HC Deb 13 December 1937 vol 330 cc850-71

4.56 p.m.

Mr. Shinwell

I beg to move, in page 4, line 26, at the end, to insert: (a) where the lease was granted prior to the first day of November, nineteen hundred and thirty-five. This is an Amendment of a fundamental character. The Clause provides that existing mining leases are not to be interfered with by the Commission. Such leases are regarded as a retained interest, which in effect means that after the Commission have taken over under the Bill they cannot override the leases and all that pertains to their working. The Government announced their intention to nationalise coal royalties in 1935, I believe on the eve of the General Election, and in my submission only leases entered into before that date should be regarded as retained interest. It means that all leases entered into subsequent to the announcement of the Government's intention should be regarded, not as retained, but as acquired.

There is a justifiable parallel for our Amendment. It is not the practice of the Government when they propose to purchase land or property to announce their intention, because the price of the land or property would rise. They proceed quietly, by secret negotiations, which are probably in the hands of other parties operating for the Government to acquire the land or property which the Government believe to be necessary. That is done to protect the Exchequer. The intention of the Bill is to give the Commission power to acquire coal royalties and operate them in the national interest. If we permit retained interest to arise as between 1935 and the vesting date, leases of an unfavourable character and detrimental to the Commission might be entered into, leases which might render nugatory the activities and functions of the Commission. It is against that objectionable practice that we protest and have put down the Amendment.

The figure, it will be remembered, has been fixed by a tribunal. How far retained interests arising during the period between 1935 and the vesting date will affect interests within that figure it is difficult to say. But clearly it would be unfavourable to the Commission, as it would affect the compensation that would have to be paid in certain cases. Over and above that, an important principle is involved. The Government have hesitated about introducing this important Measure, and in doing so they have afforded a breathing space to royalty owners and mining undertakings, who could enter into leases favourable to themselves. If the period were to end at the date of the introduction of the Bill, perhaps no serious objection could be taken, but as the period is to be extended from 1935 to the vesting date it is unfair to the Government and particularly unfair to the Commission. For those reasons, I hope that the Amendment will be accepted.

5.1 p.m.

Captain Crookshank

I see the point which the hon. Member for Seaham (Mr. Shinwell) had in mind in moving the Amendment, but I am not sure whether he has realised the consequences that would follow if the Amendment were adopted. Of course, all the leases will continue to run. The Commission will not make a breach on any contract, and anybody who has a lease will go on with it. If it is said that leases entered into subsequent to a certain date shall not be retained leases, but shall be acquired, it will mean that those leases will not have been paid for. They will thus represent an additional sum that will have to be charged over and above the figure which it was agreed would be proper compensation for certain things. It would obviously be unfair to include other interests and say that the sum must cover them as well.

The hon. Gentleman gave as a parallel the fact that when Government Departments purchase land, they do so "on the quiet," foreseeing that otherwise some rights adverse to the Government might be created, but I do not think he meant to suggest that in this case the Government ought not to have told anybody and ought suddenly to have launched the scheme without having made any public declaration of their intention or talked it over with various people interested in matters of machinery and so on. Therefore, I do not think the parallel which the hon. Member gave applies very far. He said that leases detrimental to the future work of the Commission might have been granted since the beginning of November, 1935, and may still be granted. Taking the date of November, 1935, it is true that the proposal appeared in the Government's programme at the General Election, but I do not see why we should be tied down to that date. After all, the matter was first broached as a possibility in 1919, and certainly last Summer the hon. Member was very doubtful whether such a Bill would be introduced. If he had doubts and if doubts existed in the House, it does not seem to me to be very likely that people would have been granting leases at that date which would be detrimental to the possible future work of the Commission. Moreover, the hon. Member must not overlook the effects of Clause 9, which deals with leases granted during the interim period between the valuation date and the vesting date. It is laid down in that Clause that a draft of the proposed lease must be delivered to the Commission at least two months before the date on which it is to be executed. That will operate from the valuation date. It is not probable that many leases will run out during that period—

Sir S. Cripps

It is not necessary for a lease to run out before a new one is granted. An old lease can be given up and a new one granted in its place.

Captain Crookshank

The Amendment would mean that any new leases granted in the period in question would become acquired interests, and the Commission would have to pay compensation for them. That does not seem to me to be a practical proposition. The compensation could not possibly come out of the figure of £66,000,000, and therefore it would have to be an extra financial burden on the Commission. I cannot recommend the Committee to accept the Amendment, because it seems to me to go a great deal too far. It would mean that compensation would have to be paid for interests for which a great deal of money had already been paid. Hon. Members opposite have moved to reduce the amount that is to be paid, but in this case they are suggesting that we should add to the amount. I am afraid they are not very consistent.

