DUTY OF CORPORATION TO PROVIDE INDEPENDENT ASSESSMENT OF ACCOUNTS

HC Deb 12 July 1976 vol 915 cc221-60

'In section 24 (Accounts of the Corporation and audit) at the end there shall be inserted— (8) Notwithstanding the duties imposed on directors of the Corporation under subsection (5) above, the Non-Executive Directors of the British Steel Corporation shall be regarded as an Audit Committee to whom the auditors shall report for formal consultations prior to the submission of report and accounts as provided for in subsections (4) and (6) above. The Audit Committee shall make its own report upon these consultations to the Secretary of State who shall lay a copy before each House of Parliament and, while ever it is formally in existence, with the Select Committee on Nationalised Industries.".'—[Mr. Michael Marshall.]

Brought up, and read the First time.

12.16 a.m.

Mr. Michael Marshall (Arundel)

I beg to move, That the clause be read a Second time.

Before we proceed further, I invite the Minister of State to intervene to give some idea of the Government's intention about business. It is disgraceful that at this hour of the morning we should be considering a Bill to increase the British Steel Corporation's borrowing requirement by £4,000 million. We appreciate that we now have a new Prime Minister, a new Leader of the House and a new Patronage Secretary, but it is getting beyond a joke when that combination of inexperience causes this kind of foul-up in our business. Therefore, I invite the Minister of State to tell us his intentions.

The Minister of State, Department of Industry (Mr. Gerald Kaufman)

The Government intend to complete the remaining stages of the Bill tonight and to get the Third Reading.

Mr. Marshall

I can only say that I am sorry to hear that.

Mr. Geoffrey Finsberg (Hampstead)

Does my hon. Friend not agree that it is possible for large numbers of us to make long, detailed and helpful speeches, which might take us well past one o'clock lunch-time tomorrow?

Mr. Marshall

My hon. Friend reflects the great strength of feeling on the Opposition Benches—namely, that we are being put under some kind of moral blackmail. We have a full programme this week, and I do not think it helps the House once again, on this important Bill, to be squeezed into discussing such matters in the hours after midnight.

In dealing with this clause, we in no way seek to delay the proceedings of the House—just the reverse. Let us consider the difficulties with which we are faced. First, in Committee the Government refused to accept an amendment tabled by the Opposition that would have allowed us to be satisfied that the amount of information brought forward at the time of a further increase in borrowing powers was of such a nature as to be satisfactory and to enable hon. Members to make judgments about the corporation's past performance and indeed about future investment intentions.

I make no criticism of the Chair in its selection of amendments and new clauses. We are now considering a clause which introduces an important new concept, but which is also the only possible recourse that we have in providing some sort of independent assessment of these borrowing powers. The importance of this will be evident in a moment, but I want to make it clear that by our other proposal we should have encouraged the Minister to satisfy the House at his discretion and at the discretion of the Department of Industry what information was proper and relevant for this House to have in considering the borrowing powers. It is unfortunate, but in rejecting that the Government have left us with no alternative but to bring forward some kind of check point so that when we are considering the possibility of an increase from £3,000 million to £4,000 million we move in a considered kind of way.

We recognise that the British Steel Corporation has about seven outside directors, and we are anxious to explore the role that they can play in helping both the House and the country.

Mr. Deputy Speaker (Sir Myer Galpern)

Order. Too many independent conversations are taking place in the Chamber and the Chair is finding it very difficult to hear the hon. Member moving the new clause.

Mr. Marshall

I am grateful for your protection, Mr. Deputy Speaker.

These are important matters, and I hope that we can approach these debates in a serious way. The concept behind the new clause is important, and it touches upon a basic question which I now put to the Minister. What is the role of the outside directors of the BSC? We have had no answer to that. We have very little feel from anything that was said in our previous deliberations of what view the outside directors take of the corporation's past borrowings, of its future borrowings and of its whole investment programme and performance, which are inevitably linked in an assessment of these matters.

In considering that question we have to decide what is the best way in which we can effectively seek the views of those directors, and that is why we have tabled the new clause. It is necessary to say something about what we mean by this concept of the audit committee. I hope that if some of my hon. Friends are able to take part in the debate they will develop this concept in a broader sense than I shall do by way of introduction.

Mr. Tim Renton (Mid-Sussex)

Hear, hear.

Mr. Marshall

I am grateful to my hon. Friend for his vocal support. He has considerable experience of these matters.

The basic idea is to draw on the American experience, where it is common practice for the largest companies in the United States to have an audit committee made up of their outside directors. This involves the outside directors questioning the auditors at the time of the preparation of the annual report and accounts. This could involve a major examination, but in general terms they look primarily at the internal controls.

The principle that American companies have followed in these matters is for the audit committee to concentrate its activities on the past record and performance of the company, but by being willing to create ad hoc committees and to co-opt executive directors as required it is possible for the outside directors to have a clear view of future investment intentions, of future market projections and, indeed, to make a complete assessment of the performance of the company for which they bear special responsibility. This is a concept which has great interest for us. The great advantage which the outside directors of the British Steel Corporation could bring to bear here is that they could at this moment in time help the House, the taxpayer, and the country to a better understanding of what is being done in their name.

I have stressed the American experience because I want to develop that argument, and I hope that some of my hon. Friends will give the House the benefit of their experience, too. To put the issue in the wider perspective of the American steel industry, the three largest American steel companies—US Steel, Bethlehem and Republic—all operate in precisely this way. I would be interested to hear how far the Department of Industry has looked into this concept. The three largest American steel companies use this approach, and in doing so they have set a pattern which we should explore.

The American approach is to look at budgeting, forecasting and capital investment, and, by extension, this allows outside directors to give the shareholders a view whether the report of the auditors is based on sound financial terms and whether they have satisfied themselves of the general stability of the company and the general soundness of future plans.

This brings me to the direct United Kingdom situation. In the last report of the British Steel Corporation there are seven outside directors listed, who represent a wide range of talent. They include the managing director of Vickers, a former Labour MP, a former steel trade unionist, a partner in a leading firm of chartered accountants, the Dean of Nuffield College, a former senior civil servant, and the chairman of a major engineering group. Those directors represent a wide range of experience. They reflect industrial, financial and commercial as well as trade union experience.

Are the Government sympathetic to the concept we are putting forward? In the sense of the corporation having some need to be judged by the House, I must go back to the criticisms we made during Committee stage of the Bill. We really are not satisfied with the piecemeal way in which information will be obtained from Ministers and from the Department. We have no proper voting mechanism. Hon. Members on the other side were not slow to make the same point in Committee. The hon. Member for Rother Valley (Mr. Hardy) is straining in his seat. I am sure he would agreed with me—

Mr. Peter Hardy (Rother Valley)

The hon. Member has informed the House of the very real ability and obvious sense of responsibility possessed by the directors he has mentioned. But those directors have enough ability and experience to decide whether they wish to have the sort of committee he has mentioned, and whether they would welcome such a committee being introduced by diktat from above. He has not told us whether Bethlehem Steel or any of the others he mentioned set up audit committees as a result of outside instructions or whether the idea was engendered from within.

12.30 a.m.

Mr. Marshall

I take the point. I shall address myself to that aspect, but in general we are not prescribing a commitment, it depends on how we see the creation of this audit committee. The American examples are not directly comparable since we are dealing with a nationalised industry where the question of parliamentary accountability is of concern to us all.

The measure of experience to which both I and the hon. Member of Rother Valley have referred is a basis upon which the House and the country could, with some confidence reasonably assume that the kind of vetting I have mentioned had been done, and we would benefit considerably in our deliberations when looking at the annual report and accounts and, by extension, at further tranches of borrowing commitment as envisaged in the Bill.

More than a body of knowledge is at stake here. Because of the nature of the Bill, because of the way in which the Government have felt unable to accept the arguments in favour of the open-ended, enough-information-to-satisfy-the House argument, and because we have not been able, due to the selection of amendments, to discuss the Green Paper approach, the only effective safeguard we see now for the House beyond the bland assurances we have had from Ministers lies in the sort of approach that we suggest.

I do not want to sell short the role of Ministers in this matter. They have tried to be helpful throughout the Committee stage. But I do not believe that we have yet reached a satisfactory conclusion or have addressed ourselves to the continuing problem of how the House, not just now but on future occasions, can properly judge whether the corporation. in going ahead on permission to undertake massively extended borrowing, is on the right lines.

