Commons Sitting of 12 June 1986

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS
    TEIGNMOUTH QUAY COMPANY BILL (By Order)
      SOUTH YORKSHIRE LIGHT RAIL TRANSIT BILL (By Order)
        BEXLEY LONDON BOROUGH COUNCIL BILL (By Order)

          SHOREHAM PORT AUTHORITY BILL (By Order)
          Orders for Second reading read.
          To be read a Second time upon Thursday 19 June.

    MILFORD HAVEN PORT AUTHORITY BILL (By Order)
    Order read for resuming adjourned debate on Question [18 February], That the Bill be now read a Second time.
    Debate to be resumed Thursday 19 June.

Oral Answers to Questions
  AGRICULTURE, FISHERIES AND FOOD

    S. and W. Berisford
    Mr. Livseyasked the Minister of Agriculture, Fisheries and Food if he will make a statement on the takeover bids for S. and W. Berisford and the likely effect on British sugar beet growers.
    The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer)My right hon. Friend the Secretary of State for Trade and Industry announced on 20 May that he had decided to refer to the Monopolies and Mergers Commission proposed acquisitions of S. and W. Berisford by Hillsdown Holdings and Tate and Lyle in accordance with the recommendation of the Director General of Fair Trading. The commission's investigations will include consideration of the likely effect on British sugar beet growers.
    Mr. Livsey: While welcoming the fact that the proposed acquisition has been referred to the Monopolies and Mergers Commission, may I ask whether the Minister agrees that the sugar industry is far too important to be the subject of such a takeover? Would it not be in the best interests of the industry if it rescued itself, and also for a management buy-out to be considered as the best possible solution for sugar beet growers and those who work in the industry?
    Mr. Gummer: I do not think that the series of parts in the hon. Gentleman's supplementary hang together. It is necessary that we look at the effect of any purchase in the
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    context of the interests of the country as a whole, and especially those concerned in the sugar industry. That is what we are doing.
    Sir William Clark: Does my right hon. Friend agree that the finance margin for refining beet sugar is much higher than the margin for cane sugar, which is very low? Does he further agree that that could possibly activate against the interests of the ACP countries?
    Mr. Gummer: I am sure that my hon. Friend is right. The narrowness of the refining margin causes considerable concern, because without a proper refining capacity in this country the ACOP countries would find it impossible to obtain a market for their cane, which would be a disaster. That is why we have been pressing the European Commission to hold a full investigation, and we are pleased that it will now do so.
    Mr. Spearing: Is it not true that a Monopolies Commission investigation could reveal that, given proper safeguards for monopolies, this acquisition could provide an opportunity for all the interests of beet producers and refiners as well as cane producers in the Commonwealth and cane workers in this country to be combined to provide a stable, domestically-owned sugar industry that would provide employment and markets for all concerned?
    Mr. Gummer: That is no doubt the case that Tate and Lyle will put before the commission. However, there are now two investigations — one by the Monopolies and Mergers Commission and the other by the European Commission, which is looking into the margin.
    Mr. Andy Stewart: Will my right hon. Friend reassure my constituents and others who grow sugar beet that if Ferruzzi, the Italian company, makes a further bid he will support his colleagues by referring that to the Monopolies and Mergers Commission also?
    Mr. Gummer: The Office of Fair Trading is currently considering whether Ferruzzi's holding in Berisford constitutes a material influence resulting in a merger that would qualify, at the moment, for a reference to the Monopolies and Mergers Commission under the Fair Trading Act 1973.
    Mr. Torney: Is the hon. Gentleman aware that takeovers usually mean unemployment for workers in the company taken over? Will he therefore consider making representations to try to ensure that workers do not lose jobs, especially in view of the tremendous workless total in this country?
    Mr. Gummer: In the first place, I do not think that is truthful. One must look for security of employment in an industry, and that security is sometimes advanced by takeovers and sometimes not. The hon. Gentleman must not let his political dogma get in the way of the facts. We must adopt the best possible solution across the board, and that is why we have established an impartial. investigation. The hon. Gentleman wants to prejudge the impartial investigation, which is a typical Socialist attitude.

    Set-aside Schemes
    Mr. Baldryasked the Minister of Agriculture, Fisheries and Food what consideration Her Majesty's Government are giving to agricultural set-aside schemes.
    The Minister of Agriculture, Fisheries and Food (Mr. Michael Jopling): In the cereals sector, the Government are actively considering ideas for a Communitywide voluntary set-aside scheme. The Government are also studying the Commission's proposals for set-aside in its socio-structural package.
    Mr. Baldry: Does my right hon. Friend agree that at a time when we are seeking to tackle surpluses, the advantage of set-aside schemes is that they enable us much more accurately to determine which land shall be taken out of production, and thus ensure a fairly comprehensive countryside policy in any one area? When does my right hon. Friend expect that his Ministry will be coming to conclusions on both his and the Community's schemes, which are under discussion?
    Mr. Jopling: I believe that my hon. Friend is right in his analysis. We are working on the criteria that the scheme should be voluntary, Communitywide and cost effective, and should provide an alternative for those producers who are least able to cope with a restrictive price policy. We are anxious to start discussions as soon as possible.
    Mr. John: Would not a set-aside policy be more easily achieved if we had a parallel farm woodlands policy? Does the Minister agree, on the question of surplus cereal production, that it is estimated that about 14 to 15 per cent. of cereal land in Britain will have to be taken out of production?
    Mr. Jopling: I would not accept those figures, because much depends on the degree to which the Community is successful in bringing the production of food closer to the level of consumption. We must consider, in respect of the scheme, the overall problem of land use, including the potential of a greater incidence of the growing of trees.
    Mr. Hunter: Will my right hon. Friend take this opportunity again to clarify his position on the control of cereal surpluses? Does he still believe that price control is the best and only practical way to control production, or is he seriously considering alternative and additional methods?
    Mr. Jopling: I know that my hon. Friend has heard me say on a number of occasion how I believe we should deal with the current surplus in cereals. I remind him of the Commission's estimate that if we do nothing we could find ourselves with 80 million tonnes of surplus grain in the Community by 1991. My view is that a package of measures is necessary. It would not be practical politics to deal with the matter with one device alone, such as price control. We must use the devices of price, set-aside and intervention standards. I have been saying this in the House for about six or nine months. I believe that price must be at the forefront of the package.
    Mr. Maxwell-Hyslop: Will my right hon. Friend bear in mind that while set-aside has its definite advantages, we do not want that to prolong the excessive use of fertilisers, which run off into rivers and into the public water supply from the land that is not set aside? In other words, we want to achieve a situation in which we do not get maximum production from the acreage that is not set aside.
    Mr. Jopling: My hon. Friend did not use the word nitrates, but I suspect that he had it in mind. We are conscious of the dangers of the excessive use of nitrogen
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    in encouraging plant growth. For that reason we are carrying out a careful study of the problem. I hope that we will be able to see the conclusions of that before very long. We should be careful about introducing steps to prevent the use of methods of producing high yields which hold back farmers within the Community, whereas their competitors in the rest of the world are free to use every device which leads to greater efficiency. That would be a dangerous step.

    EC Budget (Price Agreement)
    Mr. Geraint Howellsasked the Minister of Agriculture, Fisheries and Food what is his latest estimate of the likely effect of the European Community agriculture price agreement on the European Economic Community budget.
    Mr. Jopling: The Commission has estimated that the agriculture price agreement for 1986–87 will reduce Community expenditure by 320 million ecu in 1986 and by 457 million ecu in 1987. At the same time, the Council agreed to cuts in the Community financing of intervention which will save an additional 300 million ecu a year.
    Mr. Howells: I am grateful to the Minister for his reply. Does he agree that now is the opportune time to reform the way in which we market our surpluses within Europe, instead of selling beef to the Russians at a giveaway price? What plans has his Department put forward to the Commission to try to improve the situation?
    Mr. Jopling: Over the years we have tried—this was probably true of the previous Government also — to argue in favour of policies which prevented these huge, unmarketable, unwanted and uneatable surpluses from being built up. That seems to be the right policy. As the hon. Gentleman knows, we have been extremely unhappy about the special sales, which are directed, for instance with butter and other products, at countries such as the Soviet Union.
    Mr. Marlow: Is there not a simple way of solving the Community's financial problems? Is the Community not like any other organisation or person? Should it not say to itself at the beginning of each year that there is only a certain amount of money to spend on agriculture? If, perchance and sadly, it should go above that level of expenditure, could it not pass the hat round to those countries that spend the most money? If it needed surplus cash, could it not take it pro rata on the basis of where the money was spent? Would that not be a fair and sensible solution?
    Mr. Jopling: If it came to what was a fair and sensible solution, my hon. Friend would probably scrap the whole Community. Of course, that is not the policy of the majority of hon. Members or of the Government. We have a financial guideline, as my hon. Friend knows perfectly well. In this year's price-fixing the financial guideline has been a major influence on the successful outcome of that price fixing process.
    Mr. John: Does the Minister agree that the CAP budget for this year will be £800 million more than last year, despite what the Minister said is being saved? Even that is not a full statement of the problem. Ministers have sought to hide expenditure of between £300 million and £900 million this year and bury it in next year's accounts.

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    We are talking therefore about between £1,000 million and £1,700 million more expenditure. The Agriculture Ministers are doing that to try to hide the poverty of their approach to the real problems of the CAP.
    Mr. Jopling: The hon. Gentleman will recall that price fixing this year did respect the financial guideline. As he was shown, exceptional circumstances, in the view of the Commission, have led to a supplementary budget to be produced above the guideline, on the ground of the fall in the level of the United States dollar and the consequent increase in the amount of money which the Community needs to complete the programme.

    Horses and Ponies (Slaughtering Policy)
    Mr. Greenwayasked the Minister of Agriculture, Fisheries and Food if he will make a statement on his policy towards the slaughter of horses and ponies for the purpose of carcase exports.
    The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mrs. Peggy Fenner): We consider that the welfare of horses and ponies should be protected at the point of slaughter in all circumstances.
    Mr. Greenway: Does my hon. Friend agree that the existence of only five EEC-approved slaughterhouses for horses and ponies is not sufficient, and that the conditions at the lairages at them are, in many cases, disgraceful? In one case they amounted to only a muddy field where horses and ponies were kept for many days before being slaughtered. Will she look into the fact that horses and ponies are being forced to travel long distances, over many days, in unsatisfactory conditions, without food, water or exercise before slaughter? Will she look into the fact that RSPCA Inspector Rankin was forced out of the Southall horse market the other day when he said that horses being sold there were too thin for riding?
    Mrs. Fenner: On my hon. Friend's latter point, another RSPCA inspector attended the market on 4 June. I would not wish my hon. Friend to think that there was not an RSPCA inspector there. I take his point about fewer abattoirs meaning, obviously, a longer journey for horses. Horses in transit are protected by transit legislation. I have often reiterated to my hon. Friend that local authorities are empowered to enforce controls. Evidence of offences should be reported to local authorities. The Farm Animal Welfare Council is reviewing the welfare of all livestock in transit, including horses and ponies. Following the FAWC's report on the welfare of redmeat animals, including horses, at the time of slaughter, the Government have proposed a number of changes to legislation to provide further protection for all animals for slaughter.
    Mr. Bermingham: Does the hon. Lady agree that the problem is that there is an inadequate number of inspectors, that local authorities seem reluctant to prosecute and that legislation is not sufficiently penal? A decent method of slaughter of horses — many of us would object to their slaughter in any event—can be secured only through proper inspection, proper enforcement and proper punishment for offences when the law is so openly flouted.
    Mrs. FennerLocal authorities have not made the point that they arc not able to enforce the law as it stands. As
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    I pointed out, offences have to be drawn quickly to their attention. I understand that a local authority is promoting a Bill to give additional powers to deal with stray horses.
    Mr. Dickens: Is my hon. Friend aware that the French actually eat our horses and ponies as steaks? Has she considered that if we stopped eating their frogs and snails, they might consider not eating our horses and ponies?
    Mrs. Fenner: I note my hon. Friend's objection to, horsemeat as a diet. I think that, by and large, that view is shared by a large number of people in this country, but I would not like to speak on behalf of those who eat grenouilles and escargots.
    Mr. Randall: Is the hon. Lady satisfied that the problems found by the FAWC within slaughterhouses have been properly and satisfactorily dealt with? Is she satisfied that slaughtering methods and procedures used for horses are no less humane than those used for cattle, pigs and other animals?
    Mrs. Fenner: We have received the FAWC's report and have proposed a number of changes to legislation, which are now up for consultation — it will take a while because legislation is required — to provide further protection for all animals. The FAWC considered in particular horses and ponies at slaughter as well as all other redmeat animals.

