iorwerth (Rhondda, W.)
Ginsburg, DavidMilne, EdwardThompson, Dr. Alan (Dunfermline)
Gooch, E. G.Morris, JohnThomson, G. M. (Dundee, E.)
Gordon Walker, Rt. Hon. P. C.Moyle, ArthurThornton, Ernest
Greenwood, AnthonyMulley, FrederickWade, Donald
Grimond, Rt. Hon. J.Neal, HaroldWainwright, Edwin
Warbey, WilliamWilley, FrederickWoof, Robert
Weitzman, DavidWilliams, D. J. (Neath)Yates, Victor (Ladywood)
Wells, Percy (Favereham)Williams, LI. (Abertillery)Zilllacus, K.
White, Mrs. ElreneWilliams, W. T. (Warrington)
Whitlock, WilliamWillis, E. G. (Edinburgh, E.)TELLERS FOR THE AYES:
Wilkins, W. A.Winterbottom, R. E.Mr. Grey and Mr. Ifor Davies.
NOES
Agnew, Sir PeterGresham Cooke, R.Osborne, Sir Cyril (Louth)
Aitken, W. T.Grosvenor, Lt.-Col. R. G.Page, Graham (Crosby)
Allason, JamesGurden, HaroldPage, John (Harrow, West)
Arbuthnot, JohnHall, John (Wycombe)Pannell, Norman (Kirkdale)
Ashton, Sir HubertHamilton, Michael (Wellingborough)Partridge, E.
Atkins, HumphreyHarrison, Brian (Maldon)Pearson, Frank (Clitheroe)
Balniel, LordHarrison, Col. Sir Harwood (Eye)Percival, Ian
Barber, AnthonyHarvey, John (Walthamstow, E.)Pickthorn, Sir Kenneth
Batsford, BrianHastings, StephenPike, Miss Mervyn
Beamish, Col. Sir TuftonHay, JohnPitt, Miss Edith
Berkeley, HumphryHeald, Rt. Hon. Sir LionelPott, Percivall
Bidgood, John C.Henderson, John (Cathcart)Price, David (Eastleigh)
Biffen, JohnHicks Beach, Maj. W.Profumo, Rt. Hon. John
Biggs-Davison, JohnHiley, JosephProudfoot, Wilfred
Bishop, F. P.Hirst, GeoffreyQuennell, Miss J. M.
Black, Sir CyrilHobson, Sir JohnRedmayne, Rt. Hon. Martin
Bossom, CliveHolland, PhilipRees, Hugh
Bourne-Arton, A.Hollingworth, JohnRees-Davies, W. R.
Box, DonaldHopkins, AlanRenton, David
Boyd-Carpenter, Rt. Hon. JohnHornby, R. P.Ridsdale, Julian
Boyle, Sir EdwardHornsby-Smith, Rt. Hon. Dame P.Roberts, Sir Peter (Heeley)
Braine, BernardHoward, John (Southampton, Test)Robinson, Rt. Hn. Sir R. (B'pool, S).
Brooman-White, R.Hughes Hallett, Vice-Admiral JohnRoots, William
Brown, Alan (Tottenham)Hughes-Young, MichaelRopner, Col, Sir Leonard
Browne, Percy (Torrington)Hulbert, Sir NormanSeymour, Leslie
Bullard, DenysHurd, Sir AnthonySharples, Richard
Bullus, Wing Commander EricHutchison, Michael ClarkShaw, M.
Butcher, Sir HerbertIremonger, T. L.Shepherd, William
Campbell, Gordon (Moray & Nairn)Irvine, Bryant Godman (Rye)Skeet, T. H. H.
Cary, Sir RobertJennings, J. C.Smith, Dudley (Br'ntf'd & Chiswick)
Chataway, ChristopherJohnson Dr. Donald (Carlisle)Smithers, Peter
Chichester-Clark, R.Johnson, Eric (Blackley)Smyth, Brig. Sir John (Norwood)
Cleaver, LeonardJohnson Smith, GeoffreySpearman, Sir Alexander
Cole, NormanJones, Rt. Hn. Aubrey (Hall Green)Speir, Rupert
Collard, RichardJoseph, Sir KeithStanley, Hon. Richard
Cooke, RobertKaberry, Sir DonaldStevens, Geoffrey
Cooper, A. E.Kerr, Sir HamiltonSteward, Harold (Stockport, S.)
Cordeaux, Lt.-Col. J. K.Kitson, TimothyStoddart-Scott, Col. Sir Malcolm
Corfield, F. V.Lagden, GodfreySummers, Sir Spencer
Costain, A. P.Langford-Holt, Sir JohnTalbot, John E.
Coulson, MichaelLeather, E. H. C.Tapsell, Peter
Courtney, Cdr. AnthonyLeavey, J. A.Taylor, Sir Charles (Eastbourne)
Critchley, JulianLeburn, GilmourTaylor, Edwin (Bolton, E.)
Crosthwaite-Eyre, Col. Sir OliverLegge-Bourke, Sir HarryTaylor, Frank (M'ch'st'r, Moss Side)
Cunningham, KnoxLewis, Kenneth (Rutland)Teellng, Sir William
Curran, CharlesLinstead, Sir HughTemple, John M.
Currie, G. B. H.Litchfield, Capt. JohnThatcher, Mrs. Margaret
Deedes, W. F.Lloyd, Rt. Hon. Selwyn (Wirral)Thomas, Leslie (Canterbury)
de Ferranti, BasilLongbottom, CharlesThornton-Kemsley, Sir Colin
Digby, Simon WingfieldLongden, GilbertTilney, John (Wavertree)
Doughty, CharlesLoveys, Walter H.Touche, Rt. Hon. Sir Gordon
Drayson, G. B.Lucas-Tooth, Sir HughTurner, Colin
du Cann, EdwardMcAdden, StephenTurton, Rt. Hon. R. H.
Duncan, Sir JamesMacArthur, Ianvan Straubenzee, W. R.
Eden, JohnMcMaster, Stanley R.Vickers, Miss Joan
Elliot, Capt. Walter (Carshalton)Maddan, MartinVosper, Rt. Hon. Dennis
Emery, PeterMaginnis, John E.Wakefield, Sir Wavell
Emmet, Hon. Mrs. EvelynMarkham, Major Sir FrankWalder, David
Errington, Sir EricMarlowe, AnthonyWalker-Smith, Rt. Hon. Sir Derek
Farey-Jones, F. W.Marshall, DouglasWard, Dame Irene
Farr, JohnMarten, NeilWells, John (Maidstone)
Fell, AnthonyMatthews, Gordon (Meriden)Whitelaw, William
Finlay, GraemeMawby, RayWilliams, Dudley (Exeter)
Fletcher-Cooke, CharlesMaxwell-Hyslop, R. J.Williams, Paul (Sunderland, S.)
Forrest, GeorgeMaydon, Lt.-Cmdr. S. L. C.Wills, Sir Gerald (Bridgwater)
Freeth, DenzilMills, StrattonWilson, Geoffrey (Truro)
Gammans, LadyMore, Jasper (Ludlow)Wise, A. R.
Gibson-Watt, DavidMorgan, WilliamWood, Rt. Hon. Richard
Glover, Sir DouglasMorrison, JohnWoodnutt, Mark
Glyn, Dr. Alan (Clapham)Nicholson, Sir GodfreyWorsley, Marcus
Goodhew, VictorNoble, MichaelYates, William (The Wrekin)
Gower, RaymondNugent, Rt. Hon. Sir Richard
Grant, Rt. Hon. WilliamOakshott, Sir HendrieTELLERS FOR THE NOES:
Grant-Ferris, Wg. Cdr. R.Orr, Capt. L. P. S.Mr. McLaren and Mr. Ian Fraser.
Green, AlanOsborn, John (Hallam)

New Clause.— (INCREASE OF INVESTMENT ALLOWANCES FOR INVESTMENT IN INDUSTRIES OF SPECIAL NATIONAL IMPORTANCE.)

(1) In relation to expenditure incurred—

  1. (a) on industrial buildings or structures, or on machinery or plant, in any industry prescribed as of special national importance; or
  2. (b) on machinery or plant of any description prescribed as of special national importance:
subsections (2) to (5) of section sixteen of the Finance Act, 1954 (which provide for making investment allowances in respect of capital expenditure on certain new assets), shall have effect with the substitution of references to one-fifth and one-tenth (being the proportions of expenditure governing investment allow-

ances) of references respectively to three-tenths and three-twentieths.

(2) For the purposes of the last foregoing subsection an industry or a description of machinery or plant shall be prescribed as of special national importance, if, and only if, the produce of that industry or the use of machinery or plant of that description is of special value in increasing exports, saving imports or promoting technical development or the bettor use of national resources.— [Mr. Callaghan.]

Brought up, and read the First time.

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

The Committee divided: Ayes 165, Noes 226.

Division No. 215.]AYES[8.27 p.m.
Abse, LeoHayman, F. H.Plummer, Sir Leslie
Allaun, Frank (Salford, E.)Henderson,Rt.Hn.Arthur(RwlyRegls)Popplewell, Ernest
Allen, Scholefield (Crewe)Herbison, Miss MargaretPrentice, R. E.
Awbery, StanHolman, PercyPrice, J. T. (Westhoughton)
Bacon, Miss AliceHolt, ArthurProctor, W. T.
Baxter, William (Stirlingshire, W.)Hooson, H. E.Pursey, Cmdr. Harry
Beaney, AlanHoughton, DouglasRandall, Harry
Bellenger, Rt. Hon. F. J.Howell, Denis (Small Heath)Rankin, John
Bennett, J. (Glasgow, Bridgeton)Hughes, Cledwyn (Anglesey)Redhead, E. C.
Benson, Sir GeorgeHughes, Emrys (S. Ayrshire)Rhodes, H.
Blackburn, F.Hughes, Hector (Aberdeen, N.)Roberts, Albert (Normanton)
Blyton, WilliamHunter, A. E.Roberts, Goronwy (Caernarvon)
Boardman, H.Hynd, H. (Accrington)Robertson, John (Paisley)
Bowden, Rt. Hn. H.W. (Leics. S.W.)Hynd, John (Attercliffe)Ross, William
Bowles, FrankIrving, Sydney (Dartford)Royle, Charles (Salford, West)
Boyden, JamesJeger, GeorgeShinwell, Rt. Hon. E.
Brockway, A. FennerJones, Dan (Burnley)Short, Edward
Broughton, Dr. A. D. D.Jones, Elwyn (West Ham, S.)Silverman, Julius (Aston)
Butler, Herbert (Hackney, C.)Jones, Jack (Rotherham)Slater, Mrs. Harriet (Stoke, N.)
Callaghan, JamesKelley, RichardSlater, Joseph (Sedgefield)
Castle, Mrs. BarbaraKenyon, CliffordSmith, Ellis (Stoke, S.)
Chapman, DonaldKey, Rt. Hon. C. W.Snow, Julian
Collick, PercyKing, Dr. HoraceSorensen, R. W.
Corbet, Mrs. FredaLawson, GeorgeSoskice, Rt. Hon. Sir Frank
Craddock, George (Bradford, S.)Lee, Miss Jennie (Cannock)Spriggs, Leslie
Cronin, JohnLever, L. M. (Ardwick)Steele, Thomas
Crosland, AnthonyLubbock, EricStewart, Michael (Fulham)
Darling, GeorgeMabon, Dr. J. DicksonStones, William
Davies, G. Elfed (Rhondda, E.)MacDermoi, NiallStrachey, Rt. Hon. John
Davies, Harold (Leek)Mclnnes, JamesSwingler, Stephen
Davies, Ifor (Cower)McKay, John (Wallsend)Taylor, Bernard (Mansfield)
Davies, S. O. (Merthyr)MacMillan, Malcolm (Western Isles)Thomas, George (Cardiff, W.)
Deer, GeorgeMacPherson, Malcolm (Stirling)Thomas, lorwerth (Rhondda, W.)
Delargy, HughMallalleu, J.P.W. (Huddersfield, E.)Thompson, Dr. Alan (Dunfermline)
Dodds, NormanManuel, ArchieThomson, G. M. (Dundee E.)
Dugdale, Rt. Hon. JohnMapp, CharlesThornton, Ernest
Ede, Rt. Hon. C.Marsh, RichardWade, Donald
Edwards, Rt. Hon. Ness (Caerphilly)Mason, RoyWainwright, Edwin
Edwards, Walter (Stepney)Melllsh, R. J.Warbey, William
Evans, AlbertMendelson, J. J.Weitzman, David
Finch, HaroldMilne, EdwardWells, Percy (Faversham)
Fletcher, EricMorris, JohnWhite, Mrs. Eirene
Foot, Michael (Ebbw Vale)Moyle, ArthurWhitlock, William
Forman, J. C.Mulley, FrederickWllkins, W. A.
Fraser, Thomas (Hamilton)Neal, HaroldWilley, Frederick
Galpern, Sir MyerNoel-Baker,Rt.Hn.PhllipCDerby,S.)Williams, D. J. (Neath)
Glnsburg, DavidOram, A. E.Williams, LI. (Abertillery)
Gooch, E. G.Oswald, ThomasWilliams, W. T. (Warrington)
Gordon Walker, Rt. Hon. P. C.Owen, WillWillis, E. G. (Edinburgh, E.)
Greenwood, AnthonyPadley, W. E.Winterbottom, R. E.
Grey, CharlesPannell, Charles (Leeds, W.)Woof, Robert
Grimond, Rt. Hon. J.Parker, JohnYates, Victor (Ladywood)
Hall, Rt. Hn. Gienvll (Colne Valley)Paton, JohnZllliacus, K.
Hamilton, William (west Fife)Pearson, Arthur (Pontypridd)
Harper, JosephPeart, FrederickTELLERS FOR THE AYES:
Hart, Mrs. JudithPentland, NormanMr. Charles A. Howell and
Mr. McCann
NOES
Agnew, Sir PeterGresham Cooke, R.Osborn, John (Haliam)
Aitken, W. T.Grosvenor, Lt.-Col. R. G.Osborne, Sir Cyril (Louth)
Allason, JamesGurden, HaroldPage, Graham (Crosby)
Arbuthnot, JohnHall, John (Wycombe)Page, John (Harrow, West)
Ashton, Sir HubertHamilton, Michael (Wellingborough)Pannell, Norman (Kirkdale)
Atkins, HumphreyHarris, Reader (Heston)Partridge, E.
Balniel, LordHarrison, Brian (Maldon)Pearson, Frank (Clitheroe)
Barber, AnthonyHarrison, Col. Sir Harwood (Eye)Percival, Ian
Barlow, Sir JohnHarvey, John (Walthamstow, E.)Pickthorn, Sir Kenneth
Batsford, BrianHastings, StephenPike, Miss Mervyn
Baxter, Sir Beverley (Southgate)Hay, JohnPitt, Miss Edith
Beamish, Col. Sir TuftonHeald, Rt. Hon. Sir LionelPott, Percivall
Berkeley, HumphryHenderson, John (Cathcart)Price, David (Eastlelgh)
Bidgood, John C.Hicks Beach, MaJ. W.Profumo, Rt. Hon. John
Biffen, JohnHlley JosephProudfoot, Wilfred
Biggs-Davison, JohnHirst, GeoffreyQuennell, Miss J. M.
Bishop, F. P.Hobson, Sir JohnRedmayne, Rt. Hon. Martin
Black, Sir CyrilHolland, PhilipRees, Hugh
Bossom, diveHollingworth, JohnRees-Davles, W. R.
Bourne-Arton, A.Hopkins, AlanRenton, David
Box, DonaldHornby, R, P.Rldsdaie, Julian
Boyd-Carpenter, Rt. Hon. JohnHornsby-Smith, Rt. Hon. Dame P.Roberts, Sir Peter (Heeley)
Boyle, Sir EdwardHoward, John (Southampton, Test)Robinson, Rt. Hn. Sir R. (B'pool, S.)
Bralne, BernardHughes Hallett, Vice-Admira! JohnRoots, William
Brewis, JohnHughes-Young, MichaelRopner, Col. Sir Leonard
Brooman-White, R.Hulbert, Sir NormanSeymour, Leslie
Brown, Alan (Tottenham)Hurd, Sir AnthonySharples, Richard
Browne, Percy (Torrington)Hutchison, Michael ClarkShaw, M.
Bullard, DenysIremonger, T. L.Shepherd, William
Bullus, Wing Commander EricIrvine, Bryant Godman (Rye)Skeet, T. H. H.
Butcher, Sir HerbertJennings, J. C.Smith, Dudley (Br'ntf'd & Chlswick)
Campbell, Gordon (Moray & Nairn)Johnson, Dr. Donald (Carlisle)Smithers, Peter
Cary, Sir RobertJohnson, Eric (Blacktey)Smyth, Brig. Sir John (Norwood)
Chataway, ChristopherJohnson Smith, GeoffreySpearman, Sir Alexander
Cleaver, LeonardJones, Rt. Hn. Aubrey (Hall Green)Speir, Rupert
Cole, NormanJoseph, Sir KeithStanley, Hon. Richard
Collard, RichardKaberry, Sir DonaldStevens, Geoffrey
Cooke, RobertKerr, Sir HamiltonSteward, Harold (Stockport, S.)
Cooper, A. E.Kitson, TimothyStoddart-Scott, Col. Sir Malcolm
Cordeaux, Lt.-Col. J. K.Lagden, GodfreySummers, Sir Spencer
Corfleld, F. -V.Langford-Holt, Sir JohnTalbot, John E.
Costain, A. P.Leather, E. H. C.Tapsell, Peter
Coulson, MichaelLeavey, J. A.Taylor, Sir Charles (Eastbourne)
Courtney, Cdr. AnthonyLeburn, GilmourTaylor, Edwin (Bolton, E.)
Crltchley, JulianLegge-Bourke, Sir HarryTaylor, Frank (M'ch'st'r, Moss Side)
Crosthwalte-Eyre, Col. Sir OliverLewis, Kenneth (Rutland)Teeling, Sir William
Cunningham, KnoxLlnstead, Sir HughTemple, John M.
Curran, CharlesLitchfield, Capt. JohnThatcher, Mrs. Margaret
Currie, G. B. H.Lloyd, Rt. Hon. Selwyn (Wirral)Thomas, Leslie (Canterbury)
Deedes, W. F.Longbottom, CharlesThornton-Kemsley, Sir Colin
de Ferrantl, BasilLongden, GilbertTilney, John (Wavertree)
Digby, Simon WingfieldLoveys, Walter H.Touche, Rt. Hon. Sir Gordon
Doughty, CharlesLucas-Tooth, Sir HughTurner, Colin
Drayton, G. B.McAdden, StephenTurton, Rt. Hon. R. H.
du Cann, EdwardMacArthur, Ianvan Straubenzee, W. R.
Duncan, Sir JamesMcLaren, MartinVickers, Miss Joan
Eden, JohnMcLean, Neil (Inverness)Vosper, Rt. Hon. Dennis
Elliot, Capt. Walter (Carshalton)McMaster, Stanley R.Wakefield, Sir Wavell
Emery, PeterMaddan, MartinWalder, David
Emmet, Hon. Mrs. EvelynMaginnis, John E.Walker-Smith, Rt. Hon. Sir Derek
Errlngton, Sir EricMarkham, Major 8lr FrankWard, Dame Irene
Farey-Jones, F. W.Marlowe, AnthonyWells, John (Maidstone)
Farr, JohnMarshall, DouglasWhitelaw, William
Fell, AnthonyMarten, NellWilliams, Dudley (Exeter)
Flnlay, GraemeMatthews, Gordon (Meriden)Williams, Paul (Sunderland, S.)
Fletcher-Cooke, CharlesMawby, RayWills, Sir Gerald (Bridgewater)
Forrest, GeorgeMaxwell-Hyslop, R. J.Wilson, Geoffrey (Truro)
Freeth, DenzllMaydon, Lt.-Cmdr. S. L. C.Wise, A. R.
Gammans, LadyMills, StrattonWood, Rt. Hon. Richard
Gibson-Watt, DavidMore, Jasper (Ludlow)Woodnutt, Mark
Glover, Sir DouglasMorgan, WilliamWorsley, Marcus
Glyn, Dr. Alan (Clapham)Morrison, JohnYates, William (The Wrekin)
Goodhew, VictorNicholson, Sir Godfrey
Gower, RaymondNoble, MichaelTELLERS FOR THE NOES:
Grant, Rt. Hon. WilliamNugent, Rt. Hon. Sir RichardMr. Chichester-Clark and
Grant-Ferris, Wg. Cdr. R.Oakshott, Sir HendrieMr. Ian Fraser.
Green, AlanOrr, Capt. L. P. S.

