HL Deb 31 January 1967 vol 279 cc916-36

4.8 p.m.

Order of the Day for the Third Reading read.

THE LORD CHANCELLOR

My Lords, on behalf of my noble friend Lord Brown, I beg to move that this Bill be now read a third time.

Moved, That the Bill be now read 3a.—(The Lord Chancellor.)

On Question, Bill read 3a.

THE LORD CHANCELLOR

My Lords, I beg to move that the Privilege Amendment be agreed to.

Moved, That the Privilege Amendment be agreed to.—(The Lord Chancellor.)

On Question, Motion agreed to.

THE LORD CHANCELLOR

My Lords, I beg to move that this Bill do now pass. As your Lordships know, the Bill is mainly concerned with two things. The first is further disclosure of information by companies in general. Clause 2 of the Bill abolishes the status of exempt private company. When it comes into force those companies which now have the status of exempt private companies will be brought into line with other limited companies and so be required to disclose to the public information about their affairs by filing their accounts with the Registrar of Companies. Clauses 3 to 9 and Schedule I add to the information companies are required to give in their accounts. These clauses and the Schedule are concerned with information about subsidiary companies, associated companies, a company's ultimate holding company, the emoluments of directors and highly-paid employees, and the information which Schedule 8 to the Companies Act 1948 states is to be shown in accounts.

Clauses 15 to 19 are concerned with the directors' report. They will lead to directors' reports being much more informative documents than they are at present. The reports will deal with matters such as significant changes in a company's fixed assets, issues of shares made in the course of the year, contracts in which directors are interested, the results attributable to each of a company's substantially differing activities, political and charitable contributions, and exports. Clauses 26 to 30 provide for further disclosure by means of registers which will be available for inspection by the public. One register will show directors' holdings of and dealings in shares of their company and of the other companies in the same group. Another register, which will be kept only by companies whose shares are quoted on a stock exchange, will give information as to those persons who have substantial interests in the company's shares, which they may hold through nominees. The last of the disclosure provisions are those which provide that a company shall keep at its registered office, for inspection by members of the company but not by the public, copies of its directors' contracts of service and a statement showing each charitable purpose for which in the year the company have contributed more than £50. Many of these provisions for further disclosure implement recommendations made by the Jenkins Committee on Company Law.

The second main subject with which the Bill is concerned is reform where events have shown reform to be urgently needed. This part of the Bill is mainly concerned with insurance companies. Provisions are made for the authorisation of new companies before they can start insurance business, for restrictions on the ways in which any insurance company carries on its business if the Board of Trade are not satisfied in regard to matters such as the excess of assets over liabilities or reinsurance arrangements, for the content and audit of accounts, for the grounds on which the Board of Trade may petition for a company to be wound up, and for the investigations and inquiries the Board of Trade will need to make in order to exercise their powers to restrict the way in which a company conducts its business or to petition for its winding-up.

The amendment to the provision in the Moneylenders Acts which exempts any person bona fide carrying on the business of banking, although a small matter when compared with the insurance provisions, comes within the group of provisions which will effect urgently needed reforms. It is of great importance to some companies that they should know whether they are or are not, for the purposes of exemption from the Moneylenders Acts, justified in regarding themselves as carrying on the business of banking.

There are a few provisions in the Bill concerned neither with disclosure nor with urgently needed reform. There are the provisions, added to the Bill following Amendments moved by the noble Viscount, Lord Eccles, and by the noble Lord, Lord Polwarth, to permit the introduction, at such time as the Board of Trade may by order appoint, of shares of no par value. The arguments for and against extending the scope of the Bill by including these provisions were considered at length in Committee and on Report. No more need be said than that the Government will state their views about the scope of the Bill in another place.

Another provision which falls outside the two main groups is the one which would enable the Board of Trade at any time to direct that a company should change its name on the ground that its name conveys a false or misleading indication of its activities. The provision was added to the Bill following an Amendment put down by the noble Lords, Lord Drumalbyn and Lord Erroll of Hale. There might be advantage in postponing legislation on company names until considerations of Parliamentary time would permit all the recommendations of the Jenkins Committee on this subject to be taken into account. However this may be, the House may be assured that the Government will consider carefully all that was said in support of this provision before stating their views on it in another place.