    Food Surpluses
    Mr. Proctorasked the Minister of Agriculture, Fisheries and Food if he is satisfied with current measures to reduce European Economic Community food surpluses.
    Mr. Gummer: In 1984 the Council agreed milk quotas; in 1985 important reforms of the wine regime were adopted; the price-fixing agreement this year included further steps in tackling the milk and cereals surpluses; and the Council is committeed to taking decisions on beef support later this year. We intend to keep up this steady programme of reform. There is a great deal more to be done.
    Mr. Proctor: Has my right hon. Friend seen early-day motion 918 in the names of my hon. Friend the Member for Southend, East (Mr. Taylor) and other hon. Members concerning a new EEC subsidy for feeding butter to cows? What is my right hon. Friend's attitude to that? Will he confirm that £75 million a week is spent by the Community on disposing of surpluses?
    Mr. Gummer: I have watched carefully the considerable efforts that my hon. Friend the Member for Southend, East (Mr. Taylor) puts into ensuring that we never miss some of the sillier things that happen in the European Community. Our purpose is to reduce the supply of goods so that they are more nearly in line with needs. We shall continue to press for that.
    Mr. Deakins: As substantial price reductions are really the only effective alternative to quotas, which the Minister does not like, why are he and his Department so complacent about the impact of recent currency changes in the EEC which have meant that this year a number of farmers in countries in the Community will receive increases in their cereal prices?
    Mr. Gummer: I do not think that the Department is in any way complacent. We have said that the effects of the

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    package this time have meant a considerable cut in the price that will be received for cereals. It is not the method we would have used or for which we shall continue to press. However, we are honourable and honest enough to say that a great deal has been achieved.
    Mr. Kenneth Carlisle: Does my right hon. Friend agree that any system we introduce to confront the problem of surpluses must be simple and practical, and that in order to achieve that it is best to consult those who are involved in agriculture? In that respect, will he consider producing a Green Paper on the various methods by which we could reduce surpluses?
    Mr. Gummer: I am not sure that in those circumstances a Green Paper would be the right way to go about it. However, I agree with my hon. Friend that there is no way in which we can reduce the surpluses unless we do so with the support and help of the agriculture community. Sometimes I wonder whether the Oposition realise that people in the agriculture community need proper incomes as much as do those elesewhere.
    Mr. Home Robertson: Will the Minister accept that his policies have caused the maximum disruption in the industry that he has just been talking about, while having the minimum effect on surpluses? As the Minister is the proud custodian of all these vast stocks of cereals, beef, dairy produce and so on, will he try, by looking after them properly, to ensure that someone gets the benefit of these stocks in due course? How about starting by ensuring that good quality cereals in intervention stores are kept separate from the uneatable stuff about which his right hon. Friend the Minister was talking?
    Mr. Gummer: The answer to the hon. Gentleman's first question is no. The answer to his second question is that it is our purpose to keep the stocks in the form which makes them most saleable.
    Mr. John Carlisle: Will my right hon. Friend accept that the delay and confusion over the announcement of the method of collecting the co-responsibility levy on cereals is causing great concern in agriculture? Will he also accept that the draft recommendations from Brussels are totally unworkable and very much favour the farm feed process, against the country compounder? The trade is anxious that the settlement should be made well before the harvest, so that it knows where it is.
    Mr. Gummer: I am sure that my hon. Friend is right in saying that a delay in the decision is extremely difficult for the trade. As the rest of his question goes on to suggest, it is also important that we get the management arrangement correct. Our problem is that we are pushing for the most sensible and simple method which we can have in a co-responsibility levy, which is not the system we would have chosen. Therefore, I think my hon. Friend will agree that it is our job to ensure in that management committee decision that it is, ultimately, the best system for Britain.
    Mr. Meadowcroft: The Minister will be aware of the concern about food contamination following the Chernobyl disaster. Can he tell us——
    Mr. Speaker: Order. There is a later question on that.
    Mr. Meadowcroft: I wanted to ask about the effects that Chernobyl is expected to have on EEC food surpluses.
    Mr. Gummer: I think that the hon. Gentleman is getting his question in early in case we do not reach it. We are not currently in a position to assess the effect of the Chernobyl disaster on European surpluses.

    Food and Wine Surpluses
    Teddy Taylorasked the Minister of Agriculture, Fisheries and Food what was the total sum spent by the European Economic Community on the storage and disposal of food and wine surpluses in the most recent 12-month period for which figures are available, expressed in pounds sterling; and what was the comparable total five years previously.
    Mr. Gummer: Expenditure by the European Community in 1985 on the storage and disposal of products in structural surplus, that is cereals, sugar, milk products, beef and wine, was about £7·3 billion. The comparable figure for 1980 was about £4·7 billion, or, if inflation is taken into account, £6·8 billion.
    Mr. Taylor: Is it not a criminal waste of public funds that £150 million is now being spent by the Common Market every week on dumping, disposing of or destroying food surpluses? Is that expenditure not a shameful insult to every health authority and school authority, and to the old-age pensioners and unemployed of Britain, who could use the money much better?
    Mr. Gummer: It is certainly not a sensible way to spend money. It is the Government's purpose to ensure that surpluses are pulled down while farm incomes are at least protected and that we are able to have what ought to be the triumph of agriculture, which is that we are able to feed our people, not turned into the sadness of agriculture because there is too much.
    Mr. John: When the Minister's right hon. Friend says that Mr. Adriesson has estimated that in five years' time cereal surpluses will rise to 80 million tonnes, which is a fivefold increase on their present size, does he not think that this time the Agriculture Council should do other than mull over generalities and get down to solving the problem?
    Mr. Gummer: The hon. Gentleman must accept that that is what would happen if we did nothing, and that the Agriculture Council has already done a great deal, but nothing like enough. I am, therefore, pleased to note his support for the measures that we are trying to take and trying to get the Council to take to ensure that we achieve solutions. The fact is that the CAP, like the previous system in this country, was based on the principle that the major problem was a shortage of food. Contrary to everything that the experts say, we now have a world in which we have too much food. Changing the system is not the easiest thing in the world.
    Mr. Harris: May I press my right hon. Friend a little further on cereal surpluses? Does he agree that the only test of a successful policy is whether a small amount goes into intervention? Will he confirm that the prospects for the coming year are that a larger amount will go into intervention?
    Mr. Gummer: I would not wish to make any prognostication about how much will go into intervention. The fact is that China, India and other countries which used to need our food surpluses are now exporting food.

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    In those circumstances, it is a scandal that we have more and more intervention stores and grain, and we must change that.

    Common Agricultural Policy
    Mr. Thurnhamasked the Minister of Agriculture, Fisheries and Food what recent representations he has received about reform of the common agricultural policy.
    Mr. Jopling: My hon. Friend will not be surprised to know that I receive many representations from individuals and organisations about the common agricultural policy.
    Mr. Thurnham: Is my right hon. Friend aware that what Bob Geldof raised last year——
    Mr. Campbell-Savours: Sir Robert Geldof——
    Mr. Thurnham: —the EEC wastes each week in dumping and destroying food? Why cannot British pensioners have British butter at 15p a pound, instead of it being given to the Russians? Now that the Russians have poisoned their meat produce with radiation, should they not pay a proper price for our meat?
    Mr. Jopling: The latest Commission proposal, which we have only just received, suggests, disappointingly on the Commission's figures, that the revised scheme for butter disposal would deal with only about 30,000 tonnes of butter in the Community as a whole. We have not yet had proper discussions of the proposal in Brussels, and we need to have a number of points clarified before we can take a final view on how to react.
    Mr. Kirkwood: Will the Government take careful account of the importance of less-favoured area status within the CAP in terms of any future reform? Will they look carefully at the extensive extension granted recently in West Germany and consider similar proposals for extentions in other areas, such as Scotland?
    Mr. Jopling: The hon. Gentleman will recall that only about a year ago we were able to achieve the great success of enlarging the less-favoured areas in the United Kingdom, which brought about 28,000 additional farms into less-favoured area status. That has been most warmly received by the industry. Regarding the recently agreed German extension, the hon. Gentleman will recall that it was carried out under the guidelines laid down by the Commission and the Council. We are considering the possibility of further adjustments to our areas with this status and we are at present working towards that possibility.
    Sir John Farr: Does my right hon. Friend agree that in any reform of the CAP we should aim for a modest surplus to be produced at home by British farmers, and that the best way of controlling that surplus is by pressing on wih the set-aside programme, which will provide farmers with a working income at less than the present great cost of storing the surpluses produced?
    Mr. Jopling: I am extremely grateful to my hon. Friend for his warm support of our ideas on the set-aside programme. They are gaining support. I am particularly interested to hear that the German Government are proposing a pilot scheme along these lines in Lower Saxony. My hon. Friend is absolutely right in saying that we should aim at a modest surplus, so that the chances of food shortages are reduced to a negligible level.
    Mr. John: As the right hon. Gentleman is basking in the support of the hon. Member for Harborough (Sir J. Farr) for the set-aside programme, may we have some details rather than general statements about how and in what form the set-aside programme will work? At column 245 of the report of our previous Agriculture Questions on 8 May the Minister appeared to say that the cause of surpluses was bad management and that no change in the principles of the CAP was necessary. Is that still his view? If so, is that how he will approach his presidency of the Council of Agriculture Ministers?
    Mr. Jopling: Yes, most certainly. I have taken the view, as have Labour Ministers before me, that the principles of the common agricultural policy, in endeavouring to ensure that there are adequate supplies of food at reasonable prices for the housewife while providing a fair return for the farmer, are good principles to start with. The tragic mistake was the way in which the Council of Agriculture Ministers, over the years, but especially during the early 1980s, despite British protestations, has reached for the cheque book whenever there have been difficulties. It has allowed massive price increases, which could lead only to huge food surpluses and the ultimate bankruptcy of the Community. The inadequacies of management, which ignored British advice, have led us into the present mess.

