INDUSTRIAL DEMOCRACY (Hansard, 5 August 1975)

§ The Secretary of State for Trade and President of the Board of Trade (Mr. Peter Shore)
With permission, I should like to make a statement.
The Government are committed to carrying through as soon as possible a programme for the radical extension of industrial democracy in both the private and public sectors. The first steps have been taken by my right hon. Friends the Secretaries of State for Employment and Industry with the Employment Protection Bill and the Industry Bill which contain provisions allowing for greater disclosure of information and for the work force to be more closely involved in future planning. Meanwhile developments in industrial democracy, particularly below board level, are now taking place and more are planned. It is desirable that these should continue. The next step is to formulate measures which will enable those employed to participate in major decisions affecting the future of their companies through representation at board level. Not only will this involve a major change in company law but it will clearly bring about a fundamental change in the way industry is managed.
Because of this, and because the issues are both complex and in this country relatively unexplored, the Government wish to have the best available advice before coming forward with legislation. I have therefore decided to appoint an independent committee of inquiry to advise on questions relating to representation at board level in the private sector. It will have the following terms of reference: Accepting the need for a radical extension of industrial democracy in the control of companies by means of representation on boards of directors, and accepting the essential rôle of trade union organisations in this process, to consider how such an extension can best be achieved, taking into account in particular the proposals of the Trades Union Congress report on industrial democracy as well as experience in Britain, the EEC and other countries. Having regard to the interests of the national economy, employees, investors and consumers, to analyse 246 the implications of such representation for the efficient management of companies and for company law. The names of the chairman and members will be announced very shortly. The committee will be asked to present its report to the Government within 12 months so that legislation can be placed before Parliament during the 1976–77 Session. The committee will wish to call for and receive evidence quickly and I hope that interested parties will begin to prepare their evidence right away. There is a need for a wide-ranging debate on this important subject so that a full measure of public support may be achieved, and I earnestly hope, therefore, that all who are able to make a contribution, including those who are already practising forms of industrial democracy, will assist in the vital work of this committee.
I should also like to pay a tribute to my hon. Friend the Member for Chester-le-Street (Mr. Radice) who brought before the House a Private Member's Bill on industrial democracy and also those who served with him on the Standing Committee. In their debates they examined many of the issues which are fundamental to legislation and this will be a very helpful contribution to the work of the committee of inquiry.
In parallel with the work of the committee, the Government also intend to take a radical look at the rôle of employees in relation to decision-making within the nationalised industries. A study has been set in hand.
Meanwhile, the Government hope that experiments in developing new forms of industrial democracy and democratic self-management within the existing framework of the law will continue, and that the establishment of the committee of inquiry will in no way prevent the work now in progress from continuing to develop.

§ Mr. Madel
I am sure that the whole House will welcome that statement on this vitally important subject, albeit somewhat late in the Session. It is especially welcome to members of Standing Committee C who considered this matter upstairs.
I recognise the important rôle of trade unions in this matter, but do the Government see industrial democracy as involving all the work force? If so, 247 should not they reconsider the terms of reference of the inquiry, which at first sight appear to be somewhat narrow?
Will the Secretary of State say when the study into decision-making in the nationalised industries will be completed?
Will the Minister be a little more precise about when the name of the chairman of the inquiry will be announced? As the Government want the best available advice, and as there will be two studies in progress at the same time as well as developments in Europe, will the Government assure us that they will not sacrifice thorough consultation, especially with those organisations that already practise industrial democracy, for the sake of early legislation? Finally, may we take it that the process up to legislation will be a Green Paper, a White Paper and then a Bill?

§ Mr. Shore
I begin by thanking the hon. Gentleman for his warm response to the announcement I have made. I believe that the development of industrial democracy is welcomed on both sides of the House and, indeed, broadly in British industry.
I should like to be able to give the hon. Gentleman a firm answer on his last question about a Green Paper, a White Paper and a Bill, but it would possibly be inadvisable for me at least to say that there will be a Green Paper and a White Paper. At the end of the process of inquiry when we have the report the Government may well put forward their conclusions based upon its findings.
As to the timing of the nationalised industry inquiry, we certainly hope that it will be at least in phase with the timing of the inquiry I have just announced.
On the question whether the whole of the work force will be involved, it is clearly not the intention in the terms of reference to close any option for representation in boardrooms.

§ Mr. Radice
I thank my right hon. Friend for his kind remarks about the contribution made by the Industrial Democracy Bill. Is he aware that we welcome his statement, especially the terms of reference for the inquiry and the commitment to legislate in 1976–77? Does my right hon. Friend accept that the speedy 248 appointment of a suitable chairman for the inquiry is crucial for early legislation?

§ Mr. Shore
I thank my hon. Friend for his welcome and, again, for the conspicuous part he played in pushing forward legislation in this difficult but important area of industrial democracy. It is our intention to be ready with legislation in 1976–77, although I take the point made by the hon. Member for Bedfordshire, South (Mr. Madel) that we have to strike a difficult balance between thoroughness and speed. We shall go all out to get this in the 12-month period I announced. I assure my hon. Friend that there will be no delay on our part in the appointment of the chairman.

§ Mr. Cyril Smith
Is the Minister aware that his statement will be equally welcome to the Liberal Party which has been committed to the principle of worker participation since 1928, indeed for far longer than any other political party, including his own?
Will the right hon. Gentleman say whether the terms of reference of the inquiry require it to report on the possibility of worker participation as opposed to mere trade union representation at board level?
Will the Secretary of State note the regret that some of us feel that the committee of inquiry will not cover nationalised industries? I understand that there is to be a separate statement about nationalised industries but it seems to me that they have some relationship to this subject and that it is wrong to preclude the committee of inquiry from considering them.
Finally, will the right hon. Gentleman say whether there is to be an opportunity for the official Opposition and other Opposition parties to make nominations for the appointment of members to serve on the committee of inquiry? I am thinking not of politicians but of people of whom we are all aware who have a long history in and knowledge of worker participation. What facilities will be available to us to make nominations?

