War Production Undertakings (Government-Nominated Directors) (Hansard, 7 April 1943)

§ Mr. Simmonds (Birmingham, Duddeston)
I beg to move, That an humble Address be presented to His Majesty, praying that the Order in Council, dated 22nd March, 1943, made under the Emergency Powers (Defence) Acts, 1939 and 1940, substituting a new Regulation for Regulation 54CA of the Defence (General) Regulations, 1939, a copy of which was presented to this House on 23rd March, be annulled. In moving this humble Prayer, I ought to say that I am supported by no fewer than 128 Members of this House, and although the majority of them are members of the Conservative Party, we do enjoy the support of six Liberals and one Independent Member. I feel that it is to be regretted that there is, in fact, such widespread concern over matters which are akin to the one we are about to discuss, but are yet not of it, because as a result of this fact there have been many misconceptions both as to this particular Regulation and as to the motive we hold in moving this Prayer. Indeed, some organs of the Press of the Left have rushed unduly to conclusions. I have seen it stated that this Prayer arises from the fact that the Government have purchased the shares in Messrs. Short Brothers, but hon. Members will recall that the original Prayer, to which so many of my hon. Friends added their names, against Regulation 196, which was the forerunner of Regulation 437, was, in fact, on the Order Paper before ever the Government had taken over the shares of Messrs. Short Brothers. The question, therefore, does not arise from that.
Nor indeed does our moving this Prayer constitute an attack on any Minister or number of Ministers, for the House will well recall that hon. Members, particularly on this side of the House, have been studying the implications of some of these 744 Orders for a number of months past, and have, on occasion, moved Prayers, when they felt it their duty so to do. It is a question of principle alone that we raise to-day. It may be asked whether, if we approached the Government and secured withdrawal of Statutory Rule and Order 196, it is necessary to pray against the new Order. It would have been better from our point of view if we had been able to take a less drastic course, but as many hon. Members will know, the only way in which the House of Commons can raise this issue is to pray for the annulment of the Order. We thus had no other opportunity than that which, in fact, we have taken.
Before I proceed to analyse the matter, may I draw the attention of the House to one or two facts which I think ought to affect the attitude of hon. Members to these Orders? The first point is about the very interesting observations made by my hon. and learned Friend the Solicitor-General, in the Point of Ayr law case. I quote from "The Times" law report of 31st March. My hon. and learned Friend, dealing with an Order very similar to the one we now have under review, said: The effect of the general Regulations was to make the Minister the sole judge. The production of the Order itself in proper form was prima facie evidence that the prerequisites had been complied with. Even if the Minister had made an Order under a misapprehension the court still could not interfere. I would emphasise the last sentence. Again, only last week, my right hon. and learned Friend the Minister of Aircraft Production, in reply to a Question by my hon. and gallant Friend the Member for East Renfrew (Major Lloyd) dealing with these matters, when there was some criticism of an action which my right hon. and learned Friend had taken, said: I am afraid that Parliament has decided the steps which should be taken in such cases as the present, and unless other and new decisions are taken, I must operate within the ambit of these regulations."—[OFFICIAL REPORT, 31st March, 1943; col. 158, Vol. 388.] This is no longer June, 1940, we may thank God, and we have some opportunity in these days of discussing these Orders severally as they come out; we have not to take hundreds of them at one sitting and without performing what I venture to say is the rightful and necessary function of the House of Commons of examining the Orders which are brought before us. I respectfully submit 745 to you, Mr. Speaker, and to the House of Commons, that the observations of the Solicitor-General and the Minister of Aircraft Production show that there is a real duty laid upon each hon. Member to examine carefully the Orders which the Executive bring before us.
I should state what are the present powers possessed by the Government with regard to the handling of difficult questions of management, particularly in industry. First, a Minister can appoint a controller of the undertaking, and this he will do under Regulation 55, paragraph 4. It is not my intention to read out the individual paragraphs unless I am pressed so to do, because I am anxious to be as brief as possible. If, when a controller is appointed, some of the directors of the undertaking are obstreperous, there is power in the hands of the Minister for the replacement of obstructive directors, under Regulation 78, paragraph 1, sub-paragraph (a). If, further, the Minister is unable, as he thinks, to satisfy himself as to the efficient running of the undertaking in the national interest, he may order the purchase of the shares of the undertaking, under Regulation 78, paragraph 1, sub-paragraph (b). These, then, are the weapons, up to date, in the Ministerial armoury. They have been adequate for a not inconsiderable number of Ministers for nearly three years, and yet we now have this new Rule and Order 437 brought before us.
What does the Rule permit a Minister to do? It says that, if a Minister thinks it wise in the interests of improving the efficiency of an undertaking so to do, he may force on to the board of that undertaking a number of directors, not exceeding three and in any event not constituting a majority, but subject to a highly ambiguous proviso relating to the magnitude of the financial investment which the State may have in the undertaking. In commerce, a substantial investor may ask, when he is investing money in any undertaking, that he shall have representation on the board. If, when investing money, he does not make that request, I think it would be conceded that he may, at a later date, request representation if he feels that the undertaking is not proceeding on sound lines and if he feels his financial interest to be in jeopardy. This opportunity has also been well established in the investment of 746 the State. I may cite as an example the case of the Suez Canal Company, where, when the Government invested money, they appropriately asked for representation on the board. Clearly, negotiation at the time of investment is a preferable course, but I submit that the State must have the right, even if it did not request it at the time of its investment, if there be good financial reason—I stress that point—of calling for its own nominees to be elected to or adopted on to the board.
It may be claimed that in the case of many of our war industries the undertakings did not desire to have the financial assistance which was proffered to them, indeed pressed upon them, by the State, but I feel, notwithstanding that fact, that if an undertaking did accept the money, there is an obvious case for the State having the right to call for representation on the board. But the point I make is this; as the Regulation now stands would these State directors be financial directors in the usually accepted sense of the word? I think the House will need to assure itself on this point, because that is the crux of the whole thing. It will want to be certain that they are not in fact administrative directors being forced on to the board by the back-staircase of a financial phantasy.

§ Mr. S. O. Davies (Merthyr)
Would the hon. Member clear up one phrase? Would he explain to the House what he means by the phrase "financial directors"? What has he in mind?

§ Mr. Simmonds
I am not anxious to take up too much of the time of the House, but if I am asked, certainly I will reply. I would say that a financial director in the sense that I am using the word—and it is the usually accepted sense in commerce—is one who is placed upon the board because the owner of a certain interest in the business desires that that director should protect the financial investment.

§ Mr. Davies
He might know absolutely nothing about the business?