    Agricultural Land Use
    Mr. Phillip Oppenheimasked the Minister of Agriculture, Fisheries and Food whether the Department is considering the publication of a White Paper on the future of agricultural land use.
    Mr. Jopling: No, but my Department has commissioned, or is involved in, a number of studies into future agricultural land use. I expect that the results of these studies will be made widely available to enable informed discussions to take place on this important issue.
    Mr. Oppenheim: Is my right hon. Friend aware that one of the greatest problems facing agriculture is the sense of uncertainty and the lack of direction? The publication of a Government White Paper would at least have the effect of pointing farmers in the right direction and at the same time might have the effect of scotching some of the more ridiculous alternative land use schemes, such as Government subsidies for growing trees, which are phenomally expensive?
    Mr. Jopling: My hon. Friend will recall that for many years there have been Government subsidies to encourage people to grow trees. I am sorry to hear that he believes that is a mistake. I perfectly understand and agree with him about the vital future importance of land use. However, I remain to be convinced that the correct way to proceed is to produce a White Paper. Let me give him one example. In the last six months of this year we shall be discussing a new beef regime. Neither I nor anyone in the Community or the House has any idea of the outcome of the discussion. It would be very difficult to produce a White Paper with that imponderable taken into account.
    Mr. Campbell-Savours: Should not a White Paper be announced to disclose the Government's intention to carry out a study into the effects of acid rainfall on agricultural land use? As last year, 150,000 people died of cancer, and as we know that coal-fired power stations are emitting carcinogenic material by the tonne every day of the week,

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    do not the Government have a duty to discover whether any of that carcinogenic material is making its way into the food chain? Should not the Government, especially the Minister's Department, address that issue?
    Mr. Jopling: The hon. Gentleman knows that we regularly monitor food health and safety. Food is becoming safer as time goes by. That is certainly the case with regard to radioactive material. The hon. Gentleman has drawn our attention to this difficult area. He requests a White Paper on acid rain, another on cancer and another on emissions from power stations. There is no end to it.
    Mr. Coombs: Despite the obvious attractions of a White Paper and the consultation process, will my right hon. Friend take an early opportunity to tell the British people that there is no question of large numbers of golf courses being sought as the solution to this problem? Will he assure the House that, if we are to have trees, they will be British trees such as the oak, the ash and the beach and not the anonymous conifers of Scandinavia and North America?
    Mr. Jopling: My hon. Friend will recall that we recently announced a broad-leaved policy for woodlands, which was most warmly received. My hon. Friend should address his question about golf courses to my hon. Friend the Minister with responsibility for sport.
    Mr. Home Robertson: How can there be the informed discussion to which the Minister referred against the background of cuts which the Government have made in the Soil Survey for England and Wales and the Macaulay Institute, which does the same work in Scotland? For how much longer will the Minister shirk his responsibility for giving the industry the guidance that it needs to readjust the pattern of production and supply? If he is thinking about some form of set-aside scheme, will he give the House some answers and stop trying to duck questions, as he did in answer to my hon. Friend the Member for Pontypridd (Mr. John)?
    Mr. Jopling: There is no question of ducking questions. I have explained clearly our views on set-aside. I have explained them in the Community, and they are becoming more recognised. I do not understand what all this has to do with the Soil Survey.
    Mr. Home Robertson: That says it all.

    Set-aside Schemes
    Mr. Lathamasked the Minister of Agriculture, Fisheries and Food what recent discussions he has held with the president of the National Farmers Union regarding a set-aside scheme for dealing with agricultural surpluses.
    Mr. Jopling: I and my officials hold frequent discussions with representatives of the NFU on all aspects of the support system for cereals.
    Mr. Latham: Rather than just going back 200 years to "Turnip" Townsend and fallow fields in a four-course rotation, will my right hon. Friend look carefully at the NFU's brand new document on tree production? Does it not contain a good deal of common sense?
    Mr. Jopling: Yes. I believe that, for some time now, the NFU has recognised the importance of increasing
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    woodland on farms. I very much look forward to studying its document more carefully. The fallowing of land is an ancient and honourable way of land management.

    Surplus Food Stocks
    Mr. Canavanasked the Minister of Agriculture, Fisheries and Food what is the total amount and value of surplus food stocks (a) in the United Kingdom and (b) in the entire European Economic Community.
    Mr. Gummer: A note setting out the volume of intervention stocks in the United Kingdom and the Community is deposited in the Library of the House and is updated monthly. The value of these intervention stocks, which include some non-food stocks, is estimated to be £1,371 million in the United Kingdom and £6,197 million in the Community as a whole.
    Mr. Canavan: For how much longer will the Government tolerate the absolute obscenity of millions of tonnes of food rotting away in the Common Market while millions of people in the Third world face the risk of death by starvation? As the Government have given some belated recognition to Bob Geldof——
    Mr. Campbell-Savours: Sir Bob Geldof.
    Mr. Canavan: —is it not time that they gave more recognition to what the man had to say about releasing some of the surplus food to help hungry people in Africa?
    Mr. Gummer: I wish that the hon. Gentleman, whose views on the need to help hungry people I share, would just read what Oxfam and other organisations say. They say that it is not surplus food but financial aid that is needed, otherwise indigenous agriculture will be driven out and there will be no possibility of building an agricultural future for those countries. The hon. Gentleman must not allow his opposition to the Common Market to do down the underdeveloped countries.

    Food and Drink Industries (Treaty of Rome)
    Mrs. McCurleyasked the Minister of Agriculture, Fisheries and Food what estimate his Department has made of the effect of the new article 100A of the Treaty of Rome on the interests of the food and drink industries.
    Mrs. Fenner: This article, which will apply after ratification of the single European Act by all member states, contains new provisions for adoption of Community measures in the internal market. In particular, the Council will act by qualified majority rather than by unanimity. I cannot predict what effect this change will have on the nature or number of the measures adopted.
    Mrs. McCurley: I am grateful to my hon. Friend for that reply. Will she continue to ensure that there are no unnecessary restrictions on the export of foodstuffs to the EEC while we are considering our internal legislative policies?
    Mrs. Fenner: I can assure my hon. Friend that we shall continue to play a full part in the negotiations for harmonisation of food standards and ensure that the interests of our food industry are taken into account in working towards a harmonised market.

    Freezer Vessel Licences
    Mr. Randallasked the Minister of Agriculture, Fisheries and Food when he intends to publish the outcome of his Department's study into freezer vessel licences for pelagic fishing.
    Mr. Gummer: I hope that it will be possible to make an anouncement in the near future.
    Mr. Randall: Is the Minister aware that the inordinate delay in publishing the findings of his review has seriously impeded investment in, and the restructuring of, the British fleet? Will he tell the House whether he agrees, in principle, that the use of freezers in pelagic fishing could result in considerable improvements in efficiency and cost-effectiveness? Does he agree that the early construction of new freezer vessels could provide much needed orders for our very hard-pressed shipbuilding industry?
    Mr. Gummer: I think it is very important that the British fishing industry should make the most of the opportunities that it has under the common fisheries policy and which are much to its advantage. That is why I want to get the right answer, and that is why we are seeking an answer. I hope that I can give the hon. Gentleman a reply soon.

  PRIME MINISTER

    Engagements
    Ql. Mr. Pavittasked the Prime Minister if she will list her official engagements for Thursday 12 June.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in this House I shall be having further meetings later today.
    Mr. Pavitt: Is the Prime Minister totally unaware of the deep anger among nurses over the fact that, for the second year running, she has overturned the review body award and short-changed them by giving them only nine months' instead of 12 months' pay? Is she also aware that the injustice of giving the managers back pay until February has infuriated doctors and nurses alike? Ward sisters have now got £800 less than the review body decided they should have. When the Prime Minister replies to the Royal College of Nursing's letter of 28 May, will she take into account the grave shortages in acute nursing facilities and the low morale? Will she take the decision back to the Cabinet and not give the House a lot of statistics about national numbers, past comparisons and the inflation rate?
    The Prime Minister: The hon. Gentleman is aware that nurses have had a far better deal under this Government than ever they had under the Labour Government. A ward sister to whom the hon. Gentleman refers is now, on the top of her scale, receiving £2,000 a year more than she would have done had the 1979 rate, which appertained when his Government were in power, merely been increased by inflation. Our record on that is excellent.
    With regard to the pay of National Health Service general managers, the new rates of pay which operated from 1 February related to the 1985–86 pay year for
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    general managers. The hon. Gentleman is aware that many general managers had jobs with tenure and they have had to give up that tenure to take the management jobs.
    Sir Paul Bryan: Reverting to my right hon. Friend's answer of last Tuesday on the question whether Rolls-Royce required Government support, is she aware that last week Cathay Pacific Airways ordered two Boeing 747 400s, with an option on seven more?
    Cathay Pacific, when deciding upon the engines for that plane, having considered Pratt and Whitney, GEC and all the rest, finally came down in favour of the new Rolls-Royce RB21 1 524 D4D. Is it not a promising start for the engine to have a company of this standing as its launch company, and should it not bring orders for many years to come?
    The Prime Minister: I am delighted to hear of the order won by Rolls-Royce, on the merits of this engine. It is very good news indeed and it highlights the company's export record. Rolls-Royce is used to exporting. Last year Rolls-Royce engine sales to the United States were worth £435 million.
    Mr. Shore: The Prime Minister will know that this morning a state of emergency was declared in South Africa. In the light of these latest and grave events, and the sombre report of the Eminent Persons Group, is it not now plain to the Prime Minister that her stance at Nassau last October was totally misjudged? Political progress against apartheid cannot be made without effective and concerted economic pressure against South Africa. Detailed measures need urgent consideration with Commonwealth partners. The House and the Commonwealth are entitled to know from the Prime Minister now whether she accepts the principle of economic sanctions against South Africa.
    The Prime Minister: We have just received the group's report and we are studying it carefully. Time is needed for all concerned, including the South African Government, to consider the report. I shall be meeting the two co chairmen later today. We must not close the door on future negotiations. The group's report recognised that it was not its task to make specific proposals about measures. Therefore, we shall be in touch with our Commonwealth partners, our European partners and our economic summit partners to discuss this report.
    Mr. Shore: That is an equivocal, and, for the right hon. Lady, a surprisingly unclear and indefinite response to what was a unanimous report by a group that spent six months, at her personal request, studying events in South Africa.
    The Prime Minister: We have just received the report.
    Mr. Shore: We have indeed just had the report, but it has been available to almost everybody for the past 48 hours. The Prime Minister has had plenty of time to consider, not so much the detail of what we need to do, but the principle of the matter. Will she now remove her veto on economic sanctions, on which she has previously insisted?
    The Prime Minister: The right hon. Gentleman is complaining because we are to consider the report carefully with our partners before we reach our conclusions. He knows full well that the report says:
    "we are not determining the nature or extent of any measures which might be adopted, or their effectiveness".

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    The report has taken a long time to compile and we are grateful to the group that has undertaken the task. I shall be seeing its members later. I am not aware that the phrase "economic sanctions" appears in the conclusions.
    Mr. Shore: I have one final point to put to the Prime Minister, because she is equivocating. The word "sanctions" has been used by the leading members of the Eminent Persons Group. I quote directly from paragraph 352 of its report, which says:
    "We are convinced that the South African Government is concerned about the adoption of effective economic measures against it."
    If that is not equivalent to sanctions, I do not know what is.
    The Prime Minister: I have read out what the report says, which is:
    "we are not determining the nature or extent of any measures which might be adopted, or their effectiveness".
    The right hon. Gentleman is complaining because we shall take great care in considering the report and in consulting both the Commonwealth and our economic partners. I shall quote what a spokesman of the Labour Government, of which the right hon. Member was a member, said in December 1977, after Soweto was debated in the United Nations. He said:
    "We voted against"—
    economic sanctions against South Africa—
    "together with France, West Germany, the USA and some other Western countries, because we do not agree that the far-reaching economic measures which the resolution calls for would produce the changes in South Africa which we would all wish to see."—[Official Report, 16 January 1978; Vol. 942, c. 9.]
    Mr. Hunter: My right hon. Friend has made much of the sentiment "the lady's not for turning". May we take it that she will not turn aside from her view that the further isolation of the South African Government and the imposition of sanctions, while they will achieve many things, will not help the creation of a more just and equitable society in South Africa?
    The Prime Minister: Of course we want a more just and equitable society in South Africa and we condemn apartheid. We still believe that we must not close the door on future negotiations and that the group's basic approach of promoting dialogue and a suspension of violence remains correct. Of course, we shall consider this distinguished report carefully, and consider it with our European partners, our Commonwealth partners and with the seven industrialised nations. I am sure that my hon. Friends will agree that that is the right way to go about it, before dashing into premature conclusions.
    Dr. Owen: Can the Prime Minister promise the House that when President Reagan applies economic sanctions against South Africa she will not turn round and follow suit? When will she lead world opinion instead of being led by the nose? In the light of the state of emergency that was declared today in South Africa, will she tell us now that she will be ready to stop direct intercontinental flights to South Africa?
    The Prime Minister: The right hon. Gentleman is well aware that those flights are conducted under legal contract. There are specific legal obligations in those contracts, which cannot suddenly be abrogated. I note that in an article in The Sunday Times on 24 March 1985 the right hon. Gentleman said:
    "Total, or even selective trade sanctions, will not succeed."
    Mr. Baldry: Does my right hon. Friend agree that it is time that Northern Ireland said yes to something? The SDLP vetoed the Assembly and the Unionists have vetoed the Anglo-Irish accord. Is it not time that Northern Ireland said yes to something and then tried to seek a solution to its problems? Northern Ireland should not always look to Westminster for a new initiative, because we have rather run out of initiatives and out of patience with the people of Northern Ireland, who sabotage everything that we try to do.
    The Prime Minister: I appreciate what my hon. Friend has said. As he knows, my right hon. Friend the Secretary of State for Northern Ireland will make a statement later today. In the meantime, the invitation to the Unionists stands. We invite them to come and discuss how to get devolved government and to discuss the future of the Assembly. It is also open to them to come to discuss the future arrangements about the conduct of Northern Ireland legislation in the House. I hope that one day they will take up that offer.
    Mr. J. Enoch Powell: Will the Prime Minister invite her security advisers to study with great care the implicit timetable behind the outrages and attempted outrages for which the perpetrators have just been convicted? Will she compare those with the successive stages of negotiation between Her Majesty's Government and the Governments of the United States and the Irish Republic?
    The Prime Minister: I shall deal separately with the two parts of the right hon. Gentleman's question. Of course security advisers will learn any lessons that are to be learnt. It is their duty to do so. They go to great lengths to try to protect us and they do a supremely good job. I totally reject the latter half of the right hon. Gentleman's question.
    Mr. Patchettasked the Prime Minister if she will list her official engagements for Thursday 12 June.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some time ago.
    Mr. Patchett: Does the Prime Minister accept that the uprating by 10p per week of child benefit is an insult to the many families who depend upon it? Is that not another example of the Government's callous indifference to those that have not?
    The Prime Minister: No. Child benefit is at just about the right level. The hon. Gentleman fails to observe that the money for child benefit often has to come from the very families to which it goes. There are of course increased amounts under supplementary benefit. In so far as the hon. Gentleman refers to supplementary child benefit, the increase is low because inflation is low—lower than ever his Government had it.
    Mr. Craigenasked the Prime Minister if she will list her official engagements for Thursday 12 June.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Craigen: When it comes to the crunch, is the Prime Minister prepared to break the Commonwealth rather than back stronger concerted measures to break the pattern of apartheid in South Africa?
    The Prime Minister: I have said that we shall be consulting the Commonwealth, I think at the beginning of

