House of Commons Hansard Debates for 15 May 1990

Control of Toxic Waste Residues

Mr. Frank Cook accordingly presented a Bill to protect the environment by controlling the manufacture and by regulating the disposal of toxic chemical waste residues ; and for connected purposes : And the same was read the First time ; and ordered to be read a Second time upon Friday 6 July and to be printed. [Bill 140.]

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Orders of the Day

Finance Bill

(Clauses 3, 9, 10, 20, 23, 25 and 68) Considered in Committee [ Mr. Harold Walker-- in the Chair ] Ordered,

That the order in which proceedings in Committee of the whole House on the Finance Bill are to be taken shall be Clause 68, Clause 9, Clause 10, Clause 3, Clause 20, Clause 23 and Clause 25-- [Mr. Lilley.]

Clause 68

Contributions to training and enterprise councils

4.2 pm

The Financial Secretary to the Treasury (Mr. Peter Lilley) ; I beg to move amendment No. 34, in Clause 68, page 55, line 34, after council', insert

or a local enterprise company'.

The Chairman of Ways and Means (Mr. Harold Walker) : With this it will be convenient to take the following amendments ; No. 35, in Clause 68, line 49, after council', insert or company'. No. 36, in Clause 68, page 56, line 17, at end insert

and

(b) "local enterprise company" means a company with which an agreement (not being one which has terminated) under which it is agreed that the company shall carry out the functions of a local enterprise company has been made by the Scottish Development Agency, the Highlands and Islands Development Board, Scottish Enterprise or Highlands and Islands Enterprise.'.

Mr. Lilley : In line with the statement on Budget day, we announced last week that the new tax relief proposed in the clause for business contributions to training and enterprise councils in England and Wales will also be available for contributions to local enterprise companies in Scotland. The amendments simply achieve that result. They provide that the relief for contributions to LECs will be on the same basis and for the same period as that for TECs. I hope that they will be welcomed by all hon. Members. As TECs and LECs will have many similar functions, it is clearly right that the same tax relief should be available to both.

Mr. Gerald Bermingham (St. Helens, South) : I apologise for the intrusion into the Minister's brief opening remarks, but will he reassure me that tax relief granted in respect of investments in training and welfare will extend beyond what is considered to be the normal business sector, for example into professions and other such spheres, so that the broadest possible tax relief is given to training and investment in those sectors?

Mr. Lilley : I reassure the hon. Gentleman that there is no discrimination between different sectors of industry. As long as the contribution meets the conditions of the clause, whether it is in England, Wales or Scotland, it will attract relief.

Amendment agreed to.

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Mrs. Margaret Beckett (Derby, South) : I beg to move amendment No. 21, in page 55, line 45, leave out if' and insert to the extent that'.

The Chairman : With this it will be convenient to take the following amendments : No. 19, in line 47, leave out of any kind whatsoever' and insert

in money or money's worth.'.

No. 20, in line 49, at end insert

provided that neither this subsection nor subsection (4)(b) below shall apply where the benefit in question comprises the training of employees of the person making the contribution and that training is wholly or mainly for the purpose of enabling those employees to better perform the duties of their employment.'.

Mrs. Beckett : As a first priority in the debates on the Finance Bill, we sought to examine the clause that confers tax relief on contributions to training and enterprise councils. The Opposition deliberately intended to make that the first issue we raised because we share the almost universal view that good training and retraining, for employed and unemployed alike is not only beneficial and desirable for the individual, but vital for a strong economy. We seek by means of the amendment to probe the Government's intentions in the clause and perhaps even to improve the Bill. We do not oppose the clause itself but we believe that the more one studies it the more it throws into sharp relief the defects and inadequacies of the Government's training programme--if one can dignify it with such a name.

The background to the clause and to our amendment is also one of almost universal agreement about the terrifying inadequacies of the scale of training in this country and of the Government's approach to that training, not to mention the inadequacies--in the view of the Opposition--of such solutions as the Government propose.

It is rather difficult to tell to what degree the Government share our concern about the state of training, that state being identified by the fact that between 65 and 69 per cent. of 16 to 19-year olds are in training in this country, whereas in Germany more than 90 per cent. are, in Belgium more than 80 per cent. are, and in the United States and Japan similar figures obtain. The same imbalance applies to specific industries which need crafts-people to bring them up to strength.