§ Mr. Simmonds
I would think it is clearly at the selection of the investor, but there must be many cases where, for instance, the financial director is a chartered accountant and has no knowledge at all of the affairs of the business. I think the term is generally recognised 747 throughout industry. Let me therefore examine this point as to whether these directors are financial or administrative directors. In paragraph (1) we have these words: …for the purpose of improving the efficiency of the war production of the undertaking… These words strongly suggest, to my mind, that these are administrative and not financial directors, and in this I am strengthened by reference to Statutory Rule and Order 196 where are these words about State directors: …experienced in the direction of companies of a like character… Why were these directors to be experienced in the direction of companies of a like character? Obviously because it was desired that they should be men who knew the type of business and who could play their full part in the direction of the undertaking.
But surely in the way we arrange these matters in this country, if there had been a financial issue and if these had been financial directors, the Treasury, very jealous of its rights in these matters, would certainly have asked to have its say or to have been represented. But if we refer now to paragraph (1) sub-paragraph (a), we see that the public moneys which may be invested in the company are public moneys which in the opinion of the competent authority are substantial in amount; that is to say, the Minister in the supply Department or whoever else is utilising this Order would himself decide whether the sums of money were substantial. It is perfectly obvious that if this is so, there must be a very wide circle of companies about which, if the Minister desires to place a director upon their board, he could say that in his opinion the investment of the State was substantial. He might bring himself reluctantly to accept his own view that the investment was substantial, but even if he jibbed at being persuaded by himself in this matter and thus to stretch the very elastic powers in this Order, he need be nothing daunted, for with a fine Gilbertian touch, inspired by the best traditions of Strephon, he would find it was not, in fact, necessary to make any investment at all. All he would need to do would be to propose to make an investment I do not propose to tell the House the mental contortions and ethical 748 gyrations through which Ministers might pass before they brought themselves to persuade themselves to the conclusion that they had wished to come to.
The proviso in sub-paragraph (a) with regard to finance, if it were meant to restrict the Regulation to any major investment by the State, would be so ridiculous as to be almost an insult to the House. I understand that the Government intend that this Regulation should in fact apply only where the financial investment of a capital nature is substantial. If that be so, I sincerely hope that my right hon. Friend when he replies, will be able to give some very specific assurances on this point, because at the moment the financial door is wide open and there is no limit to the powers that the Minister could wield if he so desired. Certainly no hon. Member could claim that if there was not a substantial investment by the State at any given time the Minister would not be able to appoint these directors, because obviously he could merely propose that it should be done. I think we should examine for a moment the breadth of this Regulation, and in paragraph (3) I read: In this Regulation the expression 'war production undertaking' means an undertaking which, in the opinion of the competent authority, is or should be principally engaged upon the production or supply of articles required for the use of the armed forces of the Crown or otherwise for the prosecution of the war or the defence of the realm, or upon the performance of services required for such purposes… But it will be well within the knowledge of the House that unless, in fact, an undertaking comes within this definition, then no labour is permitted to it by my right hon. Friend the Minister of Labour. It thus follows that all operative undertakings come within this Regulation, and that is a point which I think should be well appreciated by all hon. Members.
I have heard it said that we ought not to be too particular about these Regulations moving directors because workers are already being moved by my right hon. Friend the Minister of Labour. But is that really a very good comparison? It is a point I have seen made, therefore I examine it, as I am entitled to do. I would suggest that if you are dealing on the one side with the direction of the undertaking, you should deal on the other side with the direction of the affairs of labour, which clearly are the 749 trade unions, and if therefore you wish to claim that the Government shall have the right to appoint men to the boards or the executive bodies of these undertakings, I think the comparable arrangements on the labour side would be for the Government to appoint members of the executives of the trade unions. [Laughter.] I am very glad that hon. Members on the other side treat that with hilarity. They do not seem to appreciate that in this world, and particularly when we have a Government which is representative both of the Left and of the Right, what is sauce for the goose ought also to be sauce for the gander. [An HON. MEMBER: "Are the trade unions incompetent?"] I need say he more on that point. I trust that, having examined it, no hon. Member on the other side will have the temerity to suggest that because workers are moved that is a reason why State directors should be placed on boards of management. The over-riding question which I ask myself in connection with this Regulation—and, I trust, in connection with every other—is, Will it enable the war to be waged more efficiently? That is the question which we should ask ourselves.
With some little knowledge of what takes place, I would like hon. Members to understand the type of events which arise before a Minister applies these powers. First, you will have the undertaking moving along smoothly, in consultation and collaboration with the Departments. Then, for some reason or other, trouble will brew. Perhaps it will be due largely to the undertaking, but in many cases it has been due largely to the Ministry. In any event, there is bad blood, possibly on both sides. In the end there is an impasse. At that point, the Minister takes his powers. I would say quite definitely that if an undertaking be so inefficient that it is prejudicing the war effort, a Minister should take it under his wing, by the appointment of a controller, but I cannot understand by what argument, when he is at loggerheads with the board of directors, it can be suggested that he should force his own nominees on to the board in order to get more from that undertaking. It seems to me, human nature being what it is, a perfectly preposterous suggestion that when you are having grave disagreement with a board you will, by forcing your own nominees on to that board, against the will of the directors, achieve anything which could 750 not be achieved by reason and diplomatic discussion, or, if that fails, by the appointment of a controller.
Let me emphasise that the whole of the management of British industry in this fourth year of the war is mentally keyed up to a point where I would suggest—and I know that my right hon. Friends Who are in charge of the Supply Departments would agree with me—they should not be faced with unnecessary trials and perplexities which are not in the national interest. Sometimes I hear it said that it is essential that we should not provoke labour. I entirely agree. It is equally essential that we should not provoke managements. The State has a responsibility to maintain a calm atmosphere at all the various levels in war production. It is an interesting fact that both in the early Napoleonic period and in recent Russian history the State insisted on having its representatives, or commissars, throughout national life, not only in industry but in the forces; but in the Napoleonic period that dual control was soon seen to lead nowhere, and recently our gallant Allies the Russians have, as I understand, withdrawn their political commissars from the forces because this dual control is not found to be fruitful. I would say, therefore, that in our war industries, whether it be by the State or by private enterprise, unity of control is essential.
As for the true reasons for the issue of this Regulation, my Friends and I are completely perplexed. I would ask my right hon. Friend to answer these two questions when he replies: What specific case renders these new powers necessary, and how can divided control increase production? At the request of my right hon. Friend the Minister of Production, some of my hon. Friends and I had a series of consultations with him on both Statutory Rule Orders 196 and 437. I have made no reference to those discussions, because they were not relevant to the points I needed to make, but if my right hon. Friend feels disposed to refer to those discussions, my hon. Friends and I take no exception to that, although of course he will well understand that any of my hon. Friends who follow him will equally be free to interpret those discussions in their own way.
I have been asked whether my hon. Friends and I intend to divide on this 751 issue. I would not like to prejudge what my right hon. Friend proposes to say, but it is quite manifest that we should be make it abundantly clear that the financial gravely failing in our duty if we did not provisos in the Order are made effective in the hands of a second Department, preferably the Treasury, and that that Department should equally share the responsibility of placing these directors on the board. I would submit in general that there have been recently too many alarums and excursions in industry. These Regulations should receive the gravest consideration by the Government before they are issued, and I am not convinced that that is always the case. When you issue a Regulation which is going to cause trouble of an unnecessary kind in industry, whether it be in management or in labour, you are throwing a spanner into the productive machine; and you have no right to do so in time of war. Industry and industrialists must feel that they will be judged in well doing, and they must not have their thoughts continually deflected from production to man the political ramparts of their factories.

