This paper informally outlines a Labelled Deductive System for on-line language processing. Interpretation of a string is modelled as a composite lexically driven process of type deduction over labelled premises forming locally discrete databases, with rules of database inference then dictating their mode of combination. The particular LDS methodology is illustrated by a unified account of the interaction of wh-dependency and anaphora resolution, the so-called ‘cross-over’ phenomenon, currently acknowledged to resist a unified explanation. The shift of perspective this analysis requires is that interpretation is defined as a proof structure for labelled deduction, and assignment of such structure to a string is a dynamic left-right process in which linearity considerations are ineliminable.