Some noble Lords expressed misgivings about the absence in the insurance clauses of a provision which would give a company whose application for authorisation the Board of Trade wished to refuse a right to be informed of the ground for refusal and, possibly, a right to be heard. In addition, some helpful comments were made on matters such as the requirement that a company should retain part of its assets in the United Kingdom. But few Amendments of substance to the insurance provisions were proposed, and it may be said that the House found these provisions generally satisfactory and appropriate to a closer control and supervision of insurance companies.

The House also showed its general support of the proposals for greater disclosure by companies in general. But here noble Lords had considerably more to propose in the way of Amendments. Some Amendments were intended to make clear the scope of a provision or to put right some defect in the Bill as introduced. The Government are grateful for the proposals which led to these Amendments and the Bill is the better for the Amendments which exclude from the directors' interests in contracts to be shown in the directors' report, interests in contracts of service and interests arising solely from being director of another company, define more closely the transactions within the prohibition on directors' purchases of options, exclude an interest arising from an appointment as proxy from the interests that are relevant to the registers of directors' share dealings and of substantial interests in the shares of a company, and make clear that the amount of the charge for taxation to be shown in a profit and loss account is the amount of the charge to revenue.

Other Amendments were concerned with the possibility that in some circumstances disclosure of certain information might be harmful to a company. The Bill now provides, as a result of these Amendments, that a company may, with the consent of the Board of Trade, withhold information about an associated company which is incorporated abroad or operates abroad; that the number to be shown of a company's highly-paid employees does not include persons who worked abroad; that charitable contributions given to persons ordinarily resident outside the United Kingdom are to be left out of account; and that details of a company's charitable contributions are to be available only to its members. The requirement to show rents payable in respect of land has been left out from the Bill. The Bill has been improved by these Amendments.

Those who supported the Amendment which added Clause 37 to the Bill no doubt consider that it falls within this category of Amendments concerned to prevent disclosure which might be harmful. The clause permits a company none of whose shares or debentures have been quoted on a stock exchange or offered to the public for subscription or purchase, and which is not the subsidiary of a company whose shares have been so quoted or offered, to omit from its accounts filed with the Registrar of Companies, but not from its accounts circulated to its members, the information about the aggregate emoluments of its directors required by Section 196 of the Companies Act 1948, and the information about emoluments of directors and highly-paid employees required by Clauses 6, 7 and 8 of the Bill. The clause also permits such a company to omit from the copy of the directors' report which it files with the Registrar of Companies the information about results attributable to substantially differing activities required by Clause 17. In the Government's view disclosure of the information with which this clause is concerned would be of use to creditors and for the purposes of an incomes policy. The Government may be expected to press that view in another place.

The Bill, although it deals with only a part of the recommendations of the Jenkins Committee, is nevertheless a substantial one of 96 clauses and 7 schedules. It should lead to an Act of Parliament which, by making more information available to all concerned with the activities of companies, will increase the efficiency with which industry and commerce is conducted; and, by strengthening the powers of the Board of Trade, will ensure that insurance business is more closely controlled and supervised.

My Lords, on the Second Reading debate the noble Lord, Lord Hawke, said that the Bill was one which had had a good Press. During the Committee stage there was a difference of opinion as to what the scope of the Bill should be. It is of course clear that this is an honest difference of opinion, and both those who take one view and those who take the other view have expressed their views at great length, and it is now at all events clear to all of us what the differing views are. I said, in moving the Second Reading of the Bill, that we should welcome Amendments which were within the scope of the Bill, and indeed we are very grateful to the noble Lord, Lord Drumalbyn, and his colleagues for all the time which they have spent and the trouble which they have taken to help us to make it a better Bill in those respects. I beg to move.

Moved, That the Bill do now pass.—(The Lord Chancellor.)

4.20 p.m.

LORD DRUMALBYN

My Lords, I should like to start by expressing thanks to the noble and learned Lord the Lord Chancellor for having summarised the position as regards the Bill and for telling us something about the intentions of the Government as regards its future. Secondly, I should like to express condolence with the noble Lord, Lord Brown. We are very sorry not to see him in his place to-day, and especially for the reason that he has had to go into hospital. We hope that he will have a kindly and skilful surgeon who will put him right (I mean physically, not politically, for that is too much to expect) in the minimum of time.

