Sub-Contractors in Construction Industry

New Clause 9 – in the House of Commons at 12:00 am on 10th July 1973.

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Section 29 of the Finance Act 1971 shall be amended in subsection (1) by leaving out the words 'is a company or'.—[Mr. Sheldon.]

Brought up, and read the First time.

Photo of Mr Robert Sheldon Mr Robert Sheldon , Ashton-under-Lyne

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

The clause deals with what we call the "lump". Although we have had many discussions in the House about certain aspects of it, we seem to be making very heavy weather of finding a fairly simple provision to end what has become an industrial monstrosity. The purpose of the creation of the lump arose primarily from the incidence of selective employment tax and the possibility of evasion of tax in other directions. I suppose that when we end the lump we shall have to turn to a measure similar to that proposed by my hon. Friend the Member for Liverpool, Walton (Mr. Heller) in his Bill on labour-only sub-contracting.

The Labour Party is opposed to the lump as it operates, and we shall have to put the matter right. The clause deals with only one aspect of it, and probably not the most important aspect. It puts right an obvious anomaly. In the Finance Act 1971 provision was made, so it was thought, to end practices that were becoming prevalent. Provision was made so that payments other than those made to a contractor which was a company or was exempt by Section 30 would have to pay tax on labour provided. It was thought that that would end most of the practices then current. What was not appreciated was the ingenuity of the people involved, and in particular the way in which the operation of the lump would spread.

There are a number of major reasons for the spread of this method of operation. The obvious one is the evasion of tax. The practice concerns large numbers of people who move around the country, and the tax collectors tend to be slower in their migrations than the work-people. Therefore, although the Chancellor of the Exchequer has put forward a number of proposals he has never been able to emulate the speed at which these gangs move from place to place.

Another matter that is becoming important deals with the advantages to people working in labour-only subcontracting of coming under Schedule D rather than Schedule E. This is probably a more serious long-term matter than many of the other matters. The great advantages of coming under Schedule D as opposed to Schedule E are becoming more appreciated. As long as we had a large industrial working class who did not pay income tax and consequently were never knowledgeable about income tax, it was only right to expect that they would not be able to order their affairs and to pay the amount of tax required by law.

Today, large numbers of ordinary people pay considerable sums of income tax, and it is only natural that they should start looking for methods of tax avoidance that are known to other people who are in a position to avoid paying tax. Such a method is available to those who come under the labour-only sub-contracting schemes. The advantages of Schedule D will not be limited to these groups of people. Unless the law is changed, it will apply to a wider range of people, who will say to themselves, "Why should we be taxed at source for every penny, with a minimum amount of offsets for expenses, and having money deducted in the precise and mechanical way for which Schedule E provides, when other people doing exactly the same work have the advantages which Schedule D provides?" The Chancellor of the Exchequer will have to face this problem increasingly in the years to come.

This is the first bridgehead of the realisation that certain people will be able to avoid paying their share of income tax. There are serious disadvantages to the community in the spread of this method of operation. My hon. Friend the Member for Liverpool, Walton pointed out the disadvantages to training. Labour-only sub-contracting breaks down the industrial structure. Training, safety requirements and associated matters are not brought into effect as they are when people are working only for one firm and acquiring an understanding of the techniques and regulations that apply to that firm.

I shall not go into the question of the disadvantage to trade unionists of the labour-only sub-contracting system. Those who feel that trade unionism is the best hope for industrial peace and progress cannot fail to be seriously concerned about the spread of labour-only sub-contracting.

Photo of Mr Frederic Bennett Mr Frederic Bennett , Torquay

Has the hon. Gentleman computed the cost of the end product produced by these rival schemes? Apart from the matters he has been arguing, can he say whether the cost of the end product in building is lessened or increased by the continuance of the lump?

Photo of Mr Robert Sheldon Mr Robert Sheldon , Ashton-under-Lyne

The difficulty is in providing the proof. One can say from one's own experience in industry that, generally speaking, a stable work force undergoing the discipline of knowing what is happening within a firm, meeting the requirements of that firm and increasing its experience is likely to be more efficient. It is not easy to make a direct comparison.

One matter that is frequently omitted from consideration is the workers' obligations to the community. The community loses because much of the taxation that should have been payable by workers in the lump is not paid. Even more important, people doing essentially the same kind of work are divided into two groups, one of which has tax advantages and the other of which does not. That aspect is likely to become increasingly important as more people realise the possibilities of tax avoidance.

Photo of Mr Charles Loughlin Mr Charles Loughlin , Gloucestershire West

Does my hon. Friend agree that the initial cost of work done by the lump system might be lower but that the total cost in the and, including the cost of maintenance, is higher?

Photo of Mr Robert Sheldon Mr Robert Sheldon , Ashton-under-Lyne

I am sure my hon. Friend is right. The responsibility that comes from a working force that can be held accountable by the company is a discipline that may well produce the sort of advantages that he claims.

Despite all the efforts that have been made, the construction industry is still operating the lump and using lump gangs, even though this is the antithesis of the way in which the industry should be organised. This is only one aspect of the way in which the industry may move in response to individual pressure in trying to reduce taxation commitments. This is a serious matter, and the new clause makes only a small dent in the problem. The solution will lie in another direction, but in the meantime I commend this modest proposal to the House.