§ Sir John Mellor (Tamworth)
I beg to second the Motion.
My hon. Friend the Member for Duddeston (Mr. Simmonds) has covered the ground, in a very able speech, and I do not propose to make more than a few brief observations. I should first like to call attention to the form of the Order against which we are praying. This Order not only makes a new Regulation, but revokes an old Regulation. If I appreciate the position correctly, should this Prayer be carried to-day, that revocation will be cancelled, and the old Regulation would be revived. I can see that that would be so notwithstanding the provisions of Section 8, Sub-section (2), of the Emergency Powers (Defence) Act, 1939, which provides that if the House resolves that the Order be annulled, the Order shall thereupon cease to have effect except as respects things previously done.
I assume that revocation would not be preserved as a thing previously done under the Order against which we are praying, and in those circumstances, if the Prayer was carried, it would be necessary for us to pray again in a very few days against the revived old Regulation 752 or rather against the Order in Council under which it was made. As this situation arises through the fact of the Minister including both the making of the new Regulation and the revocation of the old in the same Order, I am asking my right hon. Friend whether he will be prepared to give this assurance. I am sure that he has not desire to take advantage of a rather technical absurdity, and therefore I am asking my right hon. Friend the Minister of Production whether he will give an assurance that should this Prayer be carried he will forthwith take steps to revoke the revived old Regulation.
Whereas that old Regulation to which I have referred was ill-conceived, on balance the new Regulation is a worse one. The old Regulation at least provided to the company some right of objection. It was provided under the old Regulation that if the directors of the company passed a resolution objecting to an appointment by the Minister, then that objection should be valid unless the Minister took the further step of appointing an authorised controller under the provisions of Regulation 55.
I want to know why that right has disappeared in the new Regulation. I recognise that there are some minor improvements in the new Regulation, but the disappearance of that right of objection, on balance, makes the new Regulation very much worse than the old. I recognise that the Government must have whatever powers of control are necessary for the war effort. There can be no question about that, and the Government have now far reaching powers of control, which my hon. Friend has described, under Regulations 54 (c), 55 and 78, but the Regulation with which we are concerned does not confer any power of control at all. The other Regulations confer powers of control so far-reaching that one can hardly imagine that any powers could be carried which would be greater. But this Regulation confers no power of control, because it is expressly provided that the Government nominee directors shall not constitute a majority of the board. I regard this as giving power of interference without responsibility, enabling intrusion of an undesirable character which will be likely to create ill-feeling and a diversion of effort. I think I could describe this Regulation as introducing the infiltration of bureau- 753 cracy into industry. I believe that the appointment of Government nominee directors can only serve a useful, purpose if it occurs as a result of agreement. There would obviously be no objection at all to a regulation designed to overcome technical legal difficulties in the articles of association so as to enable an agreement entered into with the company to be implemented.
I would like to turn for a moment to the words of proviso (a) in paragraph (1). That paragraph stipulates that action shall be taken only in cases where advances or grants of a capital nature have been made to the company for the purposes of its undertaking or capital assets have been provided for the use of the company. It does not appear to me that that proviso contemplates the subscription of share capital by the Government. My hon. Friend mentioned the Suez Canal Company, and to take a home instance, I would refer to the Anglo-Iranian Oil Company, upon which the Government have nominated directors. In that company the Government are and have always been very large shareholders, and in that case it is most appropriate that the Government should be represented on the board. The form of capital assistance contemplated in this Regulation appears to be in the form of loans in some shape or form, either of money or equipment. I do not think that as a rule people who lend money to companies have any right of appointing directors to the board. Debenture holders may have trustees to protect their security, but they do not normally appoint directors.

§ Mr. McKinlay (Dumbartonshire)
What happened in the case of William Beard-more and Co., of Parkhead? Who appointed Frank Hodges?

§ Sir J. Mellor
I am afraid that I cannot go into a particular, case. I did say that normally the directors represent the shareholders. I do not think that the Government should usurp the privilege of shareholders for purely financial reasons. I want to ask two or three questions with regard to the meaning of the words "advances or grants of a capital nature." Do the words "of a capital nature" apply to "advances" as well as to the word" grants"? It is important that that should be cleared up, because under the expression "advances" such things as progress payments upon 754 Government contracts might possibly be included.
There is a, further point. I would like the Minister to make it perfectly clear if he will that assets in shadow factories, which, of course, are operated by the undertaking as agents of the Government, are not intended to be included. One rather interesting thing appears, from an examination of the consolidated book of Regulations, and that is that although the Treasury are a competent authority for the purposes of Regulation 55, they are not the competent authority for the purpose of the Regulation under discussion, because, as no specified list of competent authorities is given, we should have to turn to Regulation 49 [...]0 find out who they are—and that does not include the Treasury. For the reasons I have given it is important that this should be made at least a joint Treasury responsibility. To conclude, I regard this Regulation, as it at present stands, as a bad Regulation. Looked at from the financial point of view, it is unwarranted, and looked at from the point of view of production, it would defeat its own object. In either case, I consider that all it will give to the Government is a nuisance value.

§ Mr. Ellis Smith (Stoke)
Never was I more confident in feeling that in presenting the case I have to present to-day, I am speaking on behalf of the people of this country. I want to state our attitude on this issue in accordance with the facts as we see them. In our view the basic industries of this country and the services for the welfare of our country should be owned by the people.

§ Mr. Simmonds
State control.

§ Mr. Smith
While the Prayer was being moved and seconded there was hardly an interruption in the House. If that is the kind of provocative attitude to be taken up by the hon. Member, then he ought to be the last one to indulge in such an attitude. I shall never forget a phrase used by our late Speaker, for whom we all had great respect. It was that he liked to hear "cut and thrust" in Debate. We shall bear that in mind if the hon. Member intends to indulge in that kind of thing in this Debate. We are not satisfied with the Government's attitude in regard to the supply services of this country, but we recognise that, that is not the issue which is raised in this Debate. The need to win this war overshadows every other 755 issue. From 1938 that has determined the attitude of my hon. Friends in our approach to problems of the kind that we are discussing now. Even before the war—and let this be put on record, because it is too often forgotten—the trade unions of this country, and the engineering trade unions in particular, were so concerned at the worsening of the international situation that we agreed to forego all our hard-won privileges that had taken generations of struggle to win and which had been wrung from some of the people who are supporting this Prayer.
To enable us to win this war we require overwhelming superiority in equipment, and we must have maximum output, which means that we must have the greatest possible degree of efficiency. I ask hon. Members who have associated themselves with this Prayer whether they are satisfied that we have the maximum amount of efficiency in our supply industries. We are becoming greatly concerned at this war developing into a war of attrition. We want to supply our Russian and Chinese Allies with the greatest possible amount of supplies. [Interruption.] Well, if the hon. Member would only have regard to our record, he would know that we put British troops before any in the world——

Mr. Speaker
I must remind the hon. Gentleman that we are not discussing the war supply situation; we are discussing a definite Prayer.

§ Mr. Smith
Yes, Sir, but involved in the Prayer is the question for the need of the greatest possible degree of efficiency. We must bring about maximum production in the minimum of time. We say unhesitatingly that everything that impedes maximum output in the minimum of time should be limited in every way possible. The Government desire this Regulation as one method of increasing efficiency. There are ample safeguards for the protection of the companies, although the Mover and Seconder made little reference to the Regulation itself, especially the Seconder, and, of course, we can understand that in view of his associations——

§ Sir J. Mellor
I did not quite follow what the hon. Member said.