5.7 p.m.

Sir S. Cripps

I do not think the hon. and gallant Gentleman has met the point of the Amendment. Let us begin with the date with reference to which compensation moneys were assessed. They were assessed on the basis of the average yield of royalties over a period of years, assuming, of course, that the leases then existing would continue in operation; that is to say, in cases where leases ran out, the purchaser would get the benefit of being able to release the royalty on whatever terms he liked. It was on that basis that the figure of £66,000,000 was arrived at. Clearly, it is fair that the person who purchases on that basis should, when he gets the freehold, not be in a worse position than is represented by the restrictions on that freehold which existed when the figure of £66,000,000 was arrived at. The figure of £66,000,000 was arrived at, roughly speaking, prior to 1935. Therefore, it is fair and just to say that, as the sum that is to be paid has been fixed in relation to the year 1935, the conditions on which the compensation is to be paid should also be fixed with regard to the year 1935.

What might happen? It might be that in a number of cases the leases would be running out. It might be that in a number of cases there would be disadvantageous terms in those leases. As far as I can see, there is nothing in the Bill that would prevent the royalty owners from granting fresh leases on terms infinitely more favourable to the coalowners. There would be nothing to prevent that up to the time when the valuation occurred, because until the valuation date came, there would be no restriction whatever upon the royalty owners. Let us suppose that a royalty owner has a considerable interest in a mine, and says, "I would not mind foregoing my royalties during the next two years, because in any case I shall get my whack of the £66,000,000 and the only difference it will make will be in what I receive annually during the next two years. I will fix up a long-term lease on the basis of low royalties; and as I am interested in the coal-mining company, I shall get the benefit of that new lease for the next 50 years. I will get the company to give up the old lease and fix up a new lease." There is nothing in the Act to stop that.

Between now and the valuation date, every lease in the country could be recast in favour of the owner and against the Commission. That would be an impossible position, seeing that the Commission are to pay on the basis of the leases existing in 1935. I do not suggest that this Amendment is the best machinery for stopping that sort of thing. My hon. Friends have moved the Amendment in order to raise the point at an early place in the Bill. Clearly, in the case of a Bill of this sort, no private Member can produce a draft which will be accepted by the Government, but we raise the point because it seems to us to be a real and genuine one. It is a legitimate point that must be considered by the Government. It would not be fair to leave the Commission in the position of having handed to them on the valuation date property which was completely different from that for which they had paid. What the Commission will pay for is the royalty, subject to the restriction which then existed in form. We cannot leave the position such that the royalty owners can completely change the form of property which is to be handed over to the Commission. I do not say that the date of November, 1935, is the right one; it might be more accurate to take the date on which the final instalment of the royalty under the valuation of £66,000,000 takes place; but one or other of those dates ought to be adopted.

The hon. and gallant Gentleman said that if the Amendment were adopted, there would have to be extra compensation. But these leases will have been paid for, and there is no reason why there should be compensation. If the leases had, in fact, been granted since on conditions which diminished the value of the freehold, and if there were compensation for that, it would mean that the Commission would be paying twice over. The Commission have the right to ask the royalty owner to hand them the property in exactly the form in which it was valued under the figure of £66,000,000. I suggest to the hon. and gallant Gentleman that the Government should devise a new Clause or Amendment in order to make certain that when the Commission pay the £66,000,000, they will get the property for which they are paying, which will not be the case, unless some provision of this sort is inserted.

Let me take a hypothetical case. Suppose there were a coal mine which had not been opened at the date when it was acquired at the end of 1935, but that since that time a new lease had been granted for 50 years. What the Commission would be paying for would be coal on which there was no lease and as to which they had absolutely free disposition. That would be the basis on which the £66,000,000 would be calculated. What the Commission would get would be coal granted away perhaps at a royalty of 2d. or 3d. a ton for 50 years. They could not alter the lease, and it would be a retained lease. Nobody could justify that set of circumstances unless the royalty owner is prepared to pay compensation to the Commission for not giving them that to which they are entitled. It is not a question, in the circumstances which we are suggesting, of the Commission paying for something, but it is a question, in the circumstances as they are set out in the Bill, of the royalty owner paying the Commission something—assuming that the new lease has altered for the worse. This matter is not of monetary importance only. This is a Bill to assist in the reorganisation of the industry, and presumably it is desirable that there should be as little retained interest as possible, because the shorter the retained interest the more flexible the arrangement and the greater the opportunity for the Commission to use their powers in the reorganisation of the industry.