It is not just a matter of the sums of money involved. although in 1972 the corporation's borrowing commitment was about £300 million, whereas. under this Bill, by 1979–80 it can go up to £4,000 million. The Financial Times on Friday suggested that even that limit is now beginning to look very sick and that, with an increase of the capital cost of the 1972 strategy to some £5,000 million, the borrowing power may well require to receive further amendment much sooner than we think. That is indicative of the very large sums of money involved, and the therefore crucial need to have some kind of considered and dispassionate view.

Mr. Hal Miller (Bromsgrove and Red-ditch)

Will my hon. Friend tell us how more and more borrowing is needed to produce less and less steel?

Mr. Marshall

My hon. Friend raises a question which it would be more appropriate to address to the Minister of State. The burden of our criticism is that we feel that these very large sums of money are being brought forward on a basis not properly spelt out. That is why we advocate an audit committee to help us, certainly for the future.

As regards the detailed operation of the audit committee's activities, we have drawn the new clause in terms which would leave the position relatively open. We are looking for an evolutionary approach, and in order to help the House and the outside directors about our thinking, I should explain that we envisage the creation of an ad hoc committee which could begin this work on the basis of seeing how far development along American lines would be of value, and if, at some later date, that were to be formalised by the Secretary of State we would, on the basis on which we are putting the case, look at it sympathetically.

The precise way in which outside directors should have to make a report available to the House and to the Select Committee on Nationalised Industries should be a matter of discretion for them. But if we left it there, we should be doing less than justice to the gentlemen concerned because I am sure that they wish to have some idea of the way in which we feel that such proposals might work in practice.

I cannot do better than recommend them to look at the proposals in New Clause 1 which provides for such information as may be required to be contained in a Green Paper which would be produced at the time of the new tranche of borrowing under subsection (3A) of Section 36 of the Act. Such information should include an indication of the alter- native financial arrangements considered for future investment schemes, including the possibility of joint ventures.

The corporation currently has a number of joint ventures and it has said that it seeks in future to find further opportunities or joint investment with European steelmakers. It has said that it is not averse to further joint ventures with independent steelmakers in this country—for example in steel stockholding and stainless steel. Over the whole range the corporation has made it clear that joint venture is part of its thinking.

If that is the case, the problem is that there is little suggestion by the Government about the way in which the corporation is now thinking about joint ventures in terms of an overall financing commitment. We should like to hear something about that from the outside directors if they go ahead with the audit committee approach as we suggest. Similarly, with the suggestion that there should be a projected balance sheet, profit and loss account and funds flow forecast—

Mr. Deputy Speaker

I remind the hon. Member for Arundel (Mr. Marshall) that New Clause 1 has not been selected.

Mr. Marshall

I defer to your ruling, Mr. Deputy Speaker.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

On a point of order, Mr. Deputy Speaker. How can the audit committee mentioned in the new clause perform its functions unless it sees accounts? I know that nationalised industries do not produce very good accounts, but accounts must be produced and my hon. Friend the Member for Arundel (Mr. Marshall) is right to talk about them.

Mr. Deputy Speaker

But. Mr. Speaker has not selected New Clause 1, and the hon. Member for Arundel appears to be reading from that new clause. Mr. Speaker would, therefore appear to have been wasting his time in deciding not to select it for discussion. The hon. Gentleman should speak to New Clause 3, which gives him plenty of scope.

Mr. Marshall

In New Clause 3 we suggest than an audit committee should be set up. With respect, Mr. Deputy Speaker, it would be irresponsible simply to say it should be set up without outlining its activities. I suggest that a suitable short shopping list could be contained in the Green Paper if we had the opportunity of providing that document for the House. I hope, Mr. Deputy Speaker, that you see that outlining the corporation's intentions for the future is crucial to the argument if there is to be any sense at all in considering the BSC's future borrowing and its outside directors. The basis on which we should operate is, as my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) said, to look at the report and accounts as basic working documents.

There are many other areas to which attention might be turned and I have highlighted but three. Hon. Members may have their own suggestions as to ways in which the audit committee work should develop. All I say now is that we are putting forward an opportunity—because the Government have refused to do so—for the House to be satisfied that the corporation is moving along the right lines. This is a matter deserving of the most careful attention. Hon. Members must recognise in their hearts that the present situation is far from satisfactory and that we are not able to have a planned and considered way of looking at these matters.

The saga of the Bill has been a story of getting information bit by bit, in some instances because of the good will of the Minister. At the start of our proceedings it was necessary to write to the Chairman of the British Steel Corporation to get a clearer picture of what was envisaged in terms of the borrowing requirement, the breakdown of what was to come from the National Loans Board and what from public dividend capital. We had to write to the chairman to get that information. At the very start that was an indication that we should get only the most general information. It will be recalled that some Government Back Bench Members complained along these lines.

It is common ground that we have to improve the present situation, in Committee the Minister of State told us that he was a compulsive provider of information, and I pay tribute to his good will in at least answering the questions put to him. However, he will recognise that we had to ask many questions to elucidate the kind of information that we needed to build up an overall picture.

As he will recall only too well, we were being asked for these massive sums on reports and accounts that were 15 months out of date. Through his good offices, the Minister was able to get some unaudited accounts for us. But that is not good enough and he must recognise that in future we must have more than this kind of titbit information.

It has been suggested that the report of the audit committee should be made available to the Select Committee on Nationalised Industries as some way in which to give that Select Committee extra status. The Select Committee has recently taken upon itself responsibility for looking at the reports and accounts of the British Steel Corporation annually. It has to do that alongside its study of the reports and accounts of many other nationalised industries. My hon. Friends will be quick to agree that one certain feature of the Select Committee while the present Government stay in power is that it will be a growth industry—that it will have to look at more and more reports and accounts of more and more nationalised industries.

In that event the Select Committee should have access to the fullest range of information and impartial judgment. That is precisely why we have suggested that this kind of review would be helpful to the Select Committee.

Some hon. Members have argued that this investigation could be left entirely to the Select Committee on Nationalised Industries. The trouble about that is that the last steel industry study by the Select Committee was in 1972. There is currently a study into the technological problems of the corporation which is not expected to report until 1977. Such a five-year cycle is not good enough when we are dealing with massive increases in borrowing by the corporation. I do not intend to pursue that argument further at this point.

I hope that the Government will feel disposed to accept the new clause. It is the acid test of whether there is genuine goodwill and a genuine earnestness on the Government's part to make some improvement to the Bill.

12.45 a.m.

The Government have admitted on a number of occasions that this is more than a borrowing powers Bill. It has been an opportunity for them to include a number of other proposals to do a certain amount of tidying up of the iron and steel legislation generally. We are fully entitled to put forward proposals that we believe will not only improve the system but help us decide whether the borrowing envisaged is likely to be put to a clear and determined test of judgment when the final tranche must be considered in 1979–80. We look for a positive answer from the Minister tonight. Upon it will depend our attitude to the rest of the Bill.

Mr. Ridley

I speak with great humility and diffidence, because I wish slightly to quarrel with my hon. Friend the Member for Arundel (Mr. Marshall). I am not sure that I agree with the clause. My hon. Friend's speech was full of erudition, wisdom and extremely good reason. I hope that he will not take it personally if I beg to differ a little with the purposes of the clause.

It is extremely unfortunate that we must embark upon the Bill at this time of night, because these are important issues, which will come before us more and more, and we should take them with ever-increasing seriousness. The affairs of our public sector of industry are becoming more and more catastrophic and are placing financial burdens upon our economy which cannot be sustained for much longer. We should not be debating the matter when the Press has gone home and the House is thin. The nation as a whole must be told that nationalisation is one of the most disastrous failures—

Mr. Deputy Speaker

Order. Will the hon. Gentleman tell us what we must put before the nation at this stage? Is it not New Clause 3, and not the general matter of nationalisation?

Mr. Ridley

The clause lays upon the non-executive directors a duty to try to improve our nationalised industries. Poor souls! I have every sympathy with them in that impossible task which my hon. Friend wishes to place upon them. That is why I am a little unhappy about the clause.

Who are the non-executive directors? What do they direct, and on whose behalf do they direct it? Do they represent anyone? No. Do they represent share- holders? Are they elected by shareholders? They are personal friends of some clapped-out Cabinet Minister of long ago, who have been placed upon the board in order to adorn it. [Interruption.] The Minister has no need to laugh. He will do his share of patronage in the short space of time which remains to him to make such facile appointments as non-executive directors.