New Clause.— (CAPITAL ALLOWANCE FOR CARS.)

Subsection (2) of section twenty-three of the Finance Act. 1961 shall have effect as if there were substituted the sum of three thousand pounds for the sum of two thousand pounds. — [Mr. Gresham Cooke.]

Brought up, and read the First time.

Photo of Mr Roger Cooke Mr Roger Cooke , Twickenham

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

The effect of this new Clause would be to give, for a car bought for a company, initial allowance and annual allowances based on the sum of £ 3,000 instead of £ 2,000 as was provided in the Finance Act last year. Some people might say that a Clause such as this is unnecessary. I certainly am not interested in buying a car of that size nor in selling one, but I assure the Committee that there is general concern that if nothing is done about this provision in last year's Finance Act the products of Rolls Royce and Bentleys may eventually be driven out of the motoring field. That would be a tragedy for this country and something which we ought to avoid if possible.

It would be as great a blow if Rolls Royce and Bentley cars were driven out of the market, as if Germany lost the Mercedes Benz or Italy the Alfa Romeo, or the U.S.A. the Cadillac, although some people might think that that was a good thing. The Rolls Royce is acknowledged in engineering as the leader in precision engineering, and there is not too much precision engineering about nowadays.

The unfairness against cars in the class of the Rolls is brought out in a letter to me from a gentleman named Cripps, and I think none the worse of him for bearing that name. Mr. Cripps pointed out the striking anomaly among cars sold after one year. If a £ 2,000 car is sold after one year, taking into account the balancing charges, the relief to the company which sells it would be about £ 1,000, but if a £ 6,000 Rolls Royce were sold by that company after one year the relief, after balancing charges. would amount to only about £ 400. That is the measure of the anomalous position which has arisen after last year's Finance Act. It has been suggested that if the Chancellor does not wish to abolish the restriction altogether he might abolish the balancing charges in those cases, and I offer that idea for consideration.

My hon. Friend the Member for Nottingham, South (Mr. W. Clark) put down a new Clause, which was not selected by the Chairman of Ways and Means, in which he proposed that the difficulty might be overcome by making a limitation on the annual allowances every year instead of on the capital sum on the motor car. The annual allowance which he proposed was limited to £ 600. That might be fair if cars were kept for four years, but if they were sold after less than four years it would not be fair. That is a matter which would have to be considered.

My proposal. which is very modest, is that we should raise the capital limit on these cars from £2.000 to £ 3,000. After the sale of a car after three years and after the balancing charges have been taken into account. that would give a total of about £ 1,000 in allowances, and many people would consider that reasonable. This is a modest step and some modest assistance to these companies, and we have to face the situation that only one or two companies are seriously affected.

I put forward this modest proposal to see whether my right hon. and learned Friend the Chancellor of the Exchequer would accept it as a sort of holding operation so that time could be given to examine various ways in which we might achieve what many of us have in mind, namely, that these prestige cars, particularly these two makes which are a great attraction and which are renowned overseas, should not be forced out of the market as may happen in the course of a year or two if nothing is done to modify the harsh working of last year's Finance Act. I am sure that it was not intended that it should have this unfortunate effect, but I have some experience in this matter and I know that it has.

8.45 p.m.

Photo of Mr Harold Gurden Mr Harold Gurden , Birmingham, Selly Oak

I support my hon. Friend the Member for Twickenham (Mr. Gresham Cooke). I am not sure what my right hon. and learned Friend the Chancellor of the Exchequer intended when this penal tax was introduced. I was not very disturbed by it at the time. I thought that at worst it was an experiment to see whether it would seriously affect any part of the motor industry. Most of us now know how serious has been the effect on Rolls Royce. If it was the intention to get some extra tax or to prevent people from getting away with something for themselves and having very nice expensive cars on the firm, most people did not object very strongly. In fact, the tax has had a disastrous effect on Rolls Royce.

I have not the figures, but I have heard it rumoured that the sales of Rolls Royce have been seriously affected, so much so that it is questionable whether the firm could remain in this section of its business— in the production of cars. This is a car which most of the world has accepted as perhaps the best ever made. Surely the export trade alone, which is a considerable part of the firm's business, is sufficient reason to keep the Rolls Royce car in production. It has a wonderful name in the world of cars.

Everyone to whom I have spoken expected that since the tax had been tried and had obviously failed in its purpose the Chancellor would restore the previous position in this Budget. The alternative was a distinct possibility of Rolls Royce going out of business. We are surprised that nothing has been done about it in the Budget, and although the Clause does not go far enough to help Rolls Royce, it will at least safeguard one or two other car manufacturers. The new Jaguar exceeds £ 2,000 in selling price, and those who admire the Jaguar company for what it has done in exports would not like to see that car taken off the production line. It is hard to say whether it will sell well. There are sufficient orders for a start to keep the line going. I have no idea what the future holds, and I do not suppose that Jaguar would tell me if I asked, but if Jaguar take a cue from what has happened to Rolls Royce the firm will be very careful before it puts very much investment into a car costing over £ 2,000.

It may be that the Committee would like to prevent anybody from having an expensive motor car. I have not one and do not particularly want one. It may be that we have reached the stage at which we think that no one should have an elaborate car, such as a Jaguar, costing over £ 2,000, or a Rolls Royce. It may be that my right hon. and learned Friend agrees with that point of view. But what about our export trade? Rolls Royce and Jaguar, in particular, have done a wonderful export business. If we can afford to do without them for the sake of satisfying ourselves that no one is allowed to have an expensive motor car in this country, we had better know what the policy is. Since my right hon. and learned Friend indicated by his Budget that this is not just an experiment but that he proposes to stand by the tax, we are interested to hear what he says tonight.

Photo of Dr Horace King Dr Horace King , Southampton, Itchen

Would the hon. Member qualify the remark that the Committee prevents anyone from having a Bentley, a Jaguar or a Rolls Royce? Surely the point at issue is not whether they should have one but whether they can claim tax relief on it.

Photo of Mr Harold Gurden Mr Harold Gurden , Birmingham, Selly Oak

In practice this is what happens, whether we like it or not, when this sort of tax is imposed. The rumours are that Rolls Royce will have to consider closing its motor car plant. This is the effect of the tax.

Photo of Mr Norman Cole Mr Norman Cole , Bedfordshire South

Briefly, I should like to support the new Clause, to which my name is attached. My hon. Friend the Member for Birmingham, Selly Oak (Mr. Gurden) did not say so, but we know that a large part of the sales of more expensive cars are to firms who buy them on a prestige basis for use by the firms. If that sort of purchase does not take place the car manufacturers will consider carefully whether to continue in production, which will have the effect that no one will get such a car because it will not be produced.

I have no personal interest in Rolls Royce; I neither own one nor own any shares in the company. But I have a great interest, as have all hon. Members, in the prestige of the country, and there is no question but that several cars which have been named in the debate are a wonderful advertisement for British craftsmanship. There is no doubt that the firms will either have to produce a cheaper car if they wish to meet this market, which may not be of the same quality, or they will have to give up production altogether.

These quality cars, especially one of them, are among our best economic ambassadors. Sometimes we are concerned so much with economic stringency that we overlook every other worth-while value in life. For the comparatively small amount which we shall draw back from these firms, which they previously claimed, we are sacrificing something of great value. Over the week-end there was a car rally in America— and how proud the Americans are to own these cars. If British cars are prestige cars over there, then the Rolls Royce is the prestige car above all others. If because of some economic stringency or political pressure, or any less important reason, we sacrifice the production of a car in which we are unique among the nations and which at the same time embodies fine craftsmanship and day-to-day use without necessarily being a racing car, we shall have lost something worthwhile.

I hope that the Chancellor will look at this proposal again. This will not solve all the problems. It will mean that the firms will have that much less on their own account to pay, though they will still have to pay more. The original allowance was a great help, though not necessarily for the best and most expensive of these cars, and the extra £ 1,000 would also be. It would show that the Government have, as I think they have, an interest in keeping up our quality products abroad. I am not so concerned about the people in this country having these cars. This proposal does not affect them. If they can afford the price, they will continue to have them. However, if the present large proportion is not sold to industry, there may not be any available for private persons to buy. The Chancellor and his Department will be the poorer for that, because they will not have the tax which they now draw from these firms on their profits.

If the Chancellor cannot accept the Clause, I hope he will at least show that his mind is not entirely closed to the granting of some such concession. There was a big drop from the previous figure, down to £ 2,000, and this has had a very disastrous effect upon motor car firms producing the prestige cars.

Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby

This is a comparatively detailed point. Irrespective of what the Chancellor may say, I should like to express the view that the perspective put forward by the three hon. Members opposite is quite ludicrous in relation to the subject we are discussing. I would think it sad from all sorts of points of view if Rolls Royce closed down its car division. All the same, we must keep the matter in perspective. The total amount that Rolls Royce contributes to our balance of payments is, I should have thought, absolutely negligible. Although the firm has been successful in its efforts, we are not talking about large sums.

Photo of Mr Roger Cooke Mr Roger Cooke , Twickenham

Surely the hon. Member will agree that the contribution must be will over £l million.

Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby

I should have thought It was nothing like that. I think the contribution of Rolls Royce to our export figures must be very small. The notion that because it has a very good quality product it does British exports a great deal of good is not true.

Photo of Mr Hugh Wilson Mr Hugh Wilson , Truro

Will the hon. Gentleman give way?

Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby

Let me first finish my point. I will then give way. The notion that because we produce a small number of quality products like Rolls Royce cars, Scotch whisky and good woollens our exports soar up above those of the Germans is nonsense. What sells British goods is not Rolls Royce cars but whether the great mass of cars— Morris, Austin and the other popular cars— are first-rate. The fact is that the exports of the great mass of our popular cars have been going down relative to those of other advanced manufacturing countries despite the fact that Rolls Royce produces a quality car. I say this not because I want to see the Rolls Royce car division come to an end, but in order to bring the question into proper perspective.

Photo of Mr Hugh Wilson Mr Hugh Wilson , Truro

Does not the hon. Gentleman appreciate that Rolls Royce constitutes a selling lead? Rolls Royce cars are so well known and have been well known for so long that, quite apart from the economic value of the Rolls Royce sales or the quantity of them, the important fact is that it is a very well known name which is recognised all over the world, much more so than British Ford, Morris or any other such name.

Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby

I agree that it is a very well known name, and quite rightly so. But a prior question is whether the sort of prestige which Rolls Royce lends us is a type of prestige that most people in this country want in 1962 and whether or not the prestige of Rolls Royce would be really useful to the country only if it enabled us to sell far more motor car exports as a whole. The trouble is that despite this high prestige our car exports as a whole have not been doing particularly well. I repeat that I do not want to see the Rolls Royce car division closed but am merely trying to put this matter into perspective.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I do not propose again to go over the ground covered in last year's debates on the Clause, but I would point out that it was not a question of putting on a tax. It was really a question of how large a figure should be allowed for capital allowances against profits. I thought it right to recommend to the Committee then that that amount should be fixed at £ 2,000.

The Government's proposal was certainly not designed against a particular firm or intended to drive a particular manufacturer out of production. We were really trying to effect a limited reform in a rather difficult field. We are very conscious of the value of Rolls Royce. In reply to the hon. Member for Grimsby (Mr. Crosland), I should say that the Rolls Royce exports are worth more than £ 1 million a year. More than 1,000 cars are exported each year by Rolls Royce, and that is a substantial and valuable export. I think we should be a little careful about these pessimistic forecasts. The manufacturers of expensive motor cars have had other difficulties than the impact of the credit squeeze and the diminution in profits. We should be a little careful about making these gloomy forecasts about the future, because they may not advance the cause which we all want to support— the continued production of Rolls Royce motor cars. I hope that my Purchase Tax changes will help. On the standard Silver Cloud Rolls Royce motor car the Purchase Tax reduction will be £ 359. That is equivalent to an increased tax allowance of about £ 670. I hope that will he some help.

However, where I think that my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) is on to something which I think deserves further examination is with regard to the anomalies. It is true that this has worked out in an anomalous manner, appearing to benefit certain cars and unfairly discriminating against others. I have noted what has been said about that. I do not think that the new Clause is the way to deal with it, for even with it I think the anomaly would still continue. However, I will certainly think over what has been said. I hope that this new Clause will not be pressed because I do not think that it would improve the position very much.

9.0 p.m.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

I do not know what the Chancellor means when he says that he intends to think over what has been said. Does he propose to do anything about the comments that have been made? Certainly my hon. Friends would wish to remove any anomalies within the framework of the original restriction, but we would not favour any relaxation of the limitation put on the capital allowances last year.

We went over all this ground on that ocassion. We had long debates on the subject, and unless something has happened which was unexepcted then, or unless more serious damage has occurred than was contemplated last year, I see no reason for reopening the matter in principle now. There is something to be said for sticking to what we do, at least for a reasonable period, and not chopping and changing about each year, because that creates other difficulties

It is disturbing to hear hon. Gentlemen opposite suggest that the only way Rolls Royce can be kept in business is by giving tax reliefs on capital allowances to well-to-do firms which want prestige cars for their directors and executives. If Rolls Royce's name is so good, and we know that it is, and is worth preserving, and if its home market is worth maintaining and developing, business should be prepared to pay for such vehicles and not ask the Chancellor of the Exchequer to forgo substantial amounts of revenue in tax allowances on their capital outlay.

Photo of Mr Harold Gurden Mr Harold Gurden , Birmingham, Selly Oak

We are saying that the restriction is working adversely against Rolls Royce compared with other motor cars and that that is the real difficulty. The hon. Member for Sowerby (Mr. Houghton) asked whether there had been any new circumstances this year compared with last, and the answer is "yes". I can assure him that Rolls Royce is seriously thinking that unless something happens it will have to go out of business with regard to the production of its cars.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

That has not been demonstrated to the Committee in the speeches made. In any case, the Purchase Tax reductions in the Bill will operate favourably in the case of Rolls Royce and the more expensive type of car. In general, I think that the abuses which last year's Measure was designed to check could not be reintroduced without more criticism. As I say, if industry really believes in Rolls Royce it should be prepared to buy Rolls Royce cars out of its profits and, as my hon. Friend the Member for Southampton, Itchen (Dr. King) pointed out, no one has stopped anyone from buying a Rolls Royce. They can buy four of them if they like. The only question at issue is how much tax relief they should receive on the capital outlay.

It must be remembered that if those who wish strongly to support the Rolls Royce industry, which we all do, are prepared to do so only if they can get Rolls Royce cars on the cheap, that does not say very much for the sincerity of their wish to see Rolls Royce live.

Photo of Mr Roger Cooke Mr Roger Cooke , Twickenham

I was glad to hear my right hon. and learned Friend the Chancellor say that he recognises that there is an anomaly in this position. Despite what the hon. Member for Sowerby (Mr. Houghton) said, experience has shown that difficulties have been developing. In the light of my right hon. and learned Friend's assurance that he will look into this matter in the course of this current financial year, about which a great number of people will be pleased, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(RELIEF IN RESPECT OF SCHOOL FEES.)

The amounts of relief specified in section two hundred and twelve of the Income Tax Act, 1952, as amended, shall be increased by the amount of the fees paid in respect of the education of the child at any educational establishment to a maximum of seventy-five pounds.— [Mr. Turton.]

Brought up, and read the First time.