Suppose that the Mining Association were to say, "We do not like this Bill," and got into touch with the royalty owners, and that the royalty owners said, "Before the vesting date we are prepared to grant you a complete new series of leases throughout all the coalfields for 100 years." What is to prevent them? Absolutely nothing. The Commission then, instead of having leases falling in from time to time, thus giving them the opportunity to assist reorganisation, would be faced with a cast-iron position for the next 100 years and with a retained interest of 100 years in every coalfield. There is nothing in the Bill as it is to prevent that. I hope I have not put an evil thought into the minds of the Mining Association, but that is an obvious way of defeating this Measure. They can say, if they like, "Let the Bill go through; we have made up our minds to make it ineffective." I hope that the Secretary for Mines will see to it that something is done in order to remedy that situation.

5.18 p.m.

Mr. Denman

I am glad that the hon. and learned Member for East Bristol (Sir S. Cripps) has developed at this stage a point which I ventured to make in the Second Reading Debate. I do not suppose that the hon. and learned Gentleman has done me the honour of reading my remarks on that occasion, but I then gave a couple of examples of what would be permitted under this Bill during the period between now and January, 1939, in regard to the making of new leases. I think the hon. and learned Member agrees that this Amendment is not appropriate to deal with the subject. Nor does it matter, I submit, that leases have been created since 1935, because those leases have all been on standard lines, and the Commission when they take them over will benefit from them. The hon. and learned Member seemed to think that the Commission would be in some way injured in regard to mines opened since 1935 and fresh leases granted for, say, 50 years. I think that in that supposition he neglects the whole principle of the global figure. The global figure is the sum to be paid as compensation for all coal measures at a given moment. There will always be some measures whose working is almost or is quite completed, and there will be cases of fresh measures having been opened, but at any given moment during the period to which the valuation applies, that figure is appropriate to the revenue that will be obtained, from one year to another, from the coal measures. So long as normal leases are being granted, that is an advantage to the Coal Commission.

I agree with the hon. and learned Member, however, that from now until 1939 there is a danger of the creation of special leases which could injure the Commission. There is the type of lease which is fore-shadowed in a very interesting Amendment to Clause 12 in the name of my hon. Friend the Member for North Leeds (Mr. Peake). He there suggests that a colliery owner who owns his own coal should be able to obtain a lease at a peppercorn rent. The owner thereby, of course, would forego any share of the £66,000,000. Realising that he could not get, in capital compensation, an amount adequate to repay him for the coal, he can get it in another way—by not having to pay any royalty whatever hereafter. It is suggested that that should be done by a lease from the Commissioners, but as the Bill stands now it can be done without reference to the Commission at all by leases granted by a subsidiary colliery owner to the principal colliery owner and leases taken out some time between now and January, 1939. That will mean that the Commission will be taking over a lease from which it will get no revenue, and the colliery owner will be able to take the coal free. Surely that is highly disadvantageous to the Commission.

I suggest that my hon. and gallant Friend the Secretary for Mines will have to consider the position which will be created by allowing complete liberty for the creation of leases between now and January, 1939. From that time until the vesting date the Commission have adequate control, and there can be no danger then, but in the period of complete freedom I see a real danger. It is not merely a question of danger. There is some embarrassment also, because in granting leases now, it is rather difficult to know what is in the best interest of the coal-owner now and of the Commission hereafter. The Ecclesiastical Commissioners naturally want to grant leases which will be in harmony with the spirit of this Bill, but it is not easy to say what is in harmony with the spirit of the Bill or whether the Commission will like leases for 20 years or for 40 years. They will obviously like the best royalty they can get. But there are all kinds of details in these leases, and it is not plain what the interest of the owner of the coal is now and what the interest of the Commission hereafter will be. I suggest that the Government should, between now and the further stages of the Bill, devise a method by which leases made up to January, 1939, shall come under some simple supervision.

5.22 p.m.

Mr. H. Mitchell

I listened with great interest to the speech of the hon. and learned Member for East Bristol (Sir S. Cripps). He said that there was a danger of a royalty owner who was interested in a colliery company entering into a lease during the intervening period which, while involving a sacrifice of rent would bring him back profit in another direction and would be to the disadvantage, ultimately, of the Commission. There might be something in that suggestion if we were dealing only with a few royalty owners who would be able to get together and agree to act in that manner. Actually, however, there are about 5,000 royalty owners, and if one or two of them acted in that way, they would be depreciating the interests of the royalty owners. If any royalty owner acted in such a way as to reduce the fixed rent or royalty, is it not obvious that such an individual would get a smaller share of the compensation than the other royalty owners? I think it is plain that in present circumstances no royalty owner would act in such a way.