Mr. Sainsbury

Lord Beswick.

Mr. Ridley

No doubt Lord Brayley, of Canning Town Glass Works, will find his way on to several nationalised industries' boards. I remember that well-known short list which was chewed over by successive Departments looking for potential candidates. It is still current in the Minister's Department.

Mr. Norman Tebbit (Chingford)

I am certain that the trustees of the London Co-operative Society's pension fund are the sort of chaps a Government like the present one are bound to appoint to responsible jobs.

Mr. Ridley

There are certain persons who used to run the Crown Estates and who found favour in public industry. No doubt there will be a long list of trade unionists, subscribers to the social contract, who will find their reward in non-executive seats on the nationalised industries.

What is the point of these non-executive directors? They are appointed for a five-year period, I believe, and when it comes to near the end of the five-year period the Ministry rattles the sabre at them. There is a leak in one of those well-known public sector papers such as The Times or the Financial Times, to the effect that so-and-so is coming to the end of his five-year period and it is not at all certain that he will be reappointed. He has not entirely toed the line. He made a remark at the board meeting two years ago which could be interpreted as criticism.

Mr. Sainsbury

He snored.

Mr. Ridley

I am not demeaning these non-executive directors.

Mr. Martin Flannery (Sheffield, Hillsborough)

What about Lonrho?

Mr. Ridley

The hon. Gentleman has no need to ask about Lonrho. It does not come to this House at 10 minutes to one for £2,000 million, £4,000 million or £6,000 million.

What are these non-executive directors supposed to do? Who are they supposed to represent? The theory with the non-executive director of a private sector company is that he represents the interests of the shareholders. He is theoretically, at least, in a position to exert the influence of the shareholders to dismiss the management. But can these non-executive directors dismiss the management? Can they say that the affairs of the corporation are being run badly and that the whole thing should be changed? No, not for one moment.

The non-executive directors of a public sector company are not directors at all. They are adornments of the board. They are the Christmas decorations, to use a current phrase from the Lonrho report. They are taken down on twelfth night and put back into the box until the eve of the next board meeting. Even if they were formed into an audit committee, they would not be able to control the efficiency of the British Steel Corporation, and they would not be able in any way to change the course of events.

The corporation is not run in such a way as to be amenable to direction by the board. It is run by the civil servants and by the two hon. Gentlemen now sitting on the Government Front Bench. It is not run in order to make steel. It is not run in order to make profits. It is run in order to provide jobs, particularly in certain politically sensitive areas.

Let us look at the Bill. It provides up to £4,000 million, yet the total cost of nationalising the steel industry was only £600 million. Already the sums of money are escalating far beyond the promises that we were given at the time of nationalisation. The money is pouring out, and I do not believe that the non-executive directors formed into an audit committee will be able to stem this bleeding.

The trouble is that the British Steel Corporation is not losing money by some mischance. It is not losing money because adverse terms of trade have temporarily affected it. It will not start to make money at any stage in the future. It will go on losing ever greater sums of money—[Interruption.] The Under-Secretary of State, who so recently has joined the establishment, cannot avoid this by mumbling through his beard to the Minister of State. This is public enterprise. It is not investment that we are discussing. It is paying for the losses hitherto incurred by public industry. This industry was taken into public ownership to improve its efficiency. Far from doing that, the efficiency of the steel industry has been receding all the way.

Mr. Nicholas Winterton (Macclesfield)

Does my hon. Friend believe that the provisions of this Bill, involving very large sums of public money, will enable the corporation to produce more steel and thereby to reduce the vast quantities of steel that we need to import in order to export a number of manufactured goods?

Mr. Deputy Speaker

That does not arise under New Clause 3.

Mr. Ridley

I am sorry that you should say that, Mr. Deputy Speaker. I was hoping to follow my hon. Friend into the territory that he staked out so tantalizingly—

Mr. Deputy Speaker

Tantalising it may be, but it is irrelevant.

Mr. Ridley

Irrelevantly and tantalisingly staked out, but, in response to your encouragement to me to stay on the straight and narrow, I shall do so.

I should like to explore the relationships of the proposed audit committee to the Commission in Brussels, because these relationships will be difficult if my hon. Friend's clause becomes law. The Commission in Brussels has forbidden any interference in our steel industry, no price control, and no subsidies to be paid. It has said that the British Steel Corporation has actually to compete on its merits and not lose money, otherwise the Commission will frown upon our activities.

I want to know what reaction the Government have had from consulting the Commission in Brussels about this new clause. No doubt the ubiquitous Minister of State has flipped over in his British Helicopter Corporation helicopter or nationalised hovercraft to ask the Commission in Brussels whether we can continue to subsidise the steel industry under the rules of the Common Market, and no doubt he has been told that we cannot.

Why, then, does the hon. Gentleman proceed with this Bill? After all, £4,000 million, even in our depreciated currency, is a subsidy. Possibly it is not a very big one in his eyes, but it is a subsidy, and we are not supposed to grant subsidies to nationalised industries which are supposed to be competitive and commercial. So how can the audit committee meet the Commission face to face and eyeball to eyeball and say that it is efficient if we continue to lose these large sums of money?

That is what worries me about the new clause. It seems to lay the audit committee open to grave dangers of censure, even to being taken to the Court of Justice at the Hague if it approves the accounts of the corporation and accepts the money which is being provided.

I should like to know a great deal more. I do not believe that the audit committee should be the non-executive directors. I do not believe that they will discharge the rôle. But I think that the Government have a duty to explain to the House the enormous losses of the British Steel Corporation.

1 a.m.

Why do not hon. Members form themselves into an audit committee? The night is young and there is plenty of time. We could adjourn while the papers were circulated. We could see the accounts and the day-to-day figures which have been produced by the British Steel Corporation and we ourselves could be the audit committee. After all, that is what public accountability means. This industry has been taken into public ownership. Let us see the books and have all the information. I have, from time to time, studied the reports of the British Steel Corporation and I am perplexed as to why it has lost so much money and why it cannot get rid of some of its surplus manpower and get some modern plant in and do the job like the Japanese. If we had the efficiency of the Japanese steel industry we would have only one-fifth of the manpower that the BSC employs. But in deference to the modern trend I am not suggesting that we should attempt to do anything like that. That would be disgraceful. It would mean that we are making someone unemployed.

I am not suggesting it but I would like to be a member of the audit committee. When I go down to my constituency, which I do every weekend, my constituents ask me "Where has all our money gone. Where are our taxes employed? Why do we have to pay such appalling taxes?" They tell me "You are responsible. You are in the Parliament and you must know where they have gone."

I say to them "It has gone on such grandiose things as the white heat of technological revolution, the steel corporation, public ownership and the commanding heights of the economy". I come out with all that clap-trap but they are not impressed. They do not say "Hurrah for the Member".

Mr. Deputy Speaker

The hon. Gentleman knows full well that he is out of order. As far as I am aware a General Election is not imminent and there is no use the hon. Gentleman making an election address here this evening.

Mr. Ridley

I am simply seeking to discharge my role as a member of the audit committee, Mr. Deputy Speaker. Admittedly, I have not been cast in that role but I was hoping that I might be in resisting this new clause.

Mr. Tebbit

I think my hon. Friend was about to embark on a most interesting line of suggestion when he mentioned the performance of the Japanese industry. Perhaps he might like to consider whether he would resist New Clause 3 if it were arranged that the independent directors, who form the audit committee, were from the Japanese steel companies. Then we could have a truly independent view which might be of great value.

Mr. Ridley

My hon. Friend must accept the mood of the country and hasten more slowly. After all, if the Japanese accepted British non-executive directors on the board, instead of the Mitsubishi, would they improve the performance of the Japanese industry?

Mr. Tom King (Bridgwater) rose—

Mr. Deputy Speaker

Order. This has become so interesting that even Mr. Deputy Speaker is being ignored completely. No one seems to be addressing me.

Mr. Tom King

I apologise Mr. Deputy Speaker. May I put a point to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), because it is an interesting point? In the Japanese steel industry, like Japanese industry generally, considerable use is made of non-executive directors who are often retired business executives. They often retire in Japan at 55 and take on non-executive directorships. I think the point that my hon. Friend is making is not entirely irrelevant.