Photo of Mr Robin Turton Mr Robin Turton , Thirsk and Malton

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

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

I think that it will be for the convenience of the Committee if we discuss with this new Clause the proposed new Clause — Relief for medical insurance:

In connection with any assessment for liability for income tax, where a person proves that he has paid a premium in the year of assessment to an insurance company or other recognised body to provide insurance cover for the payment of expenses incurred by reason of any necessary medical treatment, whether as an in-patient or out-patient, for himself or any member of his family covered by such insurance, he shall be allowed such expenditure as an expense against his income up to an amount not exceeding fifteen pounds: Provided that he shall not be allowed to claim for any part of such insurance premium as relates to insurance cover provided for any member of his family, other than his wife, whose income is subject to a separate assessment.

Photo of Mr Robin Turton Mr Robin Turton , Thirsk and Malton

That will be satisfactory, Mr. Williams. The aim of the proposed Clause is to create greater justice for parents. At present children who are being educated in primary schools are costing the country, on average, £ 90 a year and children being educated in secondary schools are casting about £ 150 a year. But there are half a million children who are being educated entirely at their own parents' expense at the 4,000 independent schools that have been approved by the Minister of Education. The parents of these half-million children are shouldering not only the whole financial burden of their children's education, but they are also making, through rates and taxes, their contribution to the education of the other 61 million children, and they get no tax relief at all in that situation.

It is my submission that that is not entirely just. For the rich, it is a supportable burden, but for the less well-off or the less well-paid classes— the small shopkeeper and the skilled worker —it is, in my view, cruelly hard. I notice that the Minister of Education, who is not entirely favourable to the independent schools, when making reference to a speech which he made at a conference which took place at Brighton, said this: The present level of fees bears very hardly on some parents. For example, when I was at one of the new universities, I was thanked for my Brighton speech; they told me that no young don without private means could afford the fees of a first-class preparatory school. This new Clause is not merely designed for that particular kind of example, because I am thinking much more of the clergymen, the Army officer and those who have very limited means, yet who are sending their children to these smaller independent schools, and are probably paying between £ 100 and £ 150 a year.

The Committee may well ask why these parents send their children to these independent schools and do not take advantage of the education afforded by rates and taxes. I think there are four main reasons. The first is religion. Many of these parents want their children to have a more positive religious background than is afforded by the State system of education. Secondly, I think that the parents are making these sacrifices because, so long as there are these very large classes in the local education authority's schools, they want their children to have the benefit of education in smaller classes, and they believe that they are more likely to bring their children on.

The third reason, which affects a great many people— and I hope that the Chancellor will realise this— is that there are many parents who, because of their jobs or positions, move either about the country or from this country overseas. For these parents, it is absolutely vital that their children should not have their education broken when moving from one local education authority's area to another. This is particularly true V those in the Army who are being posted about the country. I am well aware from my own constituency, where there is a large camp, that these are the parents who send their children to independent schools.

The last reason is one with which some hon. Members may disagree, but it is an undeniable fact that those parents who are making these sacrifices believe that the education their children get in independent schools will give them a greater chance of reaching a university. Those are the reasons why people are making sacrifices. The Committee should be acquainted with the fact, and the Chancellor should try to work out some way of helping them.

This is a Conservative Amendment in two senses. I am not trying to secure for those parents relief in respect of the total amount that they pay. The maximum that the Clause would cost is about £ 12 million. On the other hand, it would encourage more parents to take advantage of independent schools, with a consequent saving of a considerable sum to the Exchequer. Under the new Clause, parents who were paying £ 75 a year or more would receive tax relief to the amount of £ 22 ls. 3d., which. bearing in mind the fact that they are contributing, through rates and taxes, to the average amount of between £ 90 and £ 150 a year spent on each child in State schools, is a reasonable amount of relief.

I beg the Government to look with favour on the new Clause. One of the hardest-hit classes in the United Kingdom today is that which includes the lower ranges of professional people and the small shopkeepers. I know that the people in that class are the ones who, in the main, are sending their children to these 4,000 independent schools. The Government should do more to help them.

Photo of Dr Horace King Dr Horace King , Southampton, Itchen

I intervene very briefly to express the hope that the Chancellor will resist the new Clause. I do so because of very deeply-held principles, but I want to deal kindly with some of the points made by the right hon. Member for Thirsk and Malton (Mr. Turton). He spoke of parents who send their children to schools other than State schools because of their religious convictions and— to quote what the right hon. Gentleman said— because of the inadequate positive religious background of the State schools. I suggest that the right hon. Gentleman is doing a great disservice to Christianity, religion and education in encouraging the view that the 1944 Act— which embodies the act of religious worship and applies in the State system of education a syllabus of religious instruction— is not carried out earnestly or sincerely by teachers in the State schools.

Photo of Mr Robin Turton Mr Robin Turton , Thirsk and Malton

I ask the hon. Member for Southampton, Itchen (Dr. King) to quote me correctly. I said that these parents are asking for a more positive religious background. I did not say that the State schools were providing an inadequate religious background. I merely said that these parents wanted a more positive religious background.

Photo of Dr Horace King Dr Horace King , Southampton, Itchen

We seem to be splitting hairs. The hon. Member is suggesting that there is a more positive religious background in private schools, and that must be a condemnation of the religious background in the State schools.

If the right hon. Gentleman had been referring to denominational Christianity, he might have been able to make a good case for the parent who has a conscientious reason for having his children brought up in a school which teaches not Christianity but the particular sectarian form of Christianity to which the parents are devoted. But Christianity, and the Christian ethic of religious instruction, is being as earnestly and as positively taught in the State schools as it is in any denominational or private school.

9.15 p.m.

On the other hand, I have profound sympathy for parents who serve overseas. We have not yet done our duty by those men and women who have served Britain not only in the Armed Services but in the Consular Service. I had occasion when returning from America to raise the question of the educational allowances which we provide for members of the Foreign Service, and I was instrumental in encouraging the Government to step up those allowances some years ago.

The ultimate solution is for the local authorities to provide boarding schools so that parents who make their contribution to Britain by serving this country abroad, whether they belong to the social class which can afford to buy their children a boarding school education or whether they are in a more lowly state, can be sure that their children will have continuous education in a boarding school at the State's expense.

I said that I approached this matter from a deep sense of principle. I believe that the weakest feature of our educational system, admirable though it is in many ways, is the class division which still exists. We divide our children at birth and send 250,000 of them up the educational ladder one way and the rest of them up it the other way, and, in the words of the right hon. Gentleman, parents who can afford to do so can buy their children out of the inadequate provision which is made for other classes in the State system of education.

I pay tribute to the sacrifices which many people make in educating their children. The right hon. Gentleman was right in calling attention to the sacrifices which are made, not by the rich people, but by the not so rich middle-class people, those who really go without in order to buy their children this extra privilege. That sacrifice is also made by some of the poor parents living on small incomes who pay their rates and taxes for the education of their children, which, particularly to the lowest-paid workers, represent sacrifices equal to those made by some people who send their children to fee-paying schools.

The question is not whether we prevent children from being bought out of the State system but whether we give them a fiscal inducement to do so. The right hon. Gentleman is asking us to turn away from the golden vision which the Minister of Education adumbrated at the last Conservative Party Conference and which the Prime Minister mentioned in his book The Middle Way long before the war, namely, the time when all our children will go to State primary schools because they will be so good that no parents will be foolish enough to waste their money on buying places for their children outside the State system.

If we build up the standard of education and reduce the size of classes in the State system, it will become increasingly intelligent for all people to send their children to the sort of school which is good enough for 6 million English children. If we give a fiscal inducement to people to opt out of the State system, this will be more difficult of achievement, for people will have a vested interest outside the State system of education and will resist the colossal necessary expense which the State will have to incur if it is to bring the whole of our State system of education to the class of people who are able to pay for their children to be educated in the private system. We are not asking the Chancellor of the Exchequer to prevent parents from opting out of the State system, but we ask him not to give a fiscal inducement to entice them to do so.

Photo of Mr John Eden Mr John Eden , Bournemouth West

I hope that I shall not bore the Committee if, once again, I declare my interest, which I think is quite well known by now, both in education and insurance. But it is the knowledge, as it were, which I have acquired in both those walks of life which leads me to support the principle put forward in the new Clauses. I do not expect my right hon. and learned Friend to accept the detail of what we are asking for, although I should like him to do so. I should be happy and perfectly satisfied if he were to acknowledge that the principle which we put forward in both new Clauses is worthy of support.

We are asking in general terms that the Government should give modest encouragement to those who are attempting to fend for themselves. I recognise straight away that already some eneouragement is given by the State and therefore we are not broaching something which is entirely new. It might be argued that encouragement is given indirectly in the form of grant-aided schools which involve a certain amount of taxpayers' money and that also tax relief on insurance premiums is a direct stimulus to this type of expenditure by individuals.

In supporting the two new Clauses, I am interested only in trying to obtain from my right hon. and learned Friend recognition of the fact that the system of State welfare which we have built over the post-war years has now reached a stage when it should be subjected to overall and close examination. I have said often before that it is time that the structure of the Welfare State should he recast so as to be more nearly suited to the economic circumstances of people today.

I recognise that many hon. Members opposite are opposed to what we are seeking,principally on the old out-of-date basis of class distinction and on what comes out of most of their speeches on subjects of this kind, namely, the envy which they feel lest somebody is getting something better than the majority are receiving. I well recognise that, but I hope that it is not an argument which my right hon. and learned Friend will support.

People are earning greater sums of money today. Incomes are on the increase and people are able to spend money fairly lavishly on consumer goods. This is something which we all welcome. It is something which we have been actively encouraging, but I say that if people are able and willing to spend an increasing proportion of their incomes on television sets and the like they should also be encouraged positively to spend on the education of their children and on the health and security of their families. It is wrong to encourage them to do this through taxation, and this is what the present high rate of taxation is to some extent achieving.

I want to relate more closely the true cost of these services at the consuming end so that in the experience of the parents and the child or of patients in hospital there is a closer understanding of this true cost. I go further in the case of education, because I sense that as people get more and more into a position in which they can exercise freedom of choice they will be wanting to exercise that freedom, above all, in the education of their children. None of us wants to see a completely stereotyped system of education in this country. We want variety in our schools. As individuals, we have differing needs, differing requirements, differing standards of intelligence, differing standards of means and different aspirations. These are the things which a Conservative society should be encouraging to flourish.

I understand the arguments advanced by the Opposition, but I do not understand the arguments of my right hon. Friends if they say that the present structure of the Welfare State is inviolable, that what we have inherited from the past cannot be changed to meet the totally different circumstances of today. I do not wish to penalise children who go to a school where the quality of teaching is not high. This, believe it or not, can happen in State schools as well as in private schools. I do not see why children should be forced to go to one particular school in one area. If a parent feels that his child is not benefiting from the type of education it is receiving, he should feel free and able to take the child from that school and place it in another where it will benefit to a greater extent. Many might be penalised in this respect as a result of the high rate of taxation which parents will be required to pay on top of the fees for the education of their children.

I hope that we shall move away from the present system and, perhaps, follow the advice of Professor Alan Peacock of Edinburgh University, who said that the true object of a Welfare State is to teach people how to do without it. [Laughter.] That is true. Hon. Members may mock and laugh; they seem to think of the Welfare State as a means of reducing everybody to the same standard, of spreading equality like a heavy smear across the country. As I see it, the Welfare State is there to bring sustenance and help to those most in need. When that sustenance and help comes to them from the State, it should be in amounts adequate to meet their requirements, not having been dissipated as the result of the present policy of spreading it in a broad layer over the whole community.

If the true object of the Welfare State is as I have quoted it from the words of Professor Alan Peacock, the object of Government taxation policy is to keep taxation at an extremely low level so as to give people positive encouragement to fend for themselves. This should appeal to my right hon. and learned Friend. Does not he wish to reduce State expenditure? It must be cheaper for him to encourage the development of private schools, to encourage people to contract out of State health and State medicine and to look after themselves through their own financial endeavours. It must be cheaper for him to do this than to go on calling on the taxpayer to continue to finance the steadily increasing burden of State-provided medicine and State-provided schools.

It is time that we recognised the true economic facts of the situation which Conservative policy has made possible and changed the structure of those systems which we have inherited from the Socialist past so that they accorded more closely with the realities of today.

9.30 p.m.

Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby

One of the more pleasurable features of the sermon to which we have just listened from the hon. Member for Bournemouth, West (Mr. Eden)— a rather inappropriate contribution to this stage of the Finance Bill at this moment of history— was that, when the hon. Gentleman felt that he had to find an economist on whom he could call, he found one who is on the executive committee of the Liberal Party. This only serves to show the extremely slender resources which hon. Members opposite have at their disposal.

In a way, the sad feature of the hon. Gentleman's speech, coming from a member of the Conservative Party which purports to believe in equality of opportunity, was his order of priorities, cutting Government expenditure and reducing taxation, entirely failing to realise that a really widespread educational provision is an essential prerequisite of equal opportunity. The hon. Gentleman made great play of the need for variety. I entirely agree, and I think that my hon. Friends will be with me in this. However, any question of variety has nothing to do with the argument about private schools versus public schools. There ought to be far more variety within the State system than there is now.

One of the great injustices of the present system is that the person who can afford private education can choose between an academic school and a nonacademic school, between a boarding school and a day school, between a science school and one which specialises in sport, or one which places a high premium on religious teaching. This choice is simply not open to the parent of a child in the State system. It is one of the basic causes of the division in prestige between the public sector and the private sector that in the one there is consumer choice and in the other there is not. In the State school system, there is not even an opportunity for choice between different secondary modern schools in the town in which people happen to live.

Turning to the point of principle behind the new Clause, although I know that it is honestly and sincerely put forward, I believe it to be completely indefensible. It is said that the taxpayer contributes rates and taxes to the State education system and, therefore, he should receive an element of rebate if he buys private education. If we based our system of public finance on this kind of principle, the thing would go haywire. All of us as taxpayers and ratepayers pay for services which most of us, we hope, will never use. Bachelors are paying for family allowances. Road users are paying for subsidies to British Railways. Healthy people who never spend a day in hospital all their lives are paying for hospitals in the Health Service. Employed people who will, they hope, never draw unemployment benefit are paying for unemployment benefit. This is what we mean by public finance and providing for social welfare through collective responsibility. We are paying for other people's benefits and we hope that we ourselves will never have to take advantage of them. Therefore, I do not think that this argument of principle can be sustained.

There is one other general background argument to which the right hon. Member for Thirsk and Malton (Mr. Turton) referred which I think, with respect, was truer a few years ago than it is now. It is that we have at what he called the lower end of the professional class a very impoverished group of people. There are still people in this group who are comparatively badly off compared with the rest of the population, but under the present Government's policy in the last ten years the middle classes as a whole have grown enormously better off. Whether this is good or bad is a basic political question, but I would concede the point to the Chancellor, if he claimed it, that Conservative policies since 1951 have made the middle classes very much better off. Far more of them can certainly afford to pay these school fees comparatively more easily than would have been the case ten years ago.

The immediate question is whether there is any possible justification for subsidising people who buy private education for their children. This evening we cannot, thank goodness, raise the wider question whether we think it is a good thing that we in Britain, alone of any civilised country in the world, have a private sector of schools to which all relatively wealthy people automatically send their children. It does not exist in the United States to this extent.

Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby

No. In the United States private schools are very much confined to certain areas. There are a large number in New England. There are obviously a large number of parochial schools all over the country, but there is nothing in America corresponding to this nationwide stratum of private schools— certainly not in the great bulk of the Middle West, for example. There is not in any country of the Continent. In France most middle-class children automatically go to the Lycée. In Germany there is a tiny number of schools like Salem trying to ape the English schools, but there is only a handful of them. This is the only country in the world which has this national stratum dividing the national population into two.

It is thoroughly bad from every possible point of view. But tonight we clearly cannot discuss the wider question. The question is why we should subsidise it. Why should we subsidise parents who send their children to private schools? Nobody denies that it is their democratic right to do so. Nobody denies that in some cases a financial sacrifice is involved, but it does not follow that the State should subsidise them.

I should like to take one by one the four arguments advanced by the right hon. Member for Thirsk and Malton as to why parents send their children to private schools and consider whether any of these offers a justification for the Chancellor subsidising them. First, there is the religious reason. Despite what my hon. Friend the Member for Southampton, Itchen (Dr. King) rightly said, I accept that this is certainly a motive of some parents. Nevertheless, it does not follow that the State should subsidise these parents. The State cannot make a judgment between atheist parents and religious parents, or between Church of England parents and Nonconformist or Catholic parents. Merely because parents want to have an education for their children of a more religious character than the average is certainly no reason why they should be subsidised by the Chancellor, this being utterly contrary to our whole democratic tradition in this country.

The second reason which the right hon. Gentleman mentioned— I again grant the truth of this; it is the critical reason educationally— is that parents can buy smaller classes in the private sector. Alas, they can. One of the reasons for this division between the public and the private sector which is indefensible is that a parent can buy a superior education in the private sector, and from a superior education practically everything else follows. I say nothing against parents who make sacrifices to do this. It is a natural attitude from their own point of view. However, there is no reason whatever why the Chancellor should be asked to subsidise parents who already have the enormous advantage of being able to afford to buy smaller classes. It is a great social injustice that there is this gap and contrast between the smaller classes and the larger classes. Anyway, these middle- and upper-class families are in a position to gain this terrific advantage already because they can afford to buy a smaller class. On top of this, to subsidise them from the Exchequer is utterly indefensible.

The third point which the right hon. Gentleman mentioned was a serious point about Army officers and overseas civil servants who need a boarding school education for their children. I concede that this is a valid point. As my hon. Friend the Member for lichen pointed out, the fact is that there are now boarding schools in the State sector. The L.C.C. has a boarding school. Other authorities have boarding schools. Therefore, it is not absolutely necessary for the diplomatist serving overseas to buy a private education simply to get a boarding school education. There is an increasing provision of boarding school places in the State sector. Again, since this is the case, there is no possible argument for the Chancellor subsidising these parents.

The last point is also a critical one and it brings us back to the question of buying privilege. The right hon. Gentleman said, absolutely correctly, that a child getting into a private school on an average has a better chance of obtaining a university place subsequently. I am certain that this is true. All the figures show it. More and more in our society — whether this is good or bad is a wider question— having had a university education is the key to the rest of a person's life, the key to his subsequent employment prospects, his income prospects, and everything else.