§ Mr. Shore
It is always open to hon. Members to make suggestions to a Minister before he has made an announcement and come to a firm conclusion about whom to invite. If the hon. Gentleman 249 has proposals to put to me, I shall be glad to have them, but I ask him to make haste if his proposals are to have any effect.
The study of nationalised industries poses questions significantly different from those that are posed by the study of representation on the boards of privately owned companies. Therefore, I think it right that they should be the subject of a separate study, although there might be a certain element of overlap in some of the conclusions reached.
In the terms of reference we draw attention properly in the British context to the importance of trade unions and trade union organisation. They are part of the history of the country and represent a different kind of development in some ways from that which has occurred in many other European countries which have different forms of industrial democracy. We do not rule out worker participation in the broadest sense.

Several hon. Members
rose—

§ Mr. Speaker
Order. The House has a great deal to do today. I hope that questions will be brief.

§ Mr. Heffer
Is my right hon. Friend aware that long before the Liberal Party was involved in industrial democracy many of us in the Labour Party were arguing for self-management for workers in industry? Is he also aware that some of us will be disappointed that we shall have to wait a further year for the report of another committee of inquiry? The Labour movement has been examining this subject from the time I joined it at 14 years of age. We should have come forward much earlier with concrete proposals. However, the Government have decided upon a year and we shall accept it, but let us get the legislation quickly immediately following the inquiry and not let the inquiry be used as a further excuse for holding up something which should have been done a long time ago.

§ Mr. Shore
I am being conciliatory to my hon. Friend when I say that whereas I think it is true that he and other hon. Members have given a great deal of thought to questions of industrial democracy in the Labour movement, I do not think that the movement, as a whole, has paid anything like enough 250 attention to the questions that are involved. That is certainly my experience over the years that I have been associated with it. As my hon. Friend will recall, it was only recently that the TUC, as the most representative body of organised workers in the country, endorsed the general principle of industrial democracy. There is still a great deal of work and thinking to be done, and I am sure that this committee will be valuable.

§ Mr. Amery
Having advocated industrial democracy since 1948, before I entered the House of Commons, may I congratulate the right hon. Gentleman on his statement. My only regret is that it was not made by the Conservative Party 15 years ago. I should like to raise one specific matter. Is the right hon. Gentleman aware that under our present antiquated company law, management and labour are still regarded as commodities to be hired in the market? In the guidance which the right hon. Gentleman gives to the committee, will he ask it to consider the representation of management as well as of labour, in other words, both brains and skill, because it is not easy to draw the precise dividing line between the two when considering industrial enterprise?

§ Mr. Shore
I know that the right hon. Gentleman has been a long-established advocate of forms of industrial democracy. I am glad that he, too, has joined other hon. Members in welcoming this move forward. I believe that management representation, on whatever structure of boards or board is agreed, is certainly one of the questions which the committee of inquiry must consider very carefully.

§ Mr. Park
In his statement my right hon. Friend mentioned the fact that industrial democracy had been exercising the minds of three Government Departments. May we now take it that there is to be a co-ordinated approach on this subject and not three Departments going in three different directions? Will he also accept from me that the appointment of workers to boards is not the be-all and end-all of worker participation?

§ Mr. Shore
My hon. Friend was absolutely right in his last observation. One of the matters which caused the Government some anxiety was what was the best way to proceed. Certainly no one 251 should underestimate the importance of—if I may put it this way—the sub-board level of industrial democracy, which many people consider to be even more important than representation on the boards themselves.
On the question of the three Departments, I assure my hon. Friend that we have been marching together. We have been one foot after another, or whatever the right phrase is. We have been in close contact and I am not aware of any significant disagreement.

§ Mr. Maurice Macmillan
I, too, have long advocated participation in ownership as well as in other matters. Can the right hon. Gentleman tell us whether the committee of inquiry will have written into its terms of reference the question of worker participation and ownership and whether it will have the power to consider some of the fiscal obstacles which at present stand in the way of many schemes which would enable employees of a company to become owners of part of the equity?

§ Mr. Shore
It would not be for me to put limits on the scope of the inquiry. If such matters appear to be relevant I am sure that they will be taken up by those concerned. The terms of the inquiry are clearly related mainly to the question of representation on board of directors.

§ Mr. Robert Hughes
As my right hon. Friend has said that there will be a 12-month time limit on the working party, 252 will he give an undertaking that the study concerning the nationalised industries will be completed at the same time and the conclusions published in the same White Paper?

§ Mr. Shore
I cannot give my hon. Friend a binding undertaking on that point, but it is certainly my understanding that the inquiry into nationalised industries will be kept in phase and possibly may be concluded at an earlier date.

§ Mr. Crawford
I, too, welcome the right hon. Gentleman's statement. Industrial democracy tends to flourish more effectively in those companies and factories where decision-making is integral and less effectively in branch factories, of which we have all too many in Scotland. Does the right hon. Gentleman agree that the best way to stimulate industrial democracy in Scotland is by the creation of indigenously owned and run companies?

§ Mr. Shore
I am not sure that I draw the same conclusions as the hon. Gentleman from that train of reasoning. However, I take the point that in considering the question of representation on boards, the problems of companies with substantial numbers of subsidiaries need to be thought out very carefully. Now that we have heard from the hon. Member for Perth and East Perthshire (Mr. Crawford), I point out that I have seldom launched a statement which has received such unanimous and all-party support in the House. May it continue.