9.30 p.m.

Photo of Mr Peter Trew Mr Peter Trew , Dartford

We debated the "lump" at length on the Second Reading of the Labour-Only Sub-Contracting Bill introduced by the hon. Member for Liverpool, Walton (Mr. Heller). However, I do not wish to rehearse the arguments that were employed on that occasion.

I begin by declaring an interest in the construction industry. The term "the lump" is applied to two different types of activity—labour-only sub-contracting and self-employment. There is good and bad in both. There are employers who provide a service of labour-only subcontracting, fulfil their commitments in terms of training, safety and welfare, and provide work that is efficient and of a high quality. There are others who abuse the system. There has been a tradition of self-employment in the industry for many years—indeed, for hundreds of years—involving craftsmen carrying out work in repairs, maintenance and decorating. Again, they are working perfectly legitimately and they are often good craftsmen. However, there are undoubtedly abuses. Nobody would pretend otherwise.

I want to confine myself to the remedies that lie within the scope of this debate, namely, fiscal remedies. I agree with the hon. Member for Ashton-under-Lyne (Mr. Sheldon) about Schedule D and the treatment of expenses. One of the biggest incentives to so-called self-employment is the ability to treat such things as travelling expenses as deduc- tible against tax, compared with the ordinary employee who cannot treat them in that way.

The best way to tackle this matter is to look again at the definition of "self-employment". I am not sure that the Government do not already have the power to deal with this matter. There are two tests by which one can distinguish genuine self-employment from bogus self-employment. The first test is that the genuinely self-employed person offers his services simultaneously to a number of customers. We have to consider the doctor, the lawyer or the dentist who offers a service. Many people in industry who call themselves "self-employed" work for a considerable period of time for only one employer. That is one criterion by which one can judge whether the self-employment is genuine.

The second test is whether the so-called self-employed person renders his service direct to the customer. Again, if we consider the doctor, the lawyer, the dentist or the accountant, the test is fairly easily fulfilled. The service is rendered direct to the customer. However, in the case of the self-employed person in the construction industry the service is not rendered direct to the customer but through another employer, namely, a main contractor. This is a criterion that, together with the first criterion, should be looked at. I do not know whether it requires to be looked at in terms of new legislation. Perhaps it can be dealt with under the existing rules.

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

I agree entirely that the lump has a long history in the building industry. I was interested to read several references to it in a new Penguin book that has been published about Mayhew's London—a series of letters and articles written by Mayhew in 1850. The circumstances were somewhat different, of course. In those days the lump comprised people coming into London who pretended to be craftsmen. They undercut experienced, well-trained craftsmen and were used as cheap labour by employers against men who were then trying to form trade unions. The situation is different today, but very much the same principle is involved.

The amendment goes only part of the way to meet the real problems that arise out of the operation of the lump. The Government had hoped that Sections 29, 30 and 31 of the 1971 Finance Act would pretty well catch for tax everyone working on the lump in the building and construction industry. The reality is that it has not caught them. Not only have we seen the growth of tax exemption certificates preventing people being caught at the end of the year; we have also seen the growth in the number of limited liability companies, which can and in many cases do wind up before the end of the tax year.

How, then, is the Inland Revenue to find these people and get the tax that is owing to the country? It is a very difficult problem, which the Government have not solved and cannot solve with this type of legislation. It is obvious that we have to take definite, positive and speedy action about the operation of labour-only sub-contracting in the construction industry.

We have a situation in London today in which a number of local authorities cannot continue with their building. They cannot obtain craftsmen because the craftsmen are operating on the lump, in many cases on luxury-type building, rather than on building houses and council flats required by the people of London.

The system also operates in other parts of the country. I know of one man who comes from Blackpool. He goes round in his Rolls-Royce visiting various sites and collecting sums of money from workers whom he has placed on lump contracts. That is why he has a Rolls-Royce. Activities of this sort are undermining the whole collective bargaining system operating in the industry.

I challenge the argument even that the initial cost is cheaper with the operation of the lump—

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

I was arguing not with my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin) but with a Government supporter who, from a sedentary position, said that it was cheaper.

If a building worker is a member of a trade union and working under the agreement, he is caught under phase 2. If he is working on the lump lie can get two, three, four and even five times as much, and there is no control on him. That is an additional cost.

Then something else happens. If these workers do not like the job after they have been on it for a week they move off and it is left unfinished. That puts up the cost of building. If hon. Members do not believe me, I suggest that they talk to clients who have been left in that situation. Other workers have to be found and brought in. Sometimes clients seek directly-employed workers, but finding such workers is becoming increasing difficult.

One reason for the growth of the lump is the operation of phases 1 and 2. If a worker is told, "You cannot earn more than £1 plus 4 per cent.", and there is another outlet, he will seek that other outlet. That means tax avoidance and and many other problems—National Insurance contributions, and so on.

Another serious aspect is that social responsibilities are not being faced and accepted by those who operate the lump. We had a debate earlier about the big cowboys who salt their money away in the Cayman Islands and elsewhere with their tax avoidance. These people are not in that category; they are the smaller cowboys. They represent the smaller ugly face of capitalism, but it is still the ugly face of capitalism. It means that our housing and hospital programmes, higher pensions and provision for the disabled are affected because thousands of people in the building industry, about a third, are on labour-only sub-contracting. I am not suggesting that the whole of that third do not pay their taxes, but a considerable proportion do not. The money that could be coming in and helping to provide people with better pensions. hospitals, housing, and so on, is not being collected. Therefore, social responsibilities are being avoided. Trade unionists who are on the national agreement and accept these social responsibilities feel somewhat bitter when they see this situation developing and nothing being done by the Government to stop it.