Increasingly it is difficult for the person who has, let us say, left school at fifteen, however brilliant he may be, started at the bench, and become an apprentice to work his way to the top. It is now not only the traditional professions like the Civil Service which are dominated by university graduates. They dominate industrial management, obviously, but it is increasingly true of every profession that to have had a university education is an overwhelming advantage.

Therefore, the parent who can afford to buy a private school education, providing a better opportunity for entrance to a university, is already buying for his child a very important, and an increasingly important, advantage. To say that on top of this he should be subsidised by the State is completely indefensible, and if this were done it would simply make an already unfair situation very much more so.

Lastly, I want to move in the opposite direction. I want to ask whoever is to reply this question. To what extent is the private sector already being subsidised by the Chancellor? The Government will know that the pamphlet produced by a Commttee under the chairmanship of Sir Charles Morris, published by the N.U.T, called Investment for Survival, has an appendix in which it is calculated by two educational economists that effectively about one-third of public school fees are now being paid by the Exchequer. So they are, through tax-free convenants and in a number of other ways. I do not know whether there is any need for checking this, but if the figure is anything like correct, it is very serious. It means that out of a total oF. £ 60 million spent in fees for education, something like £ 20 million is effectively provided by the Exchequer.

If this new Clause were accepted, the right hon. Member for Thirsk and Malton said, it would cost the Exchequer about £ 12 million. If the one-third is correct, it would mean that the private sector was effectively paid for to the extent of more than half by the taxpayer. I do not think that position could be justified. I should like to know whether the Chancellor has any information about how far he is already paying for schools in the private sector. If the figure is anything like one-third, I hope that he will move in the opposite direction from that proposed in this Clause and cut down the amount of public subsidy already effectively going to those schools.

Photo of Sir John Hall Sir John Hall , Wycombe

When I heard that these two new Clauses were to be considered together I could not understand the connection between education and medical insurance premiums, but, as my hon. Friend the Member for Bournemouth, West (Mr. Eden) quite rightly said, the principle is not dissimilar. Nevertheless. I hope that my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) and hon. Members on both sides of the Committee will forgive me if I do not follow very closely what has been said on the first of these two new Clauses, because I want to deal more closely with my Clause which refers to insurance premiums.

I must take up one or two points made by the hon. Member for Grimsby (Mr. Crosland) merely by way of comment. He stated that other countries do not have the same kind of private school system which we have. To some extent that is true; they do not have it to anything like the same extent, but many countries have private schools. He admitted that America has them and there are several in France and several in Australia and New Zealand. In fact, one can think of a number of countries where they exist, so it is not quite true to say that this system is confined exclusively to this country.

Another point on which I should like to comment is his remark that there is much greater opportunity to get a uni- versity place if one goes to a private school then if one goes to a State school. That may have been so, but I think it is rapidly becoming untrue. I can give an example from my constituency. The Royal Wycombe Grammar School gets the highest number of places in universities of any school, public or private, in the south of England. It has a very good record, and I think more and more grammar schools are getting records of that kind. As the hon. Member said, we want to keep this matter a little in perspective.

Turning to the Clause in my name Relief for medical insurance— I appre- ciate that it is very indifferently drafted, but I hope the purpose is clear, namely, to allow a taxpayer to claim relief for any premium he may pay up to a limit of £ 15 to cover him and his family for expense which might arise following an illness. There is nothing sacrosanct about the amount of £ 15 inserted in this Clause. I have taken that amount because it is the amount allowed at the moment for the National Insurance contributions. There is not a direct comparison between the two, because all the contributions for the various social service benefits we enjoy, or hope to enjoy, are lumped together in one weekly insurance stamp payment. Nevertheless, the element of contribution which relates to the National Health Service is excluded and not allowed as a deduction for tax.

It might be argued from that that the cost of the insurance for the National Health Service is excluded because, unlike other social service benefits, the benefit we get out of the National Health Service is not in itself taxable whereas other forms of social service benefit— such as retirement pensions— can be taxable in the hands of the recipient. That may be the reason why the element of contribution for the National Health Service is excluded and not allowed for deduction. I do not think that is a very terrible argument against this Clause.

The Budget, as interpreted through the Finance Bill, is, among other things, an instrument for social legislation and not merely a means for raising revenue. Various allowances are made from time to time which do not apply to expenditure which will result eventually in any form of taxable benefit. Various forms of income which otherwise would attract tax are exempted from tax. One can think of various examples of that kind. Those allowances and reliefs in many cases have no fiscal logic at all. They are given for special social or economic reasons.

Many of the taxes we enjoy in a masochistic way have been imposed for social or economic reasons. For example, we are given considerable help in overcoming our vices by finding smoking is made very expensive for us and drinking is made expensive. Some kinds of gambling, although not all, are discouraged, and we are stopped by taxes from ruining our teeth. We are dissuaded from clogging our houses with unnecessary furniture by the imposition of tax on furniture. The Chancellor has made a very praiseworthy attempt to keep death of the roads by making motoring increasingly expensive.

All these methods are directed at influencing our social habits. There is rather less encouragement given by my right hon. and learned Friend to our virtues. I think it was Napoleon who said that he gat much more out of the vices of his subjects than out of their virtues. There is no doubt that respective Chancellors have kept that saying very much in mind. Nevertheless, there are various aids given to virtues, particularly the virtue of saving. We are allowed a tax relief of a small amount on interest in savings deposit accounts, and various reductions in respect of life insurance premiums, although there is a catch because the benefits which may eventually accrue in the hands of beneficiaries are subject to death duties. I have no doubt that all of us could say a great deal about death duties. They are so penal that the only encouragement that we have for going on living in this tax-burdened community is the knowledge that it is so expensive to die. But I should be out of order if I pursued the subject of death duties.

9.45 p.m.

I merely quote these as examples of the various kinds of allowances and reliefs from tax which have no fiscal logic but are given for special social or economic reasons, and I hope that it will not be argued that because at the moment the element of the contribution in respect of the National Health Service is not allowed as a deduction the Clause should be rejected. Indeed, the Clause as drafted could be stretched to include the National Health Service contribution, or, if not, I would be very happy to consider Amendments to give it that effect.

Why has this kind of Clause not been introduced before? I think that this is the first time that it has been put down for debate. The answer lies largely in the rapid development in this kind of private insurance over the last few years. In 1948, the three principal associations which were concerned with this kind of insurance were the British United Provident Association, the Western Provident Association and the Hospital Service Plan. The total membership in 1948, including dependants, was less than 100,000. Today, the membership, including dependants, is about 1,250,000. Therefore, in that period the membership has risen between twelve and thirteen times and the subscriptions, the premium income, by about fifty times. That sum of money is very small in relation to the more than £ 500 million which is now spent through taxation in providing hospitals and general practice care, but it indicates an obvious and growing demand for medical facilities in place of, or supplementary to, the Health Service.

Why has there been this growing demand for this kind of medical insurance? I think it is for the same reason that we have had a demand for life and pension insurance, the kind of insurance for which my right hon. and learned Friend now gives tax relief. It is because the State system does not entirely meet the full requirements of many people. The State, through my right hon. and learned Friend and his predecessors, has encouraged individuals to provide for their own life insurance, or, perhaps it is better to say, to supplement the minimum that the State gives by making further provision for their own life insurance and pensions. To encourage them to do so, it has given them tax reliefs on their premiums. I think that the State should also encourage individuals to provide for their medical facilities, where they are prepared to do so, by giving them relief on the premiums which they pay.

This type of tax concession already applies in the U.S.A. where the Blue Shield and the Blue Cross, non-profit-making bodies, get certain tax concessions for their members. It also applies in the Republic of Ireland, which gives tax concessions of a similar nature for medical insurance premiums of this kind.

I agree that it should be part of our philosophy to encourage people to the maximum to make themselves as independent of State aid as they can so as to enable the State to concentrate the majority of its social welfare resources on those who need help most, and not to spread them widely over everybody irrespective of the help which may be needed.

I was interested to see that the noble Lord, Lord Beveridge, in another place on 29th November, last year, said that the time had come— and I quote his words—

Photo of Sir William Anstruther-Gray Sir William Anstruther-Gray , Berwickshire and East Lothian

Order. I am a little unhappy that the hon. Member for Wycombe (Mr. John Hall) should quote what was said in another place by a noble Lord who is not a Government spokesman.

Photo of Sir John Hall Sir John Hall , Wycombe

Inadvertently I transgressed, but I should like to give the sense of what he said. He was inferring that the time had come closely to examine the relationship between State and private insurance. I agree that that time has come.

At a comparatively small cost, the National Health Service could be relieved of some part of the considerable burden which it now has to shoulder in providing the various hospital and medical facilities, and at a small cost the private practice element of the medical profession could be encouraged, thereby helping to arrest the present trend for many doctors, especially young doctors, to emigrate, despite the denial about this trend which we heard from my right hon. Friend the Minister of Health not long ago. It would also help to avert the danger of something which nobody would wish to see— a complete State monopoly in medicine, which must be bad for medicine as a whole.

Finally, I suggest that the Clause provides a happy combination of fiscal justice and the encouragement of a desirable social trend. I therefore commend it to my right hon. and learned Friend with the happy confidence that if he does not accept it now, he may on a future occasion.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock

The hon. Member for Wycombe (Mr. John Hall) used the phrase that this medical insurance met the requirements of several people whose requirements were not met within the National Health Service. Would he be kind enough to give some cogent illustrations of the kind of requirement which the National Health Service does not provide and which these people wish to have and can get only under medical insurance?

Photo of Sir John Hall Sir John Hall , Wycombe

if the hon. Member for Greenock (Dr. Dickson Mabon) wants me to go into a general debate on the differences between the facilities provided under the National Health Service and those which might be obtained under private insurance arrangements, that might take a long time and put me rather out of order, but perhaps I can give one example.

There are people who, for very good reasons of their own, might feel that they could recover from illness far better in a private room or amenity bed. It is now very difficult to get an amenity bed because there are very few of them, and the only way one can get such privacy is by paying considerable sums, and prices in the hospitals for private rooms have gone up from 35 guineas to 50 guineas a week. That is a considerable sum, and it is for that kind of reason that people have their own insurance.

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

I am anxious to follow the hon. Member for Wycombe (Mr. John Hall) — although I had not intended to do so until I heard his lamentable speech, which went on at great length and was interesting and often amusing but was almost completely irrelevant to the new Clause. It follows the pattern of the hon. Member for Bournemouth, West (Mr. Eden), who quoted an economist on his behalf— an executive member of the Liberal Party. The hon. Member for Wycombe has done precisely the same thing in quoting Lord Beveridge, a prominent Liberal, and calling him in aid.

Photo of Sir John Hall Sir John Hall , Wycombe

The hon. Member said that my speech was irrelevant to the new Clause. I do not think that he has read the new Clause. Would he mind pointing out in what way my speech was irrelevant?

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

It had nothing to do with the new Clause on the Order Paper.

Photo of Sir John Hall Sir John Hall , Wycombe

To which new Clause is the hon. Member referring?

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

The one on which the hon. Member was supposed to be addressing the Committee.

Photo of Sir John Hall Sir John Hall , Wycombe

Perhaps the hon. Member would say which one that is, as I am not sure whether he knows.

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

It is the new Clause Relief for Medical Insurance.

Photo of Sir John Hall Sir John Hall , Wycombe

The hon. Member for Grimsby (Mr. Crosland) just told his hon. Friend.

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

It is true that my hon. Friend the Member for Grimsby (Mr. Crosland) mentioned the fact, but it had not escaped my notice before that. I was about to point out how gratifying it is to see the Liberal Members sitting on the Liberal bench at this juncture, as that is an unusual feature of our discussions in Committee. I hope that they will note a reactionary element quoting Liberal economists and calling them to their aid, which effectively debunks the cry that the Liberals are a party of progress.

I want to turn to the issues involved. The hon. Member for Wycombe unfortunately drew our attention to the situation in America and drew the analogy of Blue Cross and Blue Shield. That was a good point to make, and I am happy to follow it, because the logic of it is that we should have the American system of medical care. I do not know whether he wants that, but it is the logic of his speech. Those of us who have been to America and have experienced it in action hope that nothing like that ever happens in this country.

I well recall when I was spending a few weeks at Cambridge seeing an elderly gentleman collapse in Harvard Square. An ambulance duly arrived, and while the old gentleman was in a state of great distress on the floor, he was interviewed by the ambulance driver— I wit- nessed this personally— who asked whether he belonged to Blue Cross or Blue Shield, how much money he had, what sort of medical care he could pay for, to which hospital they should take him, and so on. All the time the old gentleman protested that he had no money and did not want to be taken to any hospital because he could not afford it— and would they please take him home. He was told that they could not take him home in that condition, and there was a considerable hiatus in the proceedings before they decided to take him to some down-town hospital, where he was dumped. That is the logic of what the hon. Member is seeking.

When people come to buying privileges in our hospitals, it is a matter on which some of us speak with feeling. As the hon. Member rightly said, the numbers joining these provident societies are shooting up by leaps and bounds. That is why the Clause appears for the first time on the Order Paper. It has become a political pressure group which cannot be ignored by Conservative Members. But in practice it means that not only do these people want to buy priority in admission to hospital and want to jump the queue; they do not want to be admitted on the basis of medical need. To some extent one has a little sympathy with this feeling that it is irksome when there are many delays because the hospital service is In such a state as —

10.0 p.m.

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

I am not the hon. Gentleman's hon. Friend, but I will give way.

Photo of Mr Kenneth Lewis Mr Kenneth Lewis , Rutland and Stamford

Does the hon. Member admit that this also applies to the trade union hospital at Hampstead?

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

I agree that the Manor House Hospital must have been in this position, and I have no objection to the hon. Member making what I think is a pertinent paint. If I had been Minister of Health at the time it would not have been outside the State system, and the sooner it is brought back into it, the better. I am glad that the hon. Member made the point.

What members of the public wish to do under the present system is to use the services which the State provides and to get priority for their use. The fact cannot be ignored that in the hospital world today, even more than in the educational world, the treatment which has to be bought to go into our hospitals is extremely costly and on a massive scale. The clinical, diagnostic, pathological and X-ray services, for example, cannot possibly be put into most private nursing homes or hospitals.

The hon. Member is asking that we have this great system above the National Health Service, in which one pays private consultants and perhaps pays more attractive wages to nurses in order to be nursed in a better fashion than in the Health Service, but at the end of the day the people who are paying for this have to go to the State hospital, particularly for X-ray facilities and for pathological services. In almost every case in which one analyses what is happening in respect of private pay places in the National Health Service, even where the patient is paying the doctor and sometimes paying the nurse, one finds that he is still getting priority in the use of these expensive hospital services, which are State-supplied, over and above the ordinary Health Service patient. This is an indefensible position.

Photo of Sir John Hall Sir John Hall , Wycombe

The hon. Member is overlooking that all of us, whether private patients or State patients— and I am a State patient--pay for the State medicine through the National Health Service contribution and through taxes. The private patient is not, therefore, getting something for which he has not made a contribution through normal taxation and the contribution system. He is getting no special advantage in that way. If he goes to a hospital for an X-ray as a private patient, he has to pay for it.

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

But the fact is that what the hon. Gentleman is asking is that they should be subsidised, and that they should be subsidised for jumping the queue. That is precisely the position. As the hon. Member admitted in his speech, if the National Health Service came up to the standard we all require, no one in his right mind would pay for private attention when he could get the same attention under the Service. Ninety-nine per cent. of those who pay privately now do it because they wish to jump the queue and buy priority. It is a principle which the Opposition cannot possibly support.

I hope the Government will not accede to what is proposed. It would be a very retrograde stop. It would be opposed by all those who are already worried about the unwarranted inclusion in the Service of the private pay bed and private amenity bed element, which ought, on social and ethical grounds, to disappear from the Service.

Photo of Mr Charles Doughty Mr Charles Doughty , East Surrey

I support both proposed Clauses, particularly the first. So much has been said about the second that I shall refer to it only briefly. The arguments of the hon. Member for Birmingham, Small Heath (Mr. Denis Howell) are entirely fallacious. The reason that people insure against the unfortunate risk of illness or accident is not that they wish to jump the queue but that if illness or accident should befall them they may select the hospital or nursing home to which they wish to go and the doctor or specialist they desire to treat them. Their selection may be wrong, but they desire to make their own selection and not have the matter decided for them.

I have done this myself, although, fortunately. I have not yet had to make a claim, and I hope it will be a long time before I do so. If I have to make a claim, 1 shall not hesitate to do so. I would hope that most of our people would look after their future interests by taking out insurance against risks that may happen in the same way as one insures against a car accident. It is sensible and wise and should be encouraged. If the Chancellor cannot encourage it this year, I hope it will certainly do so subsequently.

It is chiefly in respect of the first proposed Clause that I wish to speak. Many reasons have been given by hon. Members on both sdes of the Committee why so many people in this country in different income groups, high and low— I do not use the word "classes" because I do not think it is a proper one to use in the House of Commons

Photo of Mr Frank Hayman Mr Frank Hayman , Falmouth and Camborne

I can see very little difference between "classes" and "income groups". They mean the same thing.

Photo of Mr Charles Doughty Mr Charles Doughty , East Surrey

They may to the hon. Gentleman, but they do not to me. They are very different. Money does not make blue blood— [An HON. MEMBER: "It helps."]— not even among Conservatives.

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

Is the hon. and learned Gentleman suggesting that blue blood is a relevant factor in this matter?

Photo of Mr Charles Doughty Mr Charles Doughty , East Surrey

No, not in Wales at any rate. The hon. Member for Birmingham, Small Heath suggested that because one has mare money one promptly gets into a different class altogether. I do not like using the word "class" and so I refrain from doing so. People of all income groups like to get their children into the schools of their own choice. Their reasons may be good or they may be bad, but these reasons exist in a very large number of cases. Instances have been given tonight by hon. Members on both sides of the Committee.

It is untrue to say that the granting of tax relief for the payment of school fees in a civilised country is an unknown custom. Surely people think Australia is civilised? Tax relief for the payment of private school fees is allowed there. A scheme has been worked out and I hope we can follow it here.

