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Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak) : My contribution to this debate will be brief, as time is very limited and other hon. Members want to speak.
It is rather sad, especially during a week when the parliamentary burden has been comparatively light and there have been very few votes, that the very important issue of Common Market finance and the Court of Auditors is given such low priority. This is a matter to which my hon. Friend the Member for Southend, East (Mr. Taylor) and I have referred on many such occasions. We say--in vain, I know, but it should go on the record as it appears to be the view of all of us--that the House does not appreciate the fact that tens of billions of pounds go astray. But even when money is being spent properly, we are given little time to debate the expenditure.
Let me return to a point that I made in an earlier intervention. The Court of Auditors sets us on the road to fraud because people think that it is a court. It is not a court at all. One is not criticising the work of the auditors when one says that it is not a court. It cannot initiate prosecutions. It reports, I think, to the Council of Ministers. We all know what happens then. Tons of people have their hands and feet in the trough : "You scratch my back, and I'll scratch yours." That applies particularly to Spain, Greece and Italy. It applies to the Irish farmers, who, in their lovely slap-happy Irish way, keep hurling the same cattle and pigs back and forth over the border and collecting money every time they pass go. It must be absolutely splendid for them. I love the Irish, and I think that if peace ever came to Ireland I would have a farm on the border myself-- [Laughter.] There is a certain humour about this, but it is appalling.
Mr. Roger Knapman (Stroud) : Is my hon. Friend aware that France now has a record grain surplus of 5 million tonnes? That grain is being shipped to Northern Ireland, and £1 a tonne more than market price is being charged, despite the fact that shipping costs £7 or £8 a tonne. What does my hon. Friend think the Court of Auditors will say about that in two or three years' time?
Mr. Beaumont-Dark : I am grateful to my hon. Friend for the point that he has made. Of course, those of us who have been aficionados of the Common Market for some years are completely unmoved by such a thing. It is part of the general madness of the system of finance. I am sure that the Court of Auditors will simply open another large bottle from the wine lake to slake their thirst and keep their nerves steady.
The point that I want to make is clear. We are about to enter a period in which more of our money and more of the
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money of everybody else in the Common Market will go to our friends from east Europe who have discovered freedom late in the day. Happily, of course, it is never too late to be free. The money going to the Poles, the Romanians, the Hungarians and the East Germans will be administered under the sort of ramshackle, wretched, fraudulent system that cannot be contained even in a part of Europe where, for at least 200 years, people have been running things in a reasonably democratic way. Imagine what will happen to the millions of pounds, ecu, or whatever, that will go hurtling into those countries. I prophesy that the Court of Auditors will look upon that as an appalling situation and will say that anything that goes on in western Europe is absolutely marvellous. We may have fraud here, but one thing that people in east Europe have learnt is that fraud comes easy.Mr. Teddy Taylor : They are well experienced.
Mr. Beaumont-Dark : They are well experienced in fraud. They were brought up with it. To survive, poor devils, they had to be. If we are not careful, 80 per cent. of the money that goes to east Europe will not be put into proper schemes. I hope that we shall tell the Common Market quite clearly that if such things can happen here--I am not criticising the Court of Auditors ; just the name--we should have a really strengthened bunch of auditors to make sure that, in the case of east Europe, money goes to the people whom it is intended to help, and is not used to bolster a new kind of bureaucracy and a new kind of financial dictatorship. It has happened in the past and could certainly happen again.
I wish to raise a matter that is a little nearer to home--the European development fund. It is most disappointing that the court should have expressed its amazement--its word, not mine--that there has been a reduction in the proportion of the aid from the fund going to industrial projects. In terms of growth, the projects aided have hardly any incentive effect on the economic activity in the region. That is an appalling indictment of the Common Market. The fund was meant to be an engine to power economies and to help deprived regions to get going. If it is not working, let us abandon it and keep the money. We can spend it far more wisely on the purposes for which it is intended. I estimate that we subscribe £300 million or £400 million of our money to the fund. We could do a lot in the north of England and the midlands with that money.
