Category: Chief Secretary (1987-1989)

Below is the text of Mr Major’s written Parliamentary Answer on Balance of Payments on 24th May 1989.

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Mr. Cohen To ask the Chancellor of the Exchequer what was the balance of payments for the first quarter of 1989.

Mr. Major The provisional estimate of the current account balance for the first quarter of 1989 was a deficit of £4.5 billion. This is likely to be revised when the full balance of payments accounts are published on 15 June.

Below is the text of Mr Major’s written Parliamentary Answer on Overseas Assets on 24th May 1989.

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Mr. Andy Stewart To ask the Chancellor of the Exchequer what are the latest figures for the identified stock of United Kingdom net overseas assets; and what these represent as a share of gross domestic product.

Mr. Major An estimate of the value of the stock of United Kingdom net overseas assets identified at end-1988 will be included in the Pink Book in August. The latest estimate is of the order of £115 billion to £120 billion, which represents about one quarter of money GDP.

Below is the text of Mr Major’s written Parliamentary Answer on Production Industries on 23rd May 1989.

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Mr. McLeish To ask the Chancellor of the Exchequer what was the index of production industries in each of the standard regions, Scotland and Wales for each 12-month period from June 1979 to June 1988.

Mr. Major [holding answer 19 May 1989]: Information on the standard regions of England is not available; using latest published data, the indices of production for Scotland and for Wales are as given below:

Year (1) | Scotland | Wales
1979–80 99.6 105.9
1980–81 92.4 95.2
1981–82 93.6 97.7
1982–83 93.0 98.5
1983–84 95.4 98.1
1984–85 98.2 95.5
1985–86 99.2 102.5
1986–87 97.9 108.2
1987–88 102.9 119.2
1985 = 100, seasonally adjusted.

(1) Averages for the periods 3rd quarter to 2nd quarter.
Source: Scottish Office, Welsh Office.

Below is the text of Mr Major’s written Parliamentary Answer on the Gross Domestic Product on 19th May 1989.

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Mr. McLeish To ask the Chancellor of the Exchequer if he will give the gross domestic product at constant factor prices for each standard region, Scotland and Wales and for each of the years 1979 to 1988, inclusive.

Mr. Major Gross domestic product (output-based) at constant prices for Scotland from 1963–1987 was published by the Scottish Office on 3 May; comparable estimates are not made for Wales or the regions of England. Current price estimates (income based) for Scotland, Wales and the English regions for 1977–87 were published in Economic Trends No. 421, November 1988, on page 90. Provisional estimates for 1988 will be published in Economic Trends No. 433. Constant price income based estimates are not made because there are no regional price indices.

Below is the text of Mr Major’s written Parliamentary Answer on Capital Expenditure on 19th May 1989.

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Mr. McLeish To ask the Chancellor of the Exchequer if he will give the total amount of capital expenditure by construction, distribution and financial industries at constant factor prices in each of the standard regions, Scotland and Wales and for each of the years 1979 to 1988, inclusive.

Mr. Major Capital expenditure by the construction, distribution and financial industries is not estimated for Scotland, Wales or the regions of England at either current or constant prices.

Mr. McLeish To ask the Chancellor of the Exchequer if he will give the total amount of capital expenditure by manufacturing industry at constant factor prices for each standard region, Scotland and Wales and for each of the years 1979 to 1988, inclusive.

Mr. Major Capital expenditure is not estimated at constant prices in the regional accounts for Scotland, Wales or the regions of England, because there are no regional price indices. Current price estimates for 1983–86 were published in Economic Trends No. 421, November 1988, on page 97. Estimates for 1987 will be published in Economic Trends No. 433.

The text of Mr Major’s comments during the Government Publicity Cost debate, made on 16th May 1989 in the House of Commons.

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Mr. Frank Dobson (Holborn and St. Pancras) I beg to move, That this House deplores the soaring cost of the Government’s publicity machine; and calls for an end to its deployment for party political purposes.

Mr. Speaker I must announce to the House that I have selected the amendment in the name of the Prime Minister.

Mr. Dobson There is widespread and growing concern about the scale, propriety and timing of much Government publicity and advertising. It is an issue that goes to the heart of the relationship between political parties, the people, public servants and the state. In 1985 the Government acknowledged that in their evidence to the Widdicombe inquiry when they said: The unregulated use by any public authority of highly developed media techniques, particularly for persuasive purposes with a strong political undertone, is perceived as a dangerous trend in a democratic society. At the time the Government were talking about local authorities. Since that statement, spending on Government publicity has soared. The regulations laid down to minimise the party political content in Government publicity have been partly ignored and secretly relaxed. It has become increasingly difficult to distinguish between Government publicity and Tory propaganda, in terms both of the content and of the personnel and agencies producing it.

Since that statement was made, without the benefit of statute, industries owned by the public have run privatisation advertising campaigns co-ordinated with those of Government Departments and the Tory party. The only good feature of that is the growing public revulsion against some of the more patronising claptrap that they see on television. People believe that this has gone too far. In particular, they object to the £30 million of their money that is being spent on advertising by the water industry which has a monopoly product that none of us can do without. As The Economist asked last week: Who benefits from the campaign? The ten authorities’ tied customers will not get cleaner or cheaper water, merely bigger bills. The authorities themselves can hardly increase their sales or market share. Indeed, after the dry winter, some of them might be glad to be asked to supply less, not more, water. That advertising appears to have been counter productive because after the milk float water advertisement, some people thought that privatised water would be sold by the bottle. That may turn out to be right.

Spending on Government publicity has continued to soar, and that fact cannot be disputed. Publicity spending by public bodies controlled by the Government will this year total well over £220 million. That is a lot of money. To give only one example, it would pay for building four big new district hospitals. Instead of that, it is all going on paper and television.

About £120 million of that massive sum will be spent by Government Departments, and the rest by the armed forces, Government agencies and the water and electricity industries. The £120 million spending by Government Departments is a sixfold increase on the £20 million publicity spending by Government Departments in 1979. No wonder the taxpayers are beginning to think that it has all gone too far.

In 1987, according to The Daily Telegraph, the Government overtook Unilever as Britain’s biggest spender on advertising. Strange to think that a Government who proclaim that they want to roll back the frontiers of the state insist that their propaganda rolls into the front room of every family in the land. The Government now spend so much on TV advertising that they get a special discount rate from the TV companies.

In March of this year, the top five spenders on advertising were B and Q, £3.6 million; Renault, £2.2 million; the Department of Trade and Industry, £2.1 million; Midland bank, £2.1 million; and the water industry, £1.98 million. The Government Departments that spend most taxpayers’ money on publicity include the Department of Employment, with £17 million, and the Department of Social Security, with £16 million.

The Department of Social Security should spend money on publicity in an effort to raise the appalling take-up level of some benefits. It is trying to spend money now to increase the take-up that its incompetent advertising in the past failed to raise.

This year, though, the star spender is the Department of Health, the spending of which is set to soar from about £10 million to about £19 million, an increase of 87 per cent. At the same time, the Department has given the National Health Service just 5 per cent. to cope with inflation. Yet the Secretary of State for Health has had the gall to go around the country complaining about the money that doctors are spending to campaign against the NHS review. The doctors have one singular merit that the right hon. and learned Gentleman does not have: they are spending their own money.

Mr. Patrick McLoughlin (Derbyshire, West) I could not understand from what the hon. Gentleman said whether he welcomed the increase in expenditure on advertising by the Department of Social Services.

Mr. Dobson There is no Department of Social Services in national Government. There is a Department of Social Security, which has misspent money on pathetic, rather trendy advertising that did not work. It is now halving to spend more money. It would be better, of course, if we saved the money now spent on advertising and gave people benefits which were easy to take up and were not dependent on advertising to get them taken up in the first place.

The other big spender is the Department of Trade and Industry, headed by Lord Young, who is supposed to be the apostle of Government advertising. I suppose that that is because, being in the House of Lords, he is sure that, however much is spent on Government advertising, none of it will go on his election expenses. Wherever he goes, Government publicity expenditure soars. As the amendment refers to value for money, I suggest that the Government look closely at spending by the Department of Trade and Industry, because it is clear from the figures that the more that Department spends on advertising, the worse our balance of trade gets.

It is not just the scale of the publicity machine that has changed; it has become much more party political. So much so that in 1988 The Daily Telegraph, describing what had happened in election year 1987, referred to what it called the Government’s lavish publicity campaigns on such issues as job training and health education … little more than an expensive vote-catching exercise. You will note, Mr. Speaker, that the expense was borne by the taxpayer; the vote catching was to the benefit of the Tory party.

But it is not just that the old regulatory arrangements are being ignored; they have been relaxed, and they have been relaxed furtively and in some cases secretly.

The director of the Central Office of Information used to be the head of profession for Government information officers, the person to whom civil servants in information departments could turn if they had doubts about the propriety of what they were being asked to do. Earlier this year that role was handed over to Mr. Bernard Ingham, of whose relationship with professional propriety I shall say no more than that it was amply demonstrated in the Westland affair.

Mr. Tristan Garel-Jones (Comptroller of Her Majesty’s Household) What does the hon. Gentleman know about it?

Mr. Dobson The non-silent Whip the hon. Member for Watford (Mr. Garel-Jones) asks what I know about it. I read it in the report of the Defence Select Committee, on which there is a majority of his hon. Friends.

Until recently the Central Office of Information had what was called a central role in advising on the propriety of Government publicity. In a change made early last year the Central Office of Information lost that central role in advising on propriety and it was handed over to, of all people, the Cabinet Office, the organisation which gave the world the phrase “economical with the truth”. The change was kept secret from the Treasury Select Committee, which was then looking into the Central Office of Information. It was not even disclosed in the Treasury response to the Select Committee report when it was published in February this year.

Finally, the Chief Secretary to the Treasury, we now understand, has been given a special role as a ministerial point of reference on publicity matters. He will advise on propriety. This would clearly be a difficult role for any Minister to fulfil. Obviously, it could not be carried out by anyone who was vindictive, petty minded or highly partisan. Instead, such a role, as we all realise, would require someone with breadth of vision and a willingness to respect the points of view and sensitivities of political opponents; a person capable of distinguishing between the interests of his party and the interests of the country as a whole. In other words, someone who likes mixing it could not possibly properly carry out that job. Hon. Members will be able to judge from his speech today the extent to which the present Chief Secretary meets these not particularly demanding criteria.

Time after time Ministers, including the Prime Minister, have referred to the conventions published in 1985, but it took a series of questions before the Prime Minister eventually revealed two weeks ago that the conventions had been reviewed at the beginning of last year. Nobody had been told about that – at least, no one outside Government information offices. Notwithstanding those recent changes, the Government conventions on publicity are still supposed to apply to advertising and press notices and other similar material. Section 4(ii) reads: Content, tone and presentation should not be party political. The treatment should be as objective as possible, should not be personalised, should avoid political slogans and should not directly attack the policies and opinions of Opposition parties or groups. Those conventions were designed to protect the taxpayer and the public and to protect the integrity of public officials who may be asked from time to time to carry out party political tasks in the name of their ministerial masters or mistresses.

Mr. Phillip Oppenheim (Amber Valley) Relaxed though the hon. Gentleman considers those regulations to be, does he think that those relaxed limitations should be applied to local government?

Mr. Dobson As the hon. Gentleman ought to know, the unrelaxed regulations are applied by law to local government and it was the suggestion of the Treasury Select Committee that they should be applied by law to central Government as well.

Mr. Frank Haynes (Ashfield) Does my hon. Friend agree that double standards operate among Conservative Members? Is he aware that not long ago the Strathclyde local authority in Scotland distributed cards to every household so that people would know of their entitlement to social security benefits? The Government criticised it for doing so, but now we can see how they operate double standards.

Mr. Dobson My hon. Friend is spot on, as ever. Having double standards is almost the least of the criticisms that I would make of some Conservative Members. Whenever local authorities throughout the country – mainly Labour, but not exclusively – attempt to increase the take-up of benefits by people who are badly off, they are criticised by a Government who themselves have incompetently spent millions of pounds on advertising while achieving some of the lowest take-up levels in the history of the social security system.

In 1981, when a Conservative Government were in power, the Central Office of Information published a document on the role of Government information officers marked “For official use.” I do not know whether the House of Commons counts as official use but I shall still make use of that document. It states: If a Minister includes in a speech an attack on his political opponents, it would be improper for the Department to issue it as an official text or use the COI news distribution service to distribute it to Fleet Street. Such action would open the Minister and his Department to the charge of using taxpayers’ money to further party political attacks. In this case the political attack would have to be omitted from an official handout, otherwise the text must be issued by the party’s publicity machine. No mention is made of which party. It is rather like something from the Soviet Union in referring to the party. Official documents mean only one party – the Tory party.

Those rules are being broken. Civil servants complain that they are forced to expound half truths, produce dodgy material, and to leak in the Government’s interests. We are back to No. 10 Downing street. If civil servants wish to complain about being pressurised, they can always go to No. 10 Downing street and see Mr. Ingham, the head of profession, and see what sort of change they get. Everyone knows that the rules are not observed.