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    August, when the seven Heads of Government come to London for that purpose, and I shall be seeing the two cochairmen of the Eminent Persons Group later this afternoon.
    Mr. Jesselasked the Prime Minister if she will list her official engagements for Thursday 12 June.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Jessel: As it is only the Conservative party which is united, with a strong and clear defence policy for the defence of Britain, is it not a danger to our country that unilateral nuclear disarmament is supported not only by the Labour party but by live out of every six Liberal candidates, over which they are deeply split with the right hon. Member for Plymouth, Devonport (Dr. Owen)? Is this not a total abuse of the word "alliance", which should now be dropped?
    The Prime Minister: Yes, Mr. Speaker. I wholly agree with my hon. Friend that only the Conservative party and
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    the Government have a defence policy which is based on British interests and not on trying to reconcile irreconcilable views.
    Mr. Allen Adamsasked the Prime Minister if she will list her official engagements for Thursday 12 June.
    he Prime MinisterI refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Adams: Is the right hon. Lady aware that many parts of Rolls-Royce aero-engines are made in my constituency at Millington and that there is deep concern about the company's future in Glasgow, particularly its capacity to produce in the west of Scotland? Will she ask her Ministers to seek assurances from the directors of the company that they will keep a presence in Glasgow?
    The Prime Minister: I shall, of course, pass on the hon. Gentleman's request, and I am sure he will appreciate that the likelihood of the company maintaining a presence in Scotland is the greater the more orders Rolls-Royce wins. It appears to be being very successful on design and merit.

Business of the House
3.30 pm
Mr. Peter Shore: May I ask the Leader of the House whether he will state the business for next week?
The Lord Privy Seal and Leader of the House of Commons (Mr. Biffen): Yes, Sir. The business for next week will be as follows:
MONDAY I6 JUNE—Opposition Day (15th Allotted Day) (1st Part). Until seven o'clock there will be a debate on an Opposition motion entitled "The crisis in big city hospitals".
Afterwards progress on remaining stages of the European Communities (Amendment) Bill.
TUESDAY I7 JUNE — Opposition Day (16th Allotted Day). There will be a debate on South Africa on an Opposition motion.
Afterwards there will be a debate on EC Document 9360/84 as amended by EC Document 5752/86 relating to EC proposals on the marketing and testing of medicinal products.
WEDNESDAY I8 JUNE—There will be a debate on Foreign affairs on a motion for the Adjournment of the House.
THURDSAY I9 JUNE— Motions on Northern Ireland orders and consolidation measures. Details will be given in the Official Report.
FRIDAY 20 JUNE—There will be a debate on the arts on a motion for the Adjournment of the House.
MONDAY 23 JUNE—Until seven o'clock, opposition Day (11th Allotted Day) (2nd Part). There will be a debate on a motion in the name of the leader of the Liberal party. the subject for debate to be announced.
Second Reading of the Rate Support Grants Bill.
Debate on Tuesday 17 June:
Relevant documents

(a) 9630/84

Marketing and testing of medicinal products.

(b) 5752186

Marketing and testing of medicinal products.