I end as I began. We must concentrate on helping our friends in the emergent new democracies, but we must ensure that the greater proportion of the hundreds of millions of pounds involved ends up where it belongs--on the backs and in the stomachs of those whom we are endeavouring to help-- and not in somebody's else's pocket. The Government could do something to ensure that, and I hope that they will.
11.11 pm
Mr. Bowen Wells (Hertford and Stortford) : I join the hon. Member for Islington, South and Finsbury (Mr. Smith) in congratulating the Government, who have led the fight against fraud in the European Community. The Commission paid tribute in its report to the degree of political support for the fight against fraud, which it says has produced tangible results. That is due in large part to
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the activities of Ministers in the British Parliament and to our debates over the years--however short--drawing attention to fraudulent activities.We should warmly welcome the fact that we have achieved an increase in the number of auditors and that they now have the power to conduct spot checks of the way in which European funds--in the CAP and in structural funds--are being applied. The increase to 30 auditors is welcome, although that figure is still quite insufficient for the task. I hope that my hon. Friend the Minister will encourage further moves to enlarge the staff so that we can make certain that member states administer CAP and other European funds properly and that those moneys are properly accounted for. Without such a move, I doubt whether we shall begin to stamp out fraud in many of the European countries that administer European funds--a point to which my hon. Friend the Member for Southend, East (Mr. Taylor) referred. Let me take the Minister up on the question of the Treasury function of absorbing European funds into Government programmes and not delineating properly so that the public can see where the money is coming from. That makes for difficulties in auditing the use of European money and means that the people of Britain do not know whether the money is coming from the Treasury or from a European source. That weakens support for the European Community in Britain and may in itself be a fraudulent use by Britain of European funds for programmes decided and agreed in Europe.
My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) referred to the European development fund. Paragraph 70 on page 195 of the auditors' report contains an alarming statement on the question of its administration :
"There is still no notion of accumulated experience in the development field. Regardless of evaluations of individual past development projects or measures, the lessons learned from this or that type of operation, or in this or that field of activity, should be more clearly brought to the fore, if only in order to emphasize the absolute need for certain commitments, whenever it is clear that failures are due to shortcomings or omissions on the part of the administrations concerned.
The imbalance between the objectives proclaimed throughout the programming process and the results obtained so far, which, all things considered, are modest, is evidence of the difficulty that most ACP countries experience when they try to adopt a genuine development strategy."
It goes on in that vein. We have now voted, or are about to vote, through the new Lome convention--another £8.5 billion to the European development fund. I submit that the fund's method of administering that money is seriously at fault. When each Lome agreement is reached, the European development fund goes round the countries establishing what it calls umbrella agreements for each one. The umbrella agreements set a total budget for a country which must be spent. If it is not spent the officer involved is called to account. That is a wasteful way to use development funds. It will apply in eastern Europe because, as my hon. Friend the Member for Selly Oak said, the same people will administer the considerable funds being made available to eastern Europe. That is to say that they will not establish what is needed, what funds must be used for particular purposes and whether those purposes can be fulfilled within the economic infrastructure of a country. In agreement with the developing country-- presumably with Poland, Czechoslovakia and so on if we
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do not check this--we shall simply stipulate a certain sum of money to be spent and we shall spend it on anything that the Government of that country wants. That is entirely wrong. We should decide what we shall support, put the money in and then ascertain whether it has been spent properly and the objectives have been achieved. In that way the auditors could check what the EDF is doing with our money. That is an important point which I hope that my hon. Friend the Minister will take up at the Council of Ministers.As the hon. Member for Newham, South (Mr. Spearing) said, Parliament discharges the report. But what option does it have? It can either discharge it or not discharge it. If it does not discharge it, what will happen? The answer is nothing. The only sanction that we have is under the recent court ruling which stated that, where fraud takes place in a member country, that country has to repay the money to the European Commission. That principle should be established by the European Parliament so that, where it finds that the auditors are right and money has been misspent, the member country must repay it to the Commission.