Mr. Ridley

That depends on how one treats non-executive directors. I have a great deal of faith in them in the private sector. I think they should out-number the executive directors. They have a role to play in the same way as supervisors have for those who believe in the two-tier board system. However, I do not understand the point of non-executive directors in the public sector. They do not represent anybody.

While I should welcome a few Japanese, I am not sure that they would be welcome to the Government.

Mr. Hal Miller

How can my hon. Friend come to that conclusion? If the Government are capable of putting Hungarians on the British National Oil Corporation, we could presumably have other nationalities on other corporations.

Mr. Ridley

That argument has convinced me. I had not thought of it. I am grateful to my hon. Friend.

Sir Frederic Bennett (Torbay)

On a point of order, Mr. Deputy Speaker. I have sat patiently throughout this debate listening to discussions about every sort of non-executive director of every known nationality. Can someone tell me who are the non-executive directors of the BSC? Perhaps my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) could supply, in his concluding remarks, a list of the corporation's non-executive directors. It would help us in making a judgment on the new clause.

Mr. Ridley

My hon. Friend has come to my rescue. I understand that the non-executive directors of the British Steel Corporation are Sir Peter Matthews, Mr. G. R. Chetwynd, Mr. Ward Griffiths, Sir Melvyn Rosser, Mr. A. Silberston, Sir Matthew Stevenson and the honourable W. K. J. Weir. There is not a Japanese or a Hungarian among them. This reaffirms my opposition to the new clause. It is not sufficiently international. It is xenophobic. I have always been in favour of the Common Market. I should like to extend the new clause beyond Europe to Japan.

The non-executive directors on this totally inadequate list are not qualified to make the BSC efficient. I care about this bleeding of money out of the sector into the inefficient BSC. I care desperately about the inefficiency of its failure to control it.

I do not blame the corporation. It does not have the power. The Minister, sitting on the Front Bench, looking both bored and worthy, feels he has acquired some status by his elevation, but he has actually acquired a vicarious responsibility to do something about this situation. It is no good the Minister justifying the corporation by reading out a lot of mumbo-jumbo. It is his responsibility to stop my constituents having to pay high taxes because of the ever-deepening wound in the body industrial and public. The non-executive directors cannot do the job. The Government own the BSC. They and no one else can, should and must do the job.

If the non-executive directors were to be strengthened by the addition of a few Hungarians and Japanese, I should feel able to vote for the new clause. Perhaps I shall support it anyway, but I hope that what I have said will be taken into account in deciding future policy towards the corporation.

Mr. Tim Sainsbury (Hove)

I am sure that any hon. Member would be somewhat hesitant to follow such a distinguished contribution as that made by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). I was a little nervous when he appeared to become rather critical of non-executive directors. I should declare an interest as a non-executive director of what I think could be regarded as a fairly substantial public company as well as a non-executive director of several private companies. I have a special interest in the new clause as it highlights the important functions of non-executive directors.

I think that my hon. Friend the Member for Cirencester and Tewkesbury is wrong in his concern about how Brussels might view the new clause. It seems that it is a proposal that is in line with the fifth directive and the valuable work that is being done in Brussels on company law and participation.

My hon. Friend the Member for Arundel (Mr. Marshall), in so excellently introducing the new clause, spoke of the report and accounts as being a basic working document. That was a modest way of describing the most important document that a company produces, whether it be public or private, during the course of a year.

It is not just the report and accounts that one receives and studies that are important. If properly prepared, they will give an important, accurate and concise picture of the company's situation, but in the preparation of report and accounts as a director, formerly executive and now non-executive, one is aware of the need to answer a number of questions and to prepare the facts and figures that are the input to the accounts. That is a valuable method of ensuring that management is doing its job.

The pressures that are brought about by the timetable of the preparation of report and accounts work there way quite a long way down the management structure of a company. The questions that one is looking to see answered in properly prepared report and accounts, apart from all the facts and figures, relate, for example, to the source and application of funds. They will require answers from many areas of the company's operation.

To answer such questions as the adequacy of the resources available for the investment programme, the nature and scope of that programme and the sums involved in it is the problem to which the audit committee would be directing its attention. There have been unhappy occasions when it has been evident from the performance of companies that top management have not had the right answers to some questions. It is necessary to ensure that the right answers are produced and that they are checked and double checked for their adequacy.

There are many other matters that may in future become statutory requirements for report and accounts. Safety records and export performances are the sort of matters that we may expect to see more of in future. We find that the words in the first line of Schedule 24(1) are rather critical. They state: The Corporation shall keep proper accounts and other records". It is interesting that the new clause is not a change in the schedule—namely, the use of the word "proper". I think that my hon. Friend the Member for Arundel will agree that the purport of the new clause is to give additional authority that the word "proper" is used with justification and that the report and accounts that are produced are proper report and accounts. It goes on to refer to "other records".

I am concerned not only because of the enormous sums of public money involved, to which my hon. Friend the Member for Cirencester and Tewkesbury has drawn our attention, but also because nobody in commerce and industry can fail to be aware of the critical importance of the British steel industry to the rest of industry and commerce. It is one of the major suppliers of the various materials which the rest of industry and commerce need. It is also a most important supplier to the construction industry which has a vital role to play in any investment programme.

1.15 a.m.

It is not so long ago that many investment programmes in this country were critically delayed by the non-availability of certain sizes of universal beams or, if they were available, they were available on long delivery. Certain sizes were being rolled at intervals of only four or five months, and each rolling was taken up well in advance of the time that it was to become available. This was a serious handicap to a number of production programmes. It is not only with items like universal beams that these problems have arisen. We have been aware more recently of the problems involving certain sizes of steel piping and tubing. These problems can be a serious handicap not only to the steel industry but to the whole of British industry and commerce. We are considering an industry which not only involves large sums of public money and employs many people but whose performance is in itself critical to the performance of the rest of British industry and commerce.

Like my hon. Friends, I regret that because of the confusion into which the present Government seem habitually to get the affairs of the House. we are discussing this matter at this time when there is a smaller attendance than would otherwise be the case.

Apart from the importance of the steel industry to the rest of British industry and commerce, one cannot fail to be aware of the intense frustration felt very often by the public and business men in small, medium and large businesses because of the performance of nationalised industries. It seems to me that they feel that this is something over which they have no control and, indeed, over which the nationalised industry management and this House have no control. that the whole thing is going on in an apparently inefficient way and not producing the service that they could reasonably expect, while consuming vast sums of public money and suffering very badly on an international basis. There seems to be no method of focussing the attention of this House on the performance of nationalised industries.

Mr. Nicholas Winterton

Would my hon. Friend direct his attention to this audit committee which is to be formed from the non-executive directors? Does he feel that the qualifications of these non-executive directors will enable the British Steel Corporation to produce an independent assessment of accounts? Does he believe that the influence of the non-executive directors will enable the British Steel Corporation to produce more of the steel that we require and that the knowledge and influence of these non-executive directors will enable the British Steel Corporation to deal with the subsidy which it is receiving in accordance with the spirit of the European Economic Community?

Mr. Sainsbury

My hon. Friend has fired a barrage of formidable questions, all of which are extremely relevant. I was directing my attention to the audit committee and was developing my reasons for saying that my hon. Friend the Member for Circencester and Tewkesbury had pointed out—shall I say "warts and all"—some of the potential problems. I thoroughly commend the proposed new clause to the House. It certainly merits prolonged experimentation, if one puts it no higher than that. The very questions to which my hon. Friend the Member for Macclesfield (Mr. Winterton) has just referred are questions to which the non-executive directors, through the operation of the proposed audit committee, would be expected to direct their minds.

My hon. Friend the Member for Cirencester and Tewkesbury raised some doubts about the capacity of the non-executive directors to fulfil the functions which would be put upon them by the new clause, but, as I read the clause, it says not that this shall be their only function but that, in addition to their other functions, they shall have this function, and it would be my expectation that, if they were given this function, the executive management at board level of the British Steel Corporation would provide the audit committee with the sort of service in terms of full-time staff which one would look for in an internal audit department, though they would look not so much at figures and detail and the past as an audit department would as to the more general sweep of affairs and, in particular, the matters mentioned by my hon. Friend the Member for Arundel—budgeting, forecasting and investment.

Budgeting, forecasting and investment are the three critical areas in which there are the greatest public doubts about the performance of nationalised industry, and the British Steel Corporation in particular. Obviously, budgeting is fundamental to any business, but in a nationalised business which is a supplier of critical importance to the whole of British industry and commerce, the forecasting of demand both national and international, and the basis upon which forecasts are prepared, are vital to the operation of the industry.