§ Mr. Smith
In this Regulation, if Members will be good enough to read it, they will find ample safeguards——

§ Sir J. Mellor
On a point of Order. I now understand that the hon. Member has made some reference to my associations. Would he kindly specify what he means?

§ Mr. Smith
I was referring to the hon. Member's association on a number of occasions with movements of this sort in the House. I want to ask the Minister some questions. What are the total public funds expended in advances to firms engaged in industry in this country? What are the total funds used in the provision of machine tools, or in so-called loans, or by any other arrangements, to companies in this country? What is the amount allowed by the Supply Ministries in providing capital assets? Are the Government satisfied that they are securing the return that they should get on the capital expenditure? If not, does this Order go far enough? The total of public money now granted to public companies must be very large, and we are entitled to receive from the Minister a reply as to whether we are getting the very best possible return for the capital expenditure. This Order is a very modest one. If objection is taken to a modest measure of this kind while we are fighting for our very lives, it is proof of what we shall have to contend with when we come to make real progress in this country. My hon. Friends have asked me to say that they will vote solidly against this Prayer, but they are concerned about some of the directors who have been appointed. They want to know who has been responsible for the selection of these directors. What have been their qualifications for selection? Has it been their ability and competence or has it been social status? My hon. Friends are also concerned about the age of some of these directors.

§ Sir Herbert Williams (Croydon, South)
On a point of Order, Mr. Speaker. As no director has been appointed under the Order, is a discussion of the qualifications of someone who has not been appointed in Order?

Mr. Speaker
That is not a point of Order.

§ Mr. Smith
The hon. Member for South Croydon (Sir H. Williams) knows that directors have already been appointed in several respects, and we ought to have assurances on this matter while the Prayer is under discussion. The hon. Member for Duddeston (Mr. Simmonds) said that hon. 757 Members had been studying these Orders for months. He should have said that they have been studying these Orders for years. I have particulars of a case in which the hon. Member for South Croydon, the hon. Member for Stockport (Sir A. Gridley), and others, took exception to a similar Order presented on 6th August, 1941. This is part of the war of attrition of the hon. Members in this House, who have been putting the interests of finance capital before the interests of the prosecution of the war.

§ Mr. Simmonds
On a point of Order. I consider that a wholly unworthy remark and I ask the hon. Member to withdraw it.

§ Mr. Smith
This is a debating Chamber. It is better to fight these issues out in the House than elsewhere. In this country, in a House that was democratically elected in a representative capacity, we can reason with one another and debate these questions. Hon Members opposite have spoken frankly on their attitude, and I intend to do the same thing on behalf of the people I represent. I have another Order——

Mr. Speaker
This is not the occasion to go into a general discussion of various Orders. We are discussing one Prayer, and one only.

§ Mr. Smith
I will respect your Ruling, Mr. Speaker. All I want to do is to point out that at a time when we are fighting for our very lives, this is the kind of thing we have to put up with. There is another very serious aspect of this matter which I would like you, Mr. Speaker, to consider.

§ Mr. George Griffiths (Hemsworth)
Sniggers across the way.

§ Mr. Smith
Some of this superiority is based on the fact that some people, because they happen to be in a privileged position, know more about industrial affairs than those of us who have not had the same opportunity; but some of us happen to have spent our lives in some of the largest factories in the country where not hundreds but thousands are employed. I could pick out men employed in industry in this country who would manage these factories as well as, if not better than, hon. Gentlemen opposite. I was 758 about to say that this Order was first presented to His Majesty on 10th February. On nth February, the Order was laid on the Table of the House, and therefore, according to my interpretation of the Manual of Procedure, it became the property of the House of Commons. In my view, these discussions ought never to have taken place, except by leave of the House. Let me give an example. The Lord President of the Council, when he was Home Secretary, introduced many Regulations. He came to the House, and we had a frank discussion in which hon. Members from all quarters took part. He bowed to the democratic ideas that were expressed in the House and invited hon. Members of all sections to meet him at the Home Office. I contend that the procedure that has been adopted in the present case is contrary to Parliamentary practice, out of harmony with the spirit of the Manual of Procedure, and detrimental to the best interests of Parliamentary government.

§ Mr. Simmonds
I hope the hon. Member understands fully that neither my hon Friends nor I made any gesture or request to the Government. We were invited into consultation.

§ Mr. Smith
According to the OFFICIAL REPORT of 24th February of this year, the hon. Member for Duddeston said: I had given notice that I desired to move a Prayer…but as a result of this Motion being placed on the Order Paper certain discussions have taken place and are continuing, and my hon. Friends and I are in agreement with the Government that it would be desirable that these discussions should continue before I, in fact, move the Prayer. In these circumstances I have asked that the Prayer may stand over to the second Sitting Day in the next series of Sittings."—[OFFICIAL REPORT, 24th February, 1943; col. 263, Vol. 387.] I never intended that the point should be interpreted in the way the hon. Member seems to have taken it. The point I was making is that it is time the House examined its procedure in regard to this kind of thing. It is a question of interpretation. We have moved very far since the days of Erskine May and we want attention to be given to that aspect. There is another aspect of the same issue. When members of the trade union movement are active on municipal bodies the town clerk may rule that they are not eligible to take part in a particular vote.

Mr. Speaker
The hon. Member is now discussing the general procedure of the House. That is not in Order, as I have informed him before. We are discussing a particular Prayer and we must confine our remarks to that.

§ Mr. Smith
I am doing that, but it was essential to make that point to lead up to what I am about to say. Most of the hon. Members who have put their names to this Prayer are directors of a number of companies. I am not speaking critically in regard to that because, so long as the social system in which we are living continues, it is an honourable position for men to be directors of companies, although I have my own views about it. Owing to our war needs, industry has been linked up; sub-contracts are given out to many small firms, and the whole industry of the country is dove-tailed together. That means that Members who have signed this Prayer are bound to be, directly or indirectly, interested in the Order. In my view the Government ought not to have conducted negotiations or consultations with people directly interested in that way. I am sure the House will take no objection to Members discharging their duties but before they went behind the backs of the House they ought to have indicated that they had a personal interest in the matter. In our view, the Government and the House ought to examine what is taking place before we have a repetition of this kind of thing. In the "Financial News" of 1st April we get a key to an understanding of the attitude of those who are behind the Prayer. Well over 100 Members of Parliament had, up to last night, signed the Prayer asking the House of Commons to annul the Order in Council. The Order can be applied to aircraft or to any other type of firm. One of the greatest objections to such appointments, it is understood, is that a company's secrets would no longer be sacrosanct and there is some fear that information might become known which would be used after the war to the detriment of the company. That is the greatest possible indictment that one could make against this Prayer and those associated with it. I have frequently referred, here and elsewhere, to the efficiency of the war services and said that we were not attaining maximum production because, in some cases, big industry was, within certain limits, putting post-war considerations before the successful prosecution of the war. Here, at last, we have it admitted in print.

§ Sir H. Williams
On a point of Order. As that was written in respect of an Order which is not before the House, is it pertinent to this Debate?

§ Mr. Smith
I understood that it dealt with this Prayer. [HON. MEMBERS: "No."] We shall have to leave it to the "Financial News" to say. Our men and women have been directed to employment. Many of them have been fined and many sent to prison. Since the beginning of the war Regulations of all kind have been allowed to go through the House without a word being said. In September, 1939, we were concerned about the large number of Regulations that were going through, but we restrained ourselves. We have had pressure brought to bear on us from many quarters, but we have resisted it because we put the successful prosecution of the war before everything else. I, therefore, appeal to patriotic Members of the House to vote solidly against the Prayer.