11.17 pm
Mr. Ryder : I was dismayed to hear my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) contemplating the day when he will become a farmer in Ireland as I had fondly envisaged that when we retired he and I could become VAT inspectors in Palermo or at least agricultural officials in the Peloponnese. I am sure that we would make good VAT inspectors in Palermo.
In the short time that remains, I will do my best to answer the main points raised in the debate. If I am defeated by the clock, I apologise and will write to those hon. Members whose points I have not covered.
I am grateful to the hon. Member for Islington, South and Finsbury (Mr. Smith) for his remarks about the quality of the Treasury memoranda and above all for his praise of what he described as the Government's robust attitude to fraud. I appreciate his words. I am also aware that he would like the Treasury memoranda to be improved even more and I will look into that on his behalf.
The hon. Gentleman tackled several matters and I will comment on as many of them as possible. I am pleased to inform him that a treaty on extradition and transfer of criminal proceedings from this country to another country has been drafted. The implications of the draft are being considered in the light of the judgment in the Greek maize case to which I referred in my opening remarks.
I agree with the hon. Member for Islington, South and Finsbury that controls have not been sufficiently tight in the past, which is precisely why the requirements have been strengthened during the past year and minimum levels of physical examination have been specified. Those improvements are in no small measure due to the efforts that have been made by the Government, by Ministers in all Departments and, above all, by the decisions that have been taken by ECOFIN and by the European Council when it met in Madrid last June.
The report notes that the Court of Auditors is preparing a further separate report on export refunds, and I am pleased about that. When we receive it, we shall see what other specific actions are needed. As I explained in my opening speech, we do not believe for one moment that
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we have conquered fraud--far from it. I agree with my hon. Friend the Member for Southend, East (Mr. Taylor) who I do not think was in his place earlier when I said that, like him, I believe that at present we are seeing only the tip of an iceberg--those are the words that I used--and that that is why the British Government are keener than any other Government in the European Community to get to grips with this serious problem.I can assure the hon. Member for Islington, South and Finsbury that there is no complacency in our attitude to regional funds. As I said earlier, we believe that the court's criticisms are misplaced. As a result of Community receipts, public expenditure is higher than would otherwise be the case. I will try in a moment to answer the specific point about Community receipts that was raised by my hon. Friend the Member for Hertford and Stortford (Mr. Wells).
The hon. Member for Islington, South and Finsbury and one other hon. Member expressed concern about the number of staff in the anti-fraud unit in Brussels. Thirty people now work in that unit, so the number has trebled since 2 March last year when we held a similar debate, when there were 10 people working in the unit. However, that is only part of the story because those 30 people represent only a proportion of the total number of staff engaged in anti-fraud activities in the Commission. Specialist staff deal with these matters in each relevant directorate general. The House can be sure that the British Government will continue to press for an effective unit in Brussels to combat fraud--just as we have done in the past year-- and we shall also be looking to see whether the directorates general need to be improved so that the staff to whom I have already referred can help with this subject.
I mentioned earlier the improved reporting requirements for the structural funds and own resources. There are two further improvements in train which are relevant to the observations made by the hon. Member for Islington, South and Finsbury. After 18 years of legal and administrative discussions, the Community has finally managed to come up with an agreed definition of "irregularity" for the purpose of reporting. The 1986 Court of Auditors report lamented the absence of such a definition.
The Commission will shortly present an amended version of the main regulation governing reporting requirements in respect of CAP expenditure. We hope that these proposals will contain clear requirements for member states routinely to report cases of fraud and irregularity.
At this stage, I should like to reassure the hon. Member for Newham, South (Mr. Spearing) on the question of follow-up to the report on intervention. I am advised that the working party that was set up to consider improvements to the intervention system met several times and, as a result of its work, a number of reforms have been agreed which go a long way towards meeting the court's recommendations. These include changes to the system of financing on a flat-rate basis, ; improvements in the system of accounting and the introduction of an annual physical check on intervention stocks.