The noble and learned Lord on the Woolsack has gone through the various Parts of the Bill, and I should like to divide it up and comment on certain aspects of it. As the noble and learned Lord said, there are two main Parts of the Bill. In regard to Part II, which amends the law with respect to insurance companies, the provisions fall into the category of what he described as urgently needed reforms, and, as he said, we on this side regard them as generally satisfactory and appropriate to a closer control of insurance companies. I think these were his words. The troubles in one particular sector of insurance, motor insurance, which have come to light since the Bill was introduced throw some doubt on the adequacy of the provisions for securing the proper conduct of existing businesses; and no doubt they will be more closely examined in another place in the light of recent events and of the possibility of further disasters which have been darkly foreshadowed in the Press.

As to the authorisation of new motor insurance ventures, the Bill appears to give the Board of Trade complete discretion to authorise or not to authorise, except so far as share capital and net assets are concerned, where the Board of Trade are forbidden to issue authorisations unless share capital and net assets exceed the minimum prescribed in the Bill. I hope I am right in thinking that the Board of Trade will exercise their discretion not to issue an authorisation where there is an absence of appropriate experience within the company applying for authorisation to start up in motor insurance. I mentioned on Second Reading that there is a section of opinion in the insurance industry that a company should not be authorised to engage in motor vehicle insurance until it has had experience in other classes of insurance for a period of time, perhaps five years. No doubt this point also will be further explored.

Your Lordships were also uneasy about leaving absolute discretion to the Board of Trade to refuse, without assigning any reason, to issue an authorisation to an applicant to engage in a class of insurance business if the Board considered that there was associated with the applicant a person who in the Board's view was not a fit and proper person. The noble Lord on the Woolsack suggested in the course of our debates that this was a matter which perhaps could be dealt with by the Ombudsman. Later in the day—in fact I think well into the night—I understood that the Government were introducing an Amendment to the Parliamentary Commissioner Bill now before the House.

The Amendment appears as subsection (4) of Clause 5, and seems to exclude the kind of investigation to which the noble Lord appeared to be referring. In general, it appears that the Ombudsman would not have power to investigate the actions of Government where, as in this case, there was ministerial discretion. As Mr. Crossman put it in another place, a discretionary decision properly exercised which the complainant dislikes but cannot fault the manner in which it was taken is excluded by the clause. I do not know whether this would be described by the noble Lord, Lord Shackleton, as a "technical fall-out" in the Government: I am not certain that it is not a "technical knockout". Perhaps the noble and learned Lordon the Woolsack will be able to say exactly what the position of the Ombudsman is likely to be.

Most of our debates, as the noble Lord said, have related to Part I, which not only imposes new duties of disclosure of information on companies, whether in the directors' reports and their accounts or in registers kept for the purpose, but extends both the existing and the new duties to those private companies which are at present exempted from having to attach a copy of their accounts, auditors' report and directors' report to the annual return which has to be filed with the Registrar.

We have not contested the desirability of requiring greater disclosure in general on the part of companies, although we have questioned the relevance and usefulness of, for example, compelling all companies supplying goods to include in their directors' report a statement that they have not made any direct exports, or, if they have, a statement of the value of their direct exports. Nor have we contested the proposition that as much disclosure, to use the words of the Jenkins Report, as is necessary to protect those who trade with and extend credit to limited companies is the appropriate price to pay for the privilege of limited liability.

In the case of companies whose shares are offered to the public and quoted on the stock exchanges, it is right that the fullest possible information should be given, not only to shareholders, but also to the investing public as potential shareholders. But in the case of private companies whose shares are neither offered to the public nor quoted on stock exchanges, while it is also right that the fullest possible information should be given to shareholders, it does not seem right that information which is not necessary for the protection of those who trade with, and extend credit to, them should be disclosed to the Registrar and made public if it could be embarrassing or prejudicial—damaging, as the noble and learned Lord on the Woolsack said—to the business of the company. There is perhaps a difference of opinion up to a point in this matter, but the Government conceded this point in regard to the disclosure of rents payable, and amended the Bill accordingly in general.