Sir S. Cripps

But surely the basis of his share of the £66,000,000 is the valuation of the coal? It is not a question of the rent which he gets. I do not imagine that a man who was getting a royalty of 1s. 6d. would necessarily get three times as much compensation as the man who was now getting a royalty of 6d. The basis is the valuation.

Mr. Mitchell

The point which the hon. and learned Gentleman has raised is an interesting one, but I think that the only possible way of valuing coal is on a royalty basis, and also on the basis of the fixed rent. I cannot imagine any other method on which it will be possible for the appointed valuers to proceed. All my experience of coal leases has tended to show that that is the recognised method of valuation. Therefore, while, as I say, I have followed the hon. and learned Gentleman's argument with interest, I think the risk of all the royalty owners getting together and depreciating their property uniformly is very remote. I think also it would be a pity if any Amendment were made in the Bill which would make it impossible for new leases to be entered into in the intervening period. I know of cases where leases are now in negotiation in the ordinary course for the starting up of collieries in the Special Areas and it would be a pity if it were made impossible to enter into such leases. [HON. MEMBERS: "Where is that? "] In Scotland. That is a particular case which I have in mind, and I give it only as an illustration. The Minister ought to bear these considerations in mind before agreeing to any Amendment of the Clause on the lines indicated.

5.26 p.m.

Captain Crookshank

I am sure the hon. and learned Member for East Bristol (Sir S. Cripps) will agree with what my hon. Friend the Member for Brentford (Mr. Mitchell) has just said. What the hon. and learned Gentleman is trying to guard against is not so much the granting of leases in itself, as the granting of leases on what would, in the ordinary way, be considered rather abnormal terms. We could not sterilise the whole industry for the next three or four years. The work has to go on. But what the hon. and learned Gentleman wants to prevent is anything improper. I agree with my hon. Friend who has just spoken that the chances of 100 per cent. of the royalty owners agreeing to do something is exceedingly remote, and I do not think we need bother about that possibility. But what hon. Members opposite fear is that some leases might be altered, for one reason or another, in a manner which would be detrimental to the Commission. As my hon. Friend the Member for Brentford has just said, if leases were made now on terms which provided for a very small income from the royalty, it would depreciate the amount of compensation, because I am sure that the income arising from the royalty is one of the considerations which the valuers will take into account.

Sir S. Cripps

May I point out that there are two different things involved? There is the average rent which a property, whether it be a mineral property or a house or anything else, will produce. That is certainly taken into account. But there is also the specific rent, which is not taken into account. Suppose a valuation is being made of a row of houses which are all about the same. One may be let at £40, another at £50, a third at £45, and so on. The valuer will not value the house which is let at £50, higher than the house which is let at £40, if they are, generally speaking, houses of the same sort. The rent is merely the idiosyncrasy of the individual. The valuer will value all the houses, in relation to the average rent paid for that type of house in that type of district. In the same way, if there was a particularly low rent payable in the case of one royalty and a particularly high rent payable in the case of another, the valuer would eliminate that as a factor and take the average which was paid in the area.

Captain Crookshank

I think the answer to that point is that the rules of valuation in the case of minerals are quite different from the rules applicable to the valuation of other property, but I do not propose to argue with the hon. and learned Gentleman about a point which is really one for the professional valuer. I have been interested in this discussion, and I am much obliged to the hon. and learned Gentleman for having raised the subject. I cannot give any undertaking in the matter, but I shall consider it further with my right hon. Friend, in order to see how much substance there is in the point put by the hon. and learned Gentleman. It really narrows itself down to the possibility of improper leases being made during the short period up to the valuation date. I cannot go too far back, and I would would point out that the valuation date which is fixed in Clause 9 safeguards—

Sir S. Cripps

The point of time to which I suggested the hon. and gallant Gentleman should go back was the point of time at which the £66,000,000 was fixed. That is the material point of time. Leases made between that time and the valuation might alter the position of the Commission. I do not use the term "fraudulent" or any word of that kind, but leases might be altered for many reasons, collusive or otherwise, and that might materially alter the position of the Commission in respect of something for which they are to pay £66,000,000.

Captain Crookshank

As I say, in the absence of my right hon. Friend I cannot give any undertaking, except that we shall look into the point which the hon. and learned Gentleman has suggested.