We thought that the Government shared this view--all the more so because on 6 December the former Secretary of State for Employment, the right hon. Member for Sutton Coldfield (Sir N. Fowler), said that Britain's training position was "mind-boggling" and because in Employment News a few months ago the word was that

"we have a mountain to climb."

The former Secretary of State set targets for training : that by the end of 1992 no young person should be employed without training ; that two thirds of them should get to National Council for Vocational Qualifications level and a quarter to level 3 ; and that by 1995 all of them should be at least at level 2, and half at level 3. He went on to say :

"Unless we set outselves these kinds of stretching targets we shall not meet the need for upgrading and multi-skilling in a decade of continuing and rapid change."

The new Secretary of State, however, said in March :

"My predecessor offered a framework of objectives for training Progress depends on action by

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organisations outside Government ; they cannot be specific Government targets."-- [Official Report, 8 March 1990 ; Vol. 168, c. 804. ]

Moreover, the consistent theme of the new Secretary of State has been not the great need for improved training but how well we are doing. That is a substantial shift of emphasis. As I said a few moments ago, that shift of emphasis is not universally shared. The CBI said a few months ago :

"Britain's skill levels are lower than those in most of its competitor countries and the gap is widening."

The head of the Training Agency, Roger Dawe, said :

"At every level we are towards the bottom of the training league table, whether it is in education, youth training, higher level skills training or in management."

A most interesting recent edition of "The Money Programme" had a number of comments to make on our training policies. On the programme, the chair of the Blackburn TEC said :

"The situation is desperate. We are falling further down the ladder."

Apart from the move away from targets, the new Secretary of State's second, equally alarming, shift of emphasis was to be found in the words that I have already quoted :

"Progress on meeting the objectives"--

for the development of training--

"depends primarily on action by organisations outside Government ; they cannot be specific Government targets." [ Official Report, 8 March 1990, Vol. 168, c. 804. ]

It seems to us that the Government are in terrible danger of repeating a mistake that they have made in other areas. The one that always springs to mind is community care. It is the mistake of picking up a perfectly reasonable policy which is in itself a good idea--in this case the idea of encouraging employers to make greater efforts to provide training--and using it as an excuse to shuffle off that part of the responsibility for the policy that properly belongs to Government and use that transfer as an excuse for cuts. Therein lies the danger, and it is one that the Government are running in community care, of discrediting the whole of a policy that might otherwise be acceptable.

On the first occasion on which I met a senior business man who was involved in the early stages of setting up TECs, he talked about his enthusiasm for the idea. He spoke about the challenge of the needs of training and of the way in which he and his colleagues hoped to be able to begin to tackle it. However, he went on almost immediately to say anxiously that, although he thought it was a good idea and that he was looking forward to being involved, he hoped that the Government did not intend to transfer the entire responsibility for training to the shoulders of private industry.

That concern is widely shared and was well expressed in the edition of "The Money Programme" to which I referred. One of the people interviewed said :

"Somebody has to do it. I do not think we are necessarily the best but there is no one else."

That was a sad commentary on that person's view of the Government initiative. However, there is still a good deal of enthusiasm in some quarters for the TEC initiative, just as there might still be some enthusiasm for the intention behind the clause if the Government had not pulled the rug from under TECs by taking away with one hand what they seemed initially to be giving with the other. I refer, of

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course, to the cuts made by the Government in the support from public funds that were previously allotted to training. In a sense that was the unkindest cut of all and it was made without consultation with those on whom the burden of greater responsibility would inevitably devolve.

There is almost no doubt that, for most of those involved in TECs, the cut in funding was a devastating blow. They were also shattered when it took place without consultation and dismayed at the timing. Even as they warmed to their task, they were already expressing concern about the restrictions placed on the flexibility that they hoped to use to develop training and to meet the training needs in their areas. They expressed the view that reductions in scope followed directly from their duty to run the existing Government programmes of employment and youth training while their initial funding seemed to be too restrictive. It did not offer the flexibility to go further and bring in new initiatives in which they were particularly interested.

The decision substantially to cut funding has undoubtedly created immense disillusionment. In its economic report in April, the Employment Institute said that the cuts in funding are visible every year, beginning in 1988-89 with a real terms cut of 9 per cent. It was 11 per cent. in the estimate for 1989-90 and there is to be a continuing series of percentage cuts in the years ahead. The institute draws attention to the fact that, between March 1989 and March 1990, £500 million was cut from the funding of TECs. Apart from that overall and substantial cut, individual industries are seeing the impact on the way in which they operate. I quote again from "The Money Programme" in which reference was made to the abolition of the electrical contracting industry board, its replacement by a voluntary body, and then Government money being cut in terms of the amount per head. An industrialist appearing on the programme said :

"It baffles me sometimes, the inconsistency of policies. Government can have a policy of encouraging and then the next minute, a bolt from the blue, cuts in funding."