The hon. Member for Newham, South was also concerned that we had given no satisfactory answer to last year's amendment on discharge. Since he made that point
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I have had a quick glance at last year's debate on the Court of Auditors report. In the first two paragraphs of Hansard, my right hon. Friend the then Paymaster General, now the Secretary of State for Northern Ireland, dealt with that very question. He said : "First, by formally withholding approval of the discharge, we would be admonishing the Commission, because the Commission alone is responsible for implementing the budget and drawing up the accounts. If our motive for withholding approval was to make a broader point about fraud and mismanagement, the impression therefore would be that we were holding the Commission to be largely responsible for such problems. In fact, the responsibility goes much wider."--[ Official Report, 2 March 1989 ; Vol. 148, c. 456.]My hon. Friend the Member for Ludlow (Mr. Gill) queried the Government's commitment to follow up the last ECOFIN, on 15 March 1989, which dealt with the Court of Auditors report. I think that he was here when we began the debate at 6.30 pm, but I assure him that I was able to outline the ways in which the Government have followed up the debate and the Court of Auditors report last year. We did so not only at ECOFIN on 15 March, but at subsequent ECOFINs, and have continued to do so. Our successful application of pressure to introduce new provisions on sound financial management and accounting into the revised financial regulations has brought about one of the biggest improvements in the past 12 months.
My hon. Friend the Member for Southend, East observed that the time provided for this debate was inadequate in view of its importance and significance. I promise to pass on to my right hon. and learned Friend the Lord President the remarks of my hon. Friend the Member for Southend, East and others, including my hon. Friend the Member for Selly Oak. I understand that in previous years the debate has taken one and a half hours, and it was only last year that a three-hour slot for the debate could be found by the business managers.
I cannot share the pessimism of my hon. Friend the Member for Southend, East about the action taken to combat fraud, nor can I share the optimism of those who claim that all is well. That is precisely why the Government will continue to spearhead efforts to get to grips with fraud. In my opening speech, I outlined what we had done and gave an indication of what we proposed to do, not only at ECOFIN in two weeks' time but during the next few months. My hon. Friend the Member for Selly Oak talked about the money wasted on structural funds. It is worth remembering that the court's report relates to 1988. Since that report, as he knows, the operation of structural funds has been substantially reformed.
My hon. Friend the Member for Hertford and Stortford claimed that people do not know where the United Kingdom's EC receipts are going. I refer him to the annual White Paper on public expenditure which gives a detailed breakdown of Community receipts by programme. As usual, the debate has been lively and well informed. The House has recognised that significant progress has been made in the past 12 months. I do not wish to exaggerate that progress because--here I agree entirely with my hon. Friend the Member for Southend, East--much more needs to be done, but the Council has now approved the new financial regulation and that is a major advance that we should all welcome. We should be clear, however, that fraud remains a major problem and we certainly cannot afford to relax our efforts.
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As I stressed earlier, this debate will help to inform the Government's policy when we go to ECOFIN on 12 March. Our primary purpose at that meeting will be to secure specific conclusions committing the Community to further detailed measures in clearly defined areas. At the March 1989 ECOFIN we identified export refunds and intervention storage and action has been taken in terms of that remit. This year we shall emphasise, among other things, improved reporting, the need for agreement on administrative sanctions and further progress on the simplification of regulations.I hope that I have reassured the House that the Government take this matter very seriously indeed. By outlining the progress that we have made in the past year, I hope that I have satisfied the House that we are in the vanguard in Europe, and I hope that when we have a similar debate in a year's time I shall be able to report even more progress.
Question put and agreed to.
Resolved,
That this House takes note of the Annual Report of the Court of Auditors of the European Communities for 1988 and European Community Document No. 4582/90 relating to action against fraud ; and approves the Government's efforts to press for value for money from Community expenditure.