§ The Minister of Production (Mr. Lyttelton)
I think everyone will agree that vigilance in the matter of these Regulations is very commendable, and I should like to congratulate the Mover and Seconder of the Prayer on a very energetic piece of roof-spotting. I am not putting it any higher than that. If in my opinion they have spotted a number of hostile aircraft which do not exist, and have mistaken the silhouettes of a number of friendly aircraft as if they were hostile, I should be the last to complain. I think it is necessary to look at the background against which this Regulation is issued. First there is a broad background, and that is that, for better or worse—I think very much for the better—the Government have pursued the policy of employing private enterprise to, produce munitions with which to carry on the war. There are, of course, exceptions, but, by and large, we have pursued the policy of using private enterprise as the agent and medium of producing weapons of war, and there is no intention, and it is not possible to read into the regulation any intention, to reverse that policy in any way. The Government will continue to produce munitions of war under the same general policy. There is a more detailed background. In the engineering and allied industries the Government have invested by way of advances—I do not think there are any investments—about £280,000,000.

§ Sir Irving Albery (Gravesend)
Does that include guarantees to banks?

§ Mr. Lyttelton
They are advances made by the Government. There are some guarantees as well, but I do not know the figures.

§ Mr. Simmonds
Does that sum include progress payments, and are they of a capital nature?

§ Mr. Lyttelton
They are of a capital nature. I think it can be said very roughly that a total of £1,000,000,000 is invested in the engineering and allied industries. Therefore, as a start this Regulation could apply only to 28 per cent. of the total capital represented by the industry. Of course, the Regulation will not be applied to the whole of the £280,000,000; it will be applied only to that part of it where the Government consider that to do so would be appropriate. That is the background against which the Regulation is issued. It is not a heroic piece of legislation. It does not involve any of the factors referred to by the last speaker. We are dealing with a limited and not very heroic measure.
I will go through the Regulation itself. First, the competent authority has to be satisfied that the Regulation should be applied for the purposes of improving the efficiency of the war production of the undertaking. The Mover and Seconder of the Prayer did rather scant justice to these words. Their effect is to remove this subject altogether from the political field. The competent authority has to be satisfied that it is in the interests of production, and if he is not so satisfied, he cannot apply the Regulation.

§ Sir H. Williams
He is the sole judge of the state of his own mind, and he can apply the Regulation to every case where he thinks he can. Those words cannot be challenged in any court, and are therefore nugatory.

§ Mr. Lyttelton
Not in the courts, but we are all judges of our own state of mind. A Minister surely is responsible to his colleagues and to the House to see that the declared policy of the Government is carried out. To describe this proviso as nugatory does not seem to me justifiable.

§ Mr. Levy (Elland)
On the question of finance, my right hon. Friend knows 762 as well as I do that before any advances are made by a Supply Department they have to receive the sanction of the Treasury. As the Treasury are capable of looking after their own funds, why should they not appoint their own director?

§ Mr. Lyttelton
If my hon. Friend will allow me to develop the argument, I will deal with that point. The point shortly is that the capital is, so to speak, only a limiting factor in the application of this Regulation. The appointment of directors is to promote efficiency of production, and therefore they would be appointed by the competent authority. The next proviso is that the directors must be experienced in the direction of companies. This means that the competent authority will not appoint clergymen or doctors or bookmakers or shop stewards to the boards of companies. They have to be people who are experienced in the direction of companies. The next proviso is that any person so appointed shall, unless previously removed by the direction of the competent authority, continue to hold office as a director for a period of one year from the date of his appointment and no longer, but without prejudice to the power of the competent authority to re-appoint him. That means that instead of the directors coming up for re-election under the articles of association by rotation, the competent authority has to review the appointment of the Government nominees, and if, owing to the personality or experience of the directors, they are not achieving increased efficiency of production, it will be open to the competent authority to appoint others. That is a valuable safeguard to ensure that in applying the Regulation we improve efficiency.
With regard to paragraph (1, a) I confess that it is extremely difficult to get a form of words which shows in precise terms what "substantial" is. The words we have are an attempt at it. They are "substantial having regard to the circumstances of the case." In the case of a company with a capital of £100,000 receiving £100,000 advance from the Government, the sum is substantial, but a £100,000 advance to a company with a capital of £5,000,000 is not substantial. Therefore, there must be some vagueness in the actual terminology.

§ Sir Patrick Hannon (Birmingham, Moseley)
Could a percentage of the advance to capital be put in to indicate "substantial"?

§ Mr. Lyttelton
We have looked into that, but it is almost impossible to frame suitable words. I am about to say something which I think may reassure hon. Members on this point. There are two safeguards to this paragraph. The first is that in all cases before taking action under this Regulation the Minister will refer the matter to the Inter-Departmental Committee in my Ministry, known as the Craven Committee. Its members are Sir Charles, Craven (Chairman), Lord Weir, Mr. A. McKinstry, Sir Percy Mills, Mr. Frank Chapell and Mr. J. C. Little. The cases which come up will be referred to that Committee, which is only advisory. This procedure will not in any way detract from the responsibility of the Minister. It will give an opportunity for companies to make representations, whether those representations are on general subjects or are directed to personalities. That is the first pledge that we give in the administration of the Regulation. The second one is that in considering the field over which this Regulation applies the Treasury will be brought into consultation as to what is a substantial investment within the meaning of this paragraph.

§ Sir H. Williams
Are they to be brought in only for the purpose of interpreting the word "substantial" and not for any other purpose?

§ Mr. Lyttelton
The Treasury will be brought into consultation on those financial points which are contained in the last few words of this paragraph, which is the most appropriate function for the Treasury in a matter of this kind. The procedure under these provisos is only advisory and does not detract from the responsibility of the Minister concerned. I do not think I need say anything about the number of persons to be appointed to the board except that they cannot be a majority. I come to paragraph (2), on page 2, which merely says that the director is deemed to have the necessary qualification of shares without actually acquiring them and is appointed within the articles of association. I do not think it is necessary to go further into the details of the Regulation.

§ Mr. Ellis Smith
Will the Minister be good enough to say who is going to pay them?

§ Mr. Lyttelton
There can be no obligation on the company to pay the directors. It can pay the directors if it so wishes. It may surprise hon. Members to know that there is a good deal of voluntary work done in the field of production.

§ Mr. William Brown (Rugby)
At Question Time to-day it was stated that one director appointed for Overseas Airways was Mr. Marchbanks, who, as far as I know, has no experience of running any company. He has to be paid £750. If it is not to be paid by the company, by whom is it paid? The Chancellor of the Exchequer?