Mr. Alan Bartlett of the Association of British Chambers of Commerce said :

"I understand what the Government are trying to do but the general feeling is that it was not appropriate for it to turn its funding taps off long before most employers had been persuaded to turn their investment taps fully on."

An editorial in the Financial Times said :

"The Government are right to argue that industry should spend more on training, but it is sending the wrong signals by sharply cutting its own spending just as TECs are trying to mobilise support." The Government's usual excuse is that those cuts in training are justified because unemployment has been falling. Leaving aside, if one can, the fact that that fall is likely shortly to be reversed, not only have the Government cut those substantial sums, but they have cut funding per head. Even though the numbers are smaller, funding is less per head in every sector of training that the Government are in any way supporting--in employment training for the long-term unemployed, in youth training and even in training for the employed or for people such as the disabled.

4.15 pm

Nor will the clause, even amended, do much to redress the balance. The National Council for Voluntary Organisations estimated from its survey the impact of what is taking place. Again, it identifies the fact that in its

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view--after all, it is a training provider-- employer contributions would have to treble to make good the fall in Government funding for employment training alone.

It would be interesting to know--I hope that the Financial Secretary will be able to tell us--just what impact the Government expect the clause to have. I am sure that most hon. Members will be aware that, in the Red Book, the entry for this clause is marked with an asterisk, showing that it is of insignificant proportions, which I think usually means that it is expected to be less than £3 million. That is against cuts of at least £500 million which I have already identified.

Let me give a final quote from "The Money Programme" :

"If the cuts prevent us from doing something worthwhile, most of us will think it is time to go. We will give up trying to persuade the others."

That is a good employer who is concerned about training and who is prepared to give up time which, as we all know, is money, to try to promote training ; to do the very thing that the Government want and which the Government are claiming to encourage. Such employers are now saying that they are prepared to give that time to try to encourage others to train, but they are not prepared to do so if the Government pull the rug from under them. Even as it stands, the clause is somewhat restrictive, whether intentionally or otherwise. The Financial Secretary will recognise, as I expect will hon. Members, that tax deductions are already available for training. The scope will be a little greater because of the impact of the clause, but there will not be a vast change. Under section 84 of the Income and Corporation Taxes Act 1988, a deduction is available to be used for the purposes of technical education at universities and similar institutions. In sections 588 and 589, there is already a deduction for the cost of retraining employees, although with limits, and elsewhere, in section 74 under the general rules for training deductions and section 75 under expenses management, there is provision for some tax deduction.

We presume that most TEC contributions by an employer would be allocated to the local initiative fund, where the greatest flexibility exists in the operation of the TEC and where the activities are most likely to be tailored to the needs of local industry. Again, it is likely that existing law would have given a deduction for some part of the contribution and, although the relief is a little greater, it is not as generous a relief as some hon. Members might have assumed when the Chancellor announced it. We are particularly concerned about clause 68(3), which says that the provisions identified in subsection (1) do not apply in relation to a contribution if he--the person making a contribution or an associate--

"receives or is entitled to receive a benefit of any kind whatsoever for or in connection with the making of that contribution".

We interpret that as meaning that even the smallest benefit of any kind, from anyone, will result in the whole contribution being disqualified for the purpose of tax relief. We share the Government's wish to make effective anti-avoidance law, but that provision appears to go too wide. I shall explain why that is so.

As clause 68 is worded, if a TEC agreed to train local youngsters in word processing, say, and offered free places on such a course to the employees of a particular company that had made an annual contribution of £100,000 to that

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TEC, because the company was receiving a benefit from those free places, it could, as a result of its past support, lose £35,000 of tax relief on its current year's contribution.

If clause 68 really means what it says, if a TEC offers contributors free access to its video production facilities, those companies might lose their right to tax relief--even though they might seldom, if ever, use the facilities.

Amendment No. 21 seeks to deal with some of those issues. Clause 68(4) says that, where relief has been given and a benefit has subsequently been received, the value of that benefit shall be chargeable for tax purposes. That implies that the Government intended in subsection (3) that only the amount of the contribution equal to the value of the benefit should be denied relief. Amendment No. 21 seeks to deny relief not if a benefit has been received but only "to the extent that" a benefit has been received. We hope and believe that that was the Government's intention.