One of the fundamental criticisms of nationalisation which hon. Members on the Government side fail to appreciate, probably because of their lack of experience in business in too many cases, is that extremely serious consequences follow if decision making is concentrated in one board for a whole industry. I do not imagine that there is a board of directors in the country which would claim to be so wise and far-seeing that it would never make an error. If decision making for an industry is concentrated in one group of people and they make a mistake, as inevitably they will, the consequences of that mistake upon that industry and upon others will be disastrous. Where market forces and com- petition operate, as likely as not, if one board makes a mistake, another will make a mistake the other way or some will get it right.

My right hon. Friend the Member for Knutsford (Mr. Davies) referred to the oil industry. There are some very large companies in the oil industry—usually called multinationals, with an overtone of insult nowadays. Undoubtedly, their boards will occasionally make mistakes. There are five or seven large oil companies operating in this country. But the collective wisdom of these boards coming to their different conclusions is more likely to lead to a healthy oil industry than would concentrating the entire investment programmes of the industry into one board, which would be the consequence of nationalising the whole lot.

In the present context, we are considering the British Steel Corporation, in which all the decisions have to be taken through one board, and our suggestion that the report and accounts of that board should be subject to an audit committee has much to commend it.

Mr. Ridley

Does not my hon. Friend think that relationships might be strained at the board room luncheon when it is known that non-executive directors are preparing reports on executive directors and that when the smoked salmon is going round there might be a sense of froideur between certain parts of the board? Is that desirable in the interests of unity for the purpose of rebuilding our steel industry?

Mr. Sainsbury

My hon. Friend underestimates the qualities of directors, executive or non-executive, of companies in the British Steel Corporation. I do not know what sort of skills they would have, but I would expect that the non-executive directors would be working closely with and asking questions of the executive directors and through the executive arm.

I hope that the House in considering the clause will wish to see the role of the audit committee reviewed on a regular basis to see how best it can be carried out and how the non-executive directors can best be provided with the means of ensuring that they are able adequately to fulfil their role. I now that my hon. Friend the Member for Mid-Sussex (Mr. Renton) will wish to develop this theme if he catches the eye of the Chair. I hope that the clause will bring about a modest improvement in the situation, and for that reason I support it.

Mr. Tim Renton

This debate has been somewhat of a see-saw. My hon. Friend the Member for Arundel (Mr. Marshall) came down firmly in favour of this bold new experiment of an audit committee in a nationalised industry, then my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), in a devastating speech, totally destroyed the concept, and finally my hon. Friend the Member for Hove (Mr. Sainsbury) brought us back into balance.

The only thing missing from the debate has been a contribution from the Labour Back Benches. However, all three Members present on those Back Benches up until a short while ago were asleep. Therefore, perhaps it is not surprising that we have had no speech from that side of the House.

Mr. Ronald Brown (Hackney, South and Shoreditch)

Rubbish.

Mr. Renton

This serious innovation from my hon. Friend the Member for Arundel is worthy of deep consideration by the House, even at this late hour.

The person who is sadly missing from the Opposition Benches, because of other commitments, is my hon. Friend the Member for Kensington (Sir B. Rhys Williams) because he has given this subject a great deal of consideration.

Mr. Ronald Brown

Which is more than you have, you idiot.

Mr. Renton

My hon. Friend was personally responsible for bringing in the idea of non-executive directors in this context, Indeed, he dealt with this matter in Standing Committee on the Companies (No. 2) Bill.

1.30 a.m.

It was, furthermore, interesting that after that speech the Under-Secretary of State for Trade said: I believe this approach to be very interesting and, as I have said, very constructive, but only as a basis for discussion."—[Official Report, Standing Committee C; 1st July 1976, c. 66.] One is led on, on the basis of that encouragement from the Under-Secretary and a lot of research by such as my hon. Friend the Member for Kensington, to look a little more deeply into the question of non-executive directors getting together with the auditors to form an ongoing and continuing investigation into the financial performance of a company.

My hon. Friend the Member for Cirencester and Tewkesbury questioned whether the non-executive directors are capable of carrying out this function. He cast the non-executive directors in the shape of lunchtime directors who would not have the capacity to handle these functions. I should like to put it to him that he should take the view that by putting these new duties on non-executive directors we should be giving them a rôle to fulfil in both public and private sector companies.

Mr. Sainsbury

Is not a second point of relevance that if these non-executive directors see that they have a defined and valuable rôle to play within the companies we are more likely to be able to attract people of the proper calibre?

Mr. Renton

Yes. Like my hon. Friend, I must declare an interest as a non-executive director. He has put finger on the point, which is that if we give non-executive directors a specific rôle to perform on the board we shall attract people of a higher calibre. Furthermore, we shall overcome the difficulty which many non-executives feel, which is a certain lack of knowledge and uncertainty about what their role is meant to be.

In the Standing Committee considering the Companies (No. 2) Bill [Lords] my hon. Friend the Member for Kensington developed that point very well. He made the point that in auditors we have a supervisory element in each company. Add to that the non-executive directors who are at any rate there on the board, and one could have a continuing supervision of at least the financial performance and effectiveness of a company in using its cash flow and the funds available to it.

I believe that this would be an improvement on the present situation be- cause, as my hon. Friend the Member for Hove with his industrial knowledge knows, what often happens is that when the auditors present their report on the company's accounts they go to see the fiinancial director. They talk to him about the situation, tell him what they see wrong with the company, what they are worried out in the company's use of its money and how it handles its cash flow, but often they do not know what the financial director does with that report.[Interuption.] The hon. Member for Hackney, South and Shoreditch (Mr. Brown) has now awakened. Perhaps he would like to intervene instead of interrupting from a sedentary position.

Mr. Ronald Brown

The hon. Gentleman is boring the House to tears.

Mr. Renton

I know that the hon. Gentleman will develop his constructive remarks in a speech when I sit down.

Mr. Ronald Brown

The hon. Gentleman is a silly man.

Mr. Renton

The auditors report to the financial director, but they do not know what he will do with their critical comments, whether he will tell the managing director, or what he will do. They do not have the power to appear at the board as auditors to tell the board as a whole what they think about the company's financial performance. Nor do they have the capacity to know whether the board as a whole is aware of their criticisms of the company and the way in which it is handling its funds. If the non-executive directors and the auditors—

Mr. Sainsbury

Would my hon. Friend agree that in practice this weakness, to which he draws attention, in the ability of the auditors as a supervisory body is most apparent when it comes to their role in relation to forecasting? Auditors look backwards, they look at past performances, at what has happened. They are not interested in the vital area of forecasting.

Mr. Renton

Once again my hon. Friend the Member for Hove has made an interesting and valid comment. I believe that the getting together of auditors and non-executive directors should be confined to the areas of past performance and the way in which funds have been handled. The non-executive directors do not have the capacity to look forward. Here I differ from my hon. Friend the Member for Arundel. I would confine them to the specific role of examining how the company has used its funds, and its financial effectiveness.

My hon. Friend referred to the American steel companies which have gone along this road. This practice of audit committees was recommended by the Securities and Exchange Commission in New York for all major companies. It started in Ontario, Canada, about 10 years ago, and now Price Waterhouse, the well-known firm of accountants, has produced a booklet entitled "The Audit Committee" which spells out in some detail its recommendations of how such committees should operate.

I am tempted to read this booklet to the House in its entirety—[Interruption.]—because it is relevant, but I feel that it is perhaps a little too long—[Interuption.] For example, it suggests that while the ultimate responsibility for approval of financial reports rests with the entire board, the audit committee is often a better means of dealing with the uncertainty which exists in this increasingly complex and sophisticated area—indeed, that it is the best means of fulfilling the responsibilities associated with a company's financial reporting.

Mr. Nicholas Winterton

Perhaps my hon. Friend will appreciate from the new clause that the audit committee will make its own report, upon consultations with the auditors, to the Secretary of State, who, in turn, will lay a copy of the report before each House of Parliament, and the Select Committee on the Nationalised Industries. This development of the report of the directors which will be placed before the House by the Secretary of State will keep the House in touch with the way in which public funds are being expended. Does my hon. Friend believe that this will be helpful to the House in keeping a tab on the way in which the taxpayers' money is being spent in the British Steel Corporation?