§ Mr. Lyttelton
The Government will try to find a director who will do the business, but under this Regulation there can be no obligation on the company to pay. [Interruption.] The Government may pay. Probably he will not serve if he does not get anything.
Those are the details of the Regulation. The main thing is that the Government are, in accordance with the ordinary commercial practice, to be represented on the boards of companies in which they have substantial investments. If there is a Parliamentary analogy, I seem to remember having read something about "No taxation without representation," and I can assure my hon. Friend who seconded this Motion that it is by no means in the case of proprietary interests only that representation is asked for on a board. It is very common to find creditors, especially when they think that the affairs of a company are not going as well as they might, obtaining representation on the board, and it is the same where banks decide they must have representatives on the boards of industrial companies.
First of all, then, the Government are getting the ordinary commercial right to be represented. Next I must refer to a very peculiar statement—if I may say so, coming from such an experienced Member as my hon. Friend the Member for Duddeston—about financial directors. There are no such things. Directors are directors, and that is all. If my hon. Friend cares to look into the law on the subject, he will find that on many occasions directors have sought in the 765 courts to narrow the field of their responsibilities, and the courts have always ruled that this was quite impossible. A director is a director.

§ Mr. Simmonds
I think my right hon. Friend has misrepresented me. I was speaking of their functions in the company, not of their legal responsibilities.

§ Mr. Lyttelton
That is very much the same thing. I cannot make a distinction, and I do not think we need labour the point. I come to other aspects of this matter, those really covering the question, "Why do the Government want the Regulation at all?" I share the view of my hon. Friend who seconded this Motion that very little good will be done unless there is a measure of good will between the company and the Government who are going to appoint directors to the board, but what he has entirely neglected is that this instrument is a far better one for achieving our object than the instrument of negotiation. I will explain why. If, owing to their large financial interests, the Government, so to speak, negotiate directors on to the board, then several things happen. First, the board may be full under the company's articles of association, and in order to make room for the Government nominees it would be necessary for the company permanently to alter its constitution.

§ Sir J. Mellor
It is not necessary to have compulsory powers for this purpose. I did suggest that the Government should have a Regulation which would enable them to override any technical legal difficulties of that kind, so as to implement an agreement.

§ Mr. Lyttelton
There are several other points which I can make which will show, I hope, to my hon. Friend that my argument is on the correct lines. I have had a long experience of the management of joint stock companies, and I say certainly that I should much prefer to have a director, or two directors, or three directors, appointed to the board of a company of which I was chairman under this Regulation than to accept him or them under a system of negotiation. I have dealt with the first point that the board may be full, and that therefore the constitution of the company would have to be altered. A second point is that I might have to ask some of the existing directors who might 766 be doing very useful work to resign in order to make room for the Government nominees. That is sometimes an invidious task. The third point is that once directors have been negotiated on to a board they become part of the family. The Government cuckoos are permanently in the nest, and it requires executive action by the board or by the shareholders to get them out of the nest. Under this Regulation, on the other hand, the tenure of office of directors, subject to this yearly right of review, is coterminous with the Defence Regulations, which may admittedly remain in force after what we call the end of the war. At any rate, no executive action is required, no invidious requests have to be made, and the directors appointed will simply lapse into their honourable retirement, which we hope they will deserve. Therefore, it is greatly preferable that directors should be appointed under these powers, which mean no stigma upon the company, than that pressure should be brought upon the company to take them permanently into their family.

§ Mr. Bowles (Nuneaton)
When the Government exercise the powers under this Regulation surely they are dissatisfied with the board of directors, and someone must go. I do not quite understand why the right hon. Gentleman says that if he were chairman of a company, he would be much better pleased to work under this Regulation because of ensuring friendly relations. They have let the country down.

§ Mr. Lyttelton
No, no, certainly not. If the country has been let down, then there are the most drastic powers in the hands of the Government to put in an authorised controller. That, I think, answers a lot of points, which I did not think had great force, which were made by my hon. Friend the Member for Stoke (Mr. Ellis Smith). If he wishes for comparisons between the direction of labour and the direction of capital, the correct comparison is between the authorised controller and the Essential Work Order, and not a comparison with a very limited Regulation of this kind. To answer my hon. Friend's point, what we seek to do here is to take measures to prevent a serious state of affairs coming about. Many of these companies are required to double or treble their production, and the Government directors will be of great 767 assistance to them, especially in their subcontracting. That, I think, will be generally welcomed by their boards. It will be a useful function. The point with which I was dealing is that it is far better for a company to have a director of this kind than to take somebody permanently into the company's family.

§ Mr. J. J. Davidson (Glasgow, Maryhill)
Do. I, understand that this Order will be operated only where the Government are of the opinion that extra contracts or extra orders are going to be given to a particular company?

§ Mr. Lyttelton
No, there is no such limitation at all. I was giving that as an instance where directors could be of use to the company to promote efficiency. One of the instances was where the production of the firm was, say, going to be doubled or quadrupled.
There is one other point to which I would like to refer before I sit down. I think the original Regulation was open to the objection that it tended to widen the field in which the appointment of an authorised controller would be the appropriate measure. One could see that under that Regulation circumstances might arise which were not in themselves very serious but which might lead to an appointment of an authorised controller, in a case which did not require such very drastic action. One of the objects of this Regulation is to provide the Government with much more moderate means of preventing these evils before they arise, and therefore it narrows the field over which the appointment of an authorised controller might be appropriate. I must be quite candid and say that neither of the two cases which the hon. Member has in mind would have been cured, at any rate this year, by the existence of such a Regulation, but if we have the power to appoint these directors at an earlier stage, the need for drastic action will I think in many cases be prevented. I do not think that it is very good doctoring that whenever a man has a sore throat you should remove his tonsils. I suggest in these matters that the Government should have a certain number of mild therapeutics of this kind, and not be armed with the surgeon's knife only. I point out to hon. Members that the effect of this Regulation will be to narrow the field in which the appointment of 768 authorised controllers is necessary. I apologise for having gone so fully into this matter, but I hope that this explanation will satisfy hon. Members——

§ Dr. Morgan (Rochdale)
Will the right hon. Gentleman kindly turn his tonsils in this direction, as we cannot hear what he is saying?

§ Mr. Lyttelton
I was saying that I hoped hon. Members would realise that this is a reasonable Measure which will promote efficiency and prevent the exercise of very drastic powers which we do not want to use, except where they are absolutely necessary.

§ Mr. R. J. Taylor (Morpeth)
Does what the right hon. Gentleman has been telling us mean that the Government do not wish to hurt the feelings of the directors unless that is unavoidable?

§ Sir Herbert Williams (Croydon, South)
This has been an interesting Debate. We have had two speeches in favour of the Prayer and two in opposition to it. The original speech in opposition came from the hon. Member for Stoke (Mr. Ellis Smith) and he based it entirely on the grounds of efficiency. We have had one from the Minister in which he emphasised that this really was a financial consideration. Neither speech had the remotest relation to the Order in Council and neither gave a solitary reason why the Government want this power. There is no reason. The Government have got themselves into a tangle because, in the days when people were not watching these things, they turned Orders out like sausages from a sausage-machine, and without proper consideration. If the Government had known three months ago that this Debate was likely to take place, we should never have seen this Order at all.
The hon. Member for Stoke showed me a document relating to a matter which was referred to. It had reference to the gentleman who is now the Chief Justice for India, formerly a Member of this House. That gentleman tabled a Prayer against Regulation 78, which comes into to-night's discussion. After it had been explained by the then Parliamentary Secretary to the Ministry of Supply that the Regulation was wanted for dealing with certain very difficult cases, the Motion was withdrawn, which indicated a measure of 769 sweet reasonableness on the part of those who wanted to know what it meant. As the hon. Member for Stoke-on-Trent is not anxious to know what things mean, he has objected.
We have had two announcements by the Minister and we have to weigh up their significance because they may be of sufficient value to justify us in not proceeding with our Prayer. The first is that, before action is taken at all, there will be a reference to a committee presided over by Sir Charles Craven, who many of us have the honour of knowing, a very distinguished engineer who has successfully conducted many great enterprises. With him are associated a number of other people, some of whom I know and some of whom I do not know, but all of whom I believe are men of ability and probity. That is the first check on any abuse by Ministers. The next check is not as good as I hoped. It relates to the interpretation of the word "substantial" in paragraph (a) of the proviso. The whole trouble about this document is that it cannot be challenged. Any action under it cannot be challenged in the courts, because every action is taken "in the opinion of the Minister" and "in the opinion of the competent authority." The word "competent" is a legal phrase. It does not mean that the Minister is competent; very often he is incompetent and he may be out on his ear three days after he has been a competent authority. You cannot get into court on these matters and therefore you cannot examine the mind of a Minister. If you did, you might find there was not anything there to examine.