The House also carried an Amendment, against the Government' sadvice, exempting private companies from the requirements in the Bill that there should be shown in the accounts the number of salaries of employees in excess of £10,000, in bands of £2,500, and a breakdown of emoluments of directors, and also of turnover between various classes of business carried on by the company. As the Bill stands, private companies (and in this matter I am not at one with the noble and learned Lord on the Woolsack; but all I can say, if this is not so, is that it is certainly what we intended) will still have to state the total emoluments, pensions and compensation paid to directors and past directors, and their total turnover in their accounts, although Jenkins was prepared to exempt them from still having to give this information. The Bill as it now stands, as we intended it to be, and as I believe it is, seems therefore to be a reasonable compromise between the conflicting views of the Jenkins Committee and of the Government, and I hope that the Government will commend it to another place.

Among the requirements for disclosure is one which has caused the House a little trouble, not so much for itself, but as to the kind of action to which it could give rise. I refer to Clause 18, which requires the disclosure of charitable and political contributions if in total they exceed £50, and also the disclosure in the directors' report of any individual political contribution exceeding £50. We are glad that the Government accepted the view, expressed on both sides of the House, that individual charitable contributions exceeding £50 should not be recorded in the directors' report, but should be listed at the company's registered office and available for shareholders to see if they wished.

There are three matters still outstanding, and I hope the Government will deal with all of them in another place. The first is the danger of discrimination. I have expressed the view that there is cause to believe that, while it is reasonable that shareholders should be able to know what contributions have been made by their company for political and charitable purposes, publication of this information could result in discrimination against the company on the part of those who disapproved of the political purposes for which the contribution was made. The noble Lord, Lord Brown, in the course of the Report stage said this: I would say, however, that the Government are in a sense wholly in sympathy with the feeling behind these Amendments, for they would specifically deplore the action of a public body which expressly stated that it was going to refuse to place contracts with companies which had or had not given political or charitable contributions in a particular direction."—[OFFICIAL REPORT: 23/1/67, col. 377.] The clause which I moved on Report was criticised as going too wide, and it was pointed out how difficult it is to legislate against discrimination. But of this, at least, I am sure. Local authorities and public corporations should set an example in this matter. I am equally sure that it would not be beyond the skill of the Parliamentary draftsman to make it unlawful for any local authority or public corporation to say, when issuing invitations to tender or awarding contracts, that they were going to take account of any political or charitable contributions which companies may have made. The Government have indicated their disapproval of such discrimination, and I would simply say that action and not words is needed to prevent it.

The second point is whether £50 is not too insignificant an amount to warrant disclosure. My noble friend Lord Erroll of Hale suggested 100 guineas in the Committee stage, and in view of the fact that at the time when the Government undertook to increase the amount of £25 originally in the Bill Ministers themselves thought that £25 for charities, plus £25 for political purposes, was meant, the Government have not, in fact, gone further than Ministers thought the position to be originally. In those circumstances, I feel sure that the Government will be willing to reconsider the matter.

Thirdly, there is the question of the effective date when these particular provisions come into effect. Clause 18 differs from Clauses 16, 17 and 19, in that the directors' action may depend on whether or not it has to be disclosed. Directors may wish to disclose in their report that they have made a contribution to this Party or that charity, or they may not wish to do so; and if they are required to disclose they may prefer not to contribute at all. But, at least, surely this is true: that they should not have to decide whether or not to contribute, and if so how much, without knowing definitely what the law will require after the Bill has become law. So it follows that any contribution made before the Bill becomes law should not be required to be published in the directors' report; otherwise, the Bill would contain a truly retrospective element. That is why I moved an Amendment that the operative date for disclosure should be July 1, 1968, on the assumption that the Bill is likely to become law before next June. The noble Lord, Lord Brown, undertook on behalf of the Government to consider this, and I hope that the Government will amend the Bill in another place.