Mr. Shinwell

In view of what the hon. and gallant Gentleman has said, I beg to ask leave to withdraw the Amendment

Amendment, by leave, withdrawn

5.33 p.m.

The Attorney-General

I beg to move, in page 4, line 33, to leave out "not".

There are several other Amendments to Clause 5 on the Paper in the name of my right hon. Friend which are consequential on the Amendment I am now moving, and it will probably be convenient if I deal with them all together. As the Bill is drafted, the Committee will see that in Clause 5, Sub-section (1, b) there is a provision that an interest in coal shall be a retained interest where the term of years created by the lease is held in reversion as aforesaid, if the interest is not one as respects which a direction is given under the nevt succeeding Subsection. That is to say, the Commission do not take the reversionary interest under subleases unless they give a direction that they desire to do so. The effect of these Amendments is to reverse what I may call the onus and to say that the Commission shall take rights in reversion on the sub-lease, unless they give a direction that they do not want to do so. How does all this arise? If one takes the ordinary, simple case of one royalty owner and one lessee or colliery company, it is perfectly simple. The Commission gets the royalty owner's interest, and the interest of the colliery company is a retained interest which is kept by them. But suppose that there is interposed between the colliery company which is actually working the mine and the royalty owner an intermediate person. Suppose that royalty owner "A" has sub-let to "B." Supposing the rent paid by "A" is 4d. and the royalty rent paid by the colliery company "B" to "A" is 5d., it is clearly right that the Commission should get both reversionary interests. They will collect 5d. from the colliery company, because that is the effective agreement under which the coal is being worked. Suppose, however, the intermediary person, a man whom I call "A," instead of having entered into a sublease at profit to himself, entered into one at a loss to himself, then he has no landlord's interest. The royalty owner lets it to "A" at 4d. and "A" to "B" at 3d. He has no landlord's interest. He has made a bad bargain and there is no reason why Parliament should relieve him of it. Clearly the Commission must have power to disclaim his interest because it is not a landlord's interest.

There is a further point. I have no desire to suggest that anybody will try and enter into transactions which might defeat the purposes of this Bill. There is the possibility of an existing lease with an existing colliery company under which a royalty is payable. Suppose that lease was assigned to A, who then let the right to work it to the colliery company at a peppercorn rent. If the Commission automatically take not only the royalty owner's interest but the interest of the superior lessor because it is a reversionary interest, they would only collect the peppercorn rent, but would be liable to compensate the original royalty owner. That is sufficient to make these provisions clear. All we are doing under these Amendments is to lay the onus on the Commission in regard to giving a direction in cases in which they desire to disclaim. An inquiry has shown, there are not likely to be many of these cases.

Amendment agreed to.

Further amendments made:

In page 5, line 1, leave out "either before, on or within," and insert "not later than the expiration of,"

In page 5, line 2, after "date," insert: or, if later, from the date on which notice of the subsistence of the lease is delivered to the Commission under Section thirteen of this Act.

In page 5, line 4, leave out "acquired," and insert "retained."

In page 5, line 8, leave out "itself an under-lease," and insert: held in reversion on an under-lease, being a coal-mining lease.

In page 5, line 8, leave out "a superior coalmining," and insert "that."

In page 5, line 11, leave out "the superior lease," and insert "that under-lease."—[The Attorney-General.]

5.42 p.m.

Sir S. Cripps

I beg to move, in page 5, line 12, to leave out Sub-section (3).

I am moving this Amendment in order to get an explanation of the object of this Sub-section. It takes out of the Clause certain types of leases in which the lesson is not the person carrying on the business of coal-mining, or at least the person who has not a substantial beneficial interest. We do not understand what a "substantial beneficial interest" means. How is it defined, who is to decide it, and what court or tribunal is to say whether John Jones or William Smith has a substantial beneficial interest? What have the Government in mind?

5.43 p.m.

The Attorney-General

This Clause starts by excepting from the transfer to the Commission prima facie interests that arise under coal-mining leases. This Subsection is put in to prevent a possible evasion either directly under this Bill or through a state of affairs which might possibly exist apart from this Bill, but which, in our view, ought not to be treated as creating a coal-mining lease. I would ask the Committee to assume that an owner of coal entered into a long lease with trustees, possible at a nominal rent, under which they had power to work but no obligation to work the coal. That might well be held, but for this Subsection, to be a coal-mining lease, and the interest of the trustees would therefore be a retained interest. In the case I am quoting, the rent would be purely nominal, and when the coal came to be worked the trustees would get the royalty which it is intended should go as the landlord's property to the Commission. We shall be glad to have in this and the later stages of this Bill the assistance of the hon. and learned Gentleman or of any other Members in regard to the drafting. We believe that the words "substantial beneficial interest" will be found sufficiently precise for this purpose in that the cases will usually fall under the ordinary category where there is an ordinary coal-mining lease; and the only cases which it is necessary to provide for are the cases of the kind which I have indicated which might be brought about with a view to defeating the purposes of the Bill, or which possibly exist already under arrangements made in connection with the transfers to trustees, but in which the trustees could not be described as persons carrying on the business of coalmining.