Amendment No. 20 raises the question of whether the provision of training for a contributor's employees should be regarded as a benefit. It seems to us that it should not be so regarded, and should not result in the employer losing tax relief. If the contributing company had incurred training costs, they would have been tax deductible. If the excess of the contribution over the training costs had been paid to the TEC as a no-strings contribution, it seems that, under clause 68, tax relief would have been given. We see no reason for a different rule applying if the whole sum is given to the TEC and then it provides employee training.

Amendment No. 19 concerns a narrower issue. We understand that the Inland Revenue may be concerned in cases where a company enjoys a tax deduction by contributing a certain sum of money and is then refunded it in a tax-free form. If that is the intention of subsection (3), it can be narrowed by applying it only if the contributor receives the benefit in cash or in money's worth from the TEC, leaving intangible benefits such as the use of facilities, advertising support, and so on, untouched.

I refer finally to a possible drafting error, on which we have not tabled an amendment. I do not expect the Minister necessarily to answer the point today, but perhaps he will consider writing to me. We are concerned about interaction between subsections (1) and (2). Subsection (1) specifies that

"the contributions may be deducted as an expense in computing the profits or gains of the trade"

and subsection (2) refers to any such contribution

"made by an investment company"

being deductible as a management expense. Again, it appears that expenditure will not be allowable as a tax deduction under subsection (1) because it is not made by a trader for the purposes of his trade. It appears to deny the relief that subsection (2) seeks to give. If contributions are allowable under subsection (1), why is subsection (2) needed in addition?

It may be that the intention is to interpret subsection (2) as it is meant to be interpreted--but we are concerned whether the clause as drafted gives effect to the Government's intentions. Perhaps the Financial Secretary will give us an assurance that if, on re-examination, the clause is found to be defective in that respect, it will be remedied by the Government later in the Bill.

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The Opposition do not oppose the clause, but the issues that it highlights expose the Government's short-term and short- sighted approach and the weakness of their case as regards the provision of training.

The Government seem to recognise no interest wider than that of the individual, which is perhaps a practical expression of the Prime Minister's view that there is no such thing as society. The Government seem to be seeing no interest wider than that of the individual employer or the group of employers and others from the locality who share representation on the training and enterprise councils. That may be the Government's view, but employers do not believe that--they have more sense. It is not the employers but the Government who are charged with the duty of defending the public interest in training, and employers recognise that.

Opposition Members commend the amendments to the Committee because they represent a small improvement to a flawed policy, but they do not affect the fact that the Government's overall policy and intention is being defeated by their actions and mistakes, and that the Bill makes only a minor contribution to our substantial training needs.

Mr. Ian Gow (Eastbourne) : I shall take up some of the words which have flowed from the lips of the hon. Member for Derby, South (Mrs. Beckett) when she quoted my right hon. Friend the Prime Minister as having said that there is no such thing as society. I am not sure of the context in which the hon. Lady suggests that my right hon. Friend made those remarks.

Mr. D. N. Campbell-Savours (Workington) : She did say that.

Mr. Gow : Yes, but I am not sure of the context in which, according to the hon. Lady, she made that assertion.

I shall begin my remarks by quoting with approval, what a former Conservative Prime Minister said at a St. George's day dinner. Stanley Baldwin started his speech by saying :

"The responsibility for progress rests not only with the Government but upon evey man and woman in the country."

That theme seems to underline the approach of my right hon. and hon. Friends on the Treasury Bench to training responsibilities. The clause grants tax relief for the current year which did not exist for the past year in respect of contributions made to training. The hon. Member for Derby, South made it clear that the Labour party would not oppose clause 68. She said perfectly properly that her amendments are probing amendments. The hon. Lady, the Labour party and I think even the two representatives of the once-mighty Liberal Party will not oppose clause 68. Therefore, the issue before the Committee this afternoon is whether the clause is an improvement upon the law which existed hitherto or whether the Government should go further, as the hon. Lady believes. She believes that the Government--which means her fellow countrymen and mine--ought to make further direct contributions towards training. My right hon. and hon. Friends on the Treasury Bench believe that there should be a partnership between the Government and industry for responsibility for training.