Finally, the House has also amended the Bill to provide that the authorised capital for a company may consist wholly of shares without nominal or par value. No objection has been expressed to the substance of these provisions. The clauses that have been inserted are so skilfully drafted that the only way in which it is possible to distinguish them from the rest of the Bill is that in them the word "authorization" is spelled with a "z", and with an "s" elsewhere in the Bill. I very much hope that the clauses will remain in the Bill. As the noble and learned Lord on the Woolsack said, they can be activated only by an Order under Clause 35, and will certainly not be activated until the Treasury have looked to see what consequential changes, if any, are required in income and other tax legislation. The fact that they are in the Bill should encourage the Treasury to get on with it. These Amendments, in our view, make the Bill more useful. They certainly cannot be said to be any less in keeping with the rest of the Bill than Part III, which deals with moneylenders, although I would agree that, so far as the moneylenders' provision is concerned, there is an element of urgency.

Quite apart from this improvement, the Bill has certainly been improved during its passage through this House, and we are glad that the Government have accepted or implemented some of our suggestions. There are some, however, which they have undertaken to consider but have not yet implemented, so the good work is not yet finished.

4.37 p.m.

LORD MILNE

My Lords, I should like first to echo the remarks of the noble Lord, Lord Drumalbyn, with regard to both the noble and learned Lord on the Woolsack and the noble Lord, Lord Brown. When I spoke on the Second Reading I indicated certain Amendments which I considered desirable but on which, in fact, I did not wish to anticipate the views of expert bodies concerned. What I had forgotten, if I ever in fact knew, was that, other than in Bills where Parliamentary agents act for interested parties, there is no mechanism for converting views into Amendments, even in technical Bills where drafting is all-important; that is, of course, unless a submission is accepted by the Government, with or without prior debate, or unless one can arrange it through one's own resources, which are limited by time. I mention this partly to explain my silence in the later stages of this Bill, but also because it seems to me that where clauses are departures from a prior Report, or are entirely new, it would in the long run improve the quality of the result if every opportunity was taken for prior consultation with the principal expert bodies which are going to be concerned.

As an accountant I realise that, in the past, lack of consultation has not been entirely the fault of the Government of the day, but it seems now that this important step can and should be realised. It so happened that in this event the bodies with which I am concerned were not able to keep up with the pace set by the Government, and their views are only now available for consideration in another place. Your Lordships rightly pride yourselves on the care with which Bills are examined and the quality of the result. In this latter respect, I do not feel that we should be entirely satisfied with this Bill, in spite of the heroic stand put up by the noble Lord, Lord Drumalbyn, and the noble Lord, Lord Erroll of Hale, to which reference has already been made. I feel that Company Law has been confused somewhat by political irrelevancies masquerading as meaningful disclosure.

Finally, as the insurance sections were so urgent, and in view of the fact that the Government must have known at the outset what was not known to this House—namely, that a further Companies Bill was contemplated—would it not have been far wiser to arrange the insurance clauses as a separate Bill, which could have gone through its stages with considerable dispatch? As it is, in due course we shall be having what is, in effect, a third bite at Company Law, at the cost of all concerned with it, having delayed the essential for what is at this moment a trivial aspect in comparison with the fundamental problems of business ethics which, as the noble Lord. Lord Goodman, and daily events remind us, remain unsolved.

4.40 p.m.

LORD HAWKE

My Lords, it is very often your Lordships' custom on the Third Reading of a Bill to say what a fine Bill we have succeeded in passing. Personally, I have never been very keen on legislation. I think the rogues merely get more astute, and it increases the number of Government servants needed to try to catch them. In this respect this Bill is no better than most others. During the passage of the Bill I have made criticisms on one or two grounds. The first was on the main theme, which is the increased bureaucracy which will be required to deal with this business of disclosure by the numerous small companies, which I believe will serve no very useful purpose. Secondly, I have criticised the lack of some provision to tighten up the law in regard to banks which are not strictly banks. Thirdly, I have criticised the insurance provisions. Here, I declare an interest as being a director of a small tariff insurance company. In my view, the provisions in the Bill are quite inadequate as regards motor insurance—and my friends in the insurance world agree with me.