5.46 p.m.

Sir S. Cripps

I am grateful to the hon. and learned Gentleman. He is not quite so innocent as he appeared to be on the last occasion. He has had experience of the evasion of Income Tax, and he is now beginning to bring to bear the same mind upon the coalowners. I can assure him from my acquaintance with them that he will need as much caution, if not more, in dealing with them than he has to have in regard to Income Tax and Super-tax payers. This is the kind of Sub-section which has led to difficulties in the Income Tax law. It is the class of provision where an ill-defined attempt to get over some anticipated difficulty rather than to stop up the gap generally manages to give an opportunity for ingenious lawyers to find a way through the gap. While we approve of the hon. and learned Gentleman's ideas in stopping up the gap, I suggest that he should find out before the Report stage some more accurate and apt phraseology to make the stopper rather tighter in the gap than this is likely to be. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.48 p.m.

Mr. Spens

I beg to move, in page 5, line 12, after "section," to insert: an agreement whereunder a person who has incurred expenditure in or in relation to operations of boring or prospecting for coal holds an option for the grant of a coal-mining lease shall be deemed to be a coal-mining lease but subject to that qualification. I very rarely agree with the hon. and learned Member for East Bristol (Sir S. Cripps) in his criticisms, but my Amendment raises a case similar to the one he had in mind if Sub-section (3) remains in its present form. I am taking the case of the pioneer company which spends large sums of money in boring and prospecting for coal and which proves the coal. The only interest it has in sinking the borehole in the coal is an option to take up a lease at some future time. This is not a case of a person who has merely granted a lease to trustees and left the coal unworked or anything of that sort. It is the case of a person who has spent large sums doing a useful work but who has a document which, under Sub-section (3), does not confer on him a coalmining lease because in such a case the pioneer company's usual procedure is to go no further than an option to take up a lease. It is certainly not a lease where a person carrying on the business of coalmining has a substantial beneficial interest. In fact, no business of coalmining at that stage is being carried on at all. In these circumstances it appears that such a person is being excluded altogether from any benefit in respect of the money that has been spent in proving the coal. Although in the main definition Clause a person who has an option for a lease has a coalmining lease, this Sub-section excludes him altogether from the effect of Clause 4. Although I suggest the addition of some such words as I am moving in the Amendment, I feel that the words of this Sub-section should be reconsidered to make clear what it is intended to exclude and what it is intended to include.

5.55 p.m.

Captain Crookshank

The function of the pioneering company must be well known to hon. Members who are following the Debate to-day. It is admitted that they have done in the past very useful work both in proving that there is coal here or there and negatively proving that there is not. Their procedure, I understand, is generally that before starting on this enterprise they acquire an option over the coal if any should be found. Of course, they have no altruistic motives in finding out whether coal is there. They naturally turn the discovery of coal into profit. Exploratory companies are entitled to do that. Having found coal, they generally use their option either by buying the coal freehold and then letting it to some colliery undertaking, or they have an option for a lease which they afterwards sublet to a colliery undertaking. In doing so their payment has been either in the form of a lump sum or a lump sum with an enduring small sum per ton of coal afterwards—what is wrongly described as a super-royalty because it has nothing to do with a royalty in the ordinary sense.

In the Bill, in so far as they are owners of a freehold, or in so far as they have an interest in the leasehold which they have sublet, by the words which we have already been discussing they would receive compensation. They come within the ambit of compensation. I do not think there is any doubt about that. If my hon. and learned Friend thinks there is, I will look at the point again. The case which I think is more in mind in this Amendment is where they have proved coal, but where there is no probability of it being worked for some years. The question is, where do they stand from the point of view of receiving any compensation? The Amendment seeks to say that if they have such an option as the result of an agreement under which they have incurred expenditure in prospecting for coal they ought to be considered as having a lease. I find it very difficult to admit that, because of the mere fact that they have such an option, that they should be considered as having a lease. It would open the door very widely because it would be difficult to limit it to an agreement. Other owners of coal might come along and say that they had spent a certain amount of money boring and prospecting, and why should they not have a lease?