Relevant reports of European Legislation Committee

(a) HC 5-viii (1984–85), para 1 and HC 21-xix ( 1985–86), para 1

(b) HC 21-xix (1985–86), para 1

Northern Ireland orders to be debated on Thursday 19 June:
Northern Ireland Assembly (Dissolution) Order.
Northern Ireland Act 1974 (Interim Period Extension)
Order.
Northern Ireland (Emergency Provisions) Act 1978 (Continuance) ( No. 2) Order.
Consolidation Measures:
The Company Securities (Insider Dealing) (Northern Ireland) Order.
The Companies (Northern Ireland) Order.
The Business Names ( Northern Ireland) Order.
The Companies Consolidation (Consequential Provisions) (Northern Ireland) Order.
Mr. Shore: We are grateful for the full day's debate on foreign affairs on Wednesday, but the Opposition believe that it is essential that the House should have the earliest possible opportunity to debate separately the report of the Eminent Persons Group on the crisis in South Africa and that is why we have given Opposition time next Tuesday.
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Will the Lord Privy Seal arrange for an early statement on the Eminent Persons Group report so that the debate can be fully focused upon the Government's response and future policy?
Secondly, in view of the exceptional constitutional importance of the European Communities (Amendment) Bill, with its further reductions of the powers of this Parliament and the removal of the unanimity rule as accepted in the Luxembourg compromise from a large part of the Treaty of Rome, will the right hon. Gentleman make it plain that there will be a further day's debate and that there will be no attempt to bulldoze through all its stages on Monday night?
Thirdly, the right hon. Gentleman replied favourably last week to the pressure from my right hon. Friend the Leader of the Opposition for a debate on the crisis in the tin mining industry and the effects of mine closures on communities in Cornwall. Can he now say whether time for that debate will be included in his next business statement?
Fourthly, the right hon. Gentleman will know of the widespread disappointment caused by the findings of the Lord Chancellor's consultation paper on family courts. The report's tone was certainly very negative. When will the House have an opportunity to debate that report?
Finally, on the important question of the restitution of private Members' time following the disgraceful manoeuvres that led to the loss of last Friday's business, can the Leader of the House now make that positive response that he referred to in my exchanges with him last Tuesday?
Mr. Biffen: I shall respond to those questions in reverse order. I am glad to say that, following discussions through the usual channels, I shall arrange for a motion to be tabled providing for private Members' notices of motion to take precedence over Government business until 7 pm one evening, and for a ballot to be held for those notices.
Perhaps the question of the Lord Chancellor's report can be examined through the usual channels.
I confirm that it is our intention that there should be a debate on the tin industry in the near future. However, I cannot give the guarantee sought by the right hon. Gentleman.
We shall have to see what progress we make with the European Communities (Amendment) Bill next week. But I quite understand the importance of the right hon. Gentleman's point.
Finally, I appreciate the co-operation that has been given to ensure that a full day's debate on South Africa can take place early next week. I shall draw the attention of my right hon. and learned Friend the Foreign Secretary to the question about the possibility of a statement.
Sir Anthony Grant: Is my right hon. Friend aware that the whole House would very much welcome a debate on defence in the not too distant future? Presumably that opportunity will be afforded by the Liberal party on Monday, but should it absent-mindedly forget to provide it, will it be possible to have another debate, or to raise such issues in the foreign affairs debate on Thursday? Does my right hon. Friend realise that there is so much confusion in Cambridgeshire between the Liberals, the SDP and the Labour party that we do not know whether we are a nuclear-free zone. It is very worrying.
Mr. Biffen: My hon. Friend is perfectly correct to say that during the next few weeks there will be several occasions when defence can be debated in the House, and not least during the debate on the defence White Paper. I believe that on that occasion, nemesis will be awaiting the respective parties of the alliance.
Mr. A. J. Beith: Is the Leader of the House aware of the very large number of university teachers who have come to the House today because they are concerned about the future of higher education? Will he find an opportunity in Government time to enable the Secretary of State for Education and Science to make a statement on his policies towards that sector of education and give him the chance to offer some new hope to an area that is of great concern to the future of our country?
Mr. Biffen: My right hon. Friend the Secretary of State has made the most excellent start in disseminating hope and confidence. I shall draw his attention to the fact that the Liberal party believes that a statement from him on the subject of higher education might add to that. We shall have to see how we go.
Mr. Derek Conway: Will my right hon. Friend give an undertaking that the much exercised usual channels will do their best to bring together the Liberal and Social Democratic parties so that they use their day, on Monday 23 June, to debate defence policies? We could then examine in detail the so-called Commission defence report which was published yesterday, and question those hon. Members involved, if they manage to turn up, on paragraph 55, which urges Parliament to look 10 years ahead to new technology in preparing for defence, while paragraph 67 conveniently ducks the issue of an independent nuclear deterrent for Britain until after the next general election.
Mr. Biffen: The usual channels have proven and enviable powers, but it may be stretching them somewhat to suppose that they can secure what my hon. Friend wants from the two component parties of the alliance. But it would be more revealing if the Liberal party did not choose to debate defence on Monday 23 June than if it did.
Mr. Jack Ashley: Is the right hon. Gentleman aware that from today advertisements are being placed in newspapers up and down the country by disabled ex-service men who believe that they were disabled as a result of negligence while performing noncombatant duties? Those advertisements warn potential recruits to the armed force that they lose the right to sue for damages when they join the forces. They disclose facts and tell the truth, and I take it that the Leader of the House is in favour of disclosing the facts and telling the truth. As this dispute is escalating and we want service men to have those rights, may we have a debate next week?
Mr. Biffen: 'The right hon. Gentleman's dedication in this matter is well known and acknowledged. I will certainly draw the attention of my right hon. Friend the Secretary of State for Defence to the point that he makes, but I am afraid that I must disappoint him by saying that I cannot alter the order of business already established for next week.
Mr. Michael Shersby: Will my right hon. Friend try to find time as soon as possible for a debate on the reform of the rating system based on the Green Paper "Planning for Local Government"?
Mr. Biffen: It is a matter of great significance which I am sure will detain the House at some point, and maybe in the not too far distant future, hut, having a great sense of realism at this point of the parliamentary calendar, I must say to my hon. Friend t hat no provision is made for it next week and I doubt that it will be the week after.
Mr. Nigel Spearing: Has the Leader of the House read the display advertisement concerning the European Single Act on page 3 of The Guardian today? Is he aware that it is subscribed to by many of his hon. Friends, and by Lord Stoddard and Mr. Douglas Jay? In view of the fact that the Foreign Secretary has described some similar statements as constitutional fantasy, will he assure the House that there will be ample time for the House to decide whether the facts in the advertisement measure up to the description of the Foreign Secretary?
Mr. Biffen: I am sure that the hon. Gentleman will appreciate that for me there are other newspapers whose page 3 takes priority over that of The Guardian. I of course recognise the importance of the point that he makes, and obviously it will be germane to the debates that we shall be having next week.
Sir Eldon Griffiths: Now that the court has reached its conclusion about the Brighton bomber and those others who sought to destroy innocent people across our country, will my right hon. Friend invite the Home Secretary to make a statement to the House about the police operation that led to the successful conviction of these persons, first, so that the House can express its congratulations to the police service on having achieved this victory against terrorism, and, secondly, so that we may consider maturely what further measures and resources may be required to ensure the proper protection of our citizens against terrorism?
May I also ask my right hon. Friend to negotiate with those on the Liberal Benches in respect of next Monday's business so that before 7 o'clock the Liberal sector of the alliance can offer us its policy and after 7 o'clock we may hear the different story from the other part of the alliance?
Mr. Biffen: I associate myself most warmly with the tribute that my hon. Friend has paid to the police concerning their role in the detection of the bombers. I note the point that he makes about the need for an adequate level of resources for this work. I think that I had better leave it there and say to him that I will, of course, refer his request for a statement to my right hon. Friend the Home Secretary.
I must admit that, as we move into the witching season of June and July, it is fascinating to dwell upon the irrelevances that are presented by the Liberal and Social Democratic alliance, particularly as their differences become the more acute and the more inflamed. I am sure that we will all have an entertaining time thinking about what they might have done and then thinking how poor and lacklustre is the performance against what could have been.
Mr. Donald Coleman: May I remind the Leader of the House again of the Association of University Teachers lobby of the House today? Will he arrange for a debate on the funding of the University of Wales? If that is not possible on the Floor of the House, could it be held in the Welsh Grand Committee?
Mr. Biffen: I take note of what the hon. Gentleman says. I realise only too well that it is a topic of great concern in the Principality, and I will refer his suggestion to my right hon. Friend the Secretary of State for Wales.
Mr. Robin Maxwell-Hyslop: Will my right hon. Friend ensure that the report of the Select Committee on Trade and Industry on the collapse of the tin industry, the Government's response to it and the Committee's observations on the Government's response are debated before the decision concerning the application by South Crofty, Pendarves and Wheal Jane is taken and announced rather than after the event? That is very important if Parliament is to perform its proper role.
Mr. Biffen: As my hon. Friend knows, I have indicated that I hope and expect there to be a debate on the tin industry in the fairly near future. I hope that he will excuse me from making a commitment as precise as he would wish.
Mr. Robert Parry: Has the Leader of the House seen early-day motion No. 919 concerning the Iran-Iraq war?
[That this House welcomes the observation of 10th June as the International Day of Action to stop the Iran-Iraq war; supports the resolutions carried at the recent Non-Governmental Organisation International Conference at Geneva to end the war; notes that the war has continued longer than World War II with the loss of more than a half a million people killed, the violation of international laws and the use of chemical weapons; commends the efforts of the United Nations, the non-aligned movement and the Islamic Conference to resolve the conflict; and calls upon Her Majesty's Government to use its influence at the United Nations and within the Council of Ministers to call for an immediate cease fire, the release of all prisoners of war and to emphasise on the occasion of the International Day of the Child the need for the protection of children of both countries, and to make particular use of the World Congress devoted to the International Year of Peace to he held in Copenhagen in October to promote the above-mentioned aims.]
May the House have an early debate on how we can initiate a ceasefire, hearing in mind the appalling loss of life on both sides, especially among children, in that war?
Mr. Biffen: The hon. Gentleman could take advantage of Wednesday's debate on foreign affairs, which will provide him with a better opportunity than any other to deploy his arguments.
Mr. Peter Viggers: If, following the request by the right hon. Member for Stoke-on-Trent, South (Mr. Ashley), there should be a debate on the conditions of service for armed forces personnel, will my right hon. Friend bear in mind that the right hon. Gentleman has been less than fair to the current excellent conditions of service for those in the armed forces, especially as they can be compensated for injury whether or not they have been negligent in any act that caused the damage?
Mr. Ashley: That is not true—it is quite wrong.
Mr. Biffen: I note and appreciate the point made by my hon. Friend. Doubtless it could be considered if we were to have such a debate.
Mr. Dave Nellist: Is there any prospect of an early debate on electoral law, during which
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we could consider early-day motion No. 943 headed "Bradford North and Conservative financial support for non-Conservative candidates."?
[That this House notes the touching concern of the Chairman of the Conservative Party for the selection of candidates by members of the Labour Party to fight the next General Election; wonders if such concern will again be translated into financial support for non-Conservative candidates, as with the late Lord St. Oswald, former Vice-Chairman of Mid-Yorkshire Conservative Association, and the Conservative candidate for Yorkshire West, in the first election to the European Parliament, who paid £2,500 of the election expenses of Ben Ford to stand as an independent in the 1983 General Election in Bradford North; and considers that the almost unprecedented unity of hysteria between the Chairman of the Conservative Party and the leader writers of the 11th June editions of The Guardian, Daily Mail, Sun, Daily Telegraph, Daily Express and Today, in opposing Labour's democratic choice of Mr. Pat Wall to. fight Bradford North at the next General Election, shows that if that decision worries the establishment that much, it must he good for working people and their families]
Might we not then have an explanation, from someone sufficiently high in the Tory party, about why the late Lord St. Oswald paid £2,500 of the electoral expenses of an independent to stand against the official Tory candidate?
Mr. Biffen: I feel unbriefed fully to deal with that point. May I suggest that, at least as an initiation into the subject, the hon. Gentleman raises the matter with the Home Office during Question Time?
Mr. Peter Bruinvels: When will the House have a debate on the negative approach of Labour local authorities to unemployment, especially that of Leicester, which seems to take great delight in showing how many people are unemployed while carefully forgetting the number of people who have found work? Should not the House have an opportunity to correct the balance and show that under this Conservative Government many people have found work, and that the position is not quite the lies and untruths that the Labour party would have us believe?
Mr. Biffen: Every Thursday I begin to feel that Leicester is carved on my heart. I cannot offer an early prospect of Government time for such a debate, but my hon. Friend may wish to take the opportunity provided by Adjournment debates. However, I know that by raising the matter with me he ensures that the folk in Leicester truly appreciate that the position is as he so graphically describes it.
Mr. Greville Janner: In spite of the unhappy juxtaposition of this question with that which has just been asked, I shall ignore the idiotic approach to the problems of the people of Leicester, where in parts of my constituency they face 60 per cent. unemployment.
May I ask the right hon. Gentleman, as he no doubt expected me to do, what has been the result of the investigation into the Nazi criminal activities of Dr. Kurt Waldheim and whether we are to have a statement about that before the debate on Wednesday? If the Foreign Office is considering United Kingdom representation at Dr. Waldheim's inauguration, on the same ground as the Prime Minister has sent a disgraceful message of congratulation—that it is normal so to do—perhaps the

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right hon. Gentleman will bear in mind the very great regret felt on both sides of the House at the presence of United Kingdom representation at the inauguration of Chancellor Hitler in Germany in 1934?
Mr. Biffen: When I behold the sartorial elegance of the hon. and learned Gentleman, I realise that he represents gentrified Leicester and that my hon. Friend the Member for Leicester, East (Mr. Bruinvels) represents working Leicester. I think that the hon. and learned Gentleman might best hold his attention for the Adjournment debate on Friday in the name of the right hon. Member for Brent, East (Mr. Freeson), which I think will touch on the subjects that he has raised.
Mr. Derek Spencer: Is my right hon. Friend aware of the misgiving that there is in many quarters, and not only in Leicester, about the political bias that is shown by various officers in local government? The Lewisham council has said only recently that it will employ senior officers only if they are wedded to the Labour party. Is my right hon. Friend aware also that the treasurer of Leicester city council, only a short time before the local authority elections, printed a letter in the Leicester Mercury seeking to explain and justify an 80 per cent. rate increase, and that he has added insult to injury by seeking to justify his original letter? Can my right hon. Friend tell us when we can expect some early legislation to prevent various areas of local government destroying themselves?
Mr. Biffen: I do not know what three Leicesters in a row means in the parliamentary jackpot. I have taken careful note of what my hon. and learned Friend has said. I put it in the context of a request for legislation, and I shall see that it is conveyed to my right hon. Friend the Secretary of State for the Environment.
Mr. Nicholas Soames: Will my right hon. Friend make time available for the House to debate the excellent report from the Public Accounts Committee on the torpedo programme and the other procurement scandal, apart from Nimrod, that lurks within the Ministry of Defence? At the end of the day it is likely that the Tigerfish torpedo will cost even more money than the Nimrod programme. May we have an early debate on this vital waste of taxpayers' money.
Mr. Biffen: Perfectly properly, my hon. Friend raises a matter of major public concern. He will know that there is a recognised convention for responding to and debating PAC reports. I shall make investigations to ascertain when such a debate can be made available.
Mr. Michael Latham: When Hansard appears tomorrow, will my right hon. Friend read the exchanges that took place during Question Time today on agriculture? Great concern was expressed by Conservative Members about the prospects of agriculture and the need for drastic policy changes in the year ahead. Is it not time that the House debated this issue properly?
Mr. Biffen: I had the privilege of being in my place and hearing my hon. Friend's most formidable question. I recognise that there is much interest in the present state of British agriculture and an interest in what the future may hold. I shall refer my hon. Friend's remarks to my right hon. Friend the Minister of Agriculture, Fisheries and Food, with the prospects of possibly having a debate.
Mr. David Sumberg: In the context of a call for a defence debate, may we have a debate on the
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ridiculous concept of the nuclear-free zone, especially as the Labour-controlled council of Bury has now declared my constituency to be a nuclear-free zone? Does my right hon. Friend accept that such a debate would give us an opportunity to condemn this wasteful and misleading statement in so far as it relates to my constituency?
Mr. Biffen: I am sure that my hon. Friend will be reassured to know that reasonably soon we shall be having a debate on the defence White Paper. I hope that he will then have the opportunity to make the pertinent point that he has put before us.
Mr. Ivor Stanbrook: I think that everyone agrees that the present arrangements for considering Northern Ireland business in the House are inadequate. As the Government have now decided to abolish the only public forum for the expression of opinion in Northern Ireland, is there not an obligation on the Government to produce proposals for the more adequate consideration of Northern Ireland business in this place? Surely the Government should not rest upon the rather spurious and misleading invitation to Northern Ireland's political leaders to make approaches themselves. Is it not the Government's responsibility, having put Northern Ireland in this position, to bring forward proposals?
Mr. Biffen: My hon. Friend will appreciate that I cannot anticipate the statement that my right hon. Friend will make shortly. However, I remind him that the Assembly had no legislative role and, therefore, the lawmaking factors remain unaffected by any changes that might take place in the Assembly.
Mr. Richard Holt: I reinforce the remarks of my hon. Friend the Member for Orpington (Mr. Stanbrook). Is it not time that the House had an opportunity to debate the internal affairs of our country, as the American Congress has? Perhaps we would then have an opportunity to say to the Americans, "It is not your cheap conscience money we want; it is an extradition treaty."
Mr. Biffen: Discussion of the extradition treaty could be reasonably pursued in the foreign affairs debate on Wednesday. I assure my hon. Friend that the existing structures provide plenty of opportunities for making points about the Province as well as the foreign affairs aspects.
Mr. Michael Forsyth: Will my right hon. Friend find time for the House to debate, as a matter of urgency, the activities of the Animal Liberation Front and other so-called animal rights groups which, according to articles in the Daily Express, are involved in creating cells in constituencies to carry out attacks on property and individuals, representing a serious threat to public order?
Mr. Biffen: My hon. Friend has raised a legitimate point. I suggest that, in the first instance, it might be an appropriate subject for an Adjournment debate.
Mr. Geoffrey Dickens: In view of the serious statement made by the Leader of the Opposition when he was in India about removing our immigration controls — the two Acts which we have introduced—and, ever-mindful that the Labour party granted two amnesties for illegal immigrants, much to the distaste of those who had entered