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PETITIONS
East London Assessment Study
11.31 pm
Mr. Chris Smith (Islington, South and Finsbury) : I have the honour to present 10 petitions to the House, all on the subject of the east London assessment study road proposals as they affect my constituency and that of my hon. Friend the Member for Islington, North (Mr. Corbyn). These are in addition to the 37 petitions that I presented on Friday morning and in addition also to petitions from the residents of St. Peter's ward, from members of the congregation of the Union chapel and from Mrs. Sherlock, which I deposited in the Bag earlier today.
I have a petition from the residents of Compton terrace, in my constituency, signed by all the residents of Compton terrace, which Sheweth that the east London assessment study road proposals will be detrimental to our community and environment. Wherefore your Petitioners pray that your honourable House will urge the Secretary of State for Transport will give due attention to improving public transport rather than increasing the road capacity which will inevitably be filled by people commuting by car.
Those are sentiments with which I wholeheartedly concur. There is a petition from citizens concerned with the environment and quality of life in London, drawn from all parts of Islington. They urge that the implementation of the east London assessment study road proposals will be harmful to the environment by attracting increased car traffic into London.
There is a petition from residents of College cross, Witherington road and other parts of Islington showing that the road proposals will harm the environment through noise, pollutants, the division of communities and increases in global warming. They urge the Secretary of State likewise to increase investment in public transport. There is a petition from the merchants and shoppers of Holloway road. They show that the road proposals will be detrimental to our environment, our communities and our amenities. They urge the Secretary of State to abandon the road-widening schemes.
There is a petition from the residents of Holloway road and surrounding streets. They show that the widening of Holloway road will increase the number of lorries using the road and greatly increase the noise level. They urge the Secretary of State for Transport to abandon the proposal to widen Holloway road and instead to increase investment in public transport.
There is a petition from the parish and community of the Church of the Sacred Heart of Jesus in Eden grove, in my constituency. It shows that the ELAS road proposals are totally unacceptable and would cause the widespread destruction of homes, businesses and workplaces. It would mean an increase in noise, dirt and pollution. The petitioners fear for the safety of old people, mothers with prams, toddlers and children who attend Our Lady of the Sacred Heart school in Eden grove, who will often have to make the hazardous crossing to attend the school, church and community centre. They too urge the Secretary of State for Transport to abandon the new road schemes.
There is a petition from the residents of Upper Holloway. They show that the ELAS road proposals will
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drastically reduce the value of their properties. They urge the Secretary of State for Transport to abandon the road proposals. There is a petition from residents of Dunmow walk. They believe that the road proposals will be detrimental to their environment. There is a petition from residents of Ronalds road. They believe that the proposals will be detrimental to the environment by increasing pollution, traffic congestion and causing destruction to existing communities.Finally, there is a petition from the staff of the Whittington hospital, Highgate hill. They believe that the ELAS road proposals will greatly increase the transport problems that they will have in getting to and from work. They believe that it will have a disastrous effect on the services that they provide to patients in the local community, and they believe that the proposals will damage the environment in which they work due to increased pollution. They urge the Secretary of State for Transport to drop all the road widening schemes and greatly to improve public transport.
The petitions contain thousands of signatures. They represent part, but only part, of the anger and dismay felt by my constituents at the proposals for major road building which the Secretary of State for Transport is currently considering, and which no one in my constituency wants to see happen.
To lie upon the Table.
11.36 pm
Mr. Jeremy Corbyn (Islington, North) : Last Friday, I and my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) presented 86 petitions to the House, and tonight we are presenting another 20 or so. In total, more than 10,000 people have signed more than 100 petitions opposing the proposals to build major roads through our constituencies and those of our hon. Friends. Tonight I am presenting to the House 14 petitions with nearly 1,000 signatures and I have also put in the Bag a petition in similar terms from the vicar and parishioners of St. Thomas the Apostle church on St. Thomas's road,near Finsbury park.
The first petition that I wish to present is from the residents of St. George's, Islington, N19 and N7. It reads :
To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament Assembled.
The Humble Petition, of the residents of St. George's Islington, N19 and N7 Sheweth.