If there are not very many of such cases now I suspect that by the time the Bill is passed there will be a large number of people who would see the possibility of getting leases in this manner and who might be tempted to take advantage of that possibility. It would be difficult to limit it to those who held an option under an agreement and it would cut across the general object and principle of the Bill. The general object is that there should be one landlord for the coal after the coal has been vested, and to accept the Amendment would be to accept the idea that pioneer companies have done such deserving work that they should have some right to retained leases. That would cut across another principle, which is that we are acquiring the coal now at its proper market value. If their interests have any market value, they are covered by the proposed compensation. If, however, they have no present value, then to include an option of this kind would be to go against the basic principle which we have adapted hitherto. I do not think it is possible to accept the Amendment. I repeat that if the interests are of value, they are covered by the Bill, but those people are in the same position as anybody else, and if the options are not of present value, I do not see how we could possibly open this loophole without leading to considerable difficulties in other directions.

Mr. J. Griffiths

If a company have an option of this kind, though coal be found it cannot legally be worked, having regard to the other Statutes which this House has passed. For instance, they must first get a quota; the option may be purely worthless unless it is possible to get a quota.

5.58 p.m.

Mr. Spens

In the submission which I put forward I was not thinking of cases where the coal has been, if I may use the expression, tied up years ahead by means of an option. There are commonly three stages before one gets to the binding lease under which coal is worked. It is usual to start with an option granted to someone while he looks round to see whether he can get a quota and whether it will be worth while to work the coal. That may be an option for only six months or six weeks, or even for no more than a fortnight or two or three days. That option will turn into an agreement for a lease, and then, some considerable time afterwards, there comes the full-dress lease, a long document running into pages and pages, which often does not come into being until two or three years after the lessees have actually started working the coal. While this Clause provides that the man who has got the lease and the man who has got an agreement for a lease under which the coal is being worked will be entitled to retain that lease and work the coal, we are going to say to those who have only options, "No, you msut take such compensation as you can get, but under no circumstances is your right ever to blossom into a lease under which you can work the coal." I fully appreciate what my hon. and gallant Friend has in mind in dealing with options generally, but I ask him to reconsider the question from the point of view that I have put, and not from the point of view, which I think is rather heavily influencing his mind, of option holders who are thinking of tying-up the coal and leaving it there for many years ahead. I am dealing with people who have options which must result in an agreement for the coal to be worked within six months or a year. The hon. and gallant Gentleman can put in any limitation. If our case is not met, I feel that there will be a certain number of people who have spent a lot of money and will get back only a small dividend by way of compensation.

6.0 p.m.

Mr. Keeling

I hope that the Government will consider what my hon. and learned Friend the Member for Ashford (Mr. Spens) has just said. I should like to draw attention to the fact that a great deal of evidence about these pioneer boring companies was given before the Sankey Commission, and that Sir John Sankey, as he then was, said in his report, at page 14: If and when the coal mines are acquired by the State any just claims of pioneer boring companies should be recognised. The other members of the Sankey Commission, who included a number of members of the Labour party, agreed generally with the report and with that conclusion. This Amendment does not ask for any cash compensation for the pioneer boring companies, but is merely designed to improve the position of persons who have carried on the business of boring or prospecting for coal on the faith of an option on the grant of a lease to their nominees in the event of the existence of coal being proved. Under Sub-section (3) of this Clause as it stands they might be prevented from securing the benefit of a coalmining lease for their nominees when the occasion for the exercise of the option arose. I should like to remind the Committee that only on Thursday last my right hon. Friend the President of the Board of Trade said: It is clear that if you want someone else to bore for you and authorise him to do it, you really can do it only on the terms that if someone else finds coal he will be allowed to work it."—[OFFICIAL REPORT, 9th December, 1937; col. 607, Vol. 330.] I hope that the Government, bearing in mind the recommendation of the Sankey Commission, will reconsider this matter.

6.3 p.m.

Mr. Denman

I want, in two or three sentences only, to support the principle of this Amendment. I recognise that it goes further than the Government are likely to go but as things stand we are compensating persons who simply possess coal but have done nothing whatever about it, while those who have explored for coal, have spent money upon trying to make the coal available, may get nothing whatever by way of compensation. I suggest that some way ought to be found of meeting the point embodied in this Amendment, perhaps by limiting it to options which were taken out before the introduction of the Bill, or to cases in which substantial expenditure was incurred before the introduction of the Bill. Whatever limitation the Government may choose to put in, I think they will agree that here is a class of extremely useful pioneers who are entitled to obtain leases on the faith of the options which have been granted.