The Government's complacency is absolutely amazing. I met the Secretary of State for Employment and got a sympathetic hearing. However, when I heard the speech by the Secretary of State for the Environment, I felt that my right hon. Friend was absolutely right to point out that he offered nothing and made no real contribution whatsoever to the solution of this problem.

The clause will not solve the problem of the lump, but it will go some way towards it. I hope that the House will accept the clause.

Photo of Mr Lewis Carter-Jones Mr Lewis Carter-Jones , Eccles

When my hon. Friend the Member for Liverpool, Walton (Mr. Heller) introduced his Labour-Only Sub-Contracting Bill, I estimated that the amount of tax lost to the Exchequer as a result of the lump was £50 million per annum. No one challenged my estimate on that occasion.

With £50 million we can build a lot of houses and do a lot for the disabled. Indeed, perhaps the Minister could do something for pneumoconiosis sufferers in my constituency who are being denied aid because of lack of funds. That £50 million could be spent very wisely indeed.

In effect, the debate on this clause is similar to that on the previous clause in that it concerns tax avoidance to the extent of about £50 million per year. That is the first point.

The second point, which is of perhaps even more importance, is that, at a time when we need more bricklayers, the number being trained has dropped from 11,000 to 6,000 per annum. This is happening at a time when we need more men, and it is a direct consequence of the lump.

9.45 p.m.

The other loss of revenue arises from people not paying for their national insurance stamp. A considerable sum of money is involved, but lying behind the greedy people who want tax havens, and behind the greedy people who do not want to pay their national insurance contributions there are certain human tragedies.

Some people who operate the lump are not paying for their stamps, and when they die as a result of an accident at work their families receive no benefits. The classic case was the London Bridge disaster. The families of a number of those who were killed or seriously injured received no benefits because the bread winners had not paid their contributions as they belonged to the lump. That is a good reason for the Financial Secretary to accept the clause.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

I rise to support my hon. Friend the Member for Liverpool, Walton (Mr. Heller) in the sustained campaign that he has been waging against the lump. I congratulate him on his emphasis and persistence.

My second reason for taking part in the debate is to support the clause moved by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). When I was a member of the Birmingham Regional Hospital Board I was responsible for the insertion in the board's contracts of a clause that was supposed to outlaw the use of lump labour. It seemed to me an absolute travesty of justice to have people building hospitals and not paying their national insurance stamp. We thought, when we got that clause into the contracts, that we had stopped the practice, but now I hear from the UCAT organiser in Birmingham that despite that clause the lump is still in use on hospital sites. It is not an easy problem to deal with, and I accept that my hon. Friend's clause goes only some way towards putting things right.

I want to refer to a slightly different aspect of the lump but one that has many of the characteristics referred to by my hon. Friend. I want to refer to the lump in lorry driving. The kind of characteristics that one finds on building sites, with Rolls-Royce and all the overtones, are now being found in lorry driving. One man—Lance Secretan—has made himself the nation-wide expert on employment and how to get jobs. One has to go through Manpower, his firm, to get them, and he is openly going about encouraging the spread of "agency drivers".

The Minister of State may say that the abuses listed by my hon. Friend cannot happen in lorry driving. He will no doubt tell me that anyone who wants to operate a lorry must have an operator's licence, and that he cannot get that too easily. I hope the hon. Gentleman will note that less than 10 per cent of applications for an operator's licence are refused. The hon. Gentleman may also say that the definition of "operator" and "user" in the Transport Act means that in some way or other a man must be registered as an employer—in which case he must have an operator's licence—or as a user, and he may say that because a man has to be registered as one of those he cannot dodge his taxes, but that depends on the Inland Revenue's going round and checking on all those who have operator's licences.

The ready-mixed concrete people, in a deliberate attempt to shovel off some of their tax responsibilities, have told their drivers to turn themselves into owner-drivers. They have told them that if they own their lorries and operate them they can get all the tax advantages of self-employed persons. The hon. Gentleman may say that all owner-drivers must have operator's licences, but again everything depends upon the officers of the Inland Revenue going round and checking on all licensed operators to see who actually holds the licence.

In certain parts of the East End, one cannot get a job as a lorry driver or, if one is an operator, one cannot get drivers, unless one goes to one of these merchants. That is the crowd that Secretan wants to encourage—the agency men in the middle who are profiteering and encouraging the lump in lorry driving. Even if the Minister does not know much about this new and frightening aspect, I hope that he will talk to the Secretary of State for the Environment or the Minister for Transport Industries and find out something about it.

Because of these agency men and the lump drivers, in future not only income tax and national insurance contributions but the enforcement of drivers' hours will be at risk. Manpower has already been prosecuted in the courts because it cannot enforce drivers' hours.