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the United Kingdom legally, will my right hon. Friend make time for a debate on that subject so that we can ask some awkward questions?
Mr. Biffen: I underline the importance of what my hon. Friend has said. It relates to a topic which is of major concern to the British public. There is no provision for a debate next week. I am sure that my hon. Friend realises the difficulties of providing time at this stage of the year, but I shall bear in mind what he has said.
Mr. David Harris: I underline the pleas made by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) and by the right hon. Member for Bethnal Green and Stepney (Mr. Shore) on the tin crisis and the urgent need for a debate. I know that the Leader of the House does not want to be tied down to a precise date, but, when he considers the need for an urgent debate, will he bear in mind the fact that the Government have published their response to the Select Committee's report? More importantly, a shadow hangs over the far west of Cornwall, especially in the area I represent, as a result of the dire news about Geevor.
Mr. Biffen: I appreciate the point that my hon. Friend has made. I appreciate it all the more because, although his constituency is acutely affected by what is happening, he put it temperately. I cannot go beyond what I have already said. I shall look at the matter as sympathetically as I can.
Mr. Alan Williams: I am glad that, however reluctantly and truculently, the Government have decided to restore last week's hijacked private Members' day. Does the right hon. Gentleman recollect that last Friday was not only a Labour Back-Bench day but specifically the day of my hon. Friend the Member for Linlithgow (Mr. Dalyell)? [HON. MEMBERS: "No".] It was indeed. He won the ballot to bring a matter before the House last Friday. If there is to be a new ballot, will the Leader of the House recognise that there is, at best, only a one in two chance that it will be a Labour Back Bencher who wins it and a less than one in 500 chance that it will be my hon. Friend the Member for Linlithgow? Will the right hon. Gentleman confirm that a motion reinstating the lost private Members' business can reinstate the ballot that has already taken place? If that is so — believe that it is —will the right hon. Gentleman give an assurance that the motion will be so worded? If he will not,
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may we have an assurance from the Government Chief Whip, who so destructively and maladroitly organised last week's filibuster, that on this occasion he will exercise his Machiavellian powers to ensure that he keeps Conservative Members out of the ballot?
Mr. Biffen: I am disappointed at that somewhat less than generous riposte. Careful thought went into the wording of my response to the right hon. Member for Bethnal Green and Stepney (Mr. Shore). I do not think that there will be any advantage in my going beyond what I have already said.
Mr. Cecil Franks: On a point of order, Mr. Speaker. It may have escaped the attention of the right hon. Member for Swansea, West (Mr. Williams), although I am sure that it did not escape yours, that three motions were tabled for debate last Friday. Apparently, the hon. Member for Linlithgow (Mr. Dalyell) gave his speech, albeit to members of the press in a Committee Room upstairs. May I suggest that the motion standing in the name of the hon. Member who held second place should be reinstated? Perhaps I should declare a personal interest, as that motion stood in my name.
Mr. Speaker: That is not a matter for me. I assure the whole House that the ballot will be conducted fairly.
Mr. Williams: Further to the point of order, Mr. Speaker. I am afraid that the Leader of the House, rather coyly and calculatedly, failed to answer the procedural point that was raised. I suggest, therefore, that it is a point for the Chair to consider. Will you confirm, Sir, that the motion, which is unusual, to restore the lost private Members' day could procedurally and legitimately reinstate the last ballot?
Mr. Speaker: Any motion that is tabled will say what it intends. I am not omniscient. I do not know what the motion will say.
Mr. Williams: But can it?
Mr. Speaker: It could. if it is tabled in that form.
Mr. Andrew Faulds: On a point of order, Mr. Speaker. Is it not unfair that the Leader of the House should be required to comment on an incorrect hypothesis? Is it not a fact that the hon. Member for Littleborough and Saddleworth (Mr. Dickens) made a totally incorrect assessment of what my right hon. Friend the Leader of the Opposition said in India?
Mr. Speaker: I do not know.

Northern Ireland Assembly
4.2 pm
The Secretary of State for Northern Ireland (Mr. Tom King): With permission, Mr. Speaker, I wish to make a statement about the Northern Ireland Assembly.
Under the Northern Ireland Act 1982 the present Assembly has two functions. The first is to consider and report on how a devolved Northern Ireland Administration should be formed. Secondly, the Act requires the Assembly to monitor and report on the policies and activities of the Northern Ireland Departments.
The task of making proposals on devolution was undoubtedly made much more difficult by the regrettable decision of members of the SDLP not to take their seats. The Assembly has not been able to come forward with agreed proposals and there is no present prospect of that occurring. As for the monitoring of the Northern Ireland Departments, the Assembly suspended this work on 5 December. In spite of clear warnings about the threat that this action would pose to the continuation of the Assembly, the Unionist parties have not been prepared to resume this function. As a result, the Alliance party withdrew from the Assembly since it believed that there was no longer any useful role to be played.
On 13 March the Assembly formally resolved not to carry out its monitoring functions, to wind up the Devolution Report Committee, and merely to meet one afternoon a week for a debate on aspects of the Anglo-Irish agreement.
The position, therefore, is that the present Assembly, charged under the Northern Ireland Act 1982 with two important functions, is now discharging neither. As long ago as last December in this House, I warned that if the Assembly continued the suspension of its scrutiny role for long, questions about its future would inevitably arise; and on I May and 19 May I repeated this warning. On 27 May I invited the leaders of the main parties in the Assembly to discuss with me the position of the present Assembly. The leaders of the two main Unionist parties refused even to talk about it. I regret that I have therefore had to reach my decision without hearing their views.
The decision I have now taken is to lay an order today for the Assembly's dissolution under the powers in section 5(1) of the Northern Ireland Act 1982. This order will come before the House for debate under the affirmative procedure. In taking this step I would make the following points. The present Assembly would in any case reach the end of its normal life on 20 October. There would then automatically within six weeks be fresh elections for a new Assembly. The effect of this order is not to abolish the legal basis for an Assembly but simply to dissolve the present Assembly and to leave open the date for a new election for a fresh Assembly.
I wish to emphasise to the House that dissolution of the present Assembly in no way conflicts with our desire for devolved government, nor our commitment to the Anglo-Irish agreement. Devolution remains the Government's preferred option, and I hope that we may see a future Assembly playing a responsible and valuable role in the Province. The sooner that happens, the better.
Meanwhile, the Government remain ready to discuss with all the constitutional parties in Northern Ireland the best way forward. In particular, I would urge the Unionist
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parties to return to this House to argue their case and to take up the offer of my right hon. Friend the Prime Minister to discuss with her the four matters proposed: namely, devolution and the possibility of a round table conference; the future of the Assembly; arrangements for handling Northern Ireland business at Westminster; and new means of consultation between the Government and Unionist leaders.
Only if we are prepared to talk together and discuss these matters can we hope fully to play our separate but complementary roles in building a better future for the people of Northern Ireland.
Mr. Peter Archer: Does the right hon. Gentleman appreciate that his statement will hardly burst on the world as a surprise and will occasion neither joy nor regret? The Assembly was
"A maid whom there were none to praise
And very few to love".
As there was no one left who both attended and used it for the purpose for which it was established, it is only seemly that it should be laid to rest in peace, and on another occasion we can pay tribute to those who at least tried.
Does the right hon. Gentleman appreciate that missing from his statement is any positive proposal either for the immediate future or for the longer term? As he reminded us, the Assembly, when it functioned, played a role in scrutinising the Northern Ireland policies that came before the House. Has he now grasped that that role must be assumed more effectively by the House? Will he consider how to make greater use of the Northern Ireland Committee? Can he persuade the Government's business managers to treat Northern Ireland business less contemptuously an to arrange debates at less bleak hours?
More importantly, does the right hon. Gentleman understand that the people of Northern Ireland will see his statement as pronouncing the obsequies on yet another institution which they were once told offered hope? Where are they now to turn for that?
Will there not be those who seek to represent the expiry of the Assembly as a consequence of the Anglo-Irish agreement? The people of Northern Ireland will consider it worth the price if the agreement makes a measurable contribution to their livelihoods, environment, community services and civil liberties. If those benefits are seen to arise from discussions and co-operation between North and South, Catholic and Protestant, may not the people themselves denounce the bickerings of their politicians?
When the House debates the matter more fully, will the Secretary of State, if he can, give an account of the positive side of the balance sheet, or, if not, give an indication of how long we must wait? If people cry for bread and they are given a stone, can we be surprised if they turn in despair to the demagogues, the bullies and the witch doctors?
Mr. King: It is true that my statement can hardly come as a surprise, because I gave the clearest warnings that, if the Assembly did not discharge the functions for which it was set up, its continuation would obviously be brought into question. That is precisely what has happened.
It would be unfortunate if it were not recognised that I regard this very much as a lost opportunity because—certainly in respect of the scrutiny role—there is no

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doubt that the Assembly and its various committees were doing some useful work. I especially regret that the decision was made to discontinue those responsibilities.
The right hon. and learned Gentleman spoke about the way in which Northern Ireland business is handled in the House. The Government have made clear their readiness to sit down and talk. The Government are often accused of not having enough consultation. I hope that we can sit down with all parties in the House, and with those who ought to be here and are not present in the numbers that they should be, to discuss ways in which we might meet those concerns.
I must correct the right hon. and learned Gentleman in one important aspect. I was in no sense pronouncing obsequies on the Assembly. I was making it clear that this Assembly is no longer fulfilling a useful function, but I hope that it will be possible to see a new Assembly which can move forward on a new basis.
Mr. Julian Amery: I hope that I shall not embarrass my right hon. Friend by expressing my support for the decision he has just announced. Would he be gracious enough to acknowledge that a number of his right hon. and hon. Friends kept the House up late at night warning that the Assembly would not work? In saying, "We told you so," may I express the hope that he and his colleagues will pay rather more attention to our views on Northern Ireland policy than they have hitherto?
Mr. King: I hope that I can assure my right hon. Friend that I shall contain my embarrassment at that expression of support. I shall, of course, wish to take his views fully into account with the respect that I know he would wish to receive.
Mr. J. Enoch Powell: Is the right hon. Gentleman aware that in 1982 the two main Unionist parties, as they were then represented in the I-louse. opposed the legislation establishing this Assembly with all the resources that parliamentary procedure admitted? Will he acknowledge that the judgment of those Conservative Members who supported us in our endeavour to prevent that mistake being made has been validated by the statement he has now found it necessary to make?
Mr. King: I do not agree with the right hon. Gentleman. precisely for the reasons I gave in part of my answer to the right hon. and learned Member for Warley, West (Mr. Archer). I think that the Assembly proved that it could discharge a useful role. It is important that people in Northern Ireland should feel that they have much more of an immediate say in the administration of the Province. I say that as somebody who, under the present structure, exercises a degree of power and authority which, in a democracy, raises difficult issues. I would much rather see a situation in which there was greater authority and responsibility for those in the Province. It is unfortunate that the actions of some members of the Unionist parties have prevented the Assembly from discharging its proper functions, but I hope that we will see a day when that can be done.
Sir John Biggs-Davison: Since the abolition of the Northern Ireland Parliament we have had about as many short-lived successive assemblies as in the French revolution. May I ask whether Her Majesty's
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Government will now declare a moratorium on assemblies and on political initiatives, including the Intergovernmental Conference, and concentrate on the conduct of parliamentary business as befits a Province of the United Kingdom and the good government, administration and local government of Northern Ireland?
Mr. King: My hon. Friend would not necessarily expect me to agree with all that he has said. However, I welcome the fact that he is prepared to express his view s and argue for them, and I welcome the opportunity, which I have from time to time, to discuss them with him. I hope that he will join me in urging everybody who is interested in the affairs of the Province to come forward and have the confidence to argue their views as well. That must be the right approach, and I hope that the House will support me on that.
Mr. Ian Gow: Does my right hon. Friend accept the paradox between his announcement of the suspension, if not the death, of the Assembly, one of the principal tasks of which was to present proposals for devolution for the Province, and the passage in his statement in which he said that the preferred choice of the Government was still devolution? Would he acknowledge that, even if that is the preferred solution of the Government today, he will not exclude from his consideration the fact that we should govern Northern Ireland in the way in which we govern other parts of this kingdom?
Mr. King: That begs many questions which need considerably more discussion. Obviously we would seek to govern Northern Ireland as fairly, equally and impartially as we seek to govern every part of the United Kingdom. However, to suggest that that involves total harmonisation of every structure of government flies in the face of experience and practice of the present situation. What it does emphasise—I say this fairly to my hon. Friend and I pay tribute to him because I know that he disagrees with the policies we have recently pursued and honourably took the course that he did in the matter — is that he is prepared to stand up and argue his views. Above all, at present we need people in Northern Ireland who are prepared to have the courage to argue their case in debate and not to fly from this Chamber. They should be prepared to come here and argue for what they believe is the best way forward. That is what I hope to see, and I know that my hon. Friend will support me on that.
Mr. John Hume: I can hardly shed any tears over the Secretary of State's announcement today, which is long overdue. I simply repeat our willingness as a party to accept his invitation to sit down and discuss with the Unionist parties devolution or any other matter pertaining to peace and stability in Northern Ireland. Since Unionists in Northern Ireland seem to fear the future more than anything else, the SDLP would welcome the opportunity to talk to them and explain and set out in detail its strategy and view of the future. We would like to hear from them what in that strategy in any way threatens the people they represent and we would also like to hear, for a change, their view of the future.
Mr. King: I am grateful to the hon. Gentleman for his comments. He will have noted in my statement my regret about the previous attitude of the SDLP. Perhaps part of the reason for the statement today goes back to the failure