That the ELAS Road Proposals will not meet the Department of Transport's stated Objective of improving the Environment. On the contrary, the proposal D2 for the "upgrading" of the Holloway Road will in practice mean the conversion of our local High Street into a massive commuter rat run. The effect of such a drastic increase in speeding traffic, noise and pollution will be to devastate our communities on either side of the road, with continuing blight and loss of local shops and facilities.
Wherefore your Petitioners pray that your honourable House will urge the Secretary of State for Transport to reject this option D2 and all road- upgrading schemes in London, and concentrate instead on improving public transport services and restraint of commuter traffic in London.
And your petitioners, as in duty bound, will ever pray.
I have a petition from the residents of London, most of whom live in the boroughs that I and my hon. Friend represent, concerning the safety of cyclists and pedestrians
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who would ordinarily use roads and imploring the Secretary of State for Transport to reject the road-building proposals because of the danger to cyclists, pedestrians and other road users, and instead to increase investment in public transport, to reduce fares and to increase the usage of them.I have a petition from the residents of 31 Huddleston road and their friends, signed by some 39 people living in a few houses in that area, pointing out that the road proposals will harm their environment and cause road traffic congestion and accidents. I have a petition from the Boye- Anawomah family who live at 5-7 Marlborough road, Upper Holloway, N.19. It points out that the result would be the ruin of their home and their environment, and the destruction of their local shops and other amenities, and that it would drastically reduce the value of their property and make it unsafe for their children to cross Holloway road. Again it asks that the scheme be dropped.
I have a petition from 24 fathers of children who live in north Islington, pointing out that if large roundabouts between Archway and the Nag's Head shopping area go ahead, the increase in the volume of traffic will pollute the air and increase the level of noise, and endanger their children's physical and mental growth, something that is well documented because of the lead and other forms of air pollution that we suffer from through traffic in our borough. The residents of Horsell road point out that the building and upgrading of the road will cause increased levels of traffic in the study area generally and on the southern section of the Holloway road in particular, creating an environment increasingly hostile to pedestrians and inhibiting access to shops, public transport and other local services essential to the community. Again they ask for an improvement in public transport as an alternative, and a cheaper and more sensible way of proceeding.
I have a petition signed by only one person, who represents a large number of people, as he is acting chair of the Drayton park neighbourhood forum. There are 24 such forums in the borough which I have the honour to represent. Again he points out that the proposals for a priority route network described in "Traffic in London" and in the east London assessment study will encourage increased levels of car use and will lead to greater congestion in north east London, polluting the environment with noise, noxious emissions and greenhouse gases, and causing harm to the residents. Again, the petition asks the Secretary of State to reject any proposals for the upgrading of the road. That is signed by Mr. Bernstein, who represents a large number of people who are genuinely and deeply concerned.
I have a petition signed by 52 mothers of children who live in north Islington. It points out that the increased volume of traffic will pollute the air and increase the level of noise, and endanger their children's mental and physical growth. It urges the Secretary of State to abandon all road widening schemes put forward. I have a petition from the Byam Shaw school of art, in Elthorne road, N19, showing that the east London assessment study proposals, in particular the widening of Holloway road, will divide the community and ruin the environment in which the students work and study. Again it urges rejection.
The members of the Tufnell park neighbourhood forum ask for rejection of the proposal. They organised a
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public meeting where the hall proved not to be big enough for the 400-odd people who tried to attend to register their concern. I have a petition from the residents of Archway, showing that the road proposals will be damaging to the homes of people who live in that area. That is signed by 250 people.I have a petition from the mothers at the Whittington one o'clock club, which is for small children, and the over-60s at Whittington court--an interesting combination. They have come together to point out that the proposal will be harmful to children attending the club and the surrounding park, and they urge rejection of it.