There is a national shortage of heavy goods vehicle drivers. So acute is it that anyone with a PSV licence working for London Transport can go to some of these middle men in the East End and get a higher wage as a lorry driver. That is precisely the kind of device that is used to get around phase 2. If one works for two employers in a week, as many of these men do, one can get around phase 2. This is why the lump is growing on building sites and in lorry driving.

I support my hon. Friend's campaign and urge the Minister to recognise that this problem is not confined to building. It is spreading throughout many small organised industries. It is a problem that will get much worse and the Government must do something about it. I hope that the Minister will say what they will do and what investigations he intends to make. It is not only the nation's house building but the nation's transport which is being held to ransom.

Photo of Mr John Nott Mr John Nott , St Ives

Although the general criticisms of the lump in the construction industry fall more within the responsibility of my hon. Friend the Minister for Housing and Construction, I am aware of the allegations made against it. I have read the debate on the Bill introduced by the hon. Member for Liverpool, Walton (Mr. Heffer).

I realise that it is argued that the lump does not train its successors, as firms should, that where the lump works, health, safety and welfare regulations are ignored, that the work done by the lump is shoddy and often left uncompleted and that the existence of a large lump leads to bad industrial relations and weakens the joint negotiating machinery for the industry. I appreciate these points, as I appreciate the arguments advanced by the National Federation of Building Trades Employers in the opposite direction.

But although these are matters of great importance, they do not fall directly within the responsibility of the Treasury. I do not seek to evade the problem, merely to point out that the new clause is concerned with tax matters and that therefore I should confine myself to that aspect. As the hon. Member for Walton knows, the Government are considering many of the issues that he mentioned. Discussions are going on between the employers and the unions in the National Joint Council for the Building Industry, and they have been widely reported in the Press.

If the hon. Member for Nuneaton (Mr. Leslie Huckfield) or any other hon. Member has evidence of what amounts to tax evasion in any industry—this applies to the transport industry as well—I hope that he will bring it to the attention of the Inland Revenue. Clearly, the kind of practice that he described needs to be investigated. If there is evidence of this kind of practice, that should be brought to the notice of the Inland Revenue. I shall certainly draw the hon. Gentleman's remarks to the attention of the Inland Revenue.

Photo of Dennis Skinner Dennis Skinner , Bolsover

As the Minister is now inquiring about evidence that he may send to the Inland Revenue, will he take up the recent case of the two lorry drivers who smashed through picket lines, without number plates, registration marks or lights, and who, it has been reported in the Press, were paid substantial amounts of money for doing that, and in respect of whom, up to the present, we have no knowledge of any prosecutions?

Photo of Mr John Nott Mr John Nott , St Ives

I felt that I had to answer a few of the general points in a very general way, but the House would not wish me to be drawn into that case. As I understand it, it is not a matter of tax evasion, which is what the new clause is concerned with.

On the question of tax, the hon. Member for Walton said that the scheme which we introduced in the Finance Act 1971 had not been a success. That was broadly the tenor of his remarks. A variety of figures have been used for the tax loss that has been incurred. Indeed, the hon. Member for Eccles (Mr. Carter-Jones) talked about a figure of £50 million. That figure has been widely quoted as authoritative by normally responsible newspapers and others. But there is no foundation whatsoever for that figure. Indeed, before we introduced the 1971 legislation, the estimate of the loss was only about £10 million at the outside. There is no possible evidence or proof about the figure of £50 million. I make that point only in passing.

I echo the words of the hon. Member for Ashton-under-Lyne (Mr. Sheldon). He said that it is very difficult to get proof in this area.

Photo of Mr Lewis Carter-Jones Mr Lewis Carter-Jones , Eccles

If the hon. Gentleman can tell me that it is not £50 million, will he say how much money is paid out to labour-only sub-contractors in the construction industry?

Photo of Mr John Nott Mr John Nott , St Ives

I am coming to that. Returns from contractors, giving details of deductions made by them during the year, are now coming in to local Inland Revenue offices. All that can be said at present is that returns received and processed up to the end of May show deductions made totalling £4½ million. It is not known what proportion of the returns this represents, but I believe that it is enough to show very clearly that the scheme is working. I admit that we shall not know until later in the year just how successful the scheme has been.

Some individuals thought that they could avoid a 30 per cent. deduction by forming companies, and this is the supposed loophole which the new clause is designed to close. When a company is registered it is noted by the Inland Revenue and is immediately recorded, not only as a subject for assessment of its profits but also as an employer required to apply pay-as-you-earn to its directors and employees, and the Inland Revenue pressure on a company may thus begin within a month of its starting to operate. As soon as a company is registered it immediately comes to the notice of the Inland Revenue and pay-as-you-earn comes into operation very soon thereafter.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

How long does it take for the Inland Revenue to insist upon receiving accounts between the date of the company being registered and when it eventually receives its set of accounts or when it issues a notice to the Commissioner for an appeal? It is generally a very long time.

Photo of Mr John Nott Mr John Nott , St Ives

That is a matter of corporation tax. I am merely saying that in the case of individuals who might be seeking to evade tax, if they register as companies in an attempt to do so they do net achieve that purpose, because the registration of the companies comes very quickly to the attention of the Inland Revenue and the employees and directors of the company are immediately put on pay-as-you-earn.

10.0 p.m.