Another recent example was a press release issued by the Department of Employment in September 1988 containing an attack by the Secretary of State for Employment both on the Leader of the Opposition and on the shadow Employment Secretary by name, in clear breach of the rules I have quoted.

Mr. Tony Blair (Sedgefield) Why was it not stopped?

Mr. Dobson Such practices are not stopped but are being encouraged.

More blatant than that example was the concerted effort by the Department of the Environment’s press office earlier this month to back up the poll tax leaflet campaign. The Department faxed syndicated articles to at least 15 local newspapers purporting to he written by the right hon. Member for Suffolk, Coastal (Mr. Gummer) – and for all I know, he did write them. Those articles had a standard content but incorporated local variations. Those sent to Nottingham newspapers contained an attack on my hon. Friend the Member for Nottingham, North (Mr. Allen). Those sent to Leicester included an attack on the chairman of Leicester city council’s finance committee. The fax sent to the Leicester Mercury clearly came from the Department of the Environment’s press office and was signed by Nick Gammage. Again, that was done in clear breach of the published conventions.

Government press officers have also been pressured into what I can accurately describe as lying about statements made by my right hon. and hon. Friends and by me. On one occasion a radio reporter quite properly rang the then DHSS press office in my presence for its comments on a report that I issued. The press officer to whom the reporter spoke lied about the figures in my report. When I took the matter up with the Department’s head of information, she sought to justify her colleague’s lie, and no apology was forthcoming.

Mr. Tony Banks (Newham, North-West) My hon. Friend highlights significant abuses of Government power. Had they been perpetrated by a local authority, there would be demands for its councillors to be surcharged. Can my hon. Friend say what recourse the taxpayer has to get back from Ministers some of the money that they are clearly squandering on abusive and offensive practices?

Mr. Dobson The taxpayer has no redress in such matters because the Government have no statutory authority to carry out any advertising; as far as I understand, they do it under their prerogative powers. There are no statutory restraints on what they do, but they have imposed statutory restraints on everyone else who might be involved in publicity.

One recent publicity campaign cost a lot of money – more than was originally intended – broke the conventions and blurred the distinctions between the Government, the Tory party and its public relations advisers. As for value for money, which I understand is the main interest of the Chief Secretary to the Treasury, it was a washout. I am talking about the launch of the National Health Service review, which was more unpopular after it was launched than it had been when it was just a leak.

The campaign had no statutory backing and was scheduled to cost £1 million. It actually cost £1.4 million – a 40 per cent. overspend. Unless the parliamentary answers on the matter are misleading, the vast bulk of the money was paid to one agency. I understand that in the trade, if an agency bids to do something for £1 million and spends £1.4 million, the extra £400,000 is paid by the agency and does not come out of the funds of those for whom it is carrying out the work. But that did not apply here. The money was spent on eight tele-conferences totalling £440,000, six road shows costing £179,000, communication packs at £302,000 and videos at £174,000.

The rules say that publicity campaigns should not be personalised, but it has to be said that that campaign was heavily personalised around the Secretary of State. For example, copies of NHS Management Bulletin No. 19 were sent to all GPs. The envelopes containing the bulletin were marked in the way usually reserved by the Department of Health for letters notifying GPs of vital clinical matters such as outbreaks of infectious diseases or warnings about contaminated batches of vaccine. It may be appropriate that there was some warning, because the envelopes contained a document emblazoned with no fewer than five pictures of the Secretary of State. His name was mentioned 10 times on the first page and more than 30 times in total. However, it is a serious matter when, for the sake of trying to make sure that every doctor opened his or her bit of propaganda, the Government devalued the franking that they normally reserve for matters which are important to doctors and patients. If the Secretary of State wants to know why the doctors are so offended by what has been going on, that is one reason.

But we should consider who mounted the campaign for the Government. That substantial contract was given to a little-known company, NML Presentations Ltd. The company’s accounts show that it declared no dividend in 1986 or 1987. It made a loss in 1987, but its report said 1 hat the directors expected it to be profitable in 1988. The net value of its assets excluding motor vehicles was just £7,286. On the face of it, that outfit does not seem to have very much going for it, certainly not enough to justify getting a £1 million contract that the Government considered very important. But it did have one vital asset – it had close connections with the Tory party. Its ultimate holding company was Lowe Howard Spink and Bell plc – the Bell in question being Tim Bell, who masterminded the Tory general election campaign. It is a pity that he did not do that as badly as this campaign; if he had, we would all be better off.

Many of the problems that Government Departments, some decent Ministers and a lot of decent civil servants face spring from what appears to be an increasing inability on the part of the Prime Minister to distinguish between the interests of the Tory party and the interests of the country. The motto seems to be that what is good for the Tory party is good for the country, and vice versa.

Dr. John Reid (Motherwell, North) Does my hon. Friend agree that it is one of the supreme ironies of history that at the same time as the Tory Benches are praising President Gorbachev for trying to separate the party from the state, they are doing exactly the opposite in Britain? Did my hon. Friend ever think that the day would come when any political party in Britain would take lessons from the Soviet Union and would bring in corrupt practices using taxpayers’ money?

Mr. Dobson I recall as a student having to learn about the government of various overseas states. I found it difficult to unravel the relationship between the Communist party of the Soviet Union and the Soviet Government because such a close, interwoven relationship had not occurred in western democracies. My hon. Friend is right. Perhaps it is not just Mr. Gorbachev who is learning something when he comes here; the Prime Minister seems to have been learning quite a bit about how to run the state when she goes there.

The confusion between the interests of the Tory party and the state leads one to think of the one-party state which is a threat to our democracy, as the Government have said. The curious, interwoven relationship is best exemplified by the interchanges of publicity advisers between the Government, the Tory party and those industries scheduled to be privatised. As my hon. Friend the Member for –

Mr. Harry Greenway (Ealing, North) The hon. Member should not lose his place.

Mr. Dobson I have not lost my place. I hesitated because I was trying to remember the constituency of my hon. Friend the Member for Sedgefield (Mr. Blair). As my hon. Friend pointed out, Mr. Brendan Bruce used to be a senior executive of D’Arcy Masius Benton and Bowles, known as DMB and B, the agency that had the contract for the present softening-up round of the water campaign. He was recently appointed director of communications at Conservative Central Office, we understand, to mastermind the party’s media coverage in the run-up to the next election. DMB and B, which was responsible for the Tory party political broadcast on the Health Service – that does not say a lot for it – and for the current phase of the Department of Trade and Industry 1992 campaign – that does not say a lot for it, either – is engaged simultaneously in a bid to get the contract for the Conservative party election campaign.

Mr. Tim Bell, who has already been involved in these sordid matters, and who is a long-time image builder of the Prime Minister and the Conservative party, is now employed as a public relations adviser to Thames Water, the most profitable of the water authorities. Perhaps the Chief Secretary, when looking at getting value for public money, could tell us whether it was Mr. Tim Bell who suggested to Thames Water that it should spend some of my money as a Thames Water user to pay for a water privatisation advertisement in the booklet “Thatcher – the first 10 years” obtainable from the Tory Central Office at £1.95. I do not think that there has ever been a closer relationship between party and Government than that, even in the Soviet Union. The appointment of Mr. Bruce may eventually fulfil the headline in The Times in August 1987: Propaganda role for Tory headquarters”. That rather startled some of us who wondered what else would happen while the right hon. Member for Chingford (Mr. Tebbit) was chairman of the Tory party. [HON. MEMBERS: “Winning elections.”] Are Conservative Members suggesting that they had a propaganda role at the time, or that they did not? I think that that press briefing – clearly from the Tory party to The Times – suggested that the Government would have to take over the propaganda role that it had ceded substantially to the public sector and the public purse in the run-up to the 1987 general election.

Mr. Ian Gow (Eastbourne) rose –

Mr. Dobson I do not think that I should give way to someone to whom one of the Whips has run up and said, “Please intervene on Mr. Dobson’s speech”, or words to that effect.

That brings me to the question of the timing of some of this spending. During general elections, by convention, all Government advertising is suspended, in the words of the Independent Broadcasting Authority, to avoid any risk of controversy about the use of public money for electoral purposes”.

Mr. Gow I am grateful to the hon. Gentleman for giving way. I think that he will want to adjust this part of his speech to take account of the judgement of the High Court, delivered this afternoon, in which both judges found in favour of the Government and against the London borough of Greenwich. Furthermore, an order of costs was made against the borough. Perhaps the hon. Gentleman, who referred to the matter earlier, will now adapt his remarks to take account of his new-found friends the judges in the High Court.

Mr. Dobson I was aware of the outcome of the case of Greenwich v the Department of the Environment before the debate began. The fact is that, as every Conservative Member knows, it is extremely difficult for anyone to succeed in an action against a Government Department, even over a breach of statute and even with the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) in charge of the Department. When what is being questioned is expenditure carried out under the royal prerogative, the chances of success in the courts are fairly poor, and they were always poor in this case.

Let me point out to Conservative Members that the judge in the initial hearing said that he believed that aspects of the leaflet were capable of misleading people.

Mr. Harry Greenway If, as the hon. Gentleman predicted, the money of taxpayers and ratepayers of the London borough of Greenwich was so grossly wasted, why did the borough bring the action in the first place?

Mr. Dobson I did not suggest for a moment that the action of Greenwich council was a waste of time, effort or money. What the council did was observe and then seek legal advice on the basis that aspects of the leaflet were inadequate, and that one important aspect was mentioned in the Welsh leaflet but not in the English leaflet. The borough succeeded in the courts initially; now it has failed. The odds are against success in any court case against a Government who are relying on prerogative powers, as Conservative Members know. But there is always a chance, and it was wholly proper and reasonable for Greenwich council to do what it did.

Dr. Reid Does my hon. Friend recall the judgment by Judge McCowan some years ago, when he decreed that the interests of the state were synonymous with and identical to the interests of the Government of the day – a view also held, apparently, on the Conservative Benches? Does my hon. Friend recall that, when that judgment was put to a jury of 12 good men and true, they threw it out of court and released Clive Ponting?

Mr. Dobson It seemed to me at the time that any judge who, in advising a jury, came to the conclusion that the interests of the state coincided with the interests of those who, for the time being, were in government was getting on to rather dodgy ground. As my hon. Friend has pointed out, however, the common sense of the Old Bailey jury overrode the rather peculiar and absolutist advice of the judge. [Interruption]. I have now got as far as provoking the ultimate Trappist, the Government Chief Whip. He has asked me whether I was pleased with the judge’s judgment. The judge made no judgment in that case: it was the jury who made the judgment. What was wrong was the judge’s advice to the jury.

The Parliamentary Secretary to the Treasury (Mr. David Waddington) I was talking about the current case.

Mr. Dobson If the Chief Whip wants to ask me about this case he should understand, as a lawyer, that more than one judge has been involved. It was reasonable for me to assume that he was talking about the case involving only one judge.

I can sum up my response to what has happened in court today by saying that it was perfectly reasonable for Greenwich council to challenge the Government, and most people in this country will be glad that it did so. Greenwich knew, however, as we all know, that the chances of success in an action involving the prerogative powers are not very good.

Let me repeat what I said earlier, as it was shouted down before. During general elections, by convention, all Government advertising is suspended, in the words of the Independent Broadcasting Authority, to avoid any risk of controversy about the use of public money for electoral purposes. I have been in touch with the IBA to find out whether it proposes to stop the Government and public bodies from advertising on television during the forthcoming European elections. The IBA tells me that that is a matter for the Government rather than for it.

The convention that Government advertising stops during a general election is, of course, only a convention; it has no statutory authority, just as there is no statutory authority for the general conventions on Government advertising. Nor, for that matter, is there any statutory authority for the Government to advertise in the first place. The Government acted to restrict by law the use of publicity by local councils, and we believe that whatever restrictions are applied by law to local councils should be applied by law to Government Departments. We now call on the Government to cease their advertising and publicity throughout the period of the European election campaign, following precedents set in previous general elections. If the Government refuse to do that, we call on the IBA – in observance of its own code of advertising standards and practice, which states that no advertisement may be directed towards any political end – to prevent the showing of privatisation and other Government advertising during the European elections, because we are convinced that it is impossible to look on any such advertising as not being directed to a political end.

Mr. Ian McCartney (Makerfield) My hon. Friend should refer to the six-week run-up to the local government election campaign, when £8 million was spent on advertising the privatisation of the water industry, which was a major issue in the elections. If the Government are prepared to spend that kind of money to promote themselves for local government, how much will be spent to paper up the cracks between the right hon. Member for Old Bexley and Sidcup (Mr. Heath) and the Prime Minister over European issues?

Mr. Dobson I agree entirely with my hon. Friend about water advertising. However, it so irritates people that it is probably counter productive for the water industry and for the Government.

In the longer term, the Government should give statutory force to the conventions governing Government publicity. In the meantime, they should change their behaviour and ensure that the existing conventions are enforced. They should reinstate the Central Office of Information as the centre of advice on propriety. They should publish full details of all publicity campaigns that they intend to mount. The contracts for Government publicity campaigns should be awarded only on the basis of open and competitive tenders. Above all, the Government should stop using taxpayers’ money to promote party interests. Finally, they should direct the water and electricity industries to desist from their profligate and preposterous campaigns.