Many people of the middle and lower income groups Who make great financial efforts to send their children to private schools do so at considerable sacrifice. Like the people who go to private hospitals and nursing homes, they relieve the Exchequer of considerable expenditure. That is one of the grounds why the possibility of such a relief should be very closely examined. I hope we shall hear from the Treasury tonight that those Who send their children to private schools— whether or not they get better education I am not prepared to say; one hon. Member said that State schools will soon be so good that no one would wish to send their children to private schools— will be able to get some relief, as in Australia, in respect of the fees Which they pay.

Photo of Mrs Eirene White Mrs Eirene White , Flintshire East

I want to say a word about the proposal to subsidise private insurance premiums for the Health Service, but more particularly I want to talk about education. I very strongly support the arguments of my hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell) in his comparison with the United States. I have been to the United States on several occasions and was there a couple of months ago. Heaven help us, particularly the lower paid professional people who wring the hearts of hon. Members opposite, if we reach the position which has been reached in the United States where people have to pay extortionate sums for medical care, both to the medical profession— no wonder it is against Socialist medicine in view of the fees many doctors charge— and to nursing homes and hospitals. It is the most appalling burden for professional families in America to have to try to meet these costs. Not only is the cover often inadequate in that country but it is frequently inadequate here.

Experience has shown that people who have paid into one of these private insurance schemes and have, eventually, had need to take advantage of those payments have found that they are faced with the cost of a room— perhaps of 50 guineas a week— and have discovered that their cover is not adequate to meet all the charges. Thus they must pay the additional charge out of their own pocket or do without these private facilities. A number of people have paid into schemes thinking that should the time come they would be adequately covered. But when the crunch comes and the true financial cost has hit them they have decided that they cannot use their insurance because the costs to a private patient are too great. Therefore, let us have la little less of the talk about the beauties of providing for one's medical care through these sort of schemes.

Photo of Sir John Hall Sir John Hall , Wycombe

I hope that the hon. Lady will not be misled by her hon. Friends into erecting an edifice on entirely false premises. It is not true to say that because one wants to see some tax concessions made to premiums for private insurance policies one wants to see the National Health Service destroyed and replaced entirely by these policies. I want to supplement the existing facilities.

Photo of Mrs Eirene White Mrs Eirene White , Flintshire East

The logical conclusion of that argument is that if it is good for some it would be better for more. One could add to that logic ad infinitum and say that as we become more and more prosperous under our dear friends opposite "more people should go in for these insurance policies. The hon. Member for Bournemouth, West (Mr. Eden) clearly wishes to see the National Health Service wither away and it is obvious that that hon. Member does not like the Welfare State, wants to see it wither away and wishes to see people not expecting to receive provision from the State.

The logical conclusion of the remarks of the hon. Member for Bournemouth, West is that we should have a system of poor relief whereby only those on the very lowest possible incomes will be provided for by the public service. It is nice to have someone honestly admitting that, and it will no doubt come in useful when we start electioneering.

I wish tonight, however, to discuss the proposed new Clause dealing with education. I do not know how many hon. Members appreciate the position we shall face in education in the coming few years. In the recent debate on education we were given certain figures regarding the increase in the school population, the shortage of teachers, and so on. As one who is deeply concerned in this matter, I should be extremely disturbed if I thought that we were in any way going to relax our efforts to provide really adequate education facilities within our public system because of the desire of some hon. Members to subsidise private education.

The more one induces people to contract out the less anxious will they be about the standards in the publicly maintained schools. That is one of the strongest reasons why I have always felt that we should do nothing whatever to induce people to contract out of using the public education system. To talk about the sacrifices that they are making is quite misleading, for they are not really making sacrifices— just investments. Let us not have any more talk about sacrifices. The whole attitude of people who pay for a private system of education is that it is an investment from which they hope for some return— and they often get it— and to talk about their making such a tremendous sacrifice is nonsense. It is an expenditure of money on which the parents or their children will get a very handsome return, and I think we ought to get rid of this nonsense about sacrifices.

10. 1 5 p.m.

The point made by my hon. Friend the Member for Grimsby (Mr. Crosland) in his admirable speech was that it would not be only by this method that the Exchequer would be subsidising independent schools. We all know that there are other methods by which already the Exchequer is subsidising independent schools. There are various methods, not only through individual covenants, but payments by industrial firms for the fees of the children of employees and fringe benefits, by very large contributions to scientific equipment, laboratories and so on, to which the big industrial firms subscribe. In one way and another, indirectly, there is a good deal of public money already going into these schools. If it is, as my hon. Friend the Member for Grimsby suggested, to be more than half, I think that we may very well ask, at a period when we are approaching such an acute teacher shortage, what business these schools have to take teachers ex quota, when the whole system of publicly maintained schools is on a very strict quota system for teachers.

Of the many injustices that might arise if the proposals in the new Clause were followed to their logical conclusion, the worst would be that, at a time when there is an acute teacher shortage, parents would be able to buy their children out of a national crisis and make it even more acute for the other children left in the maintained schools system. As far as I am concerned, that reason alone would be quite sufficient to vote against this new Clause.

There is no real validity in the arguments put forward by the right hon. Gentleman who moved the new Clause, or for saying that we must subsidise the private schools in order to achieve certain objects. We all agree that there should be greater flexibility and a greater degree of choice within the maintained school system. Certainly, I agree about that, but the important thing is to improve that system and not to contract out of it. To talk as if there were no religious schools within the State system is again complete nonsense. The Roman Catholic schools in my own constituency, which are aided schools but not fee-paying schools, are schools at which the children of Roman Catholic parents can go if they wish and obtain the religious education which their parents desire they should have. Within the maintained school system, we are supposed to be agreeable to making arrangements for children to have what form of education their parents desire without asking for a further subsidy.

A further argument of the hon. Member for Bournemouth, West was the steadily increasing burden of expenditure and so on. This is just the old fallacy that if it is expenditure from the Exchequer, it is a burden on the economy, and if it is expenditure paid for by private individuals, it has no economic relevance at all. I do not think I need waste the time of the Committee in demolishing that sort of false analogy.

My real objection to this proposal is the fundamental one that all children are in need, where education is concerned, of the best possible opportunity to develop their talents, and that the nation requires that each child should have the best possible opportunity and that that should not depend on the income or the social standing of the parents.

Photo of Mr Percy Browne Mr Percy Browne , Torrington

I find myself in agreement with the principle enunciated by my hon. Friend the Member for Bournemouth, West (Mr. Eden), but I cannot see what it has to do with the new Clause. I have three children at fee-paying schools, but I oppose the Clause on two points of principle. The first is a social point and the second concerns fiscal precedent.

Too many of us pay lip-service to the phrase "equality of opportunity." If we are to arrive at this aim, if money is to he provided in any form at all it should be provided by the State rather than by any aids to enable more and more children to go into what we now call the public schools— the fee-paying and boarding schools. I agree with the hon. Member for Southampton, Itchen (Dr. King) that we must achieve a much higher standard in our primary schools — and we are gradually doing so— so that the time will come when parents will not wish to send their children to private schools for nine years, although they may want to send them there for five years. I want to see a 12-plus rather than an 11-plus examination, so that all children of that age can go to the school which best suits them, whether it be a boarding school or a day school. State education is there for those who wish to use it.

Just as I am opposed to free drugs for private patients, so I have the choice to do what I wish with the education of my children, and I consider that it is my private affair and that I must budget for it accordingly, as I budget for other forms of individual expenditure.

That brings me to my second point— that this would establish a fiscal precedent. The hon. Member for Grimsby (Mr. Crosland) mentioned this. We tax means and subsidise need, and give overall allowances irrespective of means— such as child allowances, which rise as the child grows older. That helps the parent who is sending his child to a fee-paying school. But what we have never done— and I hope that we are not going to start now— is to subsidise individual expenditure. For those two reasons I hope that my right hon. Friend will not accept the Clause.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock

It is only proper to congratulate the hon. Member for Torrington (Mr. P. Browne) on his courage and sincerity in making the declaration that he has a declaration which is all the more welcome in that it rebuts the argument put forward by some of his hon. Friends. I agree with the hon. Member for Wycombe (Mr. John Hall) that it is unfortunate that we should have to consider these two Clauses together in one context.

One concerns a situation which has grown up over the centuries and the other a situation which has grown up only in the last twelve years. We must ask ourselves whether we want the two situations to live side by side. I believe that the general consensus of opinion is that this is not desirable. In the kind of society towards which we are evolving it would be better if we provided more facilities and, at the same time, tried to improve those facilities. I feel that the hon. Member for Wycombe lost this argument. If there is a good case for asking for facilities which are not now provided by the National Health Service, the case should be argued by the patients under the National Health Service. They should constantly hammer at Members of Parliament to impress upon the Ministry of Health and the Department of Health for Scotland to see that these facilities are improved.

It is terribly wrong that a doctor, examining a patient, should have to say to himself, What treatment should I prescribe? How much can this patient afford to pay? "The two questions should not run side by side. If a patient needs a private bed for physical or psychological reasons, it is eminently sensible that provision should be made accordingly in the National Health Service. If such provision is not made, it means that there is something wrong with the Service. A great many improvements have been made in the National Health Service, and every pound paid in medical insurance to seek better private treatment within the National Health Service is a vote of no confidence in that Service. This is the big charge that I make against the case put up by the hon. Member for Wycombe.

If private medicine, so to speak, had its own institutions and its own facilities and were completely independent of the State service, then his argument of virtue might stand. It might be considered comparable to the argument about public schools. But these matters are not comparable, and it is true that private medicine relies overwhelmingly for the facilities which it provides for people on the public service. On that argument, the hon. Gentleman's plea must founder.

As the Minister of Health said last night, we are not within the present plan providing for a larger proportion of pay beds, which means that if we were to accept the new Clause— this is the object of the hon. Gentleman's new Clause, as he said— and raised the numbers participating from 1 million, the pressure on pay beds would be higher. If the number of pay beds is limited both now and in the future, the price paid for them to the private consultant and to all those involved, quite apart from the price which the Minister of Health might ask for pay beds as his contribution towards the sustenance of that part of the hospital service, will be higher. If the price of paybeds were consequently to rise, the hon. Gentleman would be defeating his own ends. Many people would find that the insurance premiums for comprehensive cover would gradually rise so that a very small number of people could enjoy the kind of facilities which they want to enjoy through an insurance scheme. The hon. Gentleman, in a sense, defeats his own object by urging that we should do this.

The scheme could work only if the Minister of Health is prepared to say that he is willing to allow the number of pay beds to be enlarged and more and more of the facilities of the public service to be put out for private hire. If the Minister is willing to say that, I concede that the logic of the hon. Gentleman's case is pretty profound and that it would be difficult for the Treasury to say No". But surely the Minister will not say that. Surely it would be completely wrong and almost reprehensible in the concept of the Health Service which, I am glad to say, hon. Members on both sides have championed in Health Service debates.

It is right that people who want and demand a good service, either on their own behalf or on behalf of their relatives who are ill, should say so and should make their complaints known. It is not widely known but true that a patient can say whether he should see this consultant or that consultant. He can say, "No, I do not wish to be referred to Mr. So-and-so or to Dr. So-and-so. I prefer to go to some other consultant." People, when going to their doctors, believe that whoever their doctor chooses is the best man. That may not necessarily be so. There are many men of comparable abilities in one area— indeed, in one hospital. It is a matter of pure chance that a patient is sent to this or that consultant.

The patient has a right to ask his doctor to send him to a certain consultant. He has a right to ask about amenities and to ask whether beds are isolated from the rest of the beds. It is not always the case that it is good for a patient to be away from the rest of the other patients. While I concede that this is not entirely a medical judgment and that there is a certain social assessment to be made in this regard, nevertheless we should consider carefully the problem of having people in independent beds in hospitals.

It is wrong for this case to be argued on the present Health Service basis. If, however, the hon. Gentleman were willing to amend the new Clause and to say that it should apply only to private institutions subsisting entirely on private funds, I admit that that would be a difficult argument to counter. But there is no need to counter it at this stage because the colossal sums involved in constructing hospital facilities, in hiring staff and in getting all the medical men assembled to take on this burden would be so enormous that no insurance scheme would be able to publicise a premium attractive enough to people to use it. I therefore believe that the new Clause dealing with medical expenses is certainly the most unrealistic of the two new Clauses.

10.30 p.m.

As for the first new Clause, I heartily agree with what has been said by my hon. Friends. It would seem to be turning the clock of social progress back and to be wrong that we should return to any situation where different income groups or classes, or blue-bloods and red-bloods should have different terms under the Health Service or in education. The trend is the other way. I welcome it, and I hope that these two new Clauses will not be incorporated in the Bill.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

We have been discussing these two Clauses for 1½ hours and I hope that the Committee may feel that the time has arrived when we can come to a conclusion on them. My right hon. Friend the Member for Thirsk and Mal-ton (Mr. Turton) has done the whole Committee a service in bringing forward a proposal which has enabled hon. Members on both sides of the Committee to express their views on subjects about which they obviously feel strongly. I shall keep rather rigidly to the Clauses and therefore I will not attempt to follow the hon. Member for Greenock (Dr. Dickson Mabon) and give my views on classes, income groups, blue blood, and the like. As my right hon. Friend the Member for Thirsk and Malton suggested, his new Clause would cost about £12 million in a full year. For that reason alone I am sure that he will recognise that it could not be considered this year in view of my right hon. and learned Friend's general Budget judgment.

I do not wish to rest my argument on that point, however. Matters of principle have been raised on which I think I should say something to the Committee. In general, I agree with the view expressed by my hon. Friend the Member for Torrington (Mr. P. Browne) that we ought to hesitate a good deal before we depart from the principle on which we have always acted hitherto--that Income Tax personal allowances do not take account of what the taxpayer actually spends on current goods and services. I believe that to be an important principle.

I always listen to my hon. Friend the Member for Bournemouth, West (Mr. Eden) with great interest on the theme on which he spoke tonight. I agree with him that it was right that part of the Welfare State should wither away. The part which, rightly, has withered away to a considerable extent under this Government has been that part where we were subsidising not people in need but particular objects of expenditure. I will not develop the point. I only draw the analogy with the new Clause. It was quite right to get away from the principle that whatever a person of whatever means spent on bread he was helped out of the proceeds of taxation, just as I think it right to get away from a situation where every local authority, whatever its needs, receives a general subsidy on housing. But I am bound to say that I would regard it as inconsistent with the attitude of my hon. and right hon. Friends who have spoken on that part of the social services if we were now to say that there should be an Income Tax personal allowance arising out of a particular kind of current expenditure on a particular service, namely education.

Furthermore, on education, I rather agree with my hon. Friend the Member for Torrington when he said that it was possible that in future a smaller number of people would want to pay for independent education throughout their child's school career. It is quite right that the best of parents should consider how he can best help his children, and in education he has a considerable measure of choice. A parent might rightly feel that it would be better for his child to start at a local primary school and feel that he could do more for the child at a later stage in his career. Obviously there might be a time at the start of adult life when a son or daughter who wanted to go into one of the professions might be earning very little indeed. It may be that a parent will feel that he can do more to help his child at this stage rather than by sending the child to an independent school at the very first stage. In the same way, many people feel that there are social advantages for their children in having been to a maintained school at least at the start of their life. This is certainly true in some country districts where the standard of the maintained schools has risen very much in recent years. My right hon. Friend cited the case of a clergyman. I could understand the view of a clergyman who felt that it was not a bad thing for his child to start life by going to the same school as the vast majority of other children in the district.

I make these points not to express a moral judgment as to where a child should be sent to school but simply to point out that a parent has a very real element of choice here. I cannot help feeling that it would be a new principle, and a doubtful one, if my right hon. and learned Friend were to give Income Tax personal allowances taking into account this particular type of expenditure.

It is worth remembering also that, during the last few years, the financial position of many parents who have children at school has improved. We have the differential child allowance to which my right hon. Friend the Member for Thirsk and Malton referred. We have had a reduction of ls. 9d. in the standard rate of Income Tax since 1951. Also, we have had the Surtax reliefs, to which, strangely enough, no one has referred during today's debates. I hope that I shall not start the debate going again if I make a wholly uncontroversial allusion to them now in this context. [Interruption.] Far from attacking them, I am making the point that they must make some difference to the position of a good many parents who are educating their children privately.

Turning to the second new Clause— Relief for medical insurance— many of the arguments which I have used in the first case will apply to this also. It seems to me inevitable that the proposal made by my hon. Friend the Member for Wycombe (Mr. John Hall) would go further. It would soon be argued that certain medical expenses not covered by insurance should also rank for relief, and I do not think that we could accept my hon. Friend's suggestion.

In general, I believe that the principle on which we have acted in regard to tax allowances has a great deal to be said for it. We should not depart from that system without a very great deal of thought. While I entirely appreciate all the points which have been made by my hon. Friends, I could not advise the Committee to accept these new Clauses. I believe that we should stick to our policy of helping those in need. We hope to achieve a steady improvement in the State services over the years, having a system of tax allowances which is fair to everyone. I repeat what my right hon. Friend the Leader of the House said at the very start of the Session. We on this side believe that whereas Surtax payers, rightly, did not come at the head of the queue, it would be wrong to say that they should have had no place in the queue at all. They have now had their place.

We believe that it is by our approach of helping those in need and having a system of tax allowances which is fair to all taxpayers in accordance with their personal circumstances that we should work our taxation system in the future.

Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby

Can the hon. Gentleman say anything in reply to the question which I put?

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

I apologise to the hon. Gentleman. I meant to reply to him. There is a difficulty here. In the ordinary way, I would say that if the hon. Gentleman would put down a Question I would do my best to obtain the information. The difficulty is that information about charities and covenants in that connection is not held centrally. I um told that there is a range of covenants where there is no central information, and, therefore, I might have to give the hon. Gentleman the answer that the facts could not be obtained without disproportionate work. I will look into the matter in more detail and let the hon. Gentleman know.

