toast

I read something on vzi earlier but now can't find it (Not fully awake yet)
Centre the steering by looking at the front wheels..when theyre pointing straight ahead, whip the steering wheel off
Turn the wheel upside down & you'll see this baby http://www.ebay.co.uk/itm/Horn-contact-Indicator-cancelling-ring-VW-Beetle-and-T2-van-/371304325093?pt=LH_DefaultDomain_3&fits=Car+Make%3AVW&hash=item5673765fe5

As You're looking at it the sticky up prong (about an inch wide) will be sticking up.. (In use it sticks down into the indicator cluster)

The shiny brass ring carries the Horn circuit & from Your description may be broken
The prongy bit is what cancels the indicators
The bit of wire with a spade attaches to the actual horn push button

Its possible that some bugger has had the wheel off & not put it back centralised, which'll stop the cancelling function, or they do sometimes just break off

Yell if You need more

Thanks mate , the wheels not on strait so that's very posible , just need to find I big socket to get the bugger off and have a look . Cheers for your help Pete

Whilst the wheels off, have a play & watch what happens when you indicate.. a little white plastic finger moves towards the column shaft.. That's the bit that the prongy bit nudges to cancel the indicator
You'll also see 2 brass contacts like fingers attached to the indicator housing-they carry the horn circuit & directly rub against the ring on the wheel

sorted pete , cheers