Dame Elaine Kellett-Bowman (Lancaster) What about Greenwich?

Madam Deputy Speaker (Miss Betty Boothroyd) Order. If the hon. Lady wants to make an intervention, perhaps she will say so.

Dame Elaine Kellett-Bowman The hon. Gentleman referred to taxpayers’ money. Taxpayers contribute money to the borough of Greenwich, which spent money on a fruitless exercise.

Mr. Dobson Greenwich council is perfectly entitled to bring legal actions within the statutes, just as Governments are entitled to appeal against judgments – although it was not an appeal in this case. If we were to suggest that public authorities could not bring legal actions, we would apply that not only to local authorities, but to Governments. However, we are saying, in short, that publicity at public expense has gone too far and it is about time it stopped.

The Chief Secretary to the Treasury (Mr. John Major) I beg to move, to leave out from “House” to the end of the Question and to add instead thereof: recognises the responsibility of Government to provide advice and information to the public; and commends the Government’s firm adherence to the long standing conventions governing propriety and value for money. Let me make it clear to the House at the outset that I reject without qualification the criticisms made this afternoon by the hon. Member for Holborn and St. Pancras (Mr. Dobson). The worst thing that I can say, having heard his speech, is that the speech was worthy of him. In recent weeks, the hon. Gentleman has been engaged in what one can only call a campaign of misinformation and misrepresentation on a scale that merits parliamentary rebuttal. I am pleased, therefore, that he has at last brought his campaign to the House, so that it can be examined – pleased, but a little surprised that the Opposition regard this subject as more important than defence, when they have a brand-new review about which they want to talk. To express a concern about political propaganda and then to seek to avoid discussing their defence policy seems very odd.

I am surprised, too, that this artificial debate is more important than parading their new tax and public spending policies about which they have been boasting, or explaining their new policy of “activity funding” for the National Health Service, which caused such mirth in the House last week. If misleading propaganda concerns them, they might have brought those matters before the House, rather than the trivial conspiracy theories the hon. Gentleman has described.

This debate was clearly timed to coincide with the court case brought by Greenwich council over the community charge leaflet issued by the Department of the Environment. As my hon. Friend the Member for Eastbourne (Mr. Gow) has already told the House, judgment has been delivered this afternoon. I understand that both judges gave unqualified support to the Government. The Government have always believed that the leaflet was clear, concise and accurate and we are pleased by the vindication of our position in the High Court. It is highly desirable that the public should have early information about the community charge and we are anxious to resume distribution of the leaflet. However, despite the fact that we are now entirely free to do so, as a result of the court’s decision, we have given an undertaking not to resume distribution before tomorrow, during which time Greenwich council will consider whether to appeal. If it does appeal, we shall not resume distribution until the Court of Appeal has decided the case, provided that the appeal can be heard within the next few days. I am pleased to see that my right hon. Friend the Secretary of State for the Environment is here with us this afternoon while the House is informed that he and his Department have acted wholly properly.

It has long been accepted by successive Governments that they have a responsibility to ensure that members of the public are properly and fully informed about their rights, entitlements, responsibilities and duties. One way of achieving that has been to use publicity and advertising in the press, on television and through leaflets. That responsibility has led to campaigns on matters such as crime prevention and benefit entitlements, which have run throughout the 1970s and 1980s. The hon. Gentleman seemed to oppose the advertising of benefit entitlement, although I recall many of his hon. Friends suggesting that the campaign might have been extended. There is nothing new about such campaigns and I trust that they are not a matter of contention today – indeed, we are often asked to increase them.

Mr. Harry Greenway Before my right hon. Friend leaves the subject of the leaflet, will he accept that it is urgent for delivery to be resumed as soon as possible as an honest means of countering the highly mendacious leaflets about the community charge put out by many Labour authorities at huge cost to taxpayers and ratepayers?

Mr. Tony Banks Which ones?

Mr. Greenway Greenwich and Ealing in particular.

Madam Deputy Speaker Order. I remind all right hon. and hon. Members that the motion and the amendment relate not to local authorities, but to the Government’s publicity machine and cash.

Mr. Major I take your point, Madam Deputy Speaker, so I will not read the long list of Labour local authorities that have provided misleading information about the community charge. However, I accept without qualification what my hon. Friend had to say.

Dr. Reid Will the Chief Secretary accept that no Opposition Member is opposed to supplying information, especially on benefits, although I am surprised that he should cite that example? As my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) pointed out earlier, when Strathclyde regional council issued information on benefits, the Government were the first to criticise.

Can the Chief Secretary tell us what information or useful function is provided by the large billboard hoardings we see throughout the country advertising the employment training scheme? Can he tell us why every firm used in the advertisements is also a huge financial benefactor to the Conservative party?

Mr. Major It must be clear even to the hon. Gentleman that the purpose of those advertisements was to bring the scheme to the attention of those who might benefit from it. The hon. Gentleman should welcome that advertising.

Some elements of advertising have long been accepted and are not parti pris or contentious and nor are many other large areas of publicity. The Government have a clear responsibility to promote health education and safety campaigns and the extensive AIDS campaign is an example of that. Energy conservation and training programmes are further examples of the Government’s responsible use of publicity, both to inform and influence behaviour. Other examples of more general information campaigns are those on road safety, Government recruitment and the statutory advertising that all Governments are obliged to carry out.

The misinformation we have heard in recent weeks has been of two kinds. First, there have been comments about the propriety of expenditure and, secondly, about its cost.

Mr. Dobson If energy conservation is so important, why has spending on publicity by the Department of Energy – excluding expenditure on privatisation – been reduced?

Mr. Major The hon. Gentleman cannot play it both ways. He cannot on one hand complain about levels of expenditure and on the other hand ask for more. However, he has drawn attention to a point that needs to be clearly understood. The advertising in which the Government are engaged is legitimate, proper, necessary and serves a good and useful purpose.

Mr. Tony Banks Will the Chief Secretary give way?

Mr. Major I will give way a little later.

I want to turn to the matter of propriety, because the hon. Member for Holborn and St. Pancras made some contentious comments about it. He told the House that the conventions on Government publicity had been secretly relaxed. I must tell him that they have not been, nor will they be. The basic conventions applied by successive Governments for many years have remained in place and their operation has been tightened up. The conventions have a clear purpose – to ensure that public funds are not used to finance publicity for improper or party political purposes. We are firmly committed to those conventions and observe them strictly on all occasions.

Nor do Ministers act without professional, independent advice from the Civil Service on propriety. Until July 1988, advice on propriety was the responsibility of the Central Office of Information. That responsibility was removed from the COI solely because of the changing nature of the COI’s business relationship with Departments. The more contractual basis on which COI now operates made it inappropriate for it to act as an authoritative and final source of advice on propriety. The responsibility for this advice was therefore transferred to the Cabinet Office, which has traditionally been the source of advice in Government on other questions of propriety.

That has been the case for many years under many Governments. The responsibility is not located where the hon. Member for Holborn and St. Pancras suggested. The responsibility is located in the machinery of Government division, within the Office of the Minister for the Civil Service, under the ultimate direction of the Cabinet Secretary, the head of the Home Civil Service. That is where the responsibility lies.

The established conventions governing Government publicity remain unchanged, and publicity campaigns must continue to meet important tests. First, they must deal with a subject for which the Government are responsible and on which they need to communicate with the public. Secondly, they must provide good value for money. Thirdly, they must not be open to question that the primary purpose, or principal incidental purpose, of a campaign is party political advantage.

The primary responsibility for ensuring that the conventions on propriety are observed, and that value for money is being achieved, rests with Ministers and their Departments. All Governments have accepted that. In the light of the strengthened guidance we have given, most issues under the conventions will in practice be sorted out in Departments, or between them and the COI. There will be a residual category of cases, not many, on which Departments look either to the Cabinet Office or to the Treasury.

As the hon. Gentleman trailed, at ministerial level I have been asked to act as a point of reference on Government publicity matters, and am responsible for the adjudication of conflicting departmental approaches to the presentation of Government publicity. My services in that respect are seldom required but, if and when they are, I look to the machinery of Government division for advice on propriety, and to my Treasury officials on value for money. I should make it clear to Opposition Members that when I have been asked to make a ruling I have not hesitated to turn down a proposal which seemed possibly inconsistent with the guidelines. I or my successors with that responsibility will no doubt continue to do so if it seems appropriate.

Several Hon. Members rose –

Mr. Major I give way to the hon. Member for Linlithgow (Mr. Dalyell).

Mr. Tam Dalyell (Linlithgow) Before we leave the question of propriety, does the Chief Secretary believe that his predecessor, Sir Leon Brittan – [Interruption]. I am asking a factual question. Does the Chief Secretary believe Sir Leon Brittan when he said that approval was given by Mr. Powell and Mr. Ingham for the improper disclosure of a Law Officer’s letter? Does the Chief Secretary believe Sir Leon?

Mr. Major The hon. Gentleman raises this matter repeatedly but it is not within this debate and I have no intention of getting involved in that debate.

Mr. James Wallace (Orkney and Shetland) Although the right hon. Gentleman was not the Chief Secretary at the time, he may recall that shortly before the last general election the Ministry of Defence issued a video and a publicity pack that not only argued why Britain should have an independent deterrent, but stated why it should be Trident as opposed to any other possible deterrent. Clearly that was politically contentious, no matter what the rights and wrongs of the matter were. What was the need for that information to be imparted to members of the public?

Mr. Major If the hon. Gentleman wants to run that sort of argument, I shall ask why, in the past, his party supported the publicity produced by Labour Governments on, for example, a new deal in Europe, on devolution – which is hardly uncontentious – and on the attack on inflation – “A Policy for Survival”. The hon. Gentleman has wholly misunderstood the conventions and he is wholly and entirely wrong.

Mr. Tony Banks The hon. Member for Orkney and Shetland (Mr. Wallace) is not a member of the Labour party.

Mr. Major In early 1988 – [Interruption]. Hon. Members may shout “Don’t bring in the Labour party,” but I do not need to bring in the Labour party and nor will the electorate for many years – if ever.

Mr. Banks I realise that the Minister is getting a bit hysterical, but I did not say, “Don’t bring in the Labour party,” I said that the hon. Member for Orkney and Shetland who was accused of being a member of the Labour party has never been a member of the Labour party.

However, since the Minister has graciously given way, will he tell me what recourse the taxpayer has if he believes that money has been spent on something that is essentially party political advertising? In local government such people can go to the district auditor, so what is the machinery that allows the taxpayer to make a formal complaint? Finally – I know that the Minister will never give way to me again – why do all these Government publications have to include a picture of the Minister concerned?

Mr. Major On the central point in the hon. Gentleman’s question, the recourse is the recourse that we are exercising this afternoon – the fact that Ministers are answerable to this House and to Members of Parliament. That is the central recourse and that is the distinction between central and local government –

Mr. Bruce Grocott (The Wrekin) rose –

Mr. Major I shall give way to the hon. Gentleman later if he can contain himself for a moment.

On the first of the three points to which the hon. Member for Newham, North-West (Mr. Banks) referred in his intervention, I was referring to the period of the Lib-Lab pact, and on his third point, as many of my right hon. and hon. Friends are highly photogenic, it seems entirely reasonable that their photographs should be on such publications.

Mr. Grocott Which does the Minister think is the most effective sanction – having to appear before this House in a debate or being bankrupted by surcharges?

Mr. Major If one appears before the House in such a debate or, in case of need, before the Select Committee on the Treasury and Civil Service and other Committees of the House, that is a significant sanction that cannot be beaten anywhere. It is a sanction that no Member of the House would overlook at any stage or would treat lightly.

In early 1988, the Government reviewed the arrangements needed to ensure the compliance of Government publicity campaigns with the accepted conventions, as well as the role of the COI in those matters which I have already mentioned.

The review confirmed that the conventions had stood the test of time well, and led to strengthened and tighter guidance to Departments. This covered the interpretation and operation of the conventions such as the use of public relations consultants and direct marketing, and the need for professionalism, both of presentation, and in making sure that publicity expenditure provided value for money. This covers aims, the means used, the cost proposed, and proper measurement of the results. The guidance was widely circulated to heads of Departments and Ministers and is available in the Library.

The reality, therefore, is that the principles of propriety and value for money on which we operate are unchanged and fully observed – I repeat to the hon. Member for Holborn and St. Pancras that the principles are unchanged and fully observed – notwithstanding the general background of rapidly developing publicity techniques and the fact that the Government need to compete for attention with a vast array of messages from others. We have also clarified and tightened up the operation of these conventions and set new machinery in place to ensure compliance, both in terms of propriety and value for money. Nothing that the hon. Member for Holborn and St. Pancras has pointed to or can point to can shake that fact.

Mr. Dobson Why did it take the passage of 14 months and some questions from me before the fact that the review had taken place was disclosed and the document published?