Since the Second Reading we have had a flood of disclosures of motor insurance swindles—because that is what they are—which the Board of 'Trade claim they need more powers to counter. But some insurance people believe that the Board of Trade have had the powers the whole time. Your Lordships may have seen a letter from Mr. Smeddles, the General Manager of the Royal Insurance Company, to that effect in The Times last week. My friends believe he is correct. On the other hand, from the Sunday Times last Sunday your Lordships may have seen that their correspondent believes that the Board of Trade have not got the powers. However, whether the powers exist now and are not used because the department of the Board of Trade is inadequately manned and too weak, or whether the powers do not exist, something must be done; and, in my view, whatever merits the provisions of the Bill may have in regard to fire insurance, its provisions are quite inadequate and unsuitable for motor insurance.

After all, (motor insurance is a special case. It is the only case where the risk to the general public is as wide as it is to the insured. If a house burns down, the sufferer is the insured. If the company does not pay, he is the sole sufferer. But if there is a motor accident, it may be innocent members of the public who are the sufferers, whether as victims or as passengers. The law provides that every driver must have third-party cover. That is to cover his direct victims. In addition, if something goes wrong with the policy, there is the sort of long-stop in the shape of the Motor Insurers' Bureau—which, incidentally, is financed by the solvent and good companies—by means of which his direct victims can be compensated in the event of his company not paying up. But there is no such compensation for passengers unless they are the victims of proved negligence.

To-day, public transport is drying up all over the country. Those who have not got cars are more and more depending on lifts from friends, acquaintances and even strangers. Cars are borrowed; and there is no means of knowing whether the insurance is or is not valid. All these doubts arise from two factors, the first of which is the cost. A great many people run cars who, on an accountancy basis, cannot afford to do so at all. They have to cheesepare on tyres, on insurance, on everything. They take the minimum cover that the law requires; and they get it through a broker who may have no qualifications, or who need have no qualifications, who may or may not know anything about the quality of the insurance he is selling and who, in any case, may be tempted by the very large commissions which are paid by the dud companies. In fact, there is a considerable case for saying that the broker's commission should not be paid by the company at all but should be paid by the insurer as an introductory fee. There are other people who regard insurance as sheer robbery and who buy the cheapest they can; and, as your Lordships know, in every walk of life you get what you pay for.

The second factor is risk. The premium demanded by a respectable company for insuring certain types of drivers and certain types of cars is very heavy, even prohibitive in cases. This is based on experience, not on robbery; and, in fact, many drivers cannot get cover for passenger risk, even if they want to do so. The combination of these two factors makes motor insurance absolutely wide open for the crooks, who will quote cheap rates and then, as soon as the claims start to roll in, will disappear with a good part of the premiums. Anybody who listened to the B.B.C. last Saturday morning heard an account of what pertains in the United States of America. I gather that the situation there is worse than here, and we seem to have imported some of their rogues into this country.

What is the remedy? First of all, we have to circumvent the crooks. I think we must have much more stringent provisions for motor insurance. There should be substantial deposits in short-dated gilt-edged, with the Board of Trade or a banker's guarantee. There should be reinsurance treaties with members of the British Insurance Association or with Lloyd's, and there should be immediate notification should the reinsurers refuse to fulfil or renew a treaty. These last two provisions would almost automatically stop any roguery, and would be a tremendous safeguard.

People will say that this would stop young people from setting up new motor insurance companies. I do not mind, my Lords. People are much too tenderhearted on this issue. Anybody indulging in motor insurance is the sole guardian of any member of the general public who is the victim of a motorist, and we cannot afford any sloppy sentiment about making it easy for people to start up such a business. After all, if you want to underwrite at Lloyd's you have first to show a large fortune, you have to put up a large deposit, and then you have to accept unlimited risk and be one of twenty or thirty members of a syndicate. Why on earth should anybody be allowed easier conditions to set up a limited liability company to do the same job, and get away with it?

That still leaves another problem unsolved, and that is the uncovered liability—the damage done to others which has not got to be covered by the law and which in practice is not covered by a great many of the policies. I should like to see it impossible for any passenger in a car to be uncovered. I should like to see every car covered for any licensed driver. The market might say that the cost of this would be prohibitive. That may or may not be so; but until we get the figures, we cannot know. Certainly the present position, if these risks are not covered, is highly unsatisfactory to the general public.