The presentation of the accounts of the company may be later, but pay-as-you-earn becomes payable as soon as registration of the company comes to the notice of the Inland Revenue.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

If the company simply tells the Inland Revenue that there are no employees liable to pay-as-you-earn, surely that is the end of the matter.

Photo of Mr John Nott Mr John Nott , St Ives

This is a matter between the company and the Inland Revenue. That is a hypothetical case. If the employees and the directors are employed by the company, they will be liable to pay-as-you-earn. I think that answers the main point in the amendment.

The extension of the present scheme for individuals and partnerships to companies would be generally unworkable. A large part of the work in the industry, especially specialist work, is done by subcontracting companies. To require all of these to apply for exemption certificates would be nonsensical.

It has been alleged, and it was mentioned by the hon. Member for Walton, that there has been a great increase in company registrations as a result of individuals registering companies and seeking to evade the lump. There was a large increase of company registrations, but there were other factors present to account for this, such as the considerable relaxations in the rules for the taxation of close companies. Since the objects of new companies are not recorded statistically, we do not know how far subcontractors were responsible for the increase in new company registrations, but there are indications to suggest that only a small proportion of the new companies were set up by subcontractors.

Photo of Mr Charles Loughlin Mr Charles Loughlin , Gloucestershire West

The hon. Gentleman says there are indications to suggest that only a small proportion of the increased number of companies were associated with the lump. Will he say what those indications are?

Photo of Mr John Nott Mr John Nott , St Ives

The principal reason why we believe the number of company registrations increased so greatly in that period is that it was due to a large increase following the close company legislation which we introduced.

Photo of Mr Charles Loughlin Mr Charles Loughlin , Gloucestershire West

The hon. Gentleman said that in the first instance and went on to say that there were indications. I ask him to provide the House with the information which he says that he has.

Photo of Mr John Nott Mr John Nott , St Ives

I cannot go beyond what I said. We believe that it was primarily due to the close company registrations and not due to registrations by subcontractors.

We appreciated at the time of the 1971 legislation that during the first period of this deduction-at-source arrangement the system would not be 100 per cent. foolproof. That we recognise. It is only now that the returns are coming into the Inland Revenue. I can assure the hon. Gentleman and those who have supported the amendment that during the year we shall be reviewing the scheme set up under the 1971 legislation. If action needs to be taken to strengthen the Inland Revenue's powers in this area it will be taken as soon as we have the evidence upon which to base further action. At this stage I cannot reasonably go further, except to say that we are aware of the great concern that exists about the lump. We know that allegations are being made that tax is being evaded.

We shall not be in a position to have sufficient evidence or proof about whether these allegations are correct until the returns have come in, but when evidence is available we shall review the position to see whether it is operating adequately, as indeed we intend that it should.

Photo of Mr Alf Morris Mr Alf Morris , Manchester Wythenshawe

The Minister referred earlier to the returns that had been received by May of this year. Is it possible to deduce from those returns whether stages 1 and 2 of the Government's income policy have been complied with? The Minister will recall that my hon. Friend made penetrating criticisms on this matter.

Photo of Mr John Nott Mr John Nott , St Ives

I do not think that the House would wish me now to go into the whole question of incomes policy. The code applies to work within the construction industry. We are aware that in the case of the lump certain problems have been thrown up about the code. In recognition of the difficulty the Government proposed a special construction panel which has now been set up to advise the Pay Board and the Price Commission on how the price and pay code might be applied more effectively to construction. There are grounds for concern in this area, but the matter is under review and the special review body has been set up to advise the Price Commission and Pay Board.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

The hon. Member for Heywood and Royton (Mr. Joel Barnett) said that if a company in reporting to the Inland Revenue said that nobody was on PAYE that ended the matter. That has not been my experience in dealing with the Inland Revenue. I have not found that a quick answer from somebody involved shuts the Inland Revenue up. It should not be left unchallenged on the record that the Inland Revenue is as gullible as all that.

Photo of Mr Robert Sheldon Mr Robert Sheldon , Ashton-under-Lyne

We have had a very interesting debate but I do not think that at the end of it any hon. Member could say that he was convinced by the Minister of State. The hon. Gentleman's comment that there is to be a construction panel to advise the Price Commission on how far the increases should be met was the last absurdity in a number of comments that did not do his reputation as much good as many of his hon. Friends would wish.

What has been shown is that the scheme which the hon. Gentleman explained was far less than the 100 per cent. foolproof scheme which even he admitted that it was not. The hon. Gentleman said that he was aware of the tax that was being evaded. He offered hopes for the months to come. We on this side offer rather more than hope. We put a concrete and specific path of action before the House and ask for it to be approved.

My hon. Friends the Members for Liverpool, Walton (Mr. Heffer), for Eccles (Mr. Carter-Jones) and for Nuneaton (Mr. Leslie Huckfield) made important points showing that the evasion of tax was far greater than the Minister of State was able to show. They pointed out, too, that the consequences for training and for safety were very serious.

The Minister of State is reduced to the level of arguing that the Inland Revenue will make contact with new companies and investigate them in due course. Anybody with any knowledge knows full well that the kind of contact that is made by the Inland Revenue with firms newly registered is of the most perfunctory kind and the Revenue will not be able to undertake the examination that the lump requires.