Photo of Mr Frederick Willey Mr Frederick Willey , Sunderland North

I was intrigued by what the hon. Gentleman said in the earlier part of his speech. He seems to be trying on the shoes of the Minister of Education, and what disturbed me a little was that the shoes seem to fit too easily. It has become the conventional approach of the Conservative Party to make sympathetic remarks about the primary schools. We want something more constructive than that. I do not want to say anything more to dissociate myself from the hon. Gentleman. I am very glad that he dissociated himself from those behind him.

I want to give a warning to the right hon. Member for Thirsk and Malton (Mr. Turton) and his hon. Friends. I do not think that they know what they are doing. Admitting that the calculation is difficult, I would accept Mr. John Vaizey's estimate as being roughly correct. At present the private sector, the public schools, siphon back from the Exchequer about one-third of their income. The right hon. Gentleman is now suggesting to the Committee that a further one-third should be siphoned back by way of the Clause. That would be two-thirds of the income of the public schools coming from the Exchequer.

The hen. Member for Torrington (Mr. P. Browne), the Bow Group and many progressive Tories—in fact, we had a debate on this last summer— have suggested that at least one-quarter of the places in public schools ought to be free places and should be provided by way of Queen's scholarships or in some other way. If this suggestion were adopted, we should be providing that the whole of the income of public schools will come from national funds. If we do it, it will be nationalisation. What the right hon. Gentleman and his hon. Friends propose is that we should nationalise the public schools. It is no good saying that by this means or that means the income should be provided from public funds and then saying that there should be no public control.

Photo of Mr Robin Turton Mr Robin Turton , Thirsk and Malton

The hon. Gentleman is guilty of an inaccuracy. The Clause deals with 4.000 schools. of which 500 are public schools.

Photo of Mr Frederick Willey Mr Frederick Willey , Sunderland North

The right hon. Gentleman seems to be equally unobservant. I am interested in the amount of £ 12 million, which corresponds with the present £12 million provided by way of covenant. Mr. Vaizey estimates that one-third of the income of public schools comes from covenants, and I assume on the same basis that this would provide about that amount. At the end of the day the right hon. Gentleman has to face the position that by this stratagem and that stratagem he has ensured that the income of the public schools will come almost entirely from public sources.

That is a remarkable contribution. I do not think that the right hon. Gentleman and his hon. Friends really understood what they were suggesting. It is remarkable that they should make this suggestion of a general allergy towards the Welfare State. It was remarkable that the hon. Member for Bournemouth, West (Mr. Eden) talked about the Welfare State being dispensable in the context of education. This could not make a more harmful contribution to political thought at the moment.

I accept the four points the right hon. Gentleman raised. My difficulty is seeing the relevance of the four points to the new Clause. The first point the right hon. Gentleman raised about the religious or denominational foundation of educational establishments is a very difficult question, and we have to face it. It is not a question about which we need be unduly depressed, because many colleges have such a foundation and they have been able fully to accept State support. However, it is something to which we must pay close regard. We should not ignore this aspect of education when we are talking about the private sector.

The other questions are equally irrelevant. I admit at once that there is a case for a further examination of boarding school education. We discussed this topic when we discussed public schools. There is the very difficult and aggravating question now of entrance to universities. I can think of nothing worse than to support a Clause such as this by the argument that it would provide access to education at universities. This is most unhelpful.

As to the size of classes, we recently had a debate on education. We are appalled by the prospect, but the situation would not be helped by the Clause. So I would express appreciation to the Financial Secretary for resisting this. I am, however, a little unhappy that he was not more forthright in opposing these proposals and supporting the Welfare State and our education and health provisions. He should have said that these are the first priority. Forgiving him for those shortcomings, I hope that now that he has indicated that the Government are unwilling to accept the Clause the right hon. Gentleman will withdraw it.

Question put and negatived.

New Clause.— (SCHEDULE E: PUBLIC EMPLOYEES' EXPENSES.)

The Ninth Schedule to the Income Tax Act, 1952 (Schedule E Rules), shall have effect with the addition at the end of paragraph 7 of the following:— There may be deducted from the emoluments to be assessed of the holder of an office or employment under the Crown or under a local authority (within the meaning of section twenty-one of the Finance (No. 2) Act, 1945) all expenses reasonably incurred for the performance of the duties of the office or employment."— [Dr. King.]

Brought up, and read the First time.

10.45 p.m.

Photo of Dr Horace King Dr Horace King , Southampton, Itchen

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

I have been asked by my right hon. Friend the Member for South Shields (Mr. Ede) to move this new Clause as he is unavoidably unable to be here to do so. The Treasury has still to carry out a number of useful little recommendations of the Royal Commission on Taxation and Profits and Income, 1955. The proposal in this new Clause is one of them. What it seeks to iron out is the difference between the expenses allowed under the rules of Schedule D and those which are allowed under Schedule E, expenses to be set off against one's income when seeking Income Tax relief.

I understand that as a rule businessmen come under Schedule D whereas professional men come under Schedule E and the present rules under Schedule E are far too rigid. As the Royal Commission pointed out, they have been condemned over and over again even in courts of law where judges have expressed the opinion that they are unjust and unreasonable. The formula under Schedule D, which is less rigid, provides that the expenses it allows are: all expenses reasonably incurred in the appropriate performance of the office or employment The new Clause seeks to transfer that definition of expenses to Schedule E so that professional workers in the public services would benefit.

To illustrate to the Committee what are the kind of expenses reasonably incurred in a public service, I speak of those of a teacher because that is the profession which I know best. There are plenty of such expenses. There are subscriptions to learned societies, text books which the teacher needs for teaching his class, books he needs for wider study if he is to keep abreast of his subject, protective clothing if he or she works in laboratories, handicrafts or domestic science. There is also academic dress. I well remember thirty years ago making an Income Tax claim for my academic gown, but never succeeding in securing any remission from the Inland Revenue. There is the cost of attending various refresher courses and educational courses.

The teacher is entitled to claim for a number of these expenses, but he does not always get them as of right. He can claim for protective clothing and academic dress. I understand that his subscription to a professional association is allowed as of right, but the rest are still subject to the decision of the local Income Tax office. I doubt whether the Committee is aware of the vast amount of work which goes on in the teaching profession in refresher courses. The work of every branch of education is changing and developing very rapidly, so rapidly that almost every county teachers' association is organising annual courses for its members, courses in infant education, in junior education, in secondary education, in the teaching of various subjects, in new methods of teaching and in the new problems which are thrown up by the rapid development of secondary education.

For example, my own county arranges such courses each year, and they are attended by hundreds of teachers at their own expense. Last year, I lectured at such a course in Somerset, and I understand that an annual refresher course attended by 100 or 200 teachers has been held in that county for more than twenty-five years. Most of the universities and training colleges run refresher courses during the summer recess. Ever progressive teacher in the country who wishes to keep abreast of developments in education is bound at some time or other almost every three years to attend one or other of the courses I have mentioned.

What is true of teaching is true of every other public service profession, of every professional man and woman who wishes to keep abreast of the developments in his field of work. The new Clause would permit a professional man to claim tax relief on legitimate expenses incurred in making himself better able to carry out his professional duties.

I call the Committee's attention to two passages in the arguments on this subject in the Report of the Royal Commission on the Taxation of Profits and Income, a Report to which, I am certain, the Chancellor would wish to pay tribute, one of the most important documents on the subject of taxation which has appeared this century. The Report says: It is not enough therefore to ask whether the terms of the office or employment specifically require the employee to incur the expense, and, if not, to disallow the expense as a tax deduction. In many cases the taxpayer himself must he the interpreter of the obligations of his office. To take one instance … what rule is to determine with precision the limits of a clergyman's duty to his parish? How far is it his duty to show hospitality, to aid the sick, to organise or support benevolent activities, to supplement his ministry with visiting preachers?". If he does any of those things, he is at present debarred from claiming tax relief on them as legitimate expenses of his profession.

In a longer passage, the Report says: We do not use the word 'professional' here in any precise sense: we have in mind all those persons in office or employment whose work is of such a kind that they are expected to employ in it an equipment of expert or specialised knowledge. Doctors, teachers, lawyers, scientific workers, clergymen fall into this category. Such persons require to maintain and often to increase their professional equipment of knowledge, and it must often be quite impossible to relate the expenses of so doing to any specific obligation in performing the duties of a particular period. Their obligation is not only to be skilled in learning but to remain skilled in learning as conditions change. The expenses of so doing are represented by subscriptions to professional and learned societies, purchases of books and magazines, attendance at conferences, travel for research, purchase of instruments, etc. Yet. under the present rule— which the new Clause seeks to alter— the Revenue is forced into taking what seems to us rather unreal distinctions between what an employer insists upon and what he does not, between what a person is obliged to do in the performance of his duty and what it is desirable that he should do in order to be able to perform his duty; and between current expenses of maintaining knowledge or skill for one post and capital expenses of acquiring improved knowledge or skill to qualify for another post. It is for that reason that the Report comes down fairly and squarely in favour of abolishing the tight definition which is drawn under Schedule E, suggesting that professional people should come under the broader definition of the Schedule D rules. It is that broader definition which we seek to carry out, and I hope very much that the Chancellor will give this the most sympathetic consideration.

This is something which has been before the Committee year after year, although we have never had the privilege of having it selected for many years. There should be no administrative difficulty in carrying it out. Of course, the professional man must decide what are his professional expenses; and it may be argued that to check these involves great administrative costs, but in the case of teachers it should be possible for expenses to be certified by a director of education or a headmaster and, in the case of civil servants or local government workers, by some superior officer. If this Clause is adopted it will right an injustice which professional people feel that they have vis-à-vis businessmen in the matter of expenses they incur in the professional work in so far as Income Tax is concerned, and I therefore hope that the Chancellor is going in this case to accept the recommendation of the Royal Commission and accept the new Clause.

Photo of Sir John Hobson Sir John Hobson , Warwick and Leamington

The hon. Gentleman the Member for Southampton, Itchen (Dr. King) has moved his Clause with great moderation, but, if die will permit me, I must say that he was not quite correct in saying that its sole purpose was to iron out the differences which exist between allowances for expenses under Schedule D and Schedule E nor that there is a contrast as between the professional man and the business man. The true position is that most professional men are, for tax purposes, assessed under Schedule D and the vast majority of businessmen, other than those carrying on their own business or trade, are assessed under Schedule E.

The difficulty arises—and this has been recognised time and again—with the professional man in an office or employment Who falls to be assessed under Schedule E. This has always caused some trouble and occupied a lot of the time of the Royal Commission on Taxation; but the solution proposed by the hon. Gentleman would really only succeed do drawing a distinction between those professional people in public employment and those who are in employment other than that of a public authority or the Crown. It is primarly for this reason that the Government feels itself unable to accept the proposed Clause.

Under the rule now in force, any office holder or employee, whether business or professional, may only claim a deduction under Schedule E in respect of expenses incurred "wholly exclusively and necessarily" in the performance of the duties of that office or employment. On the other hand, a professional man in private practice and assessed under Schedule D may claim a deduction for expenses "wholly and exclusively laid out or expended for the purposes of" his trade, profession, or vocation.

The present law does not go so wide as the hon. Gentleman suggested as to say that to come under Schedule D one has merely to show that the expenditure was reasonably incurred.

11.0 p.m.

The Royal Commission, which reported in 1955, recommended a new Schedule E rule to allow deduction of expenses for Schedule E taxpayers, and it is this formula which the hon. Gentleman has incorporated in his new Clause, omitting one of the words in that formula, because he has left out the word "appropriate" before the words "performance of the duties." His formula is, therefore, even wider than the proposal of the Royal Commission, and it is to be applied only to servants of the Crown and of local authorities.

There was a debate on the subject of the expenses which should be allowed under Schedule E in 1957. The Government then decided against any general rewriting of the Schedule E expenses rule, but did by the Finance Act of the following year, in 1958, allow the expenses of professional subscriptions to be deductible from the emoluments of a person who was paying tax under Schedule E.

The Schedule E rule has often been criticised by the courts, and there is no doubt that it does occasionally cause hardship, and one can get cases, particularly of professional people, where the strict impact of the rule can in certain cases give an appearance of causing injustice. But there is no doubt at all, I think, that the solution proposed by the Royal Commission and partially adopted by the hon. Gentleman is not a satisfactory solution of this problem.

No one who has studied this problem of the allowance for expenses in tax assessments under Schedules D and E can have failed to recognise the essential difference between offices and employments on the one hand and a trade or profession on the other hand. It must have a tax effect on allowances for expenses.

Certainly the Royal Commission quite plainly recognised that difference. The Commission referred to the fact that there is an inherent difference between income from employment and income from the activities of the self-employed. In judging what is reasonably done in the performance of the duties of an employment it must always be of major importance to know what the employer required by the contract, what is the professional practice in comparable employments, and what provision the employer himself may make at his own expense for the employee's use. On the other hand, the person who is engaged in a trade is directing his own income-earning activities and is of necessity forced into the position of judging whether the expenditure is of advantage for the business. No one else can be qualified by similar knowledge of the facts and hazards of the particular enterprise. Therefore, the Royal Commission said in paragraph 135 of its Report that it did not disagree with the Revenue's presentation of the problem.

The circumstances of most offices or employments are not such that any difficulty arises, nor is there any hardship caused in these cases, I think, by the operation of the existing Schedule E rule. I think it is in the cases of professional employment or offices of a professional nature that the difficulty arises. Again the Royal Commission did draw this out very clearly in paragraph 135 when it said that there are many offices and employments the true obligations of which are not capable of being precisely defined. It was to that difficulty that the Royal Commission specifically directed its attention and its criticism, and it is this problem which has been dealt with partially by the 1958 Act. There was a Minority Report of the Royal Commission which did not support the view that such an amendment should be made to the Schedule E rule. I think I ought to point out that in the debate of 1957 the hon. Member for Sowerby (Mr. Houghton) found himself in opposition to the views which have been expressed this evening on the necessity of amending the Schedule E expenses rule, He said, There is no doubt that there is a problem here, but I think that my hon. Friends and I would agree with the Financial Secretary that the Royal Commission has not found the answer. On that occasion, at any rate, he thought that he had the support of the hon. Member for Itchen in not approving the proposal of the Royal Commission, but it has been put forward in a wider form this evening. The hon. Member for Sowerby, whose knowledge of these matters is far more extensive than mine and whose experience is very great in matters of this sort, went on, There is no doubt that from the administrative point of view to have to apply a formula which refers to expenses reasonnably incurred for the appropriate performance of the duties of the office is to open up a limitless range of argument and difficulty. One of the virtues of the rules under both Schedule E and Schedule D at present is that they require the expenditure to be wholly and exclusively incurred in something, one in the course of trade and the other in the performance of an office. To say that expenditure shall be admitted if reasonably incurred in the appropriate performance of an office seems to me to add to the difficulties of interpretation and application rather than to lessen them.

He made the further point, We must not, however, lose sight of the fact that when a person is working for an employer and incurring expenditure in the course of doing that job, whether wholly and exclusively or only reasonably, the employer has a responsibility towards the employee to cover expenditure properly incurred in the performance of his office. In many cases that is something which can be agreed between the employer and the employee as part of the conditions of service."—[OFFICIAI. REPORT, 2nd July 1957: Vol. 572, c. 1047–48.]

Photo of Mrs Eirene White Mrs Eirene White , Flintshire East

If he is arguing in this way, 4would the Solicitor-General address himself, for example, to the Minister of Education, who could suggest to local education authorities that all items mentioned by my hon. Friend should be supplied by them?

Photo of Sir John Hobson Sir John Hobson , Warwick and Leamington

That may well he. But the question whether it should or should not be is a matter between the employer and the employee and not a matter for the Revenue.

There is another matter of fundamental importance on the differences between Schedule E and Schedule D and on widening, as is proposed in the Clause, the Schedule E expenses rule. It is that the great majority of taxpayers are assessed to tax under Schedule E, and, apart from any question of principle, the practical considerations are of great importance. If there is to be a general widening of the tax relief and a deduction because of expenses, arising out of individual and particular circumstances, and the particular way in which an individual who is an employed person desires to spend his money, it will involve the Revenue in the enormous administrative task of investigating the individual circumstances of up to 18 million taxpayers. This would be a tremendous burden upon the Revenue, and while I recognise that the hon. Member's proposal is limited to public servants, it would no doubt be only the first step which would be bound to lead to the removal of the rule generally and to all persons taxed under Schedule E having the benefit of the rule now proposed only for public servants.

However that may be on a general argument as to the necessity or wisdom or otherwise of amending the Schedule E expenses rule to conform to the Schedule D expenses rule, I think that there is an over-riding objection to the Clause in that it proposes a relaxation of the tax rule for public servants only. The hon. Member referred to clergymen. The number of clergymen employed in public offices or employment under the Crown or local authorities must be strictly limited, and I do not think that it would be of any great benefit to the general body or clergy to have this Clause incorporated into the tax law. As far as I know, there is no other provision which gives public servants a tax privilege, and I think that we ought not to begin now to do such a thing. Public servants, above all others, are in general provided with everything which they require for the performance of their duties. If an expense is necessarily incurred, it is usually reimbursed, and if it is not reimbursed the inference is that it is not necessarily incurred and, therefore, does not qualify for relief.

Apart from the expenses which the hon. Gentleman mentioned, there would be questions of entertaining expenses. Should a public or civil servant or a local authority official be able to say that it was necessary for the performance of his duties that he should entertain people to lunch? There are on certain occasions official entertaining funds, and here would be a claim that something outside that should give rise to tax support for the official. There are offices at home, there is the use of more convenient houses, and there is the question of better dress. As to special clothing, I am informed that usually employers provide it, but when they do not, it is very frequently allowed as an expense by the Revenue.

I submit that it would be quite unacceptable that there should be a more generous statutory rule for public servants than for the rest of the persons emplowed in trade and industry or the professions. It would mean that the Ministry of Works attendants who look after us in the House of Commons might get certain expenses allowed to them which the policemen who also attend us in the House would not. It would mean that firemen and Post Office employees, but not van drivers of commercial firms, would get tax allowances. It would mean that industrial civil servants in ordnance factories and dockyards would get tax advantages which ordinary employees in industry would not. Above all, it would mean that inspectors of taxes and other employees of the Inland Revenue would get tax advantages which the citizens from whom they were collecting the taxes would not.