Mr. Major There was nothing whatsoever secret about the review, which was predominantly about the internal workings of the COI and other bodies. The moment that the matter was raised, the documents were made fully available. Although I accept that in retrospect it might have been better if the Government had unilaterally produced them before the hon. Gentleman asked his question, the reality is that the moment the question was asked, the information was made available. However, it was essentially an internal review, predominantly about the role of Government Departments rather than necessarily about the conventions which remain unchanged.

As the hon. Member for Holborn and St. Pancras mentioned the codes of conduct for local authorities under the Local Government Act 1986, he should put that in proper perspective. Indeed, if the rules and conventions that govern central Government operations had been observed as closely and honourably in local government, there would have been no need for the Widdicombe report and the subsequent legislation, but they were not observed.

The hon. Member for Holborn and St. Pancras mentioned publicity by local government on benefit entitlement. The reality is that Widdicombe was needed to correct abuse of the ratepayers by local authorities – predominately Labour – on a monumental scale. Quite apart from extravagance and inefficiencies, many Labour local authorities had also badly misused public money for advertising. Lambeth council spent thousands of pounds of ratepayers’ money on anti-Government propaganda, and Haringey council ran an advertisement out of ratepayers’ money that said that it would campaign for the next Labour Government to repeal all privatisation laws. The next Labour Government, mark you! So it was not even campaigning against Government policy. It was using ratepayers’ money to campaign against Labour policy.

Madam Deputy Speaker Order. I must remind the Chief Secretary and other hon. Members that I have already put down a marker that the debate concerns the Government publicity organisation machine and does not refer to local government.

Mr. Major Of course, Madam Deputy Speaker, and I shall obey that injunction. I am happy to concede to the hon. Member for Holborn and St. Pancras that I obey it reluctantly in essence, because the amount of information, which indicates clearly the way in which Labour local authorities have behaved in recent years, is massive and deeply embarrassing for them. However, in any event, there is plainly no need for statutory control of Government publicity, because Ministers are firmly committed to the conventions, which have been fully published so that the House can always call on Ministers to justify their actions. That discipline cannot be applied to local government, and that is why legislation was necessary to deal with local authority abuses.

The hon. Member for Holborn and St. Pancras made much of the increase in expenditure since 1979. But he is neither making sensible comparisons over time nor dealing with the merits of the expenditure. In cash terms, of course, he is right. Expenditure on behalf of Departments by the COI has moved from £35.4 million in 1978–79 to £151.6 million, including flotations, in 1988–89. There are good reasons for that increase. The elements that must be taken into account include general inflation over the period, the introduction of VAT on press advertising, and an even more substantial rise in the cost of buying time on television and radio and space in newspapers and magazines. For television, for example, which is increasingly important in effectively communicating to the public, that increase is estimated at up to two and a half times the general rate of inflation. In addition, there is included in those figures the new item of flotation advertising in pursuit of privatisations.

The hon. Member for Holborn and St. Pancras and some of his hon. Friends have referred to the water authorities’ current campaign as being “propaganda for privatisation”. That attack is nonsense, and the water authorities have made clear that it is nonsense. We should be clear, too. The water authorities, like other nationalised industries, must make their own commercial judgment about corporate advertising within overall levels of finance set by Government. The present corporate campaign is run by the water authorities, and they pay for it.

The water authorities have made clear that the purpose of their campaign is to improve consumer awareness of the industry and the industry’s image. Of course, it is true that, in planning it, the industry recognises that the circumstances in which it operates will change radically. It knows – subject to Parliament’s approval – that it will be privatised and that its efficiency and standards of service will come under close scrutiny by consumers. Of course, it knows that. But, irrespective of that, it knows that the environmental concerns of the public are growing, and that it will have to meet those concerns. It knows, too, that a great deal of attention has been focused on the water industry in recent months and a great deal of nonsense has been talked about it and the services that it provides – often by the Opposition. It is its judgment that the current campaign will go some way to improving customers’ knowledge of the industry and the Government share that view. The Opposition criticise the corporate campaign on entirely false grounds. The only reason that they do so is that they are opposed to the Government’s policy towards the water industry.

Mr. McCartney Will the right hon. Gentleman give way?

Mr. Major I will not give way to the hon. Gentleman. This is a brief debate and I have given way on a number of occasions. I hope that on this occasion hon. Members will excuse me.

Opposition Members, of course, dislike denationalisation – as I prefer to call privatisation – as a principle. We understand that. They prefer state ownership with rigid control. We understand that, too. That is the nature of their philosophy. That is why they have been critical of the spending on flotation advertising that has accompanied privatisation. I cannot agree with them about that. Flotation advertising campaigns are designed to publicise a forthcoming offer for sale, and convey information about the availability of prospectuses and the application procedures. The Government believe that it is important that the opportunity to gain a direct and personal stake in the future of British industry is given to all investors, large and small alike. It must, therefore, be brought to everyone’s attention and not just to the attention of the large institutions, and those familiar with the markets. Indeed if it were not, the Opposition could rightly criticise us for that. But advertising on flotations is undertaken only after Parliament has approved the policy and in order to carry it out successfully.

It is also eminently justifiable expenditure. All costs incurred by Government in relation to a privatisation, including advertising costs, are netted off against the proceeds that advertising the sale brings in. Nor is the advertising excessive. The overall Government cost of those advertising campaigns has represented only a small percentage of those proceeds – 0.3 per cent. for British Telecom, 0.4 per cent. for British Gas, British Airports Authority and British Petroleum. They help the Government to get a good price for the sale and represent, therefore, a very good bargain for the taxpayer, and a popular one, too. More than 2 million people bought shares in British Telecom and around 5 million in British Gas, and the number of shareholders has tripled, largely due to the privatisation programme.

Of course, some justified publicity takes place in areas of political contention, as the hon. Member for Holborn 198 and St. Pancras said. That is not new or unique to the Government. What is new, and I hope will be unique, is the hon. Gentleman’s argument that, because he does not like the Government’s policies, publicity for them is wrong. Provided the conventions are observed, that is not so. But, if we take his line, we find that the 1974–79 Labour Government, with its Liberal support, must have had some difficulty with the conventions. I wonder on the hon. Gentleman’s argument whether their publicity on counter-inflation or selective price control would have passed a value for money test. I very much doubt it. Would their material on devolution for Scotland and Wales have got very far? I doubt it; that was hardly uncontentious then or now. The hon. Gentleman would have to argue that the European Economic Community referendum was done in order to get that Government out of a party political hole. That is the result of the hon. Gentleman’s logic when applied to his own party when in government. However, I do not take that view. I exonerate the Labour Government of impropriety. The better view is the one that we hold. They took their responsibilities for the conventions on Government publicity expenditure seriously and responsibly, just as we do, and they took advice, just as we do, on propriety. The hon. Gentleman cannot have it both ways.

Mr. Dobson The right hon. Gentleman should concede that, both in the case of the money spent on the European referendum campaign and on the national devolution referendum campaigns in Wales and Scotland, money was provided for both sides to put their cases. In the document published in 1981, the then Government justified the Labour Government’s expenditure on the counter-inflation campaign, because a very big majority of supporters of all the main political parties agreed with the points made in the advertisements. That does not apply to the contentious political advertising of this Government.

Mr. Major I think that the hon. Member for Holborn and St. Pancras has missed the point of what I was saying, which was specifically to exonerate the then Labour Government from impropriety in those advertising campaigns. That is what I expressly said just a few moments ago. What I said was that, if the hon. Gentleman criticises us now, he should have condemned the last Labour Government even more roundly. If he does so, in the spirit of Robespierre-like purity I can tell him that he was wrong about them then just as he is wrong about us now.

The hon. Member for Holborn and St. Pancras set out a number of criticisms. None is justified. All should be rejected. Our systems ensure that spending must come from within departmental budgets, and that it meets strict tests of value for money and cost-effectiveness. All publicity expenditure is also subject to the scrutiny of the House, of the Treasury Select Committee, and of the Comptroller General in the National Audit Office. We welcome that, and, of course, that scrutiny will continue.

In addition, the Government not only support the traditional principles of propriety and strictly observe them, but in recent months they have strengthened their operation and published the guidelines implementing them. The controls are rigorous and the propriety is absolute. The Opposition’s criticisms are baseless, they are shallow, and I invite my hon. Friends to reject them.

Below is the text of Mr Major’s written Parliamentary Answer on Dredged Aggregates on 15th May 1989.

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Mr. Barry Field To ask the Secretary of State for the Environment if he will list the principal areas of dredging for aggregates.

Mr. Major I have been asked to reply. The principal areas licensed by the Crown Estate Office for the purpose of dredging aggregates are as follows:

The Bristol Channel
Off Great Yarmouth
The mouth of the Humber
The mouth of the Thames
Around the Isle of Wight.

The text of Mr Major’s comments during the Relief debate, made on 9th May 1989 in the House of Commons.

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Mr. A. J. Beith (Berwick-upon-Tweed) I beg to move, amendment No. 18, in page 39, line 7 leave out ‘on or after 6th April 1990’.

The Chairman of Ways and Means (Mr. Harold Walker) With this, it will be convenient to discuss the following amendments: No. 19; in page 39, line 9 leave out ‘(whenever issued)’ and insert ‘issued on or after 6th April 1990’. No. 20, in page 39, line 9, at end insert – ‘(aa) the individual making the payment has not entered into any other contract of private medical insurance prior to 6th April 1990.’.

Mr. Beith The amendments address themselves to the issue of tax relief for private health insurance, one of the most widely trailed features of the Bill, which the Government expected to be greeted with widespread enthusiasm. I see no sign of that enthusiasm but I see it adding even more to the depression among many people working in the National Health Service about the Government’s attitude to the entire service. I see it as a further demonstration that the National Health Service is far from being safe in the hands of the Prime Minister.

The amendments are designed to test the purpose of the new tax relief and to discover whether it is intended to open the door to an ever widening opt-out system in which more and more people are encouraged to believe that the only way to get reliable health provision is to buy their way out of the Health Service. In their reply to the amendments, perhaps Ministers will clarify the position.

At a time of such anxiety about the financing of the National Health Service, who but this Government would have chosen to devote at least £40 million immediately this year to tax relief for private health insurance? When the National Health Service is in such crisis, who but this Government would have diverted funds immediately to the private sector?

The crisis in the Health Service is partly but not entirely of the Government’s making. Some of it relates to demographic change; to the increasing number of elderly people with which the Health Service must cope and the widening range of treatments now available for the illnesses and conditions from which those elderly people suffer. That crisis demands greater public funding, as successive reports of House of Commons Select Committees, including the Social Services Select Committee and the Treasury Select Committee, emphasised. Even the Government’s most ardent supporters in the Health Service – it is quite hard nowadays to find Government supporters anywhere in the Health Service – remain as anxious as ever, despite the new funds to which the Chief Secretary to the Treasury will no doubt refer, because those funds have not kept pace with the growing need that the Health Service faces and the higher rate of inflation from which it suffers through the commodities that it has to buy.

Where did the proposal for such substantial expenditure on private health insurance originate? It did not come from within the National Health Service, where it is hard to find anyone who welcomes or is enthusiastic about the idea. Nor did it come from the House of Commons Social Services Select Committee which said in its fifth report: In our judgment, the creation of new tax subsidy on all private health insurance cannot be demonstrated to extend total availability of health care. It would reduce the total public expenditure from which Health Service resources are drawn while at the same time narrowing the tax base still further. That is a clear recognition of the force of the arguments against such a proposal.

The proposal did not come from the National Health Service and it did not come from those Members of Parliament who take the closest and most careful interest in the National Health Service. It did not come from the Treasury Ministers who have to defend these clauses today. All the smoke signals from the Treasury were that Treasury Ministers were strongly opposed to the use of tax relief to encourage private health insurance and would regard it as a departure from their stated policy of broadening the tax base and reducing the rate of tax. The Government’s declared policy on income tax is surely that the base for that should be as wide as possible and that the rate of tax should be as low as possible. Yet in this measure they are specifically narrowing the tax base and departing from their crusade against all tax breaks and tax incentives. It would be interesting to hear today whether they intend to abandon their crusade and return to an era of widespread tax relief and a narrower tax base or whether they have had to swallow one single inconsistent policy because the Prime Minister insisted on it.

The basis of the proposal is the Dulwich factor, the Prime Minister’s view of retirement and old age, which is that the best way to health care is to opt out and therefore that should be subsidised and encouraged.