What is even more absurd, as anybody with knowledge knows, is that any company which finds that the Inland Revenue is getting a little too close to it for comfort can let that company go, move to another part of the country and set up all over again. This is what is happening. Everybody knows that the Revenue will never catch up with many of these practices and with those who carry out the practices.

We on this side say that we must end the lump gangs. We are committed to that. Although there may be some small disadvantages in excluding certain kinds of operation, there will in the end be positive advantages for the construction industry and for those employed in it. For that reason, we shall divide the House on the new clause.

Photo of Mr Peter Trew Mr Peter Trew , Dartford

My hon. Friend the Minister of State did not refer to the—

Hon. Members:

The hon. Gentleman has already spoken.

Photo of Mr Peter Trew Mr Peter Trew , Dartford

By leave of the House, may I—

Hon. Members:

No.

Question put, That the clause be read a Second time:

The House divided: Ayes 223, Noes 240.

Division No. 194.]AYES[10.10 p.m.
Abse, LeoBooth, AlbertClark, David (Colne Valley)
Allaun, Frank (Salford, E.)Boothroyd, Miss B. (West Brom.)Cohen, Stanley
Archer, Peter (Rowley Regis)Boyden, James (Bishop Auckland)Conconnon, J. D.
Armstrong, ErnestBradley, TomCrawshaw, Richard
Ashton, JoeBroughton, Sir AlfredCrossman, Rt. Hn. Richard
Atkinson, NormanBrown, Robert C. (N'c'tle-u-Tyne, W.)Cunningham, G. (Islington, S.W.)
Bagier, Gordon A. T.Brown, Hugh D. (G'gow, Proven)Cunningham, Dr. J. A.(Whitehaven)
Barnes, MichaelBrown, Ronald (Shoreditch & F'bury)Dalyell. Tam
Barnett, Joel (Heywood and Royton)Buchanan, Richard (G'gow, Sp'burn)Davidson, Arthur
Baxter, WilliamCallaghan, Rt. Hn. JamesDavies, Denzil (Llanelly)
Bonn, Rt. Hn. Anthony WedgwoodCant, R. B.Davies, G. Elfed (Rhondda, E.)
Bennett, James (Glasgow, Bridgeton)Carter, Ray (Birmingh'm, Northfield)Davies, Ifor (Gower)
Bidwell, SydneyCarter-Jones, Lewis (Eccles)Davis, Clinton (Hackney, C.)
Bishop, E. S.Castle, Rt. Hn. BarbaraDavis, Terry (Bromsgrove)
Deakins, EricJones, Dan (Burnley)Radice, Giles
de Freitas, Rt. Hn. Sir GeoffreyJones, Rt. Hn. Sir Elwyn (W. Ham, S.)Reed, D. (Sedgefield)
Dempsey, JamesJones, T. Alec (Rhondda W.)Rees, Merlyn (Leeds, S.)
Dormand, J. D.Judd, FrankRhodes, Geoffrey
Douglas, Dick (Stirlingshire, E.)Kaufman, GeraldRoberts, Albert (Normanton)
Douglas-Mann, BruceKelley, RichardRoberts, Rt. Hn. Goronwy (Caernarvon)
Duffy, A. E. P.Kerr, RussellRoderick, Caerwyn E. (Brc'n & R'dnor)
Dunn, James A.Kinnock, NeilRoper, John
Dunnett, JackLamborn, HarryRose, Paul B.
Eadie, AlexLamond, JamesPass, Rt. Hn. William (Kilmarnock)
Edelman, MauriceLatham, ArthurRowlands, Ted
Edwards, William (Merioneth)Lawson, GeorgeSandelson, Neville
Ellis, TomLeadbitter, TedSheldon, Robert (Ashton-under-Lyne)
English, MichaelLester, Miss JoanShore, Rt. Hn. Peter (Stepney)
Evans, FredLewis, Arthur (W. Ham, N.)Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Ewing, HarryLewis, Ron (Carlisle)Short, Mrs. Renée (W'hampton, N.E.)
Faulds, AndrewLipton, MarcusSilkin, Rt. Hn. John (Deptford)
Fernyhough, Rt. Hn. E.Lomas, KennethSilkin, Hn. S. C. (Dulwich)
Fisher, Mrs. Doris (B'ham, Ladywood)Loughlin, CharlesSillars, James
Fitch, Alan (Wigan)Lyon, Alexander W. (York)Silverman, Julius
Fletcher, Raymond (Ilkeston)Mabon, Dr. J. DicksonSkinner, Dennis
Fletcher, Ted (Darlington)McBride, NeilSmall, William
Ford, BenMcCartney, HughSmith, Cyril (Rochdale)
Forrester, JohnMcElhone, FrankSmith, John (Lanarkshire, N.)