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of his party to take part at that time. Therefore, it is certainly an advance in the sense that there might by an opportunity for all the constitutional parties in Northern Ireland to be prepared to sit down and talk constructively.
To cover a point that perhaps I did not answer in the question of my hon. Friend the Member for Eastbourne (Mr. Gow), that is perhaps part of the reason why it is worth making a further attempt to try to achieve devolved government.
Sir Adam Butler: Does my right hon. Friend accept, from my experience as a Minister on the receiving end, that the Assembly did some valuable work in fulfilling its scrutinising role? Does he also agree that perhaps the main lesson from the demise of the Assembly is that if there are those who refuse to participate in the constitutional processes available to them, it serves only to give heart and encouragement to the men of violence? As long as the Unionists continue their boycott on similar lines, they will not only do no good to themselves but will push the peaceful resolution of the Northern Ireland problem further away.
Mr. King: I am grateful to my right hon. Friend, especially with his experience of Northern Ireland, for the tribute he paid to the work done by the Assembly in its scrutinising role. It was a great pity that it chose to discontinue that role. I certainly agree that if a vacuum is left because of people's inability to sit down and discuss the problems frankly and openly and try to find a way forward, traditional to our parliamentary democracy, by argument and debate, it will be a dangerous vacuum into which others may walk.
Mr. Stephen Ross: Is the Secretary of State aware that, unlike many Conservative Members who have spoken so far, we share his disappointment at the demise of the Assembly but think that in the circumstances he has taken the right decision? Is he further aware that we share his hope that we will see a new devolved Assembly with all parties of good will serving in it? That is the only way in which the economy of the people of Northern Ireland can he put on better lines. Is not now the time to set up a parliamentary tier between this House and Dublin?
Mr. King: I am grateful to the hon. Gentleman for his opening comments. Some hon. Members seek no initiative, but to preserve the status quo. I find it unsatisfactory to have nothing between the Secretary of State and local authorities, the powers of which are not much in excess of a parish council. [Interruption.] That problem may be tackled in a number of different ways. I make no apology to the House for repeating that what is true, above all, is that we shall not begin to find the best solution unless people are prepared to sit down and talk the problem through. The present position is not a long-term solution. I regret the announcement that I have had to make today, but I hope it may provide the opportunity for discussions to start soon on a better way for the people of Northern Ireland to have more say in the administration of the Province. We are certainly willing to consider ways in which there could be a better interchange with the Republic.
Mr. Michael McNair-Wilson: Bearing in mind that the chance of the Assembly being revived in the near future is small, is this not the ideal moment to set up
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the Royal Commission, which should perhaps have been set up in 1980, to consider the structure of local government in Northern Ireland? When considering that, will my right hon. Friend also bear in mind that local government in Northern Ireland has always been unequal when compared with the rest of the United Kingdom, and that that way forward would not be obstructed by the road block created by politicians who refuse to get together?
Mr. King: At present I have no proposals for that particular approach. I would rather see direct discussions taking place. I appreciate that my hon. Friend has once again made a constructive proposal in an attempt to see a way forward in this matter. That must be the right approach. There is a range of different ways. Although I am not instinctively inclined to his suggestion, I recognise that it is a serious proposition.
Mr. Alfred Dubs: While I understand the reasons for the Secretary of State's statement this afternoon, may I urge him to resist as forcibly as possible the blandishments of Conservative Members below the Gangway, that a do-nothing policy is best for Northern Ireland? What does he intend to do about the Anglo-Irish parliamentary tier? We have raised that matter on many occasions and time and again the Government have said that it is a matter for the House. The right hon. Gentleman knows, and we know, that it not possible for us to make any progress unless he backs that proposal. I urge him to do so and to give us a date when we can get on with the task of establishing the parliamentary tier, which is part of the agreement and is a desirable feature of the relationships between Britain and both parts of Ireland.
Mr. King: I have never regarded any comment from my hon. Friend the Member for Newbury (Mr. McNair-Wilson) as a blandishment. His serious interest in these matters could never be described as such. I know that the hon. Gentleman does not want me to give this answer, but the parliamentary tier must be a matter for the House to consider. I know that my right hon. Friend the Leader of the House has made that position clear.
Viscount Cranborne: Does my right hon. Friend accept that the spirit in which the Assembly was introduced to the House was the same spirit in which the Anglo-Irish agreement was introduced? Is there any guarantee that the agreement will not suffer the same fate as the Assembly? Is not a more sensible approach—this has been suggested to my right hon. Friend several times this afternoon — to pursue parliamentary forms of government in Northern Ireland? In that context, will he consider setting up or advising the setting up of a Northern Ireland Grand Committee?
Mr. King: I see no similarity between those two items. These matters can be looked at seriously. We have made clear our willingness to consider the arrangements in the House, but we must also consider the administration of government in the Province. It is a great fallacy to assume that one can simply change the arrangements in this House in isolation, without also considering the arrangements for administration in the Province. At present very little lies between Ministers in the Northern Ireland Office and councils, most of which sadly are not meeting, and which have little more power than parish councils. We must consider the totality of the problem.
Mr. Robert Parry: Does the Secretary of State believe that the statement today will help to reduce violence in the Province, bearing in mind that we are now fast approaching the marching season?
Mr. King: It is widely recognised in the Province, and by many responsible politicians, that, sadly, the present Assembly is no longer discharging a useful function and that it is not helpful in present circumstances. Many of those who believe in devolution and the concept of an Assembly think that the state of the present Assembly is a positive blockage to considering the form of a new and effective Assembly and how it could work. I hope that that will be recognised. I see no reason why the absence of the Assembly should lead to an increase in tension, especially as it was about to go into recess for the summer.
Mr. Nicholas Budgen: Will my right hon. Friend undertake to issue a White Paper so that the House may be reassured that the aggressive English liberals in both the Northern Ireland Office and the Foreign Office will not attempt a similar expensive, dangerous and destabilising experiment, at any rate within the next decade?
Mr. King: I am grateful to my hon. Friend for the typically unpejorative way in which he puts his question. I do not want to issue a White Paper now, precisely because I want first to hear the views of those most involved. Rather than trying to lay down the matter in tablets of stone at this stage, I should like to talk to people and hear their views. In the absence of any contribution from those who have been elected to represent the people in the Province and in their continuing refusal to express any views whatever on behalf of their constituents, we may have to consider a step such as that suggested by my hon. Friend.
Mr. David Winnick: Is not the fallacy of the argument advanced by many Conservative Members today that Northern Ireland is just like any other part of the United Kingdom? Was not the signing of the Anglo-Irish agreement a recognition by the Government that Northern Ireland is indeed different? It is about time that Conservative Members recognised that position. If the Unionists continue their present tactics of obstruction, boycotting the House, and so on, will not many people come to the same sort of conclusion as that illustrated in the question by the hon. Member for Banbury (Mr. Baldry) to the Prime Minister today — namely, that many people will get so fed up with Northern Ireland and its problems and with the refusal of politicians to accept any possible agreement that they will shrug off the problem and conclude, on balance, that there is no positive role for Britain to play?
Mr. King: That would be a tragic and defeatist approach to the genuine problems that exist in Northern Ireland and a betrayal of all those who live there, who are part of the United Kingdom and who are entitled to good government. Obviously, all parts of the United Kingdom are not identical. The many areas, while all being part of the United Kingdom, are different. The arrangements in the House for handling Scottish affairs are different and the arrangements in Northern Ireland are different. I make no apology for emphasising that point.
Sir Eldon Griffiths: I agree with my right hon. Friend that a properly elected democratic
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Assembly is an essential part of the local government of the Province, but may I ask for his assurance that it is in the best interests of the Union that until civil peace is restored in Northern Ireland, there can be no devolution of responsibility for the enforcement of the law, the administration of justice and the upholding of internal security?
Mr. King: I should like to make it absolutely clear that we support the point made by my hon. Friend. There could clearly be no question of devolution on those matters unless there was a considerable basis of confidence, perhaps at an earlier stage with experience of devolved administration in other areas more traditionally associated with devolved government.
Mr. Merlyn Rees: In the face of a divided Northern Ireland, where 2,500 people have died and more than 30,000 have been injured by the violence and where the Northern Ireland (Emergency Provisions) Act has been in force for 10 or 12 years, does the Secretary of State accept that to continue to talk about devolution is a pipe dream and, equally, to talk about integration is also a pipe dream? If both sides in Northern Ireland will not sit down and talk with the Secretary of State—I wish that they would— they should be asked to sit down together without hon. Members being present and, if nothing results from that—which is likely—we should completely reassess our policy towards Northern Ireland. Perhaps only that thought will concentrate the minds of people in the Province.
Mr. King: The House respects the right hon. Gentleman's considerable experience on these matters. I listened carefully to his comments. He has had experience along this path and knows the difficulties that exist. It might be fair to say that the concentration of minds to which he referred at the end of his question, has followed in part after the Anglo-Irish agreement. In the coming months it might be possible to see more interest in the idea of sitting down and talking.
It is true that those matters upon which agreement could be reached would be removed, and the Anglo-Irish agreement would cease to operate on those points. There is, therefore, clearly an interest among those parties opposed to the Anglo-Irish agreement to see whether certain matters can be removed from the ambit of the agreement.
Mr. James Prior: Is my right hon. Friend aware that for those of us who have a deep and abiding commitment to all the people of Northern Ireland, this afternoon's announcement must come as a disappointment? Is he further aware that others, like myself, do not believe that integration is the answer to the problem? In the United Kingdom's interests there must be devolved government some time in Northern Ireland, if not now. The SDLP more than any other party, which has achieved significant success through the Anglo-Irish agreement, should play its part by helping to bring about an Assembly in Northern Ireland. That would be a great advantage to the unionists, because the more the Assembly could do, the less the Anglo-Irish agreement would have to operate. Does that not afford some way forward? Is it not right that the House should always seek some way forward to resolve a problem which is not new, which will not go away, and which it is our duty to solve?
Mr. King: I am grateful for my right hon. Friend's comments. I share the feeling of sadness at the necessity of having to make the announcement today. I understand that the concept that he launched was well worth pursuing and had shown merit. It was a tragedy that the SDLP did not take part, and that posed difficulties. I know that the hon. Member for Foyle (Mr. Hurne) understands why my right hon. Friend the Member for Waveney (Mr. Prior) made the comments that he did. I hope that the idea launched by my right hon. Friend will be carried forward in a new form in future.
Several hon. Members rose——
Mr. Speaker: Order. I appreciate the interest of the House in these matters. However, there is pressing business to come. I shall allow questions to continue for another seven minutes, after which we must proceed to the next business. I hope that by then all hon. Members will have been called—if they speak briefly.
Mr. Jerry Hayes: Does my right hon. Friend agree that it is regrettable that the House has heard some distasteful crowing about his announcement this afternoon? People should be looking to the future. Perhaps this drastic measure—which will be debated on another day — might concentrate the minds of all parties in Northern Ireland and force them to sit down and negotiate. That is the only way to keep the peace in the Province.
Mr. King: It is clear that we must make progress. The danger is that people talk in slogans — perhaps I am guilty of this also—about devolution or integration, and they do not consider the problem as a whole — the relationship of this House with the Province and the problems of the Province's administration. We must consider the totality of these problems and find a basis on which we can go forward which will command the widest possible acceptance among people in the Province. We know the difficulties. We realise that so far that has been unachievable. The House must try to find the correct approach. I will try to do that.
Mr. Patrick Nicholls: Does my right hon. Friend accept that by raising even now the spectre of devolution at some future date, he is turning his face away from the only lesson that can be learnt from the inevitable demise of the Assembly—that devolution in Northern Ireland will never work? It will never work because neither the minority community nor a United Kingdom Government will accept that the ballot box in Northern Ireland will always, for the foreseeable future, produce a Unionist majority. Faced with those inevitable facts, can he say whether there is a realistic way forward, other than the integration, on suitable terms, of the Province into the local government and parliamentary structure?
Mr. King: My hon. Friend glides easily with a wave of the wand from the problems of achieving devolution to integration, as if that was immediately achievable on some acceptable basis. He greatly underestimates the problems that that would pose. I have made it clear, and my right hon. Friend the Prime Minister has made it clear to the Unionist leaders, that, while we remain committed to the principle of devolution, we are also prepared to consider the ways in which Northern Ireland business is handled in this House. These matters require serious discussion. I
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hope that my hon. Friend the Member for Teignbridge (Mr. Nicholls) will lend his shoulder to the wheel and try to get people to join in these discussions.
Mr. John Mark Taylor: Does my right hon. Friend agree that if Northern Ireland is to be governed in the same way as the rest of the United Kingdom, as many Unionists would urge, one of the first requirements must be to have county councils or a provincial council? Does he accept that he has now abolished the elected Assembly which could have adopted that role? If he were to use the introduction of county councils or provincial government as a point of departure, what guarantee is there that everyone will sit in the chamber?
Mr. King: That is the point that I was making. My hon. Friend has understood the point that the present Assembly comes to the end of its life on 20 October, at the end of its four-year term. However, it has ceased to discharge the functions for which it was set up. There is no question but that the Assembly could have moved on in the direction that my hon. Friend has mentioned. I hope that we can have discussions to discover whether it is possible to move in any way along the lines that my hon. Friend has described.
Mr. John Stokes: Will my right hon. Friend be assured that, in spite of the natural and inevitable impatience in England about affairs in Ireland, many English people hold the Province in great esteem? They remember its wonderful contribution in both world wars. The English people wish it well. I believe that our best efforts must be directed towards improving parliamentary and local government in the Province, not to have too many new initiatives here.
Mr. King: Everyone who has had the honour to serve in Northern Ireland would share the comments made by my hon. Friend at the start of his question. Our recognition and appreciation of the quality of the overwhelming majority of the people in the Province is completely unquestioned. That is why we are so committed to trying to find the most acceptable way in which to proceed and to give the people of Northern Ireland as substantial a say as we can in their administration.
Mr. Michael Brown: Does my right hon. Friend agree that whatever our views on the Northern Ireland Assembly previously, the most important conclusion that any hon. Member representing Northern Ireland should draw from today's announcement is that, whatever their views and however aggrieved they may feel, this is now the central forum for political debate?
Mr. King: One of the comments that may be made about my statement today is that the Government are in some way seeking to choke or close off channels of communication and expression. That charge falls flat when one sees the Benches opposite and realises that one of the most important channels open to anyone in this United Kingdom is this Chamber. Nevertheless, the House is completely neglected and unused by the overwhelming majority of Unionist Members. 'They are abusing district councils at the same time. They are failing to use the channels that are available to them. I very much agree with my hon. Friend.
Mr. Kenneth Carlisle: Does my right hon. Friend agree that the failure of the Assembly is to be regretted, because it provided a local forum in Northern Ireland where the various parties could try to resolve their differences? Does he also agree that no actions or words in this House can thrust peace on Northern Ireland? Does he accept that peace can be achieved in the Province only if all parties there genuinely wish to talk and reach some accord on future life and prosperity there?
Mr. King: I very much agree with my hon. Friend. There is no doubt that if we are to find a way forward, the people in the Province and their representatives will have to be prepared to come forward and make their contribution.
Mr. Neil Hamilton: Is if not clear from the SDLP's attitude to the Assembly and a comparison of that attitude with its attitude to the Anglo-Irish agreement that it is prepared to support Government initiatives only when it calculates that they are likely to weaken the Union? That should be enough to make us view with suspicion any initiatives that it supports. Did not my hon. Friend the Member for Teignbridge (Mr. Nicholls) put his finger on the central point about experience in Ulster in the past 16 years? The attempt to reconcile two irreconcilable opposites merely by talking will never succeed. The time has come to allay Unionist fears by moving towards proper integration of the Province, ceasing to govern it as a colonial dependency and treating it properly as part of the United Kingdom.
Mr. King: I am not sure that an agreement which gets the British Government and the Government of the Republic of Ireland to sign an undertaking which was originally given in this House, concerning the rights of the Unionist majority in Northern Ireland, represents consent to the right to dominate. Membership of the United Kingdom is an important safeguard. I do not regard that agreement as weakening the Union in any way. As for integration, I do not have much to add to what I have already said. I am anxious to deal with affairs in the House, and especially to get hon. Members to focus on the real problem of administration in the Province.
Mr. William Cash: Does my right hon. Friend agree that the most important thing is to take the politics of Ireland off the streets and into the debating chamber? I have consistently advocated a Select Committee. That would help. Will my right hon. Friend consider it? In such a forum, members of the SDLP, Unionists and others who represent the rest of the United Kingdom could, in a proper constitutional framework, scrutinise legislation in a calm atmosphere, which would, I hope, enable progress to be made.
Mr. King: I am interested in that suggestion. The right hon. Member for South Down (Mr. Powell) made just such a one in the debate on the appropriation order earlier this week. I confirm that that is the type of matter that my right hon. Friend the Prime Minister said we would be prepared to discuss.
Mr. Peter Bruinvels: I accept that the Assembly has been used improperly. It has been used as a political platform against the Anglo-Irish agreement. I have some sympathy with that, but will my right hon. Friend consider the role of the Democratic Unionist party, which has threatened to take politics on to the streets rather than pursue genuine debate? Will he consider the £2·5 million that it costs to run the Assembly? Could it not be better used helping the economy and providing jobs to encourage the people of Northern Ireland who want to remain part of the United Kingdom?
Mr. King: The Democratic Unionists must answer for their own utterances, but I hope that everybody will show responsibility at a time when problems can easily arise in Northern Ireland. One cannot sit back and do nothing if expenditure is being incurred when none of the functions for which it is authorised are being performed. Bearing in mind the state of the Northern Ireland economy, there are several areas where the money could be much better used.
Mr. Stuart Bell: Does not the fact that the Assembly is now to be dissolved and there is no progress towards devolution mean that there is an added burden on the Anglo-Irish agreement? Does the right hon. Gentleman agree that, under article 10 of that agreement, there will be a responsibility to promote co-operation between the two parts of Ireland, so there is an additional responsibility on the agreement? Does he also agree that it ill behoves those who do not come to the House to presume that, by their actions in Northern Ireland and laying the Assembly to rest, they can somehow achieve back door integration? Will he confirm that there is nothing mutually exclusive about the Anglo-Irish agreement and round table talks on the future of Northern Ireland without preconditions?
Mr. King: I believe that talks without preconditions must be the way forward. I am grateful to the hon. Gentleman for making that clear. One component of the Anglo-Irish agreement is the opportunity for the minority to be able to advance its views. In no circumstances was the Anglo-Irish agreement intended to supplant the opportunity for the majority view to be taken into account. The present tragedy is that the majority representatives have chosen to switch themselves off.