§ Mr. Davidson
While the hon. Member is dealing with competency, will he say whether he means by "competent" a Minister who retains office, or does he mean by "incompetent" one who has been in office and cannot get back again?

§ Sir H. Williams
It may be either. Sometimes the reason why a man retains office is that he is incredibly subservient. I am told that being a "Yes" man is the best qualification of all for a Minister. These matters cannot be challenged in the courts and therefore we have to consider that, if a Minister thinks of any of these things, he can do them without fear of any legal challenge of any kind whatever. The matter cannot be challenged in Debate in this House because 770 there is no means of securing an effective Debate. I understand the Minister of Aircraft Production to say, "Except by Vote of Censure," but that would be an extreme case if a Minister had rather unwisely, shall we say, thrust certain directors on to a board of a company as the result of which some deterioration had taken place in the efficiency of that company. The Minister now suggests that we should take the extreme step of putting down a Vote of Censure, but that is not easy. An extreme step should not be taken in a matter which may be important in itself but is of minor importance in relation to the whole effort, and it is childish to suggest that Vote of Censure is the means we should choose.
If a Regulation made under this Order could be debated as we are debating this matter to-night, democratic power would exist, but all the sub-Orders are not debatable in this House. That is why some of us regard this method of administration as being essentially Fascist in character. Support for this Order in Council has been obtained in the most extraordinary way. Take to-day's edition of the "Pink 'Un," as I now call it. It is not as amusing as Mr. Sievier's "Pink 'Un" was. I refer to "The Times" newspaper. They have a leading article in which they ask for support for this Order in Council on the grounds that if the Government do not get it, they will be deprived of certain powers which they have recently been exercising. "The Times" copied that from a recent edition of the "Shop Stewards' Journal," published a month ago, where the same dishonest argument was used. Other journals have also used the same argument. Not one newspaper that has been critical has had the honesty to state the facts, and the facts show a desire to intrude directors on to the board of a company which is not inefficient. It is not a case of dealing with a company that is inefficient because, in that case powers under Regulations 78 and 55 apply. No case has been made out and no example cited. There is no reason why we should not cite examples in this House, where we are protected and cannot be sued for it.
It is one supreme advantage. We do not mind discussing things; we do not mind discussing persons. If the Government had in mind one solitary example of a company where they wanted to use this power, why not say it? They dare not— 771 no case, no example, no attempt to build up an example. What case is there for it? What case had been made out? The speech the hon. Gentleman behind me made had no relation to the Order. The speech of the Minister had no relation to the Order—not the faintest indication, except that I understood him to say that he did not want to put a clergyman on the board. Some clergymen are exceedingly competent. What is the case against this Regulation? What is the board of a company? It is a team of men who have learned to work together. It is essential, whether it is the committee of a football club, the committee of a trade union, or a board of directors, that they should all have the same quality; if they are to work together, they must be a team. Into that team it is proposed to obtrude outsiders against the wishes of the people on the board.

§ Sir P. Hannon
Does the hon. Member contend that every board in this country is a team? Does he realise that there are boards of directors here and there where there is a sad absence of team work?

§ Sir H. Williams
All I know is that if I were on a board of directors which was not a team and could not be made a team, I should get off, which is the proper solution. Unless you can work with your colleagues, you have no business there. More mistakes are being made by the Ministries than are being made by the companies engaged in war contracting. A company is asked to do something which it believes is probably unwise and wrong. One of the representatives comes down for a discussion with the management, and the management resists what the Ministry want to do because they know it is against the public interest. It has happened dozens of times. Then some quite important person representing the Ministry, someone whom the company probably would not employ because he is not good enough, will threaten, "Unless you do this, we will put Government directors on the board." You are going to intimidate every management in this country, and diminish efficiency by that power, and even more if you obtrude on the board people not acceptable to those there—not on the ground that the company is inefficient; that is not the basis of the Order; the Government have all the powers they 772 need under 55 and 78. They have made out no case for this. [Interruption.] Strengthen the board? But how do you strengthen the board by shoving in a stranger whom the other people do not like? It will weaken the board. If you want to help people, you can negotiate, but the method of pushing someone into a household will never do any good at all, and everybody knows it.
We are offered these two safeguards, one the Craven Committee, which I admit goes a very long way because of the existing composition of that committee; and the further safeguard, that in interpreting the word "substantial" the Treasury has to be satisfied. I think that is an advantage a little greater than it appears at first sight. It means that before any one of the Production Ministers can act on this Regulation he has to consult the Treasury, and therefore another Minister is brought in. The bringing in of another Minister if there are difficulties means bringing in the War Cabinet. That does represent a very important advance. Obviously, it does. It means that no individual Production Minister can act on his own. I have nothing to say against individual Production Ministers. I do not know whether one or all of them desire these powers, or which. It is true that the name of the Minister of Aircraft Production has been spread about the papers a great deal, but that has been entirely by those who support this Order, not by those who criticise it. Where they have got their inspiration from, I do not know. Not through us, because we had not the faintest idea when we tabled our Prayer whether he was interested or any other Minister.
All we saw was an Order in Council empowering altogether about six different Ministers to do things. We did not know which of them it was who was parrticularly interested. The first time I discovered which was particularly interested was when I read the "Shop Stewards' Journal," next when I read the "Daily Worker" and then the "News Review" and still more when I read the "Sunday Pictorial." All these organs of public opinion have dragged in the Minister of Aircraft Production. We have been forced to the conclusion that he above everyone else wanted to use this power in the same way as he used to horrify the hon. Members behind me by wanting to shut up the 773 House of Commons and rule by Order in Council. That, I understand, is largely the reason why he and the party behind me parted company. [An HON. MEMBER: "What has this to do with the Prayer?"] Because he wants the Prayer. [Interruption.] I did not say so, but all the papers which gave the fullest reports of his speech say so, and I presume they must be in his confidence, because they published so much about his desire.
Having regard to the very important statement made by the Minister of Production, I am inclined to suggest to my hon. Friend that as we have obtained an honourable declaration representing very important changes which mean that these things cannot be done irresponsibly by a single Minister, then as sensible people we have to take account of the declaration. Declarations by Ministers are always honoured, and I am inclined to think that my hon. Friend the Member for Duddeston (Mr. Simmonds) could with advantage ask leave to withdraw the Prayer, as he has achieved the main part of his object.