There is a petition from the residents of Holbrooke court in London N7, which overlooks Holloway road and Parkhurst road. It points out that they are opposed to the widening of Archway road and Holloway road because of the destruction of homes, workplaces and churches, and the ruination of the Nag's Head shopping centre. They say that the proposal will increase London's already severe traffic problems. Finally, I have a petition from the parishioners of St. John's church, London N19, showing that the ELAS road proposal will cause the destruction of the church. A large number of churches along the route will be destroyed, as well as many homes, community centres and jobs.
I hope that the House, in receiving these petitions, will seriously consider the total opposition to major road-building proposals and the awful damage that they will do to the borough that we have the honour to represent.
To lie upon the Table.
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Actors (Taxation)
Motion made, and Question proposed, That this House do now adjourn.-- [Mr. Greg Knight.]
11.43 pm
Mr. Tom Arnold (Hazel Grove) : I am grateful for this opportunity to raise the issue of the tax treatment of actors and actresses, because I wish to alert the House to a proposal by the Inland Revenue to treat actors and actresses--particularly newcomers to the profession, about whom I shall have something further to say later--as employed by producers and therefore subject to tax under schedule E of PAYE as from 5 April this year.
I am delighted to see the Financial Secretary to the Treasury here, although he may be somewhat weary at having to contemplate traversing yet again the ground which he covered at the meeting on 25 January with my hon. Friend the Member for Arundel (Mr. Marshall) and my right hon. Friend the Member for Shoreham (Mr. Luce), who represents the Society of West End Theatre. I am also pleased to see my hon. Friend the Member for Altrincham and Sale (Sir F. Montgomery) in his place because he also represents that society and has shown a keen interest in the theatre for many years.
I must declare an interest, which is in the Register of Members' Interests, and to which I have drawn hon. Members' attention publicly on a number of occasions over the years. Before and indeed after entering the House I was a producer and I have employed many actors and actresses. I do not employ any at the moment, but there is always the possibility that I will at some time in the future, and I am still a member of the Society of West End Theatre.
I am somewhat out of touch, on a day-to-day basis, and I must confess that I was not aware of the latest developments until I was approached by a firm of solicitors, Wright Webb Syrett of 10 Soho square, which has acted for many branches of the theatrical profession over the years. The firm acts for the Personal Managers Association and for numerous stage and film actors, actresses and producers. There is a general feeling that the impact of the proposals will pose a serious threat to the theatrical profession--a profession which I think we all recognise has a tradition second to none, and which contributes enormously to the culture of our nation. Briefly, stage performers have traditionally been taxed under schedule D, a position endorsed by the High Court in 1921 when Lilian Braithwaite successfully argued that she was assessable under that schedule in respect of profits which she derived from her profession.
In 1972, however, in the case of Fall v. Hitchin, a ballet dancer engaged at Sadlers Wells was held to be employed and therefore taxable under schedule E. It seems that the Inland Revenue, on the basis of that somewhat aged case, now proposes to adopt the proposition that all stage personnel should be taxed under schedule E. Let me make it absolutely clear that, so far as I can judge, the Revenue's behaviour has been impeccable. It has listened at length and courteously to all the representations. It has replied, sometimes voluminously, to the various points that have been put to it and it has allowed a great deal of time in which the profession could make arrangements.
However, the Revenue's view is necessarily narrow, and tonight I urge the Government to take a wider view of some of the implications of what is proposed. Equity, the
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actors' trade union, and the theatres national committee have jointly made representations to the Revenue, so far without success. The Inland Revenue seems determined to proceed with its intention. That is not satisfactory. To start with, actors and actresses have differing circumstances, and the Revenue will be faced with expensive appeals. Those appeals will, as a result of the change, proliferate. There are a number of other consequences which I believe are serious. The Inland Revenue is saying that newcomers must be taxed under schedule E after 5 April. Theatres in the regions in particular will be greatly affected, because those theatres tend to attract newcomers to the profession and in many cases they already operate under grave financial limitations. All the signs are that the actors and actresses affected by the change will demand higher salaries and that the employers, be they repertory theatres or individual producers, will be asked to bear the costs. To meet that demand they will have to reduce some of the concessions which they offer to their customers at present, and that will be in direct opposition to the policy that they have been urged to follow by the Arts Council. But there is no other way in which they will be able to maximise their revenue to meet the additional costs. There is a real threat that a number of the smaller repertory theatres may have to close as a result of the proposal.Apart from the huge administrative problems, I believe that great injustices will result from the distinction between allowable expenses under schedule D and those under schedule E. Under schedule E, allowable expenses are those incurred wholly, exclusively and necessarily in the performance of the employment ; artistes, however, incur considerable expenses that would not be allowable according to that definition.