6.4 p.m.

Sir S. Cripps

May I suggest that the royalty owners should compensate the persons who hold the options, because a royalty owner will get a better price if coal has been proved? He will get a better share of the £66,000,000 owing to the expenditure by the option-holder. I suggest that the hon. and learned Gentleman opposite should put down an Amendment by which the royalty owner is compelled in such cases to compensate the man who has done the useful work. That would be very fair indeed, and I think I can say that we on this side would support it. If they have ideas of justice, honesty, and honour, no doubt they will take that course.

Amendment negatived.

6.5 p.m.

The Attorney-General

I beg to move, in page 5, line 23, at the end, to insert: (5) Where coal or a mine of coal in which a term of years created by a coal-mining lease is subsisting is subject to a right granted by a working facilities order the provisions of Sub-sections (1) and (2) of this Section shall have effect in relation to interests in that coal or mine arising under the lease in like manner as if the term had been held in reversion as mentioned in Sub-section (1) of this Section. This is really little more than a drafting Amendment. Under Sub-section (4) of this Clause a right to work granted by an order issued by the Railway and Canal Commission is treated as a lease. In speaking of the right to work, I am not referring to ancillary rights. A right granted by the Railway and Canal Commission is the equivalent of a lease, and, that being so, the only effect of this Amendment is to make it clear that by being the equivalent of a sub-lease, in the case where there is an order to work made against an original lessee, it is treated as a sub-lease for the purpose of paragraph (b) of Sub-section (1) with which I was dealing a short time ago.

Amendment agreed to.

Further Amendment made: In page 5, line 30, leave out from the beginning to "and," in line 35.—[The Attorney-General.]

Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

6.7 p.m.

Mr. Ellis Smith

In the Memorandum explaining the Bill it is stated that the properties and rights to be acquired will comprise all coal, whether now being worked or not, and I have a point to raise about that. The Attorney-General has told us that he could conceive of a case where people had the power to work coal but were under no obligation to work it. I know a district, one in which the quota is not being fulfilled, where the following situation exists: It is explained in several letters which I have in my hand, which I shall not read in full but from which I shall give extracts. One letter explains that a man was given power to work what they call a foot rail. He went to a fair amount of expense in preparing to work the coal and got a number of unemployed men to work with him. Then there came along a new company which got into touch with those owning the land and the result was that after all his expenditure this man was not to be allowed to obtain the coal from the foot rail, despite the fact that the quota in that district was not being fulfilled. The man got into touch with the Mines Department and received a reply which stated that "at present"—that was prior to this Bill being introduced—there was no way of obtaining the grant of a compulsory right to work minerals except by means of an order made by the Railway and Canal Commission. I want to know what will be the position of these men—and there is a number of men for whom I am putting this question—when this Bill becomes an Act? According to the letter from the Mines Department, these men, who are relatively poor, will be required to go to the Railway and Canal Commission. They will have to be represented by counsel at the hearing and, in addition, have to get London agents. The men are in such circumstances that they could never go to all that expense.

6.11 p.m.

The Attorney-General

I think the hon. Gentleman's point goes a little wide of this Clause, and that it would have been more directly relevant to one of the Clauses which we have passed dealing with the general powers of the Commission. If I followed his point aright, he is dealing with the case of certain men who, after having had a right for some time, have had that right taken away owing to the appearance of a company on the scene and other arrangements being made by the coalowner. His view is that these men ought to be allowed, not only in the national interest but in their own as well, to work this coal, but says they have been told that at present the only way of getting that right is by going to the Railway and Canal Commission. Broadly speaking, all coal will pass to the Coal Commission if this Bill passes, subject to existing leases, and it will be for the Coal Commission to make such arrangements as seem proper to them and to confer the right to work coal on those whom they may think proper. In the carrying out of that duty they must, under the terms of Clause 2, have regard to the interests, efficiency and better organisation of the coal-mining industry. I cannot generalise about the particular case which the hon. Member put forward, but if the men for whom he spoke have a good case to work coal in the national interest, then, when this Bill becomes an Act, instead of having to come to court and employ London agents and counsel to submit a case against a landlord who is under no statutory obligation to have regard to the national interest or the interests of the coal-mining industry, they may apply to the Commission, which will be a body which must have regard to the national interests and the efficiency and better organisation of the coal-mining industry. They can put their case to the Commission, and I am sure that it will be considered sympathetically.