Mr. Speaker
Mr. Kendall.

Mr. Speaker
If the hon. Member wishes to withdraw the Prayer, he cannot do so if anyone else objects.

§ Mr. Kendall (Grantham)
As a comparatively new Member of this House, it is not often that I enter into debate. I do so to-day for two reasons. First of all, I run a war factory which is highly efficient. Secondly, my firm has had a great deal of experience of conditions similar to those of 54CA. Before giving the House my experiences, I would like to make my own approach, an appropriate angle of approach, to the problem we have been discussing to-day. Some hon. Members have approached it from the angle of leaving private enterprise entirely alone—efficient or inefficient. Some hon. Members will prefer State control, State owner-Ship, as being the only solution for this type of problem. My own angle is rather different. I am not wedded to private enterprise nor to State control. My only desire is to see that every factory shall turn out the maximum of its production—nothing less. Whether that is done through State ownership, private enterprise, or a mixture of both I do not care, so long as we get the results.
774 The Prayer we are discussing is to annul 54CA. This provides that if the competent authority is satisfied that it is desirable, in the interests of efficiency, so to do, he may appoint a director or directors to the board of the undertaking concerned. This power is limited to enterprises spending a substantial amount of public money or receiving substantial grants. The number of persons that the competent authority can appoint to the board is a maximum of three directors, and it shall not, under any consideration at all, represent a majority. The House has to ask itself whether these conditions will produce the desired results, increased efficiency and production. I would like to apply two tests. The first is the experience I have had with the application of 54CA to my own company. One of my right hon. Friend's predecessors appointed to the board with which I am concerned a number of directors. It is not part of my purpose to criticise the individuals whom he appointed, but I should be doing less than justice to the situation if I failed to say that their effect on the production of my company for good or ill has been precisely nil. The record of expanding production of my company before their appointment was tremendous. The amount of production since their appointment has continued to be tremendous. I ask the House to believe me when I say that without their appointment this production would still have been tremendous. I believe that the same directors, who are operating under conditions similar to those of 54CA, would agree with me whole-heartedly in that statement. They would be the last to claim that they have had any effect in either increased production, lowered costs, or better quality. It is quite true that I have derived the advantage of coming to know some very charming gentlemen; I have made friends. But surely some other purpose ought to be served in applying 54CA than to facilitate my introduction, or anybody else's introduction, to charming people.
I would like to assert the following things of directors whom Ministers of Aircraft Production have appointed to my firm or to other firms, under one or another of the Defence Regulations. I assert, first, that they have appointed, generally speaking, elderly people; secondly, that they have tended to choose men with names and reputations already 775 attached to them for past accomplishments; and, thirdly, that they have tended to choose the names from three specific fields—finance, the legal field, and the trade-union field. I wish to make it quite plain that I do not discourage age, technical qualifications, or trade union representatives or financial contacts. I assert, however, that the character of the appointments so far made derives from a profound misapprehension of the job to be done.

Mr. Speaker
The hon. Member is discussing a matter which comes under the administration of the Department, and not under the Order. It comes under Supply, and not under this Motion.

§ Mr. Buchanan
We are discussing the appointment of directors. Surely if the hon. Member can show that the directors so far appointed have not been what was claimed for them, that has a bearing on the matter.

Mr. Speaker
In going into detail the hon. Member is going much too far, in my opinion.

§ Mr. Kendall
I have finished with that side of the matter. The present position in factories is very simple. The price of practically every piece of raw material is controlled, through the Steel Control. Therefore, we do not any longer need to have directors who may be financial geniuses in the raw material world. Wages are fixed for us, through conciliation or arbitration, and employers are pledged to pay the appropriate rates of wages for the different categories of workpeople they employ. In the third place, we do not need directors who are chartered accountants, because prices are controlled through Ministerial Orders, which give the Ministers power of investigation and access to all books. I have, as the House knows, had personal experience of that. Finally, profits are controlled, through the Excess Profits Tax. In short, the problem to-day is one of production alone. It is concerned with factory lay-out, factory organisation and factory planning. In this field, however eminent these people may be in their own line of business, I say, through my own knowledge and experience, that the appointments made so far under the conditions of 54CA have proved themselves to be eminently undesirable.
776 But the Prayer we are discussing does not come from people who are satisfied that 54CA is not enough. It comes from people who feel that 54CA is too much, who resent any interference with the freedom of private enterprise, efficient or inefficient. Therefore, whatever I think of 54CA and its inadequacies, I have no sympathy with the motives that have prompted the tabling of this Prayer. What is the conclusion to be drawn? Is it that we should leave 54CA where it is? Plainly, that does not solve the problem. Is it that we should do nothing? No, for that involves the admission that we should give up the problem as being insoluble. Then what is the remedy? It is to apply 54C or Defence Regulation 78. That remedy has been applied by the Minister of Aircraft Production in three instances. From all the information I have had given to me over the last 12 months, I think the position he has taken has been absolutely right, proper, and well justified. My purpose to-day is to urge him and all Production Ministers to be utterly ruthless in the application of 54C and Defence Regulation 78, and to ignore Defence Regulation 54CA, which is only a compromise, and take over the other factories which are inefficient. There are only two categories of factories in this country—the efficient and the inefficient—and because of this Prayer the Minister should now start ignoring the borderline cases and take them over. As far as labour is concerned, the Minister of Labour has, with thoroughness and ruthlessness, applied the powers which were given to him.

Mr. Speaker
The hon. Member is discussing a wider question. We are discussing, as I had to remind the hon. Member before, one particular Prayer.

§ Mr. Kendall
I wanted to say more, but I close in view of your Ruling, Mr. Speaker. I am confident that experience will teach all Production Ministers that they will not solve their problem of efficient production through the application of 54CA and appointing a minority of directors and those of an unsuitable type to the boards of existing companies. I am confident that experience alone will teach Ministers that the only real solution is to exercise the powers vested in them in Regulation 54 and Regulation 78, and it is my earnest hope that they are the two powers that they will apply and not 54CA.

§ Mr. Buchanan (Glasgow, Gorbals)
Some of my colleagues thought that the hon. Member for South Croydon (Sir H. Williams), who to some extent appears to be the leader of the Conservative Party, was running away. [HON. MEMBERS: "He is back again."] I did not take the view that he was running away but that he had got very substantial guarantees to-day. I think that the guarantees are another sign that the present Government move steadily to the right each time. Sir Charles Craven is a great engineering magnate, and the guarantees which have been given are guarantees which, if I belonged to that party, I would welcome. The Government seem steadily to make every concession to those who come from certain quarters of the House, whereas those who hold different political views do not receive the slightest concession, and that is evidence of the tendency of political development in these days.

§ Mr. Simmonds
I must agree that my right hon. Friend the Minister of Production has given us some very substantial pledges, and I am sensible of what my hon. Friend the Member for South Croydon (Sir H. Williams) and a number of my hon. Friends who signed this Prayer feel on this issue. Although, therefore, we feel that the Order would be better off the Statute Book, we nevertheless take note of what has been said, and although we shall be very diligent to see how these powers are used, I would, with the permission of the House, beg to ask leave to withdraw the Motion.