That leads one to question the purpose of the provisions in the minds of the Treasury Ministers. The amendments test the proposals by arguing that tax relief should not be granted to existing holders of private health insurance. It is necessary that we establish whether the measure is intended to be a growing provision for a widening number of people encouraged to opt out of the National Health Service, or whether it is what Treasury Ministers have recently said it is. I listened with some fascination to the Chief Secretary when he answered questions last Thursday. When he was pressed to give his view of the proposals he replied: In a ring-fence way it will help many elderly people who wish to continue medical insurance cover on retirement but who are unable to do so because they have lost the benefit of the employer scheme. At the moment of retirement their income tends to fall and their premium tends to rise. We are seeking to retain the capacity for these people to sustain and retain the medical insurance they have previously had. That is entirely fair and reasonable, and I support it thoroughly.” – [Official Report, 4 May 1989; Vol. 152, c. 351.] I have heard of proposals being damned with faint praise, but that takes the prize for the faintest praise I have heard in a long time. The Chief Secretary was saying that the Government’s proposal was nothing that the Prime Minister had in mind and that it was not an attempt to encourage large numbers of people to take up private health insurance, but was for those who had already found themselves in employer-based, employer-funded schemes and who, when they retired, had to decide whether to stay in the scheme. Such schemes become expensive, because at retirement age, people have to pay their own premiums and they are in the age bracket at which premiums are higher. For such people alone, the Chief Secretary seemed to imply, the Government were making special provisions. That is not what clause 51 says and it appears to be intended to be much wider. The Chief Secretary’s view seemed to be attempting to find something in the Government’s proposals that he could support with a modicum of enthusiasm. He will have to go much further tonight, unless his promotion chances are to be restricted, because he will have to say that he welcomes the proposal in its entirety and not only that small part he singled out when answering questions.

The proposal goes wider. It is part of the route to a two-tier Health Service, in which the better-off do not depend on the public provision. It will undermine the essential principles of the National Health Service, which one of my predecessors as Member of Parliament for Berwick-upon-Tweed, William Beveridge, laid down and which were implemented by the Labour Government in the years immediately after the war. There was the principle of a universal service, available free to all at the point of delivery and which should not require people to take out private insurance to provide for their essential health needs. There is no reason why people should not make provision for whatever they wish, whether health, leisure or a more comfortable retirement, out of their own taxed income. However, there is no reason why the generality of taxpayers, many of whom are struggling hard to make ends meet, should subsidise those who make the choice to have health provision outside the National Health Service. Those who have been called on to subsidise such provision are often those in the greatest need. That is an argument that Ministers are fond of using themselves against many aspects of public expenditure, but they seem unwilling to use it when it comes to the hard-pressed taxpayers at low levels of income subsidising those who are well-off enough to engage in private health insurance.

The provision will bring into the Health Service a further degree of inequity and it will benefit the richer pensioners because it will apply not only to the standard rate of tax, but to those on higher rates, who can claim relief at a higher level at the expense of the ordinary taxpayer. The cost of the provision is open-ended, but is likely to become expensive. I do not know how the Government made an estimate, but they have estimated that in the first year, the cost will be £40 million. That is the basic cost of giving relief to those already insured, who without any incentive have seen fit to take out private health insurance. They have made a free choice to do so as they are entitled to do. The Government propose to reward those people with a subsidy of £40 million, although the money could better have been used in the Health Service itself.

Amendment No. 18 seeks to take away that element of cost by not providing tax relief for those who are already insured. As the number of pensioners with private medical insurance plans increases, both because of the increasing number of elderly people and because of the increasing proportion of those retiring who have been in company schemes, the cost could escalate considerably, which I presume is the Government’s intention. What incentive will there be for private medical insurance firms to control costs when tax relief will make the premiums cheaper? As relief becomes more expensive and more widely enjoyed, Treasury Ministers know that it will become progressively more difficult to restrict and even more difficult to remove.

The Government’s argument is that the provision will relieve pressure on the National Health Service. That argument is not even supported by those most closely involved in the health insurance industry. The Investors Chronicle analysed the benefits to be obtained from taking advantage of the tax relief and concluded: private medical insurance should not be regarded as a substitute for the NHS, since it does not provide an emergency ambulance service or cover long-term hospital care. The article goes on to say: BUPA, the leading medical insurer with about 60 per cent. of the market, defines treatment as ‘surgical or medical procedures the sole purpose of which is the cure or relief of … illness or injury’. This excludes chronic illnesses such as cancer and on-going treatment such as renal dialysis. Most insurers do not cover alcoholism or psychiatric problems”. The publication then lists a number of other problems not covered by private health insurance.

Private health cover is likely to take up those parts of the National Health Service that can be made profitable rather than those which cannot, by their very nature, be made profitable, such as after-care, community care, preventive medicine and the long-term treatment of conditions such as senile dementia, which is now a great problem for many elderly people. For all those things, most people will continue to depend on the National Health Service and the Health Service will pick up many of the after-care costs associated with treatments covered by private health insurance.

Even though the private sector may succeed in adding to the total of treatment carried out – one can only welcome any additional treatment that it secures – all health experience suggests that it will still give rise to more dependence on the National Health Service. There is no escaping the fact that any diversion of money into the private sector will not help the NHS with its problems but instead will make them infinitely worse. I simply do not understand how Treasury and Health Ministers can blind themselves to that fact – unless it is simply that the Prime Minister has power to override all reasoned argument in her Government.

There are 12 million people over 60, and the number is growing. Of those, 600,000 have so far chosen to invest in private health cover. It is costing £40 million to subsidise that 5 per cent. and it will cost perhaps £200 million to subsidise 25 per cent. of eligible pensioners. That constitutes a large and growing diversion of funds from the NHS, which it is in no position to afford. All over the country, hospitals are crying out for staff – the continuity of resources that will enable them to staff facilities that already exist. As Ministers go round opening glossy new hospitals, they should be aware that such hospitals do not add up to much if they cannot be staffed and cannot provide the services that they are designed to provide. The funds that are to be diverted in this way could have helped to keep existing facilities going and to improve them.

The amendment would remove that first year burden. I have tabled it as someone who is wholly opposed to the principle of a public subsidy going to private health insurers. In seeking the support of the Committee for the amendment, I also seek its support in opposing the principle of money that is desperately needed in the Health Service being channelled into private health insurance, when those who wish to choose that insurance can already do so freely and need no public subsidy to encourage them.

The Chief Secretary to the Treasury (Mr. John Major) The hon. Member for Berwick-upon-Tweed (Mr. Beith) has started what I suspect will be a long march through the Committee stage of the Bill – both in Committee of the whole House and in Standing Committee. Although the hon. Gentleman argued against the principle of tax relief, amendments Nos. 18, 19 and 20 admit that principle and simply seek to limit the deadweight cost at the time of its introduction. If the hon. Gentleman will permit me to say so, I think that there is an inconsistency in his approach.

Amendments Nos. 18 and 19 are essentially paving amendments for amendment No. 20, which deals with the substance of the hon. Gentleman’s concern, although I think that many of his remarks of principle trespass somewhat on the next group of amendments, which I expect to be widely debated. I know that many hon. Members, including the hon. Member for Berwick-upon-Tweed will wish to debate further the principle of tax relief when we reach that group.

The effect of the amendments of the hon. Member for Berwick-upon-Tweed would be to rule out any tax relief for people who are now, or who ever have been, covered by private medical insurance. I understand the hon. Gentleman’s concern about deadweight cost, although on this occasion it is misplaced. I hope to show the hon. Gentleman that the effect of his amendments goes a good deal further than he intended and further, perhaps, on reflection, than he would think is desirable.

I believe it is clear that the central point of the concern of the hon. Member for Berwick-upon-Tweed was the deadweight cost. It is inevitable with relief of this kind that, on its introduction, a significant proportion of the cost of relief will go to those who have already taken out private medical insurance, often at some personal sacrifice. However, it would be neither just, fair nor practical to discriminate against those who are already covered by medical insurance in that way. If we believe that tax relief is merited – I do, although the hon. Gentleman does not – such a discrimination would be entirely unacceptable. Those people thus discriminated against would feel – I think with some justice – that they were being penalised simply because they had had the foresight to make provision for their future needs, and in that they would be right. On reflection, the hon. Gentleman may not wish to do that.

I expect the new relief in later years to go increasingly to people who in retirement would not otherwise have had insurance cover. The deadweight cost, therefore, is not likely to run through in the future. It is those people who are the principal target for the new ring-fenced and limited relief proposed in the clause. By how much and how speedily that benefit will build up will depend on the rate at which the take-up of medical insurance increases over the next few years. That, too, is dependent upon uncertainties. To a large extent, it will depend on the way in which the marked is developed by the medical insurers.

I have already said to the hon. Member for Berwick-upon-Tweed that his amendments go further than he intended. They do so because they have unwelcome side effects, which I hope may encourage the hon. Gentleman to withdraw them at the conclusion of the debate. First, they would act against the main objective of the proposal, which is – I reiterate in essence what I said the other day – to encourage those who have had medical insurance cover during their working lives to continue it in retirement. Many working people enter into medical insurance contracts, usually known as “group schemes”, where their employer negotiates the insurance cover on behalf of his employees as a whole. Premiums are usually significantly less than for cover taken out on an individual basis, and in many cases, as the hon. Gentleman will know, the employer subsidises the cost.

Individuals in such schemes, who bear part or all of the cost of medical insurance during their working lives, were intended to benefit from the relief when they retire, just as much as individuals whose insurance cover is wholly provided by their employer. But the amendments of the hon. Member for Berwick-upon-Tweed would draw a distinction between the two categories. Those who had a contract to make a contribution towards the cost would be debarred from the new relief on retirement, whereas those who had no contract, probably because the whole of the cost was borne by their employer during their working lives, would be eligible for the relief. Whatever other view the hon. Gentleman may have on the general principle, I am sure that he will recognise that that sort of discrimination could not be justified. I do not believe either that that is what the hon. Gentleman intended when he tabled his amendments.

Mr. Beith The Minister is basing his argument on the case that he advanced at Question Time on Thursday, that the relief is intended to provide for those who had already entered either into a contract or some form of health insurance – I appreciate that there may be a technical difference – with their employers prior to retirement, and who then found it difficult to maintain their contracts after they retired. If that is the case, why is the clause so wide? Why is it not confined to such people?

Mr. Major The hon. Member for Berwick-upon-Tweed is misrepresenting what I said. In answering questions the other day, I was referring to the people who had difficulty on retirement and to whose difficulty the clause was especially addressed. In no sense was I seeking to circumscribe the relief solely to those people. Other people may wish to take advantage of the relief and that is a decision for them but it is in respect of those people who face the particular hardship that we feel that the clause will go some way to putting right.

The second drawback of the amendments is that they would discourage people who are thinking of taking out medical insurance cover before next April. That cannot be justified and I suspect that the hon. Gentleman had not intended that effect when he tabled his amendments.

On the hon. Gentleman’s central point, the amendments would have the effect of limiting the deadweight cost of the scheme to a negligible level in 1990–91 as, of course, the hon. Gentleman intended. The great majority of the £40 million cost in 1990–91 will be spent in giving tax relief to those over-60s who have already taken out medical insurance cover. That is the inevitable deadweight cost which, as I conceded a moment ago, is unavoidable with the introduction of a new relief of this sort. However, when considering the deadweight cost, one must bear in mind that it will help many of those people to retain their cover and not to surrender it in the future as some may have found necessary.

It is correct that only a small proportion of the initial £40 million relates to additional take-up as a result of the relief. However, the costing assumes an increase in take-up of about 10 per cent. in the first year from around the 600,000 who are covered at present to around 660,000. The hon. Gentleman’s amendments do not limit the relief to those who do not have insurance cover now, but to those who have never had insurance cover at any stage in their lives. Therefore, the amendments would effectively limit the take-up of tax relief contracts to well below the 60,000 additional take-up that we envisaged. In practice, that would mean that any elderly person who had never had insurance cover would be ineligible for the relief, even on a wholly new contract taken out in retirement. Quite apart from the hon. Gentleman’s objection in principle to tax relief, such discrimination between people taking out new insurance contracts is not logical and could not be justified under any premise.

I hope that for those reasons – and as the issue of principle remains for us to debate later – the hon. Gentleman will realise that the amendments are defective and do not meet the underlying objectives that he had in mind and I hope that he will feel able to withdraw them. However, if he feels unable to withdraw them, I shall advise my hon. Friends to vote against them.

Mr. Beith I am glad that the Treasury’s capacity for detecting hidden snags in proposals has increased since last year when the Chancellor brought forward his mortgage interest relief changes which were postponed until August with such dramatic consequences. I hope that he had the benefit then – but perhaps he did not and that is why he did it – of such detailed advice of the unintended side-effects of such amendments.

The Minister seems unable to see the wood for the trees because throughout our discussion he has seemed unwilling to clarify the essential purpose of this legislation. Amendment No. 18 goes to the heart of that matter and identifies the very group of people on whom the Minister wishes to concentrate relief and would deny them the relief. That gives us an opportunity of finding out what the Minister really thinks about this. The Minister has sought again and again to suggest that the main purpose of the clause is to concentrate relief on a group of people who have already entered into medical insurance but who find it difficult to continue with it when they have retired. He has also suggested that all but 10 per cent. of the cost in the first year will go to such people rather than to people who come new into private health insurance. If that is the object of the exercise, the Government should have put a different clause into the Bill.

Treasury Ministers are hiding behind a slender tree – there are not many trees that the Chancellor could hide behind even if he tried – when they seek to pretend that the whole purpose of the clause is to help a few pensioners who entered employer-based schemes for health insurance before their retirement. Its purpose is to have a large and expanding opt-out from the National Health Service. It is the first step towards a two-tier Health Service.