I think that a Working Party of Government and insurance officials should be asked to attempt to ascertain the cost of covering these risks. If we get the figures, we can then have an idea of the cost of providing the cover. Undoubtedly funds could be raised. For instance, the driving licence is remarkably cheap in this country. A £3 or £5 driving licence would raise an enormous sum of money. I should have thought it would have been more than ample for the job required. But certainly I regard this investigation as most important. There is not one of us who does not accept a lift at times and few of us who do not occasionally drive somebody else's car, even if only for a few yards. Could we, or do we, demand to see the policy? Of course not. In fact, does the owner know what is written in small print? By no means always.

The market might have two main objections here. First, they might say that this is not proper underwriting, because a fiat rate is charged for a wide variety of risks covering a wide variety of drivers. My reply to that would be: "We are not covering drivers; we are covering the general public—just as a personal accident policy covers widely differing risks to widely differing people at the same rate." They might then say: "This is the thin edge of the wedge of State insurance." My reply would be "Insurance against calamity is a very personal matter. Nobody would want to have to get a claim paid by a State bureau. Imagine trying to get an ex gratia claim out of a State bureau!" Ex gratia payments form a very important part of insurance in this country.

My Lords, there are plenty of ways by which a scheme financed by levy on the licence could be operated by the insurance market with no risks to public funds. For instance, one could enlarge the scope of the Motor Insurers' Bureau, top it up with funds derived from levy on the driving licence and have Government representatives on the Bureau to see fair play in the administration. I hope that the Board of Trade officials will not turn down this suggestion automatically because they have not thought of it themselves (which I am afraid is sometimes a habit of the Civil Service), but will put it to the Minister and let him give some thought to it: because I believe that this is something which would fulfil a very long-felt public need.

4.54 p.m.

THE LORD CHANCELLOR

My Lords, I am grateful to all who have taken part in the discussion on this Motion. The noble Lord, Lord Drumalbyn, raised a point about insurance provisions in the Bill. The Government will certainly consider, before the Bill comes before another place, whether they need any amplification in the light of recent events relating to motor insurance companies.

In discussing how far the Ombudsman could investigate a case in which my right honourable friend the President of the Board of Trade came to the conclusion that certain people ought not to be given authority to start an insurance company, the noble Lord then said that, by a recent Amendment in another place, his power had become so limited that it would be useless in this case because that was an Amendment to provide that the Ombudsman could not overrule the discretion of the Minister. This is not the day on which to start a consideration of the Parliamentary Commissioner Bill, but I can assure the noble Lord that he is quite wrong. It was never intended by Justice, or by anyone who has been in favour of the Parliamentary Commissioner, that he should be a one-man universal court of appeal from every policy decision made by every Minister. What he would be entitled to do in the case put is to walk into the Board of Trade and cross-examine my right honourable friend, or any civil servants, to find out exactly what material they had before them when the Minister made his decision.

It is, of course, the essence of a question of discretion that the circumstances are such that one man might have one view and another man a different view. One could not have the Parliamentary Commissioner overruling a Minister on a question of discretion without making him a one-man appeal from every policy decision or discretionary decision by a Minister. But what he will be entitled to do is to say, and report to the Select Committee, that the Minister had not acted properly in the matter because all the material on which he came to the conclusion that the applicants ought not to have authority to start an insurance company was so-and-so; that the Minister ought to have checked it with other people. Or the Parliamentary Commissioner might find that it was a casein which, when the Minister came to his decision not all the relevant documents in the Ministry had been put before him. So the Commissioner will certainly be able to check on every administrative point. The only thing he will not be able to do—and which nobody has ever supposed he would—is to overrule what is a policy or discretionary decision by a Minister.

The noble Lord again raised on some points arguments which were discussed at length during the Committee stage. I am sure he will not want me to reply again to them. As to discrimination, we are all agreed how undesirable it is. The sole difference between us is whether or not it can usefully be stopped by an Act of Parliament. The Government do not say that it cannot be stopped: we may yet in this Parliament have to consider again the question of racial discrimination. But it is, I think, a very difficult field. I can certainly undertake that my right honourable friend will consider again the question of the £50, and whether this ought not to be a higher figure—indeed, I know that he intends to do so. I will also see that he takes into account what the noble Lord said with regard to the dates of particular sections coming into force.