The hon. Member made particular reference to school teachers. I can see that as a profession school teachers present a very difficult problem. It would mean that school teachers in maintained schools would get a tax advantage and that teachers in privately supported schools and university professors would not. This would seem to be wholly wrong. Therefore, on this ground, apart from the general principle of the necessity to maintain the Schedule E rules, I submit that it would not be right to accept the proposed Clause.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

First, I congratulate the Solicitor-General on his maiden speech in our debates. It is rather late in the day for us to say that we want to hear him many more times in future, at least on the Finance Bill.

I am sure my hon. Friend the Member for Southampton, Itchen (Dr. King) will appreciate the difficulty of pressing for a concession on the Schedule E expenses rule which is confined to the public service—the central and local government services. Whatever the merits of the recommendation of the Royal Commission in paragraph 140 of its final Report, my hon. Friend will agree that it would be indefensible to modify the rule in favour of public servants and to deny all other employed persons equal treatment under a new formula.

The Solicitor-General made his task lighter by relying so heavily on a speech that I made five years ago. I would make exactly the same speech again tonight, but I do not think that I could trespass on the time of the Committee to develop this theme fully once more, because the narrow issue in the new Clause is whether a relaxation shall be given to public officials only, and I am sure that my hon. Friend, whose sense of fairness in these matters is unrivalled in the Committee, will see that he could not press for that to be done.

There is no doubt that the difference between the Schedule E rule, which is "wholly, exclusively and necessarily incurred in the performance of an office," and the Schedule D rule, which is "wholly and exclusively laid out for the purposes of trade," gives rise to a good deal of dissatisfaction among employed persons. They feel that the man in business on his own—and this includes the professional man in practice on his own account—has greater freedom to incur expenditure for his own personal benefit and pleasure when it is charged against his taxable profits than is the case with an employed person who has to satisfy the Inland Revenue that the expenditure was necessarily incurred, as well as wholly and exclusively incurred, in the performance of his office.

11.15 p.m.

The Solicitor-General has drawn attention to the omission from the new Clause of the formula which the Royal Commission included—that the expenditure should be reasonably incurred in the appropriate performance of the office. The word "appropriate" is significant in this connection, and without it the rule would be wider than the Royal Commission recommended. I fear, however, that the Royal Commission did not find the solution; nor do I believe that the Minority Report found the solution. This is one of the unresolved grievances of our tax system.

The remedy, I very much regret to say, cannot be found in the way proposed by my hon. Friend. Hon. Members on this side of the Committee feel that the expenses racket—which it is so frequently called; justifiably, in my view—needs to be tightened up rather than relaxed. This Clause would open the door to a very wide field of expenditure which it would be very difficult for the Inland Revenue to check or to deny. It would greatly complicate matters of administration and, I believe, lead to a greater abuse of the expenses provisions of the Income Tax Code than would be the case if we left matters as they are.

I am sorry to say this; it is a difficult and complicated matter. Probably one day we shall get a little nearer to the solution, but, unfortunately, the new Clause does not bring us any nearer that objective.

Photo of Dr Horace King Dr Horace King , Southampton, Itchen

I am accustomed to waging war alone on the Treasury, but to wage war on the Treasury, represented by the persuasive eloquence of the Solicitor-General, and also reinforced by my hon. Friend the Member for Sowerby (Mr. Houghton)—who is about the greatest expert on taxation in the House—is more than one hon. Member can stand.

I want to say a few words in reply to the arguments that have been raised against the new Clause. First, I apologise for the absence of the word "appropriate". I am quite prepared to sit down if the Solicitor-General will say that he will accept the new Clause if the word "appropriate" is inserted. It was by a regrettable oversight that it was left out. Obviously what we seek to do is what the Royal Commission on the Taxation of Profits and Income re-commended. We do not seek to go beyond that.

If the new Clause appears on the Notice Paper in the form it does, it is because the professions which have become aware of the injustice most are the organised professions. It is the teachers who have been making representations on this question ever since the Royal Commission made its report. It is the civil servants—including some of the Income Tax inspectors to whom the Solicitor-General referred—who feel the injustice of the present system. It is the public service professions who first called attention to the matter.

I would be prepared to withdraw the Clause if the Solicitor-General would introduce in its place a wider provision, including all professional persons, so that we would not have the anomalies to which he referred in the latter part of his speech. The Solicitor-General has heavily criticised the solution propounded by the Royal Commission, and in this he has been supported by my hon. Friend the Member for Sowerby. But neither has propounded a solution to the problem. If the new Clause is rejected the problem remains.

There are great groups of what we call the professional workers who incur as part of but not all of the necessary expenses of their job—not because their employers say, "You must take a certain book," or "You must have a certain instrument ", but because they wish better to serve the profession to which they belong—expenses which they regard as morally necessary, at any rate, but in respect of which they are not allowed to claim for tax purposes.

I hope that the Treasury, which does not accept the Royal Commission's solution, will continue to give consideration to this problem, because as long as there is injustice in the taxation system it will continue to fester in the minds of people who suffer from it, and I prophesy that we shall return to this question again on other Finance Bills.

I should like to make what is almost an annual protest against the Treasury gambit, which has become so monotonous, that if we give a reform to one group we must give it to others inside a certain category. The Treasury brings this out with dreary regularity, not as an argument for extending a reform to a wider group, but as an argument for rejecting the reform altogether. With these comments, and with profound regret that I have not been able to persuade either Front Bench, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(PERSONS EMPLOYED TO TAKE CHARGE OF CHILDREN OF MARRIED WOMEN WITH EARNED INCOME.)

(1) Subject to the provisions of this section, if the claimant proves in the case of a year of assessment:—

  1. (a) that his total income includes any earned income of his wife;
  2. (b) that he is entitled to relief under section two hundred and twelve of the Income Tax Act, 1952, in respect of a child resident with him;
  3. (c) that a female person is employed by him for the purpose of having the charge and care of the child;
  4. (d) that neither he nor any other individual is entitled under sections two hundred and twelve to two hundred and seventeen of the Income Tax Act, 1952, or section seventeen of the Finance Act, 1960, to relief in respect of the person so employed, or if he or any other individual is so entitled, that the claim thereto has been abandoned; he shall be entitled to the relief provided for in the next following subsection.

(2) The claimant, in computing the amount of his wife's earned income, shall be entitled to a deduction equal to the amount paid by him, as emoluments in the year of assessment, to the person referred to in paragraph (c) of subsection (1) of this section, or to the sum of two hundred pounds whichever shall be the smaller, provided only that no such deduction shall exceed the amount of the wife's earned income.

(3) In any case in which the wife of the claimant is not required to devote substantially the whole of her time to the duties of a trade, profession, vocation, office or employment the profits of which count as earned income, the deduction provided for in the last foregoing subsection shall be reduced in the proportion that the time actually devoted thereto by the wife of the claimant bears to the whole of the time which could have been reasonably so devoted.

(4) For the purposes of this section income shall not be treated as earned income if it would not be so treated for the purposes of subsection (2) of section two hundred and ten of the Income Tax Act, 1952.—[Mr. Wade.]

Brought up, and read the First time.

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

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

The object of the Clause is to remove an anomaly which affects married women who are either full-time or part-time employed and who have children at home. It affects primarily professional people, though it is not limited to any class.

The problem has been raised by the Federation of University Women. I am not sure that there is the same degree of importance in it since the Surtax levels were raised last year, but as I was one of those who objected to the extent of the general Surtax relief and thought it was excessive and that it would have been wiser to have used that amount of revenue to deal with anomalies and hardships, I think that it is reasonable to raise this anomaly tonight.

One of the curious features of our tax system is the markedly divergent treatment of the earned income of married women for Income Tax and Surtax purposes. The problem here arises when the joint income of husband and wife brings the husband into the Surtax bracket. There is much to be said for dealing with the incomes of husband and wife entirely separately. There are many advantages in the proposal that they should not be combined in any circumstances, but this Clause does not go as wide as that. It deals with a much smaller point.

I understand that in the case of the Surtax payer the husband will get his £100 allowance against his Surtax liability but the wife's income, both earned and unearned, is added to his for Surtax purposes. Where that is so and the wife's absence from home necessitates the employment of someone to take charge of the children—and there are occasions when that is perfectly reasonable—it would seem that there should be some tax relief. I shall not question whether it is desirable for married women to take employment. There are cases where it is right that they should do so, and there are oases where it is necessary to employ someone to look after the children. Some women are well qualified to take up employment again as dentists, university teachers, and so on. The object of the new Clause is to grant relief in the circumstances I have outlined where the combined income results in liability to Surtax.

The Clause provides that the claimant must prove that in the year of assessment his total income includes earned income of his wife and that he is entitled to relief under Section 212 of the Income Tax Act, 1952, in respect of a child resident with him. Under paragraph (c) he must show that a female person is employed by him for the purpose of having the charge and care of the child". Subsection (2) is important: The claimant, in computing the amount of his wife's earned income, shall be entitled to a deduction equal to the amount paid by him, as emoluments in the year of assessment, to the person referred to "— that is, to the person employed— or to the sum of £200, whichever shall be the smaller "— so that it will not be in excess of £200 provided only that no such deduction shall exceed the amount of the wife's earned income". By subsection (3) it is provided that, where the wife is engaged in employment only part-time, the amount of the allowance will be reduced in proportion. That is a fair summary of that subsection.

As I understand it, the new Clause would not involve much loss of revenue. I have not been able to make any calculations, but I imagine that, as a result of the increase in the Surtax level, the amount of revenue which would be lost as a result of acceptance of the new Clause would not be very great. There is an anomaly here which should be removed, and I hope that the Government will accept the proposal I make.

Photo of Mr Anthony Barber Mr Anthony Barber , Doncaster

The new Clause proposes, in effect, a new type of allowance for married men whose wives have earnings of their own. The allowance would be given to the husband. If such a married man has living with him a child in respect of whom he receives Income Tax child allowance and he employs a woman to take care of the child, then, under the new Clause, he is to he allowed to deduct from his wife's earnings the wages he pays to the person employed, with a maximum limit of £200 a year. If the wife works only part time, as I understood the hon. Member for Huddersfield, West (Mr. Wade), the idea is to scale down the full deduction in the ratio which her actual hours of work bear to the time for which a full-time job might reasonably be expected to occupy her.

In practice, this would cause considerable difficulty, but I do not make anything of that point because what the hon. Member is seeking to do is quite clear. The new Clause seems to be modelled on Section 218 of the Income Tax Act, 1952, which provides that a married man who faces single-handed responsibility for a dependent child because his wife is totally incapacitated throughout the year may claim a housekeeper allowance of £75 if he maintains or employs a resident female person to take charge of the child. Under the same Section, a female claimant, for instance, a woman who has been divorced or deserted by her husband, may obtain the same £75 allowance in respect of a resident child-minder if she is in full-time employment or engaged full time in a trade, profession or occupation, or if she is incapacitated. But a man who is receiving a married man's allowance of £240 a year qualifies only if his wife is totally incapacitated. As I understand it, the hon. Gentleman puts forward the Clause on the view that there is an anomaly, a gap to be filled, that is, in the case where the wife is earning.

11.30 p.m.

Because of the extent of the reliefs already given in respect of the earnings of a married woman, I cannot advise the Committee to accept the Clause, because I do not think that the proposal is justified. The Income Tax structure already grants special reliefs in the case of a married couple where the wife is at work. This relief is not limited to cases where there are young children in the home, but rests on the view that, whatever the family circumstances, the fact of a wife's employment throws a burden of expense in one shape or another on the married household which the household would not otherwise bear.

The special reliefs already available to a taxpayer in these circumstances are, first, the wife's earned income allowance of seven-ninths of her earnings, subject to the maximum allowance of £140, and also a second set of reduced rate reliefs. This special relief in respect of the wife's earned income is additional to the normal married man's allowances and reliefs which are given against the married couple's joint income other than the wife's earnings. The Income Tax advantage which under the present law, without this change, is derived from the special relief in respect of a wife's earnings may already, if the wife's earnings are sufficient, be equivalent to the wiping out of Income Tax at the standard rate on no less than £283 a year of assessable income.

The effect of the Clause, on top of the existing reliefs, would be that in a normal case where there was no question of incapacity and where the parents were sufficiently fortunate to be able to afford a nursemaid there would be relief from taxation in respect of the wife's earned income, which could be equivalent to complete relief from Income Tax on something approaching £10 a week—that is, the existing £283 a year to which I referred a few moments ago, plus the £200 a year involved in the Clause. I must ask the Committee to consider whether the proposed Clause is justifiable.

The Second Report of the Royal Commission, whose Reports were referred to in connection with the last new Clause, was concerned mainly with personal allowances and reliefs. In its Second Report the Commission considered at length the taxation treatment of the earnings of married women. I shall not weary the Committee with long extracts. I want merely to refer to three very briefly. I hope that the Committee will take it from me that, although these are short selected passages, they represent fairly the views of the Royal Commission. Under the heading "Earnings of Married Women", in paragraph 132 the Commission said this: In our opinion there is a valid difference between the taxable capacity of the married couple where the wife is at work and the married couple where the wife is at home. We adhere to the view that the fact of her employment throws a burden of expense on the married household that it would not otherwise bear. To recognise that this difference does exist for the purposes of taxation is not to ignore the fact that the wife or mother or stays at home to keep house or care for children makes a valuable, though unsalaried, contribution to society. Whether the measure of difference achieved by the reliefs as they now stand is excessive is another question to which we must attend.

Paragraph 133 begins in this way: Accepting, however, that there must be some difference we cannot avoid the conclusion that the present difference is excessive. The Commission gave various examples with which I will not trouble the Committee. The final paragraph in this section, paragraph 134, begins in this way: We think therefore that we must look for some reduction of the special reliefs given to the married couples of two earners.

In the light of the very firm conclusion to which the Royal Commission came that there should be some reduction of the special reliefs, and bearing in mind the extent of the reliefs which are already available and to which I have referred in some detail, I cannot advise the Committee to accept the Clause.

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

I am not satisfied with the remarks of the Economic Secretary that there is no anomaly here. I am inclined to the view that the simplest solution would be to separate the income of husbands and wives entirely for tax purposes. That, however, is not the object of the Clause. I do not propose to press this matter to a Division. I think it has been useful to have this discussion. I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(RELIEF FROM PROFITS TAX FOR CO-OWNERSHIP SCHEMES.)

(1) Where in accordance with a co-owner-ship scheme approved as is provided in this section a body corporate makes an appropriation within the meaning of this section, a sum equal to one hundred per cent. of the amount of the appropriation shall be allowed to be deducted as an expense in computing the profits or gains of the said body corporate for the purposes of income tax and profits tax.

(2) For the purposes of this section a body corporate shall be deemed to have made an appropriation of the amount hereinafter specified in the following circumstances, that is to say:

  1. (a) where a body corporate has applied profits to or towards the paying up of shares in the said body corporate held by persons employed by it, the amount equal to the profits so applies; or
  2. (b) where shares in a body corporate have been purchased at the expense of the body corporate with a view to their resale to persons employed by said body corporate or to their being transferred to such persons and have been so sold or transferred, the amount by which their purchase price is in excess of any value or money paid or given by the employees in respect of such sale or transfer.

(3) For the purposes of this section "co-ownership scheme" means a scheme which is approved for those purposes by the Commissioners of Inland Revenue, and, subject as hereinafter provided, the said Commissioners shall not approve any fund unless it is shown to their satisfaction that:

  1. (a) the object of the scheme is to enable persons employed by a body corporate to acquire on favourable terms and hold shares therein;
  2. (b) the scheme applies generally to persons employed by the body corporate and is not restricted to any particular class or classes of such persons;
  3. (c) the shares acquired under the scheme by persons employed by the body corporate are deposited by such body corporate on their behalf in Employee Savings' Accounts as is provided in section (Tax reliefs and deferment of taxation for Employee's Savings' Accounts) of this Act;
  4. (d) the value of shares so deposited under any scheme on behalf of any individual shall not exceed the sum of one hundred pounds in any year of assessment; and
  5. (e) the scheme contains no provisions in any way restricting the right of any person to hold or dispose of shares already acquired by him under the scheme in the event that he ceases to be employed by the body corporate.

(4) Approval under the last foregoing subsection shall not be withheld by reason only that: —

  1. (a) employees with less than a specified period of service with the body corporate are excluded in whole or in part from the scheme;
  2. (b) employees with more than a specified period of service are entitled to proportionately greater benefits under the scheme;
  3. (c) the scheme provides for the exclusion of persons not required to devote the whole or substantially the whole of their time to the service of the body corporate;
  4. (d) the benefit accruing to individuals by reason of an appropriation is related to the wage or salary earned by them;
  5. (e) the scheme makes reasonable provisions that no person may assign shares in respect of which he has benefited from an appropriation without first offering them to existing shareholders; or
  6. (f) benefits accrue under a scheme only to such individuals as elect to participate in it, provided that, subject to the foregoing revisions of this subsection, employees are generally entitled so to elect and such entitlement is not restricted to any class or classes of employees.

(5) The Commissioners of Inland Revenue may make regulations generally for the purpose of carrying this section into effect, and, in particular, may by such regulations:—

  1. (a) require the body corporate to deliver to the said Commissioners such information and particulars as the said Commissioners may reasonably require for the purpose of this section;
  2. (b) prescribe the manner in which claims for relief under this part of this Act are to be made approved and in which applications for the approval of co-ownership scheme are to be made, and
  3. (c) provide for the withdrawal of approval in the case of a scheme which ceases to satisfy the requirements of this section.

(6) The power conferred by subsection (5) to make regulations shall be exercisable by statutory instrument.—[Mr. Wade.]

Brought up, and read the First time.

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

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

I shall not be able to deal with this new Clause quite so briefly as I dealt with the last. The object is to facilitate the introduction of co-ownership schemes. I do not pretend that this Clause by itself would alter the whole pattern of industrial relationships. It is only one part of a very much wider policy with that far-reaching aim of altering the existing industrial set-up.