Mr. Renton

Yes, that is an important point. [Interruption]. Here we are representing effectively the shareholders in the nationalised industries. If we had in the House or in the Select Committee the availability of such audit committees, we would be far better placed to discharge our functions as representatives of the shareholders in the continuing examination of the affairs of the nationalised indutries than we are by being landed once a year with a series of indigestible reports. Audit committees would make our task easier and would enable us to discharge it more effectively.

It will be of interest to you, Mr. Deputy Speaker, to know that this pamphlet describes the functions of a typical effective audic committee. I wish I had had the foresight to photocopy it and, as in the case of the photocopies of the famous rig that was or was not a ship, circulate it throughout the Chamber. Having failed to do that, I shall quote just two functions which are important to the consideration of the new clause. The typical effective audit committee will have responsibilities that include the following: first, a review of the financial statement with the independent accountants prior to recommending approval by the board. Second on the Price Waterhouse list is enquiry into the effectiveness of the company's management, financial and accounting functions through discussion with the independent accountants, external auditors and appropriate officers of the company. Having described—[Interruption.]—the functions—

Sir John Eden (Bournemouth, West)

On a point of order, Mr. Deputy Speaker. I am listening to these quotations, and, although I am sitting immediately in front of my hon. Friend the Member for Mid-Sussex (Mr. Renton), I find it extremely hard to hear what he is saying and follow his line of argument because of the constant interruptions coming from another quarter of the House. I think that perhaps the hon. Member for Hackney, South and Finsbury (Mr. Brown) is finding himself in some difficulty. I do not know whether he is trying to take part in the debate, but it must be clear to you that he is making considerable noise from a sedentary position. It would help further the course of the debate if hon. Members could hear what the hon. Member who has the Floor is saying.

Mr. Deputy Speaker

I have no difficulty in hearing what the hon. Member for Mid-Sussex (Mr. Renton) is saying. But I appeal to him to get on with the business. Let us get on with it.

Mr. Ronald Brown

Further to that point of order, Mr. Depty Speaker. I was listening to the debate but the vulgarity of the hon. Member who raised the issue provokes me to say that he should have some standard of courtesy in this House.

Mr. Deputy Speaker

That is not a point of order.

Mr. Renton rose—

Mr. Deputy Speaker

The hon. Member was at his last quotation.

Mr. Renton

Yes, Mr. Deputy Speaker. You have had the last quotation.

Having described the functions of the audit committee, as I see it, one is led back to the point raised by my hon. Friend the Member for Cirencester and Tewkesbury, who asked whether non-executive directors are the right people from the board to sit with the auditors in the continuing functions I have described. I think that they are, because executive directors have a parti pris in the way financial decisions have been taken, Some of those decisions will have been decided with the managing director. They will have taken such decisions throughout the year, and they are not capable of sitting in independent judgment on themselves with the auditors. Far better placed to do so are the non-executive directors, who stand a bit back from the executive directors in this respect and have a freedom of argument and objectivity of view which, coupled with the approach of the auditors, should bring a correcting discipline to this area of the company's performance.

Mr. John Davies (Knutsford)

My hon. Friend will be aware that in some continental practice the audit committee is outwith the board and makes a report to the company which enables the company to decide whether it will discharge the directors in respect of the responsibilities they have engaged to fulfil in the preceding period. Is that not a better arrangement, as it is external to the board, and the board is looking therefore to the annual general meeting for discharge? I wonder whether non-executive directors are as well able as an external body to do that.

Mr. Renton

What my right hon. Friend is touching on, in effect, is the producing of tension within the board if the board has non-executive directors being critical, with the auditors, of the executive management. It is because of that tension, even conflict, that the situation of the audit committee outside the board has been developed instead. But I have a preference for an audit committee which has non-executive directors on it as well. I see a counter balance between the non-executive and the executive of the board and out of that counter-balance will come fruitful progress. I see that my right hon. Friend the Member for Knutsford (Mr. Davies) is well aware of that development and prefers it.

1.45 a.m.

We are led back to the points made by my hon. Friend the Member for Arundel about the function of the audit committee and its continuing rôle. My hon. Friend defined that well. I differ from him in one or two respects but I am glad that he drew our attention to the improvement that such an audit committee might bring about in the performance of the British Steel Corporation. I echo what my hon. Friend said about such an improvement being desperately needed. On the Select Committee on Nationalised Industries, he and I have been privileged to hear about the future plans of the BSC. We know that it desperately needs an investment of literally billions of pounds if it is not just to keep up with but to catch up with the expansion which has taken place in the past decade in the German, Japanese and American steel industries.

I want to see the BSC undertake investment so that it is, as my hon. Friend the Member for Hove said, fully competitive in all steel products produced in this country. But one must sit back and look at the record of the corporation over the past eight years and ask, in view of the enormous loss it has made in past years, whether it is right for another £3 billion or £4 billion of tax payers' money to be used for new capital investment in the corporation.

In recent months I have been anxious about the enormous losses it has incurred through foreign borrowings. The sterling slide cost the BSC £40 million lost on its foreign borrowings. When the BSC management found that it could tap the Eurodollar market, it went into that market almost bald-headed. It did not appear to have thought of the consequences to the corporation of borrowing dollars if the dollar appreciated in value against sterling. Indeed, The Times of 5th May said: The rôle of the BSC in raising large sums from foreign sources was hailed as a considerable advance in the financial management of the public sector of British industry". That is an extraordinary remark. For such borrowing to be hailed as a considerable advance must lead one to query the internal financial disciplines of the corporation.

In answer to a Question, a Treasury Minister recently told me that the total of foreign borrowing by the public sector now amounted to about £5 billion. To repay that sum at the exchange rate ruling at the end of March would cost £6 billion. None of that money has been repaid and if the dollar goes up more, the loss will be greater. At the end of March the total loss, if the loans had been repaid at that time, would have been £1 billion.

Mr. Anthony Nelson (Chichester)

Does my hon. Friend the Member for Mid-Sussex (Mr. Renton) agree that it is not just a matter of substantial foreign currency borrowing incurred by public corporations which may at some later stage be covered by profits but, because of the Treasury exchange rate guarantee system, the main part of the liability will fall on the tax payers and that half—

Mr. Deputy Speaker

Order. That has nothing to do with the clause.

Mr. Renton

With the greatest respect, Mr. Deputy Speaker, I should have thought it had everything to do with the clause, but I do not question your ruling. The corporation has lost £40 million to date on its foreign exchange borrowings, many of which are guaranteed by the Treasury. Whether or not they are guaranteed by the Treasury, the burden in the end falls on the taxpayer.

Mr. Deputy Speaker

The fact that those words come from the hon. Gentleman's mouth does not make them in order. Those references are not in order.

Mr. Renton

We are talking about the audit committee, the prime function of which is to review with the non-executive directors the corporation's continuing financial performance. Is the audit committee suitable for a public sector com pany? I take the point made by my hon. Friend the Member for Cirencester and Tewkesbury that it is hard to see how easily an audit committee with non-executive directors fits into the pattern as compared with the private sector. We are all acting for the shareholders in the nationalised industries. If such an audit committee were to make continuing reports to us, and if the non-executive directors had a specific function which I believe they would welcome, it would be that much easier for us to discharge our function as watchdogs of the financial performance of these industries.

Mr. Nicholas Winterton

Bearing in mind the splendid advice about the car industry given to the Government by the hon. Member for Sheffield, Attercliffe (Mr. Duffy) as Chairman of the particularly important Select Committee on Nationalised Industries, does not my hon. Friend believe that if the Select Committee were more involved through the report it receives from the Secretary of State, the audit committee and the board of British Steel, the House could more adequately represent the interests not only of the corporation, in giving it good advice, but—of paramount importance—the taxpayer, to whom my hon. Friend has so rightly referred?

Mr. Deputy Speaker

That, too, has nothing to do with the clause.

Mr. Nicholas Winterton

On a point of order, Mr. Deputy Speaker. The Select Committee forms an important part of the clause, and the report which the Secretary of State could lay before it, coming from the audit committee, I believe to be very much of importance and very much part of the debate.

Mr. Deputy Speaker

The hon. Member has already said the same thing three times in the course of the discussion of this clause.

Mr. Renton

My hon. Friend the Member for Macclesfield (Mr. Winterton) has extended the argument somewhat by suggesting that there would be a continuing theme for the audit committee in reporting on the whole range of the nationalised industries to the Select Committee on Nationalised Industries, which would enable the House to discharge its duties more effectively. That is the kernel of the argument.