The noble Lord, Lord Milne, spoke of the need for prior consultation and said that there is only now available the views of accountants and others who ought to have been consulted. I agree with the noble Lord in principle. I am a little surprised about this particular case, because the bones of the Bill were published in the lifetime of the last Government, of the last Parliament; so I should have thought that in this particular case they had had time, although certain provisions have been added since. A Government is always, in a sense, in conflict between time, on the one hand, and wanting to take advantage of proper consultation, on the other.

I am convinced myself that certainly, generally speaking, in the field of law reform, consultation is vital. I know that the Law Commission found this. Nearly all the time which the Law Commission take over the preparation of reports and of a Bill is taken up by consultation: always, of course, with the Bar Council, the Law Society, the Society of Advanced Teachers of Law, and so forth; and, in particular cases, with outside lay bodies. They regard this consultation as essential, as I am sure it is.

It may be that we shall live to see the day when Members of both Houses themselves are given a good deal more information than they have at present about the Bills which are before them. It may be that we ought to have with every Bill a much longer Explanatory Memorandum than we now have, explaining what is the mischief which the Bill intends to cure, and how it is to be done. As noble Lords will know, Ministers have the advantage of having notes on clauses explaining exactly what each clause is intended to do, and how. It may be that there is no real reason why these notes on clauses should not be available to every Member of both Houses. It would make for a much more intelligible discussion on a Bill and would save a good many Amendments being put down simply for the purpose of "probing", as it is phrased, of finding out what is behind a particular clause. I see no reason why all the Members of both Houses should not know that from the start.

Then the noble Lord, Lord Hawke, raised a point which indeed he had raised on Second Reading, about whether there ought not to be some new entity, halfway between a bank and a limited company. There may be a good deal to be said for that, and it is the sort of point which the Government will now have time to consider before the second Bill is introduced. With regard to the matter of insurance, I will see that what the noble Lord has said is conveyed both to my right honourable friend the President of the Board of Trade and to my right honourable friend the Minister of Transport. I cannot honestly say, speaking personally, that I differ from anything the noble Lord has said. I have never understood why, if it is right to provide insurance against a claim by somebody in another motor car whom you injure, it is not equally right to provide for insurance against a claim by a passenger in your own car. I once read through all the proceedings—Committee stage and all—in both Houses on the original Road Traffic Bill to find out the reason why, when we started compulsory insurance, we excluded passengers. To my surprise, I found that nobody raised the point in either House at any stage of the Bill, and if I may say so (I speak personally rather than for the Government) I have always had the greatest sympathy with the view which the noble Lord, Lord Hawke, expressed.

LORD HAWKE

My Lords, may I enlarge slightly on one point, because it might help later on? I believe that the ordinary insurance companies would find that covering these people—particularly some of the younger, more reckless drivers—for passenger insurance would require a premium so prohibitive that such people would never drive at all.

THE LORD CHANCELLOR

My Lords, that might be a good thing. I think I am right in saying that our motoring insurance premiums are substantially lower than those in other countries, and it may be right to say that if people cannot afford to pay the premiums to provide for compensation to be paid to those they injure, they should not be driving what is a dangerous machine. I know that my right honourable friend the Minister of Transport is considering this carefully, but that is not really the main difficulty. I do not think that the premium would be exorbitant.

The main difficulty is that the motorcyclists and the motor scooterists are a powerful lobby. There are a great many of them. Naturally, a great many of them are not people of means, but they can afford this kind of transport. There is usually a place on the vehicle where a passenger can be carried, but many of the drivers say, "I never carry a passenger, I have no intention of carrying a passenger; why therefore should I pay a premium for a risk which cannot arise?". It is this difficulty about motorcyclists which, so far, has always proved to be the biggest difficulty in practice in implementing the views which the noble Lord has expressed. May I say again how grateful I am to these noble Lords who have taken part in the discussion on this Motion, and I hope that we can now send this useful Bill on its way.

On Question, Bill passed, and sent to the Commons.