Fraser, John (Norwood)McGuire, MichaelSpearing, Nigel
Freeson, ReginaldMachin, GeorgeStallard, A. W.
Galpern, Sir MyerMackenzie, GregorSteel, David
Gilbert, Dr. JohnMackie, JohnStewart, Donald (Western Isles)
Ginsburg, David (Dewsbury)McMillan, Tom (Glasgow, C.)Stewart, Rt. Hn. Michael (Fulham)
Golding, JohnMcNamara, J. KevinStoddart, David (Swindon)
Grant, John D. (Islington, E.)Mallalieu, J. P. W. (Huddersfield, E.)Stonehouse, Rt. Hn. John
Griffiths, Eddie (Brightside)Marks, KennettStott, Roger (Westhoughton)
Grimond, Rt. Hn. J.Marsden, F.Strang, Gavin
Hatton, F.Marshall, Dr. EdmundSummerskill, Hn. Dr. Shirley
Hamilton, William (Fife. W.)Mason, Rt. Hn. RoySwain, Thomas
Hamling, WilliamMeacher, MichaelThomas, Rt. Hn. George (Cardiff, W.)
Hannan, William (G'gow, Maryhill)Mellish, Rt. Hn. RobertThomas, Jeffrey (Abertillery)
Hardy, PeterMendelson, JohnTins, James
Harrison, Walter (Wakefield)Miller, Dr. M. S.Tourney, Frank
Hart, Rt. Hn. JudithMilne, EdwardTope, Graham
Fattersley, RoyMitchell, R. C. (S'hampton, Itchen)Torrey, Tom
Healey, Rt. Hn. DenisMolloy, WilliamTuck, Raphael
Heifer, Eric S.Morgan, Elysian (Cardiganshire)Irwin, T. W.
Hooson, EmlynMorris, Alfred (Wythenshawe)Vartey, Eric G.
Horam, JohnMorris, Charles R. (Openshaw)Wainwright, Edwin
Houghton, Rt. Hn. DouglasMoyle, RolandWalden, Brian (B'm'ham, All Saints)
Howell, Denis (Small Heath)Mulley, Rt. Hn. FrederickWalker, Harold (Doncaster)
Huckfield, LeslieMurray, Ronald KingWallace, George
Hughes, Rt. Hn. Cledwyn (Anglesey)Oakes, GordonWatkins, David
Hughes, Mark (Durham)Ogden, EricWeitzman, David
Hughes, Robert (Aberdeen, N.)O'Malley, BrianWhite, James (Glasgow, Pallok)
Hughes, Roy (Newport)Oram, BertWhitehead, Phillip
Irvine, Rt. Hn. Sir Arthur (Edge Hill)Orme, StanleyWhitlock, William
Janner, GrevilleOswald, ThomasWilley, Rt. Hn. Frederick
Jay, Rt. Hn. DouglasParker, John (Dagenham)Williams, W. T. (Warrington)
Jenkins, Hugh (Putney)Parry, Robert (Liverpool, Exchange)Wilson, Alexander (Hamilton)
Jenkins, Rt. Hn. Roy (Stechford)Pavitt, LaurieWilson, William (Coventry, S.)
John, BrynmorPendry, TomWoof, Robert
Johnson, James (K'ston-on-Hull, W.)Perry, Ernest G.
Johnson, Walter (Derby, S.)Prentice, Rt. Hn Reg.TELLERS FOR THE AYES:
Jones, Barry (Flint, E.)Prescott, JohnMr. Donald Coleman and
Price, William (Rugby)Mr. James Hamilton.
NOES
Adley, RobertBossom, Sir CliveCooke, Robert
Alison, Michael (Barkston Ash)Bowden, AndrewCoombs, Derek
Archer, Jeffrey (Louth)Bray, RonaldCooper, A. E.
Astor, JohnBrewis, JohnCordle, John
Atkins, HumphreyBrinton, Sir TattonCorfield, Rt. Hn. Sir Frederick
Awdry, DanielBrocklebank-Fowler, ChristopherCormack, Patrick
Baker, W. H. K. (Banff)Brown, Sir Edward (Bath)Crituhley, Julian
Barber, Rt. Hn. AnthonyBruce-Gardyne, J.Crouch, David
Batsford, BrianBuck, AntonyDavies, Rt. Hn. John (Knutsford)
Bell, RonaldBullus, Sir Ericd'Avigdor-Goldsmid, Maj.-Gen, Jack
Bennett, Sir Frederic (Torquay)Burden, F. A.Dean, Paul
Bennett, Dr. Reginald (Gosport)Butler, Adam (Bosworth)Deedes, Rt. Hn. W. F.
Benyon, W.Carlisle, MarkDigby, Simon Wingfield
Berry, Hn. AnthonyChapman, SydneyDixon, Piers
Biffen, JohnChataway, Rt. Hn. Christopherdu Cann, Rt. Hn. Edward
Biggs-Davison, JohnChurchill, W. S.Dykes, Hugh
Boardman, Tom (Leicester, S.W.)Clark, William (Surrey, E.)Eden, Rt. He. Sir John
Body, RichardClegg, WalterEdwards, Nicholas (Pembroke)
Boscawen, Hn. RobertCockeram, EricElliot, Capt. Walter (Carshalton)
Elliott, R. W. (N'c'tle-upon-Tyne, N.)Kirk, PeterRidley, Hn. Nicholas
Emery, PeterKnight, Mrs. JillRidsdale, Julian
Eyre, ReginaldKnox, DavidRoberts, Michael (Cardiff, N.)