If in this one instance a nationalised industry were to start with an audit committee and if the system were to be found to work effectively and the non-executive directors were used sensibly in this function, for once we should have an area in which the public sector could lead the way and the private sector might follow, and that would be a change very much for the better.

I hope that the new clause will commend itself to the Government. A great deal of thought has gone into its preparation. I believe that if once this idea of an audit committee got under way, the British Steel Corporation would find that the committee would greatly assist in its financial results.

The Under-Secretary of State for Industry (Mr. Les Huckfield)

I want to help the House as much as possible by addressing my remarks to the new clause. I hope that the hon. Member for Arundel (Mr. Marshall) has recognised from the start that the clause has one major drawback, namely, it is technically defective in that the Iron and Steel Act 1975 did not create the class of non-executive directors of the British Steel Corporation to whom he and his hon. Friends have made such constant references.

As I understand Section 1(3), the Act specifies that the corporation shall consist of the chairman and not fewer than seven nor more than 20 other members, and no distinction is made whether they shall be full-time or part-time members, or whether they should have any executive functions.

Mr. Fairbairn rose—

Mr. Huckfield

As a matter of practice, the chairman may invite a member to undertake particular responsibilities, but it is a matter of arrangement and not of law. because it is not in the statute.

Mr. Fairbairn rose—

Mr. Huckfield

I recognise the intention of the new clause and I understand that it is a fashionable concept in accountancy circles.

Mr. Fairbairn rose—

Hon. Members

Give way.

Mr. Michael Marshall rose—

Mr. Deputy Speaker

Order. If the hon. Member addressing the House does not wish to give way, he does not give way.

Mr. Huckfield

I am sure that hon. Members recognise that, although it is a fashionable concept in accountancy circles, it is premature at this stage, particularly when, as is fairly well known, the Government are conducting a fairly wide-ranging review of the whole relationship and the conduct of relations between Government Departments and nationalised industries, a review under the auspices of the National Economic Development Office. I am sure that hon. Members will appreciate the good sense in awaiting the outcome of that survey before proceeding with any changes in the relationships among Government Departments, the House and the nationalised industries.

As the new clause is defective and as, for the reasons I have explained, it is premature, I hope that the House will now agree to its withdrawal.

Mr. Walter Harrison (Treasurer of Her Majesty's Household) rose—

Mr. Peter Bottomley (Woolwich, West)

On a point of order, Mr. Deputy Speaker. As the Minister did not give way during his short speech and as the debate has been going on for just two hours, I hope that you will not accept the closure motion.

Mr. Tom King

On a point of order, Mr. Deputy Speaker. Can you confirm to the House that, although the Government have got themselves in a position in which we are proceeding with this very important business at this time of night, the Chair is not in any way influenced by that lateness in determining how long a debate will run and that we on the Opposition Benches are entitled to the same time for consideration of these measures at this hour of the night as we should have at a more normal hour?

2.0 p.m.

Mr. Deputy Speaker

I have had ample experience of all-night sittings and it does not worry me in the slightest.

Mr. Walter Harrison rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

Division No. 236.	AYES	[2.2 a.m.
Archer, Peter	Golding, John	Ogden, Eric
Armstrong, Ernest	Graham, Ted	Orme, Rt Hon Stanley
Athton, Joe	Grant, George (Morpeth)	Ovenden, John
Atkins, Ronald (Preston N)	Hardy, Peter	Owen, Dr David
Atkinson, Norman	Harper, Joseph	Palmer, Arthur
Barnett, Guy (Greenwich)	Harrison, Walter (Wakefield)	Park, George
Bates, Alf	Hart, Rt Hon Judith	Parry, Robert
Bean, R. E.	Hatton, Frank	Pendry, Tom
Benn, Rt Hon Anthony Wedgwood	Hooley, Frank	Penhallgon, David
Bennett, Andrew (Stockport N)	Hoyle, Doug (Nelson)	Perry, Ernest
Bishop, E. S.	Huckfield, Les	Price, C. (Lewisham W)
Blenkinsop, Arthur	Hughes, Mark (Durham)	Price, William (Rugby)
Bradley, Tom	Hughes, Robert (Aberdeen N)	Radice, Giles
Bray, Dr Jeremy	Hughes, Roy (Newport)	Richardson, Miss Jo
Brown, Hugh D. (Provan)	Hunter, Adam	Roderick, Caerwyn
Brown, Ronald (Hackney S)	Irving, Rt Hon S. (Dartford)	Rodgers, George (Chorley)
Buchan, Norman	Jackson, Colin (Brighouse)	Rooker, J. W.
Buchanan, Richard	Jackson, Miss Margaret (Lincoln)	Roper, John
Callaghan, Jim (Middleton & P)	Janner, Greville	Rose, Paul B.
Campbell, Ian	Jay, Rt Hon Douglas	Ross, Stephen (Isle of Wight)
Canavan, Dennis	John, Brynmor	Rowlands, Ted
Carmichael, Nell	Johnson, James (Hull West)	Sandelson, Neville
Cartwright, John	Johnston, Russell (Inverness)	Sedgemore, Brian
Clemitson, Ivor	Jones, Barry (East Flint)	Selby, Harry
Cocks, Michael (Bristol S)	Judd, Frank	Shaw, Arnold (Ilford South)
Coleman, Donald	Kaufman, Gerald	Silkin, Rt Hon John (Deptford)
Colquhoun, Ms Maureen	Kilroy-Silk, Robert	Silkin, Rt Hon S. C. (Dulwich)
Cook, Robin F. (Edin C)	Kinnock, Neil	Silverman, Julius
Corbett, Robin	Lambie, David	Skinner, Dennis
Cox, Thomas (Tooting)	Lamborn, Harry	Small, William
Craigen, J. M. (Maryhill)	Lamond, James	Smith, John (N Lanarkshire)
Crawshaw, Richard	Latham, Arthur (Paddington)	Spearing, Nigel
Crowther, Stan (Rotherham)	Leadbitter, Ted	Stallard, A. W.
Cryer, Bob	Litterick, Tom	Stoddart, David
Cunningham, Dr J. (Whiteh)	Loyden, Eddie	Stott, Roger
Davidson, Arthur	Lyons, Edward (Bradford W)	Strang, Gavin
Davies, Bryan (Enfield N)	Mabon, Dr J. Dickson	Summerskill, Hon Dr Shirley
Davies, Denzil (Llanelli)	McCartney, Hugh	Swain, Thomas
Davies, Ifor (Gower)	McElhone, Frank	Thomas, Jeffrey (Abertillery)
Davis, Clinton (Hackney C)	McGuire, Michael (Ince)	Thomas, Ron (Bristol NW)
Deakins, Eric	Mackenzie, Gregor	Tinn, James
Dean, Joseph (Leeds West)	Maclennan, Robert	Urwin, T. W.
Dempsey, James	McMillan, Tom (Glasgow C)	Varley, Rt Hon Eric G.
Dormand, J. D.	McNamara, Kevin	Wainwright, Edwin (Dearne V)
Douglas-Mann, Bruce	Madden, Max	Walden, Brian (B'ham, L'dyw'd)
Duffy, A. E. P.	Mallalieu, J. P. W.	Walker, Harold (Doncaster)
Dunnett, Jack	Marks, Kenneth	Walker, Terry (Kingswood)
Eadie, Alex	Marquand, David	Ward, Michael
Edge, Geoff	Marshall, Dr Edmund (Goole)	Weetch, Ken
Ellis, John (Brigg & Scun)	Maynard, Miss Joan	White, Frank R. (Bury)
English, Michael	Meacher, Michael	White, James (Pollok)
Evans, Fred (Caerphilly)	Mellish, Rt Hon Robert	Wilson, Alexander (Hamilton)
Evans, John (Newton)	Mendelson, John	Wilson, Sir Harold (Huyton)
Ewing, Harry (Stirling)	Mikardo, Ian	Wilson, William (Coventry SE)
Fernyhough, Rt Hon E.	Millsn, Bruce	Wise, Mrs Audrey
Flannery, Martin	Miller, Mrs Millie (Ilford N)	Woodall, Alec
Foot, Rt Hon Michael	Moonman, Eric
Fowler, Gerald (The Wrekin)	Morris, Charles R. (Openshaw)	TELLERS FOR THE AYES:
Fraser, John (Lambeth, N'w'd)	Murray, Rt Hon Ronald King	Mr. Peter Snape and
George, Bruce	Newens, Stanley	Mr. James Hamilton.
Gilbert, Dr John	Noble, Mike