I accept that there are technical defects in the amendments and I therefore propose to invite my right hon. and hon. Friend to vote against the principle of the clause at a later stage. I therefore beg to ask leave to withdraw the amendment.

[Amendment, by leave, withdrawn.]

Mr. Gordon Brown (Dunfermline, East) I beg to move amendment No. 5, in page 39, line 7, leave out ‘1990’ and insert ‘1993’.

The Chairman With this it will be convenient to take the following amendments: No. 8, in page 39, line 45, leave out from ‘claim’ to `deducted’ in line 46 and insert `set off against its profits liable to tax the amount.’. No. 21, in page 40, line 23, at end add ‘(10) Relief under this section shall be given at the basic rate of income tax only.’.

Mr. Brown The amendments do not seek merely to limit the scope of private health insurance tax reliefs but prevent them from being implemented until after the next general election, the result of which will show clearly what the country wants done about this matter. On the Treasury’s admission, the proposal will cost at least £40 million this year. That money will go, mainly to top rate taxpayers. The Chancellor has already admitted that at least half of it will go to the top 5 per cent. of taxpayers. As the Chief Secretary has just admitted, the majority will go to those who already have private medical insurance, and beyond that, the cash available is open-ended. Under the proposal, the number of pensioners eligible for relief is uncapped. Despite the claim last Thursday in Treasury Question Time that it would be ring-fenced, I shall show that the clause even includes 900,000 people who are not pensioners. The amounts on offer in tax relief are limitless. The proposal is inflationary and liable to push up Health Service costs without controlling them at all.

It will provide an unjustifiable subsidy of incalculable cost and completely unproven value. The proposal does not suggest that the Health Service should buy operations or services from the private sector and the industries within it, but that a minority of people over 60 should have a minority of their operations and treatments subsidised when they are carried out in the private sector. The main effect of the proposal is that a monthly, three-monthly or yearly cheque will go to BUPA, Private Patients Plan and other private health insurance industries. That cheque will be paid straight from the Government to BUPA and the other organisations.

We already know that the private health industry is subsidised by the Government. Employers can set the expenditure on private medical insurance against their tax bills and people with salaries below £8,500 can avoid paying tax on private medical insurance. We know that the Government have set a limit on the amount of new investment that they will put into the Health Service and that there is a limit on the amount of money that they will give to the hospital service this year. They have set a limit on the amount of money to be used for new buildings and equipment. However, there is no limit on the subsidy that is given to the private sector in such an open-ended way. The scheme contains no rate-capping equivalent for BUPA, no cash limit for private medical insurance, and no cash ceiling is imposed by the Chancellor. It is an open-ended subsidy in which commercial medicine receives a signed cheque and effectively writes in the sum.

It is not surprising that the proposal has not been defended by the Chancellor in any meaningful way. It was not even mentioned by him in his Budget Statement, even though it has appeared in the Finance Bill. On Second Reading of the Finance Bill, the Chief Secretary said that the proposal had achieved “a false importance.” At no point has the Treasury given the scheme anything other than lukewarm endorsement.

The reason for this is clear. It is a proposal which comes not from the Chancellor, Chief Secretary or Treasury, but from the Prime Minister. The proposal offends every Treasury principle. It is open-ended and uncapped, and it starts with a huge deadweight of people who already buy private medical insurance and who, therefore, will receive subsidies. It offends the Chancellor’s own proposals for the simplification of the tax system.

Mr. Tim Smith (Beaconsfield) The hon. Gentleman said that there was no cash limit on this tax relief. Can he name one tax relief that is cash-limited?

Mr. Brown The question that we are debating this evening is whether we should give open-ended subsidies. I think that the hon. Gentleman is genuinely worried about the scheme. He has already said: What worries me is the deadweight cost of relief for all those elderly people who already buy private medicine without incentives. It is a subsidy to the private sector paid for by all taxpayers. If we don’t stop here then it may spread to other fields such as independent schools. If the hon. Gentleman wants to pursue his objections to this open-ended subsidy and to prevent it from escalating into other areas, he would do well to support us in the Lobby this evening. I hope that other Conservative Members who have already expressed severe doubts about the advisability of the scheme will join him in opposing it this evening.

I said that this offended Treasury principles. The Chancellor said in his 1988 Budget speech that the objective behind his tax reforms was to sweep away tax breaks. Yet, this is the introduction of a new tax break – as we had last year – which is even more unjustifiable than some of the tax breaks he is trying to sweep away. It is hardly supported by the Department of Health, either. It was barely mentioned in the Health Service review. It is not mentioned seriously in the working papers, or covered in the £1 million advertising campaign that the Health Secretary launched. The new Tory campaign guide, published only a few days ago, contains 15 pages on the National Health Service and only one sentence on this private medical insurance proposal. It is the proposal that dares not speak its name.

Perhaps the best idea of the Health Secretary’s views on this matter was given when he became Secretary of State for Health in July and the proposal was first floated. I quote from an interview that he gave and which was mentioned in The Independent on 27 July 1988. Speaking on private medical insurance, he said: You don’t need it. We have a National Health Service. It is not surprising that the hon. Member for Beaconsfield (Mr. Smith) is not the only Conservative Back Bencher who is unhappy about the proposal. I have noted from the debates on this matter that the hon. Member for Horsham (Sir P. Hordern) has opposed the proposal and that the hon. Member for Corby (Mr. Powell) is very unhappy about it. I believe that more Conservative Members, some of whom will have absented themselves today, are unhappy about it.

In the Finance Bill debate that we held only a week or two ago, apart from the hon. Member for Dover (Mr. Shaw), whose excuse is that he has had no research assistance to help him for some time, the only person who spoke in support of the private medical insurance proposal was the hon. Member for Gillingham (Mr. Couchman). He declared an interest in the form of his connection with a company called Denplan which led him to believe not only that the proposal should go ahead but that it should include insurance for dental treatment and operations. So the one Conservative Member who has spoken up strongly in the debate on this matter has had to declare an interest in it.

This proposal was not in the manifestos of 1979, 1983 or 1987. It was never mentioned to the public as a possibility before it was thrust upon us as a result of the Health Service review, and the reason why is clear; it has neither the support of the Health Department nor a great deal of support in the Treasury. In the battle between the Chancellor and the Prime Minister over the garden wall at No. 10, the shriller voice was the more successful. The Chancellor’s opposition on behalf of established Treasury principles was shouted down.

Of course, there was a promise of consultation on the Health Service reforms. In January, when the Secretary of State for Health announced the reforms he said: We will be consulting … we shall, of course, listen particularly to the views of the public and the patients.” – [Official Report, 31 January 1989; Vol. 146, c. 173–174.] But there has been no consultation on this proposal, as the Chief Secretary well knows. There has been a review that was not independent or impartial and which never included a doctor, a nurse, or even a patient. It was staffed mainly by people who use the National Health Service only when the private sector fails them. Within a few weeks of the promise of consultation, this clause is being imposed without consultation, without full information, and even without – as yet – the publication of the regulations which allow us to judge how far the proposal will go.

The only consultations held in the past few weeks have been with the private health industry. So keen are the Government to push the proposal ahead that the one group with which they have been prepared to consult has been the private health insurance industry.

Never before has such a significant change been made in the principles underlying the National Health Service with so little consultation. Faced with a choice between listening to patients and doctors in the National Health Service and listening to their friends in business, the Government listen to their friends in the City and in business, first time and every time.

So keen are the Government to push this proposal through that they have made it a subsidy which is paid directly, through the cost being reduced, to the person with private medical insurance.

I have examined the housing benefit forms that have been devised by the Government since the reform of social security. When pensioners want housing benefit, they must first obtain a form, fill it in, carefully read the detailed questions and supply the necessary information about their income, the income of people staying in the house and the details of savings and capital. They must be open about every bit of cash in their possession. All of that must be done to obtain a minimal amount of housing benefit.

On the other hand, to get this private medical insurance tax relief, people need only wait for the private medical insurance industry to give it to them. The Treasury has made it that easy for people to obtain it. But the means-testing that is done for housing benefit, poll tax rebate and everything else is such that for pensioners it is a huge hurdle to overcome.

Whatever the Government claim, this subsidy – and it is a subsidy – will go to a minority of pensioners for a minority of treatment and operations. The best way to relieve pressure on the NHS – the test which the Government say they are imposing – is not to give money to private health services but to give it directly to the NHS.

Mr. James Couchman (Gillingham) The hon. Gentleman referred pejoratively to my Second Reading speech. He may not be aware that my main point was that the benefit coming from this tax relief will directly benefit health care. Whatever money is given by way of tax relief will represent an addition to the resources that go to health care in Britain.

Mr. Brown The hon. Gentleman has missed the point. Three Members of the Cabinet are over 60. They will enjoy a subsidy on their private medical insurance policies. They will get that relief without even having to claim it. The only claim they will need to make will be in respect of the top rate tax relief, but they will get the basic rate relief automatically.

I have in my constituency a number of people on NHS waiting lists waiting, for example, for cataract and hip joint operations. The Government have made a choice between giving additional money to the NHS, to people who need it, and giving the money to people with private medical insurance policies, people who do not need it.

Mr. Couchman Is the hon. Gentleman aware that those on NHS waiting lists will benefit as a result of people taking their ills to the private sector?

Mr. Brown If what the Government propose goes ahead, those in the queue will be subsidising the queue-jumpers. If the Government want to use £40 million or more of resources to the best effect to help people on waiting lists, the most cost-effective way of doing that would be not to give it to BUPA and other similar bodies, but to give it to the NHS.

Mr. Couchman Will the hon. Gentleman concede that £40 million of tax relief, even at the top rate of tax, would result in £100 million worth of additional resources going to health care?

Mr. Brown I do not accept that. I assume that the same point will be made by the Chief Secretary. That £40 million will not go to pay for operations and hospital treatments. The hon. Member for Gillingham knows that because he has been advocating Denplan as an insurance scheme. The money will go to pay for the administration and marketing of BUPA and other schemes, and not necessarily towards improving the quality of health care.

Mr. Win Griffiths (Bridgend) Does my hon. Friend agree that Mr. David Lock, the managing director of Private Patients Plan, gave the game away when he asked the Government: Please do not ignore the incentives which would encourage patients to. provide for themselves and their families and reduce government expenditure on the NHS”?

Mr. Brown I am grateful to my hon. Friend for making that point. Not only have many people in the private health industry given the game away, but almost every organisation associated with the NHS – the Royal College of Nursing and others – has come out against the plan.

Only a few days ago the Chief Secretary, in support of the Budget, quoted comments from Help the Aged, saying that it gave an unqualified welcome to the proposals in the Budget. But I have to tell him that only today it has said that the proposals being put forward for private medical insurance tax relief are a complete irrelevance. The same has been said by Age Concern and many other organisations.

The Chief Secretary may also like to know that the Centre for Policy Studies, the Right-wing organization that the Prime Minister helped to set up some years ago, has not come out in support of the plan. It has advocated that the plan should not be proceeded with. It said: It would be wrong to give it tax relief … The US system of private health insurance came close to collapse because nobody has responsibility for managing health costs. This mistake should not be repeated here. It goes on to give three additional reasons why it believes that private medical insurance tax relief should not be operated.

Mr. Eindhoven, an American research scientist, has been given a great deal of credit for developing the proposals for the internal market on which the Health Minister and the Prime Minister have based their plans. Only a few days ago, in an interview to the British Medical Journal he was asked: Were there no specific points” – in the Health Service review – that made you think ‘my goodness? Mr. Eindhoven said: The only thing like that was the proposal of tax relief for private health insurance. My reaction to that is watch out. This has been a disaster for us in the States. He was asked why, and he said: Because it costs the federal budget a great deal of money – about $40 billion a year – and works to encourage the choice of a more costly rather than a less costly health scheme. Others have made exactly that sort of comment on the proposal. There is no support from the Health Service, there is no support on the basis of established Treasury principles, and there is little support even from some people in the private medical insurance industry.

There are good reasons why the country should be opposed to the scheme.

Mr. Tony Marlow (Northampton, North) The hon. Gentleman has a reputation for being an ex-student leader, so obviously at some stage in his life he was educated. Therefore, why cannot the hon. Gentleman understand that if the Government provide an incentive for health insurance more people will take it out, enabling more people to obtain their health care elsewhere, and freeing resources in the NHS for his constituents and my constituents and adding to the increasing resources that the Government have already put in to the Health Service?

Mr. Brown The hon. Gentleman fails to understand the drift of the argument. The Opposition argue that if the Government have £40 million – this also happens to be the argument of any serious person who has looked at the issue – the best and most economical way to use those resources to provide health care is not through a subsidy to the private medical insurance industry or people who take out private medical insurance, but to use them in the NHS. The hon. Gentleman has been unable by his question to persuade us that he has any case for the point of view that he has put forward.

The problem is that we are not just talking about £40 million going in tax relief to private medical insurance; This is £40 million as a start that is going to a small number of people who are already rich enough to afford that private medical insurance in the first place.