Fenner, Mrs. PeggyLamont, NormanRoberts, Wyn (Conway)
Finsberg, Geoffrey (Hampstead)Lane, DavidRodgers, Sir John (Sevenoaks)
Fisher, Nigel (Surbiton)Langford-Holt, Sir JohnRossi, Hugh (Hornsey)
Fletcher-Cooke, CharlesLe Merchant, SpencerRost, Peter
Fookes, Miss JanetLewis, Kenneth (Rutland)Royle, Anthony
Foster, Sir JohnLloyd, Ian (P'tsm'th, Langstone)Russell, Sir Ronald
Fowler, NormanLuce, R. N.Scott, Nicholas
Fox, MarcusMacArthur, IanScott-Hopkins, James
Fraser, Rt. Hn. Hugh (St'fford & Stone)McCrindle, R A.Shaw, Michael (Sc'b'gh & Whitby)
Gardner, EdwardMcLaren, MartinShelton, William (Clapham)
Gibson-Walt, DavidMaclean, Sir FitzroyShersby, Michael
Gilmour, Ian (Norfolk, C.)McMaster, StanleySimeons, Charles
Gilmour, Sir John (Fife, E.)Macmillan, Rt. Hn. Maurice(Farnham)Sinclair, Sir George
Glyn, Dr. AlanMcNair-Wilson, MichaelSkeet, T. H. H.
Gorst, JohnMadel, DavidSmith, Dudley (W'wick & L'mington)
Gower, RaymondMarten, NeilSpeed, Keith
Grant, Anthony (Harrow, C.)Mather, CarolSpence, John
Gray, HamishMaude, AngusSpreat, Iain
Green, AlanMaudling, Rt. Hn. ReginaldStainton, Keith
Grieve, PercyMawby, RayStanbrook, Ivor
Griffiths, Eldon (Bury St. Edmunds)Maxwell-Hyslop, R. J.Stewart-Smith, Geoffrey (Belper)
Grylls, MichaelMeyer, Sir AnthonyStodart, Anthony (Edinburgh, W.)
Gummer, J. SelwynMiscampbell, NormanStokes, John
Gurden, HaroldMitchell, Lt.-Col. C. (Aberdeenshire, W)Stuttaford, Dr. Tom
Hall, Miss Joan (Keighley)Mitchell, David (Basingstoke)Sutcliffe, John
Hall-Davis, A. G. F.Moate, RogerTapsell, Peter
Hannam, John (Exeter)Money, ErnieTaylor, Frank (Moss Side)
Harrison, Col. Sir Harwood (Eye)Monks, Mrs. ConnieTaylor, Robert (Croydon, N.W.)
Hasethurst, AlanMonro, HectorTebbit, Norman
Hastings, StephenMontgomery, FergusTemple, John M.
Hawkins, PaulMore, JasperThomas, John Stradling (Monmouth)
Hayhoe, BarneyMorgan, Geraint (Denbigh)Thomas, Rt. Hn. Peter (Hendon, S.)
Hicks, RobertMorgan-Giles, Rear-Adm.Thompson, Sir Richard (Croydon, S.)
Higgins, Terence L.Mudd, DavidTilney, John
Hiley, JosephMurton, OscarTrew, Peter
Hill, John E. B. (Norfolk S.)Nabarro, Sir GeraldTugendhat, Christopher
Holland, PhilipNicholls, Sir HarmerTurton, Rt. Hn. Sir Robin
Holt, Miss MaryNoble, Rt. Hn MichaelVaughan, Dr. Gerard
Hornhy, RichardNormanton, TomVickers, Dame Joan
Hornsby-Smith, Rt. Hn. Dame PatriciaNott, JohnWaddington, David
Howe, Rt. Hn. Sir Geoffrey (Reigate)Oppenhelm, Mrs. SallyWarder, David (Clitheroe)
Howell, David (Guildford)Osborn, JohnWalker, Rt. Hn. Peter (Worcester)
Howell. Ralph (Norfolk, N.)Owen, Idris (Stockport, N.)Walker-Smith, Rt. Hn. Sir Derek
Hunt, JohnPage, Rt. Hn. Graham (Crosby)Wall, Patrick
Hutchison, Michael ClarkPage, John (Harrow, W.)Ward, Dame Irene
Iremonger, T. L.Parkinson, CecilWarren, Kenneth
Irvine, Bryant Godman (Rye)Percival, IanWeatherill, Bernard
James, DavidPeyton, Rt. Hn. JohnWhite, Roger (Gravesend)
Jenkin, Patrick (Woodford)Pink, R. BonnerWiggin, Jerry
Jennings, J. C. (Burton)Powell, Rt. Hn EnochWilkinson, John
Johnson Smith, G. (E. Grinstead)Price, David (Eastleich)Winterton, Nicholas
Jones, Arthur (Northants, S.)Prior, Rt. Hn. J. M. L.Woirige-Gordon, Patrick
Jopling, MichaelProudfoot, WilfredWood, Rt. Hn. Richard
Joseph, Rt. Hn. Sir KeithPym, Rt. Hn. FrancisWorsiey, Marcus
Kaberry, Sir DonaldRamsden, Rt. Hn. JamesWylie, Rt. Hn. N. R.
Kellett-Bowman, Mrs. ElaineRawlinson, Rt. Hn. Sir Peter
Kershaw, AnthonyRedmond, RobertTELLERS FOR THE NOES:
King, Tom (Bridgwater)Reed, Laurance (Bolton, E.)Mr. Kenneth Clarke and
Kinsey, J. R.Rees, Peter (Dover)Mr. Tim Fortescue.
Rhys Williams, Sir Brandon

Question accordingly negatived.