I welcome clause 68 because it will give additional tax relief and additional encouragement to those who have a

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responsibility for training--the employers. The responsibility for training rests upon employers and management. That responsibility cannot be foisted on the Government. As clause 68 provides further encouragement and additional fiscal incentives to managers and employers to carry out their responsibilities, it is a significant improvement upon the law up to 5 April 1990.

The hon. Member for Derby, South made a compelling speech, but her philosophical proposition seemed to be that the responsibility for training rests exclusively with the Government.

Mr. Paul Boateng (Brent, South) : Nonsense.

Mr. Gow : That was the impression that I formed when I listened to the hon. Lady's speech. Her proposition is, I believe, misconceived. If, therefore, she presses her amendment to Division, we shall resist it.

Mrs. Beckett : If I gave that impression, let me correct it at once. The Opposition do not believe that the Government have the sole responsibility for training ; we believe that it is the responsibility of many employers to train. Therefore, we regret the fact that so many employers in this country do not do so, but instead poach those who have been trained by others. We believe also that the partnership to which the hon. Gentleman referred is perfectly proper and that one side of that partnership--the Government side--is being dissolved.

4.30 pm

Mr. John Battle (Leeds, West) : A partnership is crucial, and many believe that the Government are not keeping to their side of the deal. We have to consider the matter in the context of the approaches to the Treasury by the spending Departments. We have read in the press that the spending Departments have put in bids worth £12 billion and that the Chief Secretary to the Treasury has said that he will be hard-pressed to pay out the £3 billion that is needed to cushion the effects of the poll tax if reductions are not made in the budgets of other spending Departments.

It is interesting to consider which Departments would bear the brunt of those reductions. It was suggested yesterday in the Financial Times that one of the budgets that would be reduced in an attempt to cushion the effects of the poll tax was the training budget. Therefore, it is fair to question the Government's real commitment to properly funded training.

The Government have cut this year's training budget by £190 million. Spending on the Department of Employment's main training programmes will be £212 million less than in 1988-89. The Government are quick to tell us at Question Time that that is due to the fall in the number of young people, but that is not the reason for the reduction. Spending per head on youth training has been cut by £8 a week.

It is widely believed that the training and enterprise councils have been set up by the Government in an attempt to get training done privately and to keep it in the background. They are not interested in ensuring that it is properly supported by a partnership between the state and industry. It is an attempt by the Government to shuffle off their responsibilities and hope that the private sector will pick up the tab, and at the same time leave the Government the leeway to carry through further reductions. That is the prevailing view, even within the TECs.

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The TECs were relatively unpopular and hard to get off the ground when they were first introduced. The tax reductions and concessions in clause 68 are an attempt to increase the incentives--a bigger carrot--in the hope that enterprises will continue to contribute to TECs on a scale that will make up for Government reductions. It is clear that the initial enthusiasm of some employers is waning, and the scheme needs a boost.

That is the purpose of the clause. The promised levels of public funding for TECs have not been forthcoming, and participating employers are becoming reluctant to contribute to TECs when they see that the public budget--the Government's commitment to that partnership--has been cut back, squeezed and reduced.

I hope that the Financial Secretary can assure the House that the Chief Secretary to the Treasury will not cut the Department of Employment's training budget, and that training will not pay the price for the cushioning of the poll tax. Already the Employment Institute is calling for

"an increased public contribution to each TEC."

Mr. Russ Mason of the Thames Valley TEC has said that TECs are a "picture of inadequate funding, particularly in the start-up year".

That is precisely the year when they need guarantees of investment and income.

Dorset TEC has had its funding for 1990-91 cut by 18 per cent. As a result, it has been forced to cut its programmes. While the Labour party would be keen and eager to back genuine training that is properly supported in a partnership between Government and business, the Government must ensure that they underpin their commitment to that partnership rather than undermining it. We know that Secretaries of State and other Ministers are in the background, bidding with the Treasury to ensure that their Departments' budgets are not reduced in these difficult times.

The TECs have not been built on principles of partnership, or democratic principles ; there are no employee representatives on their boards. There is no policy underwriting to ensure that the special needs of people with disabilities, women--whom the Government now claim that they are eager to bring into the work force--and ethnic minorities are provided for in the TECs. Positive action and programmes for such people would be welcome. They would turn the Government's training policies into genuine training policies. Such policies require a high level of commitment through public funding : that is part of the partnership.

I hope that the Government will accept their responsibility. It would be nonsense for them to suggest that TECs are providing employment opportunities for all when they cannot do that as their budgets are being persistently cut and undermined.

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