Under schedule E, touring and living expenses would have to be borne out of taxed income. That includes the cost of travel to and from venues for rehearsals and performances away from home ; self-promotion, including printing and advertisements, photographs, blocks and so forth ; the cost of theatre tickets for agents, managers and press ; audition expenses, telephone calls, postage and stationery ; singing and dancing coaching, including the hiring of rooms ; theatre laundry ; the cost of repair to wardrobe and props ; the cleaning of wardrobe and props ; the cost of replacements to wardrobe and props ; the cost of renewing wardrobe and props ; chiropody for dancers, especially ballet dancers ; hairdressing ; insurance ; and professional fees. That load will be too heavy for most artistes to bear.
I have left until last the most onerous charge of all--one that is causing considerable confusion and has a number of curious features. I understand that henceforth the fee paid by an artist to his agent will also be chargeable against him for tax purposes. That is unfair, and likely to lead to real difficulties : perhaps the Financial Secretary can clarify the position.
In a letter dated 31 July last year, Mr. Peter Lewis, director of the personal tax division of the Inland Revenue, wrote :
"On agents' fees, it would not be appropriate for the Revenue to advise on the contractual changes needed to ensure that actors assessed under Schedule E do not pay tax on agents' fees. But we thought it might be helpful to you to suggest that you consider whether the present arrangement under which these fees represent a slice of the actor's income which he in turn has to pay over to the agent is the only
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possible one. While the detail of the relationship between actor and agent is probably unique to your industry, we were conscious that the same problem does not arise in other agency situations such as the temporary agency workers supplied by employment agencies. There the agency obtains its commission direct from the client not through the worker. If similar contractual arrangements were introduced for actors the difficulty with agents' commission you have identified would not arise. It is entirely a matter for the industry to decide whether or not possible changes of this kind should be considered, and if they are possible, whether or not they should be implemented. But we would, of course, be happy to give our views on the tax consequences of any new arrangements you contemplated introducing." Curiouser and curiouser. The Revenue has shown a remarkable naivety in what appears to be a suggestion that theatre managements should pay agents direct. That cuts across the whole legal concept of agencies. The Revenue makes an analogy with that of employment bureaux, but such bureaux are specifically not permitted by statute to charge the principal--that is, the employee. They can charge only the employer. Section 6 of the Employment Agencies Act 1973 makes such behaviour a criminal offence. We are none the wiser about the Revenue's intentions.At a meeting on 10 November 1989 the Inland Revenue suggested--I quote from a memorandum of what took place--
"that an application could be made to the IR Board for extra statutory allowances but that if a generous interpretation of the rules concerning allowable expenses under Schedule E was made there might be no need for such an application. The need for consistency of interpretation would be important in such an event."
Does the Inland Revenue expect actors and actresses to pay their agents and then to have to pay tax on those fees? The position is unclear. The Inland Revenue says that it proposes to leave the matter in the hands of tax inspectors. That is unsatisfactory, and I invite the Financial Secretary to comment upon it.
At the meeting on 25 January I understand that the Financial Secretary said that he would let the industry's representatives have the Government's considered view after the Budget. I hope that it is not too late for the Government to think again and to introduce into the Finance Bill a clause that would restore the position to what it was when actors and actresses were taxed under schedule D and allowed to claim various expenses. I strongly believe that, if the proposal is allowed to go ahead in its present form, grave damage will be caused to regional theatre in particular, that there will be a proliferation of appeals and that that will not be the end of the matter.
11.55 pm
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