This is one of two complementary Clauses which are designed to remove some of the obstacles in our taxation system which tend to deter firms from introducing co-partnership schemes. This Clause deals with the subject primarily as it affects an employing firm. The other new Clause, which is not before the Committee at the moment, was discussed on the Committee stage of the Finance Bill in 1958 and deals with the problem from the point of view of the employee.

Before referring to this Clause in detail, I should like to point out some of the reasons for advocating co-ownership. The essence of the idea is co-partnership. With that in view, we are in favour of employing shareholding. This involves a great deal more than the shaming of profits. Co-ownership involves the sharing of responsibility, the shaming of profits where they are to be shared, and the sharing of ownership. It is fair to say that the Liberals have travelled a dong way since the days when profit sharing was regarded as a method of distributing bonuses to employees by paternalistic employers without any prior consultation with employees.

I think that we learned much from a study of this subject and I think that we have gained much from experience. For example, we do not for a moment advocate the mere sharing of profits. We are also well aware of the dangers of recommending employees to put all their shares in one basket. I dealt with that on a previous occasion in a debate on this subject in a Committee stage on a Finance Bill. It is possible to have shares, not only in the firm in which one works, but also in other firms so that the risk may be wider spread.

The ultimate aim is clear. Britain cannot afford to go on with industry divided into two sides with conflicting interests. If we are against further nationalisation as a panacea—and I am one who is opposed to the policy of further nationalization—I think we must have some alternative. I think this is the right alternative.

It is an alternative not only to Socialism but to old-fashioned capitalism. Of course, capital is necessary and industry cannot be carried on without it, but we have gone past the idea that capital employs labour. I regard that as an out-of-date concept, and I look forward to the day when management and employees working together in partnership will employ capital. That is the right attitude.

Employees' shareholding is in keeping with this more modern concept of capitalism. There is no one simple blueprint for all forms of employees' shareholding. There is a wide variety of different schemes suited to the different conditions of different industries and different firms. But I have detected a tendency for these schemes to be adopted mainly by the very large concerns which have the benefit of expert advice, sometimes obtained at considerable expense.

It is reasonable where, after consultation with the employees, a firm decides to issue shares to employees and give dividends on them, to consider how those payments should be treated for taxation purposes. Should the payments be deductible before arriving at the net amount on which Income Tax and Profits Tax are paid? That is the kind of problem which faces any firm introducing such a scheme. It is a complicated subject and smaller firms are often put off by its complexities. It is easy enough for the big firms. There are ways of overcoming the difficulties and they have been overcome. The fact that I.C.I. has a very successful employees' shareholding scheme is evidence of that.

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

I think that it is reasonable to say that it is a successful scheme. I understood that the Leader of the Opposition said that it was working very satisfactorily, or words to that effect.

Photo of Mr James Callaghan Mr James Callaghan Shadow Chancellor of the Exchequer, Member, Labour Party National Executive Committee

As the hon. Gentleman says that it is successful, does he know how many shares are sold by employees on the day of receipt, or within seven days, or a month thereafter?

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

My information is that a large percentage are retained.

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

Perhaps I may briefly quote from the Liberal Party's research department which, referring to the I.C.I. scheme, says: … a short time before the actual handout many city gamblers sold, on the assumption that the majority of the workers would rush to sell shares and prices would drop considerably. But there was no wild rush to sell. Two of the I.C.I. men gave their reasons. 'To me the shares are a good investment. It's always handy to have something like that by you, in case of emergencies', The other said: Unless you need the money desperately it is pointless selling something that can provide you with security later on in life. I do not wish to pursue that but merely make the point that there is evidence to show that where the shares are issued to employees, the majority are retained.

If the tax difficulties are to be overcome, the first step is a specific recognition in the Finance Bill of co-ownership, and that is the first purpose of the Clause. The second is to make it clear that profits set aside for the acquisition of shares for employees, or for the issue of bonus shares to employees, should not be treated any less favourably than ordinary cash bonuses in the form of additions to wages or salaries. Surely such a scheme is in the nation's interests, for it is a form of saving and in some ways is preferable to mere cash bonuses.

11.45 p.m.

The object of the proposed new Clause is to lay down certain definitions and limitations. I think it would be accepted as reasonable, if we are to have co-ownership defined in the Finance Act, that there should be some limitation and some attempt at definition. This, of course, would not rule out a variety of schemes which might come within the definition; but these should be a definition to show that we are concerned with genuine and appropriate schemes, and not a few "top hat" schemes, designed to serve only a few people.

I should like to refer to the actual wording of the Clause. The first section deals with the amount to be deducted. . as an expense in computing the profits or gains of the said body corporate … for the purposes of Income Tax and Profits Tax. Section (2) provides for the circumstances in which this shall apply, and an appropriation is defined in the following words: where a body corporate has applied profits to or towards the paying up of shares in the said body corporate held by persons employed by it … and secondly, where shares in a body corporate have been purchased at the expense of the body corporate with a view to their re-sale to persons employed by the said body corporate or to their being transferred to such persons and have been so sold or transferred … to the employees. I am trying to summarise a rather lengthy Clause, and this first part is the definition of an appropriation.

Now we come to the limitation provisions. This is dealt with in subsection (3) (a), which states that the object of the scheme is to enable persons employed by a body corporate to acquire on favourable terms and hold shares therein". That is one of the conditions which must be fulfilled if the scheme is to be accepted for our purposes, and the next subsection makes it clear that the scheme is not restrictive; that it shall apply not merely to any particular class or classes of persons in a firm.

I will omit mention of the details in subsections (c) and (d) because they are related to another Clause not before the Committee. I hope that the Economic Secretary will not make too much heavy weather of that, because the purpose of that other Clause is to grant relief to employees who receive the shares; and that is not covered by this particular Clause.

Subsection (e) makes it clear that there is no restriction on …the right of any person to hold or dispose of shares already acquired by him under the scheme in the event that he ceases to be employed by the body corporate". There should not, we feel, be a restriction on sales of shares. In practice, the majority of employees do not sell, but we do not think that there should be a restriction on selling if an employee so wishes. There are certain specified grounds on which approval should not be withheld. It should, for example, not be withheld by reason of the fact that employees with less than a specified period of service … are excluded in whole or in part from the scheme and it is made clear that there are proportionately greater benefits for those employees with more than a specified period of service, and that the benefits accruing to employees by reason of an appropriation is in proportion to the wage or salary earned. The scheme makes the reasonable provisions that no person may assign shares in respect of which he has benefited, without first offering them to existing shareholders, and that benefits should accrue only to such individuals as elect to participate. I think that is reasonable. Finally, there are some provisions that the Commissioners of Inland Revenue may make regulations. I am not particularly enthusiastic about regulations, but I think that provision is necessary in this case.

I apologised for dealing with this matter at some length, but I think that if we are going to incorporate this principle of co-ownership into our Finance Acts it is necessary to have some definitions, and those I have tried to provide. The main point is that we wish to make quite clear that where profits are used in providing shares to employees, either through their buying the shares, or through shares being transferred to them on favourable terms, by issuing bonus shares or by whatever method, that shall be deductible in arriving at the amount of Income Tax or Profits Tax payable by the company issuing the shares. In other words, this should not be treated less favourably than the ordinary cash bonus. That is the main thing. The other thing is that the principle of co-ownership shall be recognised in our Finance Acts. I again apologise for taking a rather long time in developing this somewhat complicated new Clause, but I hope it will be considered favourably.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

As the hon. Member for Huddersfield, West (Mr. Wade) has said, we discussed this Clause two years ago, and it will be necessary, if we are to deal with it at any length—and I am not—to repeat many of the arguments which were used then both for and against it. It will be within the recollection of the Committee that on that occasion the Clause came in for some rather severe but not altogether unfriendly criticism. The right hon. Gentleman the Leader of the Liberal Party on that occasion himself admitted that the Clause may have been badly drafted. I thought then that it was badly drafted. I still think it is badly drafted, and I am astonished that the Liberal Party has made no attempt in the meantime to meet the genuine criticisms which were then levied against the Clause both on its purpose and the way it was drafted. Instead of trying to improve it, the Liberals have put forward the same Clause again.

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

Would the hon. Gentleman say to which year he is referring? —because there were two Clauses tabled. One Clause was discussed and certainly criticised, but the Clause I have now moved, although tabled then, was not called and was not discussed.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

I am sure that the hon. Member is making a mistake.

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

It depends on which year.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

I am talking about two years ago—1960. If the hon. Member looks at HANSARD for 22nd June, 1960—col. 511—he will find this ClauseRelief from profits tax for co-ownership schemes—word for word as it is now.

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

I was referring to 1958. Mr. Darling: I said two years ago. As I say, the right hon. Gentleman the Leader of the Liberal Party said the Clause was badly drafted, and I repeat that I am surprised that that party has not tried to improve it.

When hon. Members on the Liberal bench discuss co-ownership in this Committee they are usually very cautious in their statements and the claims they make for co-ownership, and they do not repeat some of the claims they make outside. They turn down the picture of co-ownership they offer to the public when they explain it to us. Even so, some of the claims which were made in the debate two years ago and which to some extent have been repeated by the hon. Member for Huddersfield, West tonight seem to me to be rather fulsome. The Leader of the Liberal Party said two years ago that co-partnership schemes would encourage more production in industry, would improve industrial relations and would share out more fairly the proceeds of private enterprise.

I do not think, personally, that distributing shares to employees will by itself do any of these things, and I do not believe the right hon. Gentleman thinks so, either, but that is no reason for opposing employee shareholding. Indeed, the right hon. Gentleman said that co-ownership is no substitution for consultation and no substitute for a much firmer recognition of the status of labour throughout industry".—[OFFICIAL REPORT, 22nd June, 1960; Vol. 625, c. 524.] The hon. Member for Huddersfield, West said tonight that co-ownership is only one contribution which they wish to make to improve industrial relations.

But, as I said, these claims are different from those which they make outside, and one of the claims made for co-ownership ought to be brought to the Chancellor's attention, because the Liberals have a far better solution to the wages problem which is worrying the Chancellor in this leaflet on co-ownership and profit sharing which they issued. Pt is called "A Challenge to Trade Unionists", and in it they make the claim—and this is what the Clause is designed to encourage— Under co-ownership and profit-sharing the need to demand frequent wage increases would cease. In other words, if in certain industries the employees were given shares whenever they asked for a wage increase, they would stop asking for wage increases.

But I have worked out some figures of typical firms about the amount of distribution of profits which could possibly go into shares to employees or any other form of bonus, and in no case as far as I can see is it possible out of the profits of the firm to give anything like the wage increases which many trade unions today are demanding—legitimately from their point of view and that of the productivity of industry. Whether the increases should be paid is a matter for discussion. But as far as I can see no firm in this country is in a position to put aside wage increases by issuing shares to their employees.

I do not want to go into the figures because the hour is late, and I will confine myself to one or two general criticisms of this form of co-ownership. Let me make it clear that we are not opposed to firms sharing profits with their employees. Some of us, encouraged by my right hon. Friend have been making a wide study of the question, and we believe that we should provide in a new or amended Companies Act proper legal provision for employees to participate in the sharing out of companies profits. But we wish to see that the employees' part of the profits is paid out in whatever form they decide—in cash, in the pay packet or in collective welfare schemes, or whatever it is—and we should look carefully at the idea of a company paying out, without pay consultation with them, in the form of shares. This Clause, providing for payment in shares, is open to abuse, and it does not protect employees from all the abuses in which some firms might indulge. Nor are we opposed to employees holding shares in the firms for which they work. The hon. Member for Huddersfield, West suggested that in order to spread the risk employees might hold shares in other companies, too. How this gives them a better stake in their own company I do not know.

But we must, as we have done before, warn employees who are faced, so to speak, with these suggestions of taking part in share distribution schemes of the dangers of investing both their labour and their savings in the same firm. One of the reasons why I do not think that, if it were passed, the Clause would encourage employers to go in for share distribution schemes on the scale that the hon. Member thinks would happen is that many employers share this view and want never to be in the position of having to tell a workman that not only has he lost his job because there is no work for him but that his shares have taken a tumble on the Stock Exchange and are practically worthless. Those two disasters usually come together in periods of economic difficulty. Therefore, we say it would be grossly unfair to them to risk both their jobs and their savings in one organisation.

We differ from the Liberal Party, therefore, on this basic principle. They say in their propaganda for co-owner-ship, even if they do not say it so forthrightly here, that to gain a better status in industry the employee must become a shareholder in his company, that that is a condition that he must accept before he can have a proper share in the management of the firm. Our view is that he should be brought into the management by virtue of his employment, by the fact that he is employed by the firm, and that by belonging to it he has certain rights, which, in our view, should be spelt out in an amended Companies Act or a new one, depending to some extent on what the Jenkins Committee will report. I do not want to go into detail about that, and I suppose I should be out of order if I did, but that is the view that we take.

12 m.

I have mentioned the argument about spreading the risks. Let me as briefly as I can just offer one or two more critical views, again in a friendly fashion. Even under the most generous employee shareholding schemes that I can consider, the employees will always be minority shareholders. Indeed, in many firms the chances of the employees for many years collectively having any substantial stake in the company is very small.

It is argued in the literature which the Liberal Party has put out that the employee shareholders would be able to attend company meetings—if the firm gave them time off to do so, of course. But our view is that they would have a far more effective voice in the firm's affairs if the directors and the managers had to attend employees' meetings, which is what an increasing number of progressive firms now arrange.

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

I think we shall have to keep to the merits of this co-ownership scheme and not deal with too many alternatives to it. That would be the better course.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

I agree, Mr. Williams, that one ought to stick closely to the letter of the scheme. The purpose of the Liberal Party behind it has been in the remarks that I have been making, but I will stick closely to the letter of the scheme.

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

I want to make myself clear. The hon. Gentleman can deal with this scheme, but I do not want him to deal with any alternatives, because there could be a hundred and one alternatives. We do not want to do that at this time of the morning.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

I think I have earned that rebuke, Mr. Williams.

I will just ask one or two questions which relate particularly to the new Clause we are discussing. No reference is made in it to the fact that the shares distributed under the scheme must be shares which carry voting rights and are equal to all the other shares issued by the company. It is possible under the scheme for special second-grade shares to be distributed to employees, carrying perhaps a low rate of interest and no voting rights, and yet the firm would still be able to get the tax relief provided for in the Clause. This is a criticism that we made before, and I am surprised that the mover of the Clause has not amended it in order to cover the point. I appreciate that if he had insisted that the employees' shares must carry voting rights and must not be limited in any other way he would have been compelled to criticise some firms that he now praises, because some carry these restrictive, second-class shares for their employees.

On a more general point, we know from experience that to operate a successful profit-sharing and share-ownership scheme, such as that suggested in the Clause, a firm must fulfil certain conditions. It must have a steady demand for its products and must be able to maintain a high level of employment year in and year out; otherwise the scheme will be bedevilled by a high labour turnover. It must operate at a high capital cost and a relatively low labour cost; otherwise the margin of profit in relation to the wages bill will not allow it to offer anything like a reasonable share distribution, and it must have a good record of industrial relations; otherwise the scheme will meet with suspicion and hostility.

Not only are there relatively few private firms that fulfil those conditions; to begin with, about half of our 23 million employed persons would be rubbed out at the start, because they are engaged in public industries and possibly in services in which there are no private shareholders.

There is another point which I do not wish to labour too much, because I brought it up on a previous occasion. I cannot understand why the Liberals ask for tax relief for companies that are registered under the Companies Act for share distribution schemes and refuse to give the same relief to enterprises which are registered under the Industrial and Provident Societies Acts. The two firms pay the same rate of Profits Tax.

Although the hon. Member for Huddersfield, West says that the Clause and what lies behind it gets away from paternalism, all the words in the Clause add up to a dressed-up version of nineteenth century paternalism. The whole conception is years out of date. We say that the workers should be allowed to share in the profits, as provided by the Clause, but that they should have a bigger and better share to put into their pay packets, which is where it should be. Encourage the workers to save, by all means—and this might be stimulated by the Clause—and open savings accounts for them, as many firms do, deducting the savings, by agreement with the employees, from the wage packets. Let them put their money into unit trust shares or co-operative society shares. But let the workers decide for themselves where they will put the bonuses out of the profits which, by their enterprise, they have helped to earn.

I have spent a large part of my life observing and reporting on industrial affairs. I can understand what the mover of the Clause wants to achieve. He wants to give the workers a bigger stake in the management of the industries in which they work. I agree with that. But I say, from my experience, that I am confident that there are scores of thousands of wage earners and salary earners who could make a really good and constructive contribution to the management of our industrial and commercial enterprises, large and small, and that our industries are all the poorer for shutting them out of the board rooms.

We want them in. We want there to be a common recognition of their right to be there as representatives of their fellow workers. That is the sole right that we accept. We shall oppose any element of conditioning of that right by imposing such qualifications as shareholding. Therefore, for those reasons of principle; for the reason that the Clause is still badly drafted, because it does not meet the criticism brought against it two years ago and today; because it excludes employees whom it is supposed to benefit from consultation about the terms of the share distribution schemes and the management of such schemes, I hope that the mover will seek permission to withdraw the Clause and will try to put his profit-sharing ideas into more practical shape.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

As hon. Members have said, the Clause is an old friend to at any rate those of us who have experienced these debates over a number of years. It has been put down on several occasions and was debated in 1958 and in 1960. In previous years it has been linked with another Clause and the two together represent a complete scheme for encouraging wider ownership of industrial shares. This year only one Clause has been put down, but, as the hon. Member for Huddersfield, West (Mr. Wade) pointed out, it refers in line 28 to another Clause which has not been put down.

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

There is no special significance in the fact that both Clauses are not on the Paper this year. It was simply my hope that this particular Clause would be debated this time.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

I was not saying that with special intent. I was simply stating the fact.

The Clause deals with the tax treatment of a company which sets up what is called a "co-ownership scheme". The Clause which has normally gone with it, but has not been put down this year, dealt with the position of the employees and provided certain special relief. I should, however, be out of order if I dealt with the proposals in that second Clause and I must confine myself to what is proposed i