Doubtless one or two people in the lower income group will benefit from the scheme, but we know that half the cost of the first year of relief will go to the top 5 per cent. of pensioners – people who are already rich enough to afford private medical insurance and who already have massive tax relief from the Government in many other areas.

Even those people, who have benefited so much, would say that if the Government had wished to give to pensioners the first priority should have been to do something about housing benefit cuts, eyesight and dental check-up charges, and low poll tax and rate rebates – all things that they know have done damage not just to individual pensioners but to the integrity of our community life in this country.

The Chief Secretary tells us that the aim of this scheme is to help a number of elderly people who have had their private medical insurance through their companies all their working life and will be unable to afford to continue it after the age of 60. Somehow, he tells us, a priority for public spending resources in this country should be that a small group of people who have had private medical insurance as a perk from the company during their working life should now receive from the taxpayer additional resources to pay for their health care.

I have had dozens of constituents come to see me about the freezing of transitional protection. I have had scores of constituents complaining about the implementation of charges for eyesight tests and dental check-ups and rising prescription charges. I have had hundreds of constituents worried about cuts in housing benefit. I have not received one constituent inquiry from someone worried about this tax relief for pensioners. Those people who argue the case for private medical insurance tax relief must bear in mind that the people most in need of resources from the Government are not those rich enough to afford private medical insurance but those whom the Government have made poor as a result of housing benefit and other cuts.

Our objections to this tax relief go beyond that. It is not just that only a few at the top are liable to benefit; it is that this subsidy is open-ended. The Chief Secretary has not yet told the House, and it has not been in the public arena to the extent that it should have, that this tax relief proposal is not just open to people over 60. There are 900,000 people under 60 who will be entitled to receive the benefit of this tax relief because they are married to people over 60 and their policies will be covered by the tax relief as well. That is another reason why this scheme is not ring-fenced, as the Chief Secretary says; it is open to another group of people, as high a figure as nearly 1 million of them, throughout the country.

Mr. Beith There is an even larger potential group of people who can also benefit from high-rate tax relief. Any relative who cares to pay the premiums for a pensioner to whom he is related can get the highest rate of tax relief in that way.

Mr. Brown I am grateful to the hon. Gentleman for pointing that out in his second intervention this afternoon. BUPA itself has said that this scheme will be used by what it calls yuppies – people with high salaries who buy private medical insurance as a present for their elderly parents. I have to ask the Chief Secretary whether he thinks it is a proper use of public sector resources to subsidise gifts of this sort.

As to the question whether the subsidy is open-ended, I was interested in what the Financial Secretary said when he dealt with this matter. He said that he could not tell us what the costs of this scheme would be – rather like the Chief Secretary this afternoon. So we have the Treasury entering into a scheme without knowing what the cost will be. Then he said that the costs depended on meeting the new marketing challenge. The question was how much BUPA and other private sector organisations would meet the marketing challenge. So the resources devoted to this scheme are not to be decided on the basis of the needs of pensioners or the needs for health care throughout the country; they are to be decided by the extent to which BUPA meets the new marketing challenge. It is the advertising budgets of Saatchi and Saatchi that will decide the take-up of the scheme rather than the real needs of pensioners throughout the country.

I will tell the Chief Secretary and the Financial Secretary how these resources could be better used. The £40 million, if it is really £40 million, that is being devoted this year to private medical insurance would pay for 3,000 nurses, 1,000 consultants, 20,000 ventilators, 1,300 ambulances or nearly 20,000 hip-joint replacement operations. But the money will not go to guarantee any operations or treatments; it will merely go to provide tax relief on insurance money that is paid out to companies such as BUPA.

What will BUPA and similar organisations be able to do for pensioners with the money that is given in the form of subsidies to those who subscribe to private medical care? People who have had illnesses or even symptoms in the past cannot, when they are aged over 60, obtain private medical insurance in many cases. Policies will not anyway cover the mentally ill or those requiring psychiatric care, the physically or mentally handicapped, or those suffering from long-term conditions such as cancer. So that money will be used to subsidise a minority of people undergoing a minority of treatments, and almost certainly a minority of the operations that they really need. Is that the best use of £40 million or more of public sector resources?

Much of that money will be spent on administration. We know that about 6 per cent. of National Health Service costs and 5 per cent. of hospital costs are accounted for by administration. However, we know also that 10 per cent. of BUPA’s costs are accounted for by administration, and that the figure is 12 per cent. in the case of Private Patients Plan. That is hardly cause for arguing that money is better spent in the inefficient private sector. The private sector under BUPA is the most inefficient of all.

The cost of a hernia operation in the private sector is more than twice the National Health Service figure, as is that of a hip joint replacement. Operations as simple as cataract removal also cost twice as much in the private sector. The Government support the private sector not because it is efficient but simply because it is the private sector. They oppose extra funds for the public sector not because it is inefficient but simply because it is the public sector. The Government prefer to subsidise an inefficient private sector rather than support an efficient public sector.

The Prime Minister herself, even though she supports the private sector, acknowledges that the coverage it can give is inadequate in respect of major operations. She commented: The day may come when we” – she uses the term “we” again – have to have a very complicated operation. I hope not. I hope it will never come. But if it does, then I am afraid that one could not possibly perhaps bear that on private insurance. Those are the words of the Prime Minister, who is the greatest supporter of private medical insurance and the author of the subsidy – but she recognises that no matter how large the resources she gives to private medicine to try to make it function more efficiently and encourage more people to subscribe to it, at the end of the day the private sector is unable to do the job if a major operation is required.

The National Association of Health Authorities today published a new survey of Health Service finances, which reveals very clearly the remaining backlog. The survey claims that since 1980 the Government have underfunded the National Health Service by £3 billion. Last year underfunding was of the order of £400 million, as it was the year before that. Despite all the claims made by the Chief Secretary and other Ministers as to the huge resources that they made available to the Health Service this year, the hospital and community health services remain underfunded by £490 million.

On the same day as that survey is published, the House is asked to divert to the private sector money that should go to the Health Service. All health arguments and all traditional Treasury arguments have been set aside. The only question asked by the Prime Minister was what could be done for the private sector, and how could the rich be helped to help themselves.

We now know what the Chancellor meant when he gave that unintended interview to the correspondents on that Friday last year which caused so much embarrassment. He said then that he wanted to target benefits to pensioners, that only a tiny minority of pensioners concerned him; what he did not say was that the tiny minority were not the poorest in the land but the richest and that the targeting was to be on the richest, not the poorest.

This proposal has been rejected by almost everyone who has looked at it. It commands very little support, even on the Minister’s Back Benches. It is objected to by all health organisations which have looked at it. It is even rejected by many of the Right-wing think-tanks which the Minister knows are the authors of many of the worst proposals for the National Health Service. Yet Ministers and the Government have made a choice between giving Health Service resources to those who need them and to those who do not. They have chosen to give these resources to those who do not need them. That is why we will oppose the proposal this evening.

Mr. Major In moving his amendment, the hon. Member for Dunfermline, East (Mr. Gordon Brown) was typically forceful, and it might be appropriate at the beginning of what I suspect will be a lengthy and interesting debate to set out the background and concerns to the proposal to introduce tax relief and the secure justification we believe exists for it.

As I listened to what the hon. Gentleman said, I found it hard to appreciate that we are discussing tax relief for a limited number of elderly people rather than, as his dramatic delivery would have led us to believe, the ritual slaughter of the first born. It is curious that on all other occasions when assistance for the elderly has been suggested – and a lot of assistance for the elderly has been introduced under this Government – the Opposition tend to support it but on this occasion, for rather curious reasons, which I will come to later – [Interruption]. Not the rich elderly, as hon. Members will find out in a moment. I fear the hon. Gentleman has the measure rather out of perspective, though the manner in which he presented his case will enable elderly people who enjoy tax relief and who may enjoy tax relief to put the Opposition very clearly in perspective.

In the course of his remarks the hon. Gentleman made a number of errors of substance, to which I shall return. There were a number of minor errors, which I simply correct in a spirit of accuracy. [Interruption]. The hon. Gentleman finds accuracy funny, as we have noticed before. My right hon. Friend the Chancellor mentioned tax relief for health insurance in his Budget. The cost of £40 million which the hon. Gentleman referred to arises, of course, next year, not this year. I assume that was a just a slip of the tongue.

The position about the open-ended cheque is not at all correct. Treatments which may be covered will be specified in regulations and there is a natural limit to those. Those regulations will be available to the House at a later stage.

Mr. Gordon Brown Will the right hon. Gentleman give way?

Mr. Major In a moment. If the hon. Gentleman intervenes every time I point out his inaccuracies, we will still be here in the middle of August.

The hon. Gentleman is, of course, wrong about getting relief without claiming it because the application form for insurance cover will also contain the claim for tax relief. Whether the claim is made is optional. Claimants will have to certify in the normal way as to their eligibility for tax relief, just as with mortgage interest tax relief, which to the best of my knowledge the Opposition have not yet declared it to be their intention to abolish.

The hon. Gentleman made some other errors, to which I will return when we deal with the more substantive parts of this amendment.

Mr. Gordon Brown Will the Chief Secretary confirm whether there is a ceiling on this tax relief or not?

Mr. Major There has never been in any tax relief of any sort the possibility of setting a cash limit. If the hon. Gentleman does not understand that, he ought not to be the Shadow Chief Secretary, for he understands very little. As it happens, Shadow Chief Secretary is likely to be the limit of where he gets – [Interruption]. I am perfectly prepared to exchange badinage with the Opposition if they wish, but they may care to listen to the substance of the debate.

Amendment No. 5 would delay the introduction of tax relief on private health care provision until 1993. As the hon. Gentleman made clear, its intention is wholly different; but the effect is simply one of delay, which implies – inaccurately – that the Opposition accept the principle of tax relief and merely wish to defer it. The Opposition, however, are wholly opposed to tax relief, as any casual listener to the hon. Gentleman’s tirade will have understood. The hon. Gentleman hopes that a delay beyond the end of the current Parliament will enable a new Labour Government quietly to strangle the extra help for the many elderly people who will welcome it. It will not, of course, because there will be no new Labour Government after the next general election. One of the reasons for that is Labour Members’ basic and instinctive hostility to self-provision, self-dependence and individual choice, which they are showing yet again today. They hate those things; unless provision is made by the state, in their eyes it is not good.

Mr. Gordon Brown Will the Chief Secretary simply confirm that of that £40 million he expects at least £20 million to go to the richest people – the top 5 per cent.?

Mr. Major Let me tell the hon. Gentleman in precise terms that the Inland Revenue’s best estimate is that, in the first year of the tax relief, well over 80 per cent. of those aged over 60 and covered by medical insurance will be either basic-rate taxpayers or not liable to tax at all. I hope that the hon. Gentleman will remember that when next he makes his inaccurate speeches.

Mr. Gordon Brown Will the Chief Secretary now answer my question? Is it or is it not the case that half the £40 million that he expects to be set aside will go to top-rate taxpayers?

Mr. Major I do not expect that to be the case. My answer to the hon. Gentleman’s question showed clearly the extent to which he either does not understand what is going on or deliberately chooses to misrepresent it. I have opted for the charitable explanation, although others, of course, may not.

Mr. Win Griffiths Is the Chief Secretary aware that NHS provision is paid for by taxpayers and payers of national insurance? The clause merely gives extra help to a very small number of people, when those resources could be better used in the NHS.

Mr. Major I understand the hon. Gentleman’s point entirely, but we live in a society where there is a private medical sector as well as a National Health Service, whether he likes it or not. I suspect that that point is not alien to him. The private medical sector provides a good deal of care for people who would otherwise need to be treated within the NHS, which would add to the difficulties and delays that sometimes occur within it. [Interruption]. If hon. Members will permit me to get past the few first seconds of my speech, I shall explain the point directly, as it is the substance of the amendment.

Mr. Gordon Brown Is the Chief Secretary willing to correct his statement of a few minutes ago? Is he prepared to accept the accuracy of the answer given to me by his right hon. Friend the Financial Secretary on 22 March, stating that about half the relief is expected to be received by higher-rate taxpayers?

Mr. Major As far as I am aware, what I said a moment ago is correct: 80 per cent. of the beneficiaries will be basic-rate taxpayers. Although it is not possible to be certain about how that 80 per cent. breaks down within the total tax relief, it is clear that over a period the majority will go to basic-rate taxpayers – or indeed, as I shall explain shortly, in reduced payments for those who are not taxpayers at all. They will find, as we operate a MIRAS-type system, that the cost of their medical insurance cover is reduced by the rebatable element – 25 per cent. at present – when they make their first payments under the new system. That will in our judgment grow over the years.

Mr. Gordon Brown Will the Chief Secretary tell us whether the Financial Secretary was right or wrong? I asked on 22 March: what is his estimate of the proportion of the £40 million set aside for tax relief for private medical insurance that will go to top-rate taxpayers. He replied: Around one half of the cost of relief is expected to be received by higher rate taxpayers.” – [Official Report. 22 March 1989; Vol. 149, c. 588.] Is the Chief Secretary disowning the Financial Secretary?