NOES
Bennett, Sir Frederic (Torbay)	Gower, Sir Raymond (Barry)	Rippon, Rt Hon Geoffrey
Bottomley, Peter	Grist, lan	Roberts, Michael (Cardiff NW)
Brotherton, Michael	Heseltine, Michael	Sainsbury, Tim
Chalker, Mrs Lynda	Hunt, David (Wirral)	Shaw, Giles (Pudsey)
Clarke, Kenneth (Rushcliffe)	King, Tom (Bridgwater)	Sims, Roger
Cooke, Robert (Bristol W)	Marshall, Michael (Arundel)	Stradling Thomas, J.
Davies, Rt Hon J. (Knutsford)	Meyer, Sir Anthony	Townsend, Cyril D.
Durant, Tony	Miller, Hal (Bromsgrove)	Winterton, Nicholas
Eden, Rt Hon Sir John	Montgomery, Fergus
Edwards, Nicholas (Pembroke)	Morgan-Giles, Rear-Admiral	TELLERS FOR THE NOES:
Fairbairn, Nicholas	Nelson, Anthony	Mr. Nicholas Ridley and
Fairgrieve, Russell	Renton, Tim (Mid-Sussex)	Jim Lester.
Gilmour, Sir John (East Fife)

Question accordingly agreed to.

The House divided: Ayes 178, Noes 33.

Question put accordingly, That the clause be read a Second time:—

Division No. 237.]	AYES	[2.10 a.m.
Bennett, Sir Frederic (Torbay)	Gower, Sir Raymond (Barry)	Ridley, Hon Nicholas
Bitten, John	Grist, Ian	Rippon, Rt Hon Geoffrey
Bottomley, Peter	Havers, Sir Michael	Roberts, Michael (Cardiff NW)
Brotherton, Michael	Heseltine, Michael	Ross, Stephen (Isle of Wight)
Chalker, Mrs Lynda	Hunt, David (Wirral)	Sainsbury, Tim
Clarke, Kenneth (Rushcliffe)	Johnston, Russell (Inverness)	Shaw, Giles (Pudsey)
Cooke, Robert (Bristol W)	King, Tom (Bridgwater)	Sims, Roger
Davies, Rt Hon J. (Knutstord)	Lester, Jim (Beeston)	Townsend, Cyril D.
Durant, Tony	Meyer, Sir Anthony	Winterton, Nicholas
Eden, Rt Hon Sir John	Miller, Hal (Bromsgrove)
Edwards, Nicholas (Pembroke)	Montgomery, Fergus	TELLERS FOR THE AYES:
Fairbairn, Nicholas	Morgan-Giles, Rear-Admiral	Mr. Anthony Nelson and
Fairgrieve, Russell	Penhaligon, David	Mr. John Stradling Thomas.
Gilmour, Sir John (East Fife)	Renton, Tim (Mid-Sussex)

NOES
Archer, Peter	Gilbert, Dr John	Ogden, Eric
Armstrong, Ernest	Golding, John	Orme, Rt Hon Stanley
Ashton, Joe	Graham, Ted	Ovenden, John
Atkins, Ronald (Preston N)	Grant, George (Morpeth)	Owen, Dr David
Atkinson, Norman	Hamilton, James (Bothwell)	Palmer, Arthur
Barnett, Guy (Greenwich)	Hardy, Peter	Park, George
Bates, Alf	Harrison, Walter (Wakefield)	Parry, Robert
Bean, R. E.	Hart, Rt Hon Judith	Pendry, Tom
Benn, Rt Hon Anthony Wedgwood	Hatton, Frank	Perry, Ernest
Bennett, Andrew (Stockport N)	Hooley, Frank	Price, C. (Lewisham W)
Bishop, E. S.	Hoyle, Doug (Nelson)	Price, William (Rugby)
Blenkinsop, Arthur	Huckfield, Les	Radice, Giles
Bradley, Tom	Hughes, Mark (Durham)	Richardson, Miss Jo
Bray, Dr Jeremy	Hughes, Robert (Aberdeen N)	Roderick, Caerwyn
Brown, Hugh D. (Provan)	Hughes, Roy (Newport)	Rodgers, George (Chorley)
Brown, Ronald (Hackney S)	Hunter, Adam	Rooker, J. W.
Buchan, Norman	Irving, Rt Hon S. (Dartford)	Roper, John
Buchanan, Richard	Jackson, Colin (Brighouse)	Rose, Paul B.
Callaghan, Jim (Middleton & P)	Jackson, Miss Margaret (Lincoln)	Rowlands, Ted
Campbell, Ian	Janner, Greville	Sandelson, Neville
Canavan, Dennis	Jay, Rt Hon Douglas	Sedgemore, Brian
Carmichael, Neil	John, Brynmor	Selby, Harry
Cartwright, John	Johnson, James (Hull West)	Shaw, Arnold (Ilford South)
Clemitson, Ivor	Jones, Barry (East Flint)	Silkin, Rt Hon John (Deptford)
Cocks, Michael (Bristol S)	Judd, Frank	Silkin, Rt Hon S. C. (Dulwich)
Coleman, Donald	Kaufman, Gerald	Silverman, Julius
Colquhoun, Ms Maureen	Kilroy-Silk, Robert	Skinner, Dennis
Cook, Robin F. (Edin C)	Kinnock, Neil	Small, William
Corbett, Robin	Lambie, David	Smith, John (N Lanarkshire)
Cox, Thomas (Tooting)	Lamborn, Harry	Snape, Peter
Craigen, J. M. (Maryhill)	Lamond, James	Spearing, Nigel
Crawshaw, Rchard	Latham, Arthur (Paddington)	Stoddart, David
Crowther, Stan (Rotherham)	Leadbitter, Ted	Stott, Roger
Cryer, Bob	Litterick, Tom	Strang, Gavin
Cunningham, Dr J. (Whiten)	Loyden, Eddie	Summerskill, Hon Dr Shirley
Davidson, Arthur	Lyons, Edward (Bradford W)	Swain, Thomas
Davies, Bryan (Enfield N)	McCartney, Hugh	Thomas, Jeffrey (Abertillery)
Davies, Denzil (Lianelli)	McElhone, Frank	Thomas, Ron (Bristol NW)
Davies, Ifor (Gower)	McGuire, Michael (Ince)	Tinn, James
Davis, Clinton (Hackney C)	MacKenzie, Gregor	Urwin, T. W.
Deakins, Eric	Maclennan, Robert	Varley, Rt Hon Eric G.
Dean, Joseph (Leeds West)	McMillan, Tom (Glasgow C)	Wainwright, Edwin (Dearne V)
Dempsey, James	McNamara, Kevin	Walden, Brian (B'ham, L'dyw'd)
Dormand, J. D.	Madden, Max	Walker, Harold (Doncaster)
Douglas-Mann, Bruce	Mallalieu, J. P. W.	Walker, Terry (Kingswood)
Duffy, A. E. P.	Marks, Kenneth	Ward, Michael
Dunnett, Jack	Marquand, David	Weetch, Ken
Eadie, Alex	Marshall, Dr Edmund (Goole)	White, Frank R. (Bury)
Edge, Geoff	Maynard, Miss Joan	White, James (Pollok)
Ellis, John (Brigg & Scun)	Meacher, Michael	Wilson, Alexander (Hamilton)
English, Michael	Mellish, Rt Hon Robert	Wilson, Sir Harold (Huyton)
Evans, Fred (Caerphilly)	Mendelson, John	Wilson, William (Coventry SE)
Evans, John (Newton)	Mikardo, Ian	Wise, Mrs Audrey
Ewing, Harry (Stirling)	Millan, Bruce	Woodall, Alec
Fernyhough, Rt Hon E.	Miller, Mrs Millie (Ilford N)
Flannery, Martin	Moonman, Eric	TELLERS FOR THE NOES:
Foot, Rt Hon Michael	Morris, Charles R. (Openshaw)	Mr, Joseph Harper and
Fowler, Gerald (The Wrekin)	Murray, Rt Hon Ronald King	Mr. A. W. Stallard.
Fraser, John (Lambeth, N'w'd)	Newens, Stanley
George, Bruce	Noble, Mike

Question accordingly negatived.

The House divided: Ayes 37, Noes 174.