Mr. Major The hon. Gentleman is overlooking two factors. [Interruption]. I am just about to explain to the hon. Gentleman since he does not understand. That includes, first, the basic rate of tax relief. So only a proportion of that half to which he refers is higher rate tax relief, for they would be entitled to the basic relief in any event. [Interruption]. It is no good hon. Gentlemen giggling and shouting. That happens to be fact. Secondly, since 80 per cent. of the beneficiaries will be basic rate taxpayers or not taxpayers at all – I shall reiterate the point so that the hon. Member for Dunfermline, East does not get it wrong again – over a period of time the majority of the tax relief will go, not to the rich, whom the Opposition claim are receiving such disproportionate amounts, but to people who are basic-rate taxpayers or not taxpayers at all. I hope the hon. Gentleman now understands the point. [Interruption]. If the hon. Member for Holborn and St. Pancras (Mr. Dobson) wishes to intervene instead of cackling in such an absurd fashion from a seated position, I shall give way to him. He is the best advertisement I have yet seen for having television in the House. Then people might see how he behaves.

Mr. Frank Dobson (Holborn and St. Pancras) Will the Chief Secretary confirm that of those people who have private health insurance, no fewer than 50 per cent. go into a National Health Service hospital when they are sick and in need of in-patient hospital treatment, thus saving the National Health Service not a penny?

Mr. Major As the hon. Gentleman’s hon. Friend pointed out a moment ago, those who have private medical health insurance will also have paid their tax and national insurance contributions, so they have the same entitlement as the hon. Gentleman, if they choose to exercise it, to use the National Health Service. If they choose to pay separately and not use the provision, that is a matter for them which ought not to concern the hon. Gentleman.

Mr. Denzil Davies (Llanelli) As I understood it, the Chief Secretary said that some elderly people who do not pay tax will get a benefit. Will he please explain that? I presume that most people on state pensions who do not have any other income do not pay tax. I take it that the personal allowance still covers the whole pension. Is he saying that that pensioner can deduct a sum equivalent to tax at the standard rate when making the payment of the premium, and can retain that money and not have it reclaimed by the Inland Revenue?

Mr. Major That is entirely correct. Since a system like MIRAS will operate, someone who is not a taxpayer would have the equivalent of the basic rate refund deducted from the premium, so that person would have a lower premium than otherwise.

Mr. Denzil Davies Could the insurance company reclaim the sum in full from the Inland Revenue?

Mr. Major Yes, in precisely the same way as the mortgage interest relief system operates, as the right hon. Gentleman, as a former Treasury Minister, will know.

Mr. Beith Will the Chief Secretary make it clear that the non-taxpaying pensioner will not have to sign a form when making the initial claim to say that he or she is liable to tax?

Mr. Major I will have to check that, but I suspect that people will have to indicate that they are eligible – no, I think the answer is that they will not because the 25 per cent. would be deductible automatically in any event. If I am inaccurate about that, I shall write to the hon. Gentleman later.

One of the curiosities about the position of the Opposition, although they may not care to admit it, is that they are resolutely opposed to helping the elderly help themselves, or to helping families help the elderly, despite the general position that they take that they care and want to assist the elderly in whatever way is possible. The 5.5 million people currently covered by private medical insurance will surely notice that.

I wish to turn in a moment directly to the concerns that the hon. Gentleman raised, but I should like to say something first about private health care provision and public health provision. Although the Opposition choose not to mention it, public provision for the National Health Service has grown dramatically in recent years to deal with a variety of changes in circumstances, such as improving medical treatments, greater public expectations and demographic changes. By any realistic yardstick, the National Health Service is better funded than ever before. I, for one, have no doubt that that trend will continue, for we are determined to produce and improve public health care. The whole thrust of the health reforms has that in mind.

Where we part company with the Opposition is that we believe that support for public provision should not mean opposition to private provision, although for many – I suspect not all – Opposition Members, private provision adds to the total resources for health care and should generally be welcomed. As to provision for health care, even the Labour party yesterday committed itself to the belief that firm public expenditure control was desirable and necessary. Whether the Labour party will ever pay more than lip service to that belief, or have the chance to, is a separate matter.

I must make it clear to the hon. Member for Berwick-upon-Tweed (Mr. Beith), who raised the point earlier, that I welcome the expansion of private health care provision. I welcome it unreservedly, as one who has invariably used the National Health Service.

There is a variety of reasons for my welcome for private health care provision. First, it relieves pressure on the National Health Service. Secondly, it increases the scope for co-operation between the National Health Service and the independent sector. Thirdly, it increases individual choice, and I find that attractive. It also means, of course, a wider range of options for National Health Service management as well as individual patients.

There is already a growing partnership between the National Health Service and the independent sector. Through the reforms that we have in mind we want to open up further opportunities for the public and the private sectors to work together, providing services for each other, engaging in joint ventures, and sharing the use and spreading the cost of expensive hospital facilities. Anyone needing treatment, including those of us who continue to depend wholly on the National Health Service, can only benefit from closer co-operation, for private provision will supplement and not replace public provision in the National Health Service.

The new relief that we are debating is limited. It is not a general relief for private medical care or even for medical insurance. It is limited in scope and ring-fenced to those over 60, or, as the hon. Member for Dunfermline, East accurately pointed out, the wives of those who are over 60, who also receive age allowance on exactly the same principle – unless the hon. Gentleman proposes to withdraw the age allowance in those circumstances. If he wishes to do that, I will let him admit it now; I assume that he does not. I am pleased that he is consistent and agrees with the principle.

I must make it clear to him that we have no plans to extend the relief further down the age scale. Direct payments for private health care and most medical insurance premiums for those aged under 60 will not in future attract tax relief. [Interruption]. Many things come forward in the debate, but I think that a reference to the dock labour scheme may stretch the Chairman’s patience.

The central justification for the new relief is entirely clear. It is one that I have set out before. As people reach 60, the cost of their private medical insurance rises. If they retire, their income generally tends to fall. Of course, usually they lose employers’ contributions to any private medical insurance scheme to which they may have belonged. Many elderly people think that it is grossly unfair, and for the benefit of the hon. Member for Berwick-upon-Tweed I must make it clear that I agree with them without qualification. Clause 51 addresses that difficulty. The effect of the clause that the amendment seeks to wreck is that the new tax relief will be available from April 1990 where an individual aged 60 or over is covered by eligible medical insurance. It will be due where the premium is paid by the elderly themselves or where another individual pays the premium on their behalf. In most cases, that individual is likely to be a son or daughter or other close relative; but it could equally be a family friend.

Mr. Win Griffiths The Minister is enunciating what I take to be a principle which he wishes the Government to spread throughout tax relief between the employed person and the retired person. He seems to be saying that it is one way of helping people belonging to company-financed health plans to continue with those plans after retirement. Does he therefore agree that that principle could apply to any other perk that a company provides, such as a company car – so that people could receive some help with having a car after they retire – or any scheme of luncheon vouchers, as retired people might need help with their meals after they retire. Is the Minister seriously trying to tell us that there is a need to provide help with perks that were received during employment when people retire?

Mr. Major Unlike the hon. Gentleman, we know the difference between health relief and luncheon vouchers. That is why we have ring-fenced that relief specifically to people seeking some form of health or medical insurance. Unlike the hon. Gentleman, we think that that is particularly important and brings comfort to many elderly people who are keen to continue with the insurance, the protection and the cover that they enjoyed until the age of 60. It is ring-fenced to that.

Mr. Win Griffiths That is nice to know.

Mr. Major The hon. Gentleman now need be in no doubt about it.

Basic rate relief will be given at source – like MIRAS to which the right hon. Member for Llanelli (Mr. Davies) referred a moment ago – so that only a net premium will need to be paid to the insurer. That means, even where a subscriber is not liable for tax, tax relief will still be given and only a net sum will be payable.

The hon. Member for Dunfermline, East repeatedly referred to the fact that tax relief benefits only the rich, and I outlined the extent to which basic rate taxpayers will benefit. His belief that only the rich benefit is wholly wrong, as it is in the case of tax relief on mortgage interest. The measure brings private health care within the reach even of non-taxpayers for the reasons we have discussed in the past few minutes.

Dr. Lewis Moonie (Kirkcaldy) Can the Minister estimate the number of people on the basic old age pension who will take out private health insurance after this generous scheme comes in?

Mr. Major We shall have to wait and see. But I can tell the hon. Gentleman that any pensioners who do that will find that the tax relief reduces their premium by the standard basic rate of taxation – currently 25 per cent. – in precisely the same fashion that I have set out. Therefore, the hon. Gentleman may be surprised at the number of elderly people who will take advantage of the measure. The cost of a budget policy for someone between 60 and 69 would be £240 a year. That is a budget scheme and would vary with individual insurance companies. That £240 is before the deduction of the sum covered by the tax relief.

Mr. Dobson Will the Minister give way?

Mr. Major I am not keen to give way to the hon. Gentleman who has been chuntering like a clown throughout most of our proceedings.

Mr. Dobson Only from a sedentary position.

Mr. Major The hon. Gentleman is sometimes more funny than he is wise.

It is completely inaccurate and outdated to suppose that only high earners have private medical insurance, in precisely the same fashion that home ownership, largely thanks to Conservative policies, has long ceased to be the privilege of the few. About 5.5 million people – one in 10 of the population – are now covered by medical insurance, many of them through company schemes. Even trade unions are arranging group cover for their members, for, unlike the Opposition, they believe in the principle and practice of private medical health care and I have no doubt that their members, once retired, may wish to take out their own policies and benefit from the tax relief that is offered to them.

There is a further point. The type of insurance cover most generally marketed to older people, and which they are most likely to find attractive, is so-called “budget” cover. The very much lower premiums reflect retired people’s priorities. For example, someone who has retired will be willing to have his non-acute operation at an off-peak time for the hospital at a lower cost. Tax relief will bring just that type of low-cost cover within reach of even more people than the 600,000 people over 60 already covered.

Mr. Dobson Is it not true that a number of the so-called budget schemes make themselves cheap by giving pensioners a certain amount of money provided that they can find treatment at a National Health Service hospital within six weeks? How will that save money for the National Health Service?

Mr. Major The hon. Gentleman overlooks the fact that cash schemes are not generally covered by the tax relief, but if there are any exceptions we shall look into them.

I recognise that some hon. Members may be opposed to any tax relief, not on the grounds advanced by the Opposition, but on general fiscal policy grounds, because it contradicts strict tax neutrality principles. It does. I agree with that and there is no point in not recognising it and acknowledging it, and I do so. But we have never pretended that it is our policy to remove all tax relief regardless of merits. Each is considered individually. My right hon. Friend the Chancellor made clear in 1984, when he introduced his first tax reform Budget, that he had no intention of removing all tax reliefs in the tax system. That is not our aim.

It is true that the general presumption is in favour of fiscal neutrality, but in practice there will always be room for some carefully-considered and limited tax incentives to meet particular needs. That is why we have introduced a number of reliefs, such as those for profit-related pay and personal equity plans, which are specifically designed to make the economy more flexible. The new relief that we are introducing for health insurance is fully justified on merit, as it is well directed at a particular problem, will increase take up and have wider benefits.

I referred earlier to the limited nature of the relief. I should make it clear that there are two restrictions on the relief apart from that imposed by the age of the insured person. First, the relief will be due only to people who are resident for tax purposes in the United Kingdom.

It is axiomatic that a tax relief should not be given to people who put themselves outside the scope of normal United Kingdom taxation. Furthermore, by and large, people who are not resident in the United Kingdom do not use the National Health Service on a regular basis; thus, encouraging them to take out medical insurance would do little to relieve pressure on the NHS. They will not therefore qualify for relief.

Secondly, the clause provides for relief to be withdrawn in certain circumstances. That is where, for example, tax relief has been given when it was not properly due, or when it was given in respect of a contract that has ceased to be eligible for relief, perhaps because its terms have varied. In those circumstances, it is right that no further relief should be given and that any excessive relief should be paid back as speedily as possible.

I hope that hon. Members will now understand what caused us to bring this measure before the House and I hope too that they will appreciate that for many elderly people this new tax relief will be widely welcomed for a considerable period.

I understand the concerns of hon. Members about this relief, but I must say bluntly that I do not share them. This modest measure will give the double benefit of peace of mind to those who are able to take up private medical insurance as a result of it and an increase in flexibility in the provision of health care, which can only benefit the National Health Service and the community as a whole. Those are both desirable policy objectives, so I invite the Committee to reject the amendment and to support the principle enunciated in clause 1.

Below is the text of Mr Major’s written Parliamentary Answer on Incomes on 8th May 1989.

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Mr. Nicholas Bennett To ask the Chancellor of the Exchequer if he will give his latest estimate for net disposal income after mortgage payments in each region of the United Kingdom.

Mr. Major [holding answer 5 May 1989]: The most recently available figures are for 1986: these were given in my reply to my hon. Friend on 1 March 1988 at column 503. It is expected that the estimates for 1987 will he available in July.