Leyland Bus
4.47 pm
Mr. D. N. Campbell-Savours: As the House is aware, when the Government feel unable to make a statement on a matter of national importance and urgency, hon. Members have the right to apply for a private notice question. This morning, British Leyland made an announcement to its work force, and it was not possible, for obvious reasons, for the Government to make a statement. I felt that it would be wrong to apply for a private notice question, although the matter is most urgent, because of the tragic circumstances that have befallen the Channon family and because the Secretary of State would have been required to answer the private notice question if you, Mr. Speaker, had granted it.
I therefore beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing an important and specific matter, that should have urgent consideration. It is specific because it relates to the affairs of Leyland Bus and important because it concerns a large manufacturing company with nearly 3,000 employees at three locations in the United Kingdom — Lowestoft, Farringdon, near Preston, and Workington.
The matter is urgent, as I have already described. At midday today, British Leyland announced that the company will no longer be known as British Leyland plc but as Rover Group plc. BL will no longer exist. The Leyland name will be retained for commercial vehicle interests only. Through its advisers, Hill Samuel, BL today informed the three parties which have expressed interest in acquiring Leyland Bus that it is inviting offers from them for the entire business on the basis of a tender procedure. We should debate the issue because we need to know whether it is a sealed bid basis.
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Tenders are to be delivered to Hill Samuel by 26 June, after which time the BL board will consider them and submit a recommendation to the Government, as the majority shareholder, as soon as possible. The three prospective purchasers are Aveling Barford, the Laird Group and Leyland Bus management consortium.
It is also proposed to establish Leyland Bus as a registered limited company with its own business before any sale. That has not been known hitherto. The company aims to keep the current parts business intact. It is planned to achieve that by selling to the purchaser of Leyland Bus an interest in Leyland parts. The effect will be to leave the loss-making Leyland Bus group free-standing without any support from Leyland parts operations. It means that what remains will be ripe for asset stripping. I earnestly implore you, Mr. Speaker, to allow those matters to be raised under Standing Order No. 10.
Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House, under Standing Order No. 10, for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
"The statement today made by British Leyland about the future of Leyland Bus."
I have listened carefully to what the hon. Gentleman has said, but I regret that I do not consider the matter that he has raised as appropriate for discussion under Standing Order No. 10, and therefore I cannot submit his application to the House.

BALLOT FOR NOTICES OF MOTIONS FOR MONDAY 7 JULY
Members successful in the ballot were:

Mr. Kenneth Carlisle

Mr. Robert Kilroy-Silk

Mr. Robert McCrindle

BILL PRESENTED
  RATE SUPPORT GRANT
  Mr. Secretary Ridley, supported by Mr. Secretary Edwards, Mr. William Waldegrave and Mr. Norman Lamont, presented a Bill to validate certain block grant determinations already approved by the House of Commons; and to clarify and amend the law relating to rate support grants: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 177.]
Orders of the Day
  Financial Services Bill
  As amended (in the Standing Committee), further considered.
  Financial Services Bill
    New Clause 12

      JURISDICTION AS RESPECTS ACTIONS CONCERNING DESIGNATED AGENCY ETC.
      '(1) Proceedings arising out of any act or omission (or proposed act or omission) of a designated agency, transferee body or the competent authority in the discharge or purported discharge of any of its functions under this Act may be brought in the High Court or the Court of Session.
      (2) At the end of Schedule 5 to the Civil Jurisdiction and Judgments Act 1982 (exclusion of certain proceedings from the provisions of Schedule 4 to that Act which determine whether the courts in each part of the United Kingdom have jurisdiction in proceedings) there shall be inserted—
      "Proceedings concerning financial services agencies
      10. Such proceedings as are mentioned in section [Jurisdiction as respects actions concerning designated agency etc.] of the Financial Services Act 1986.".'. — [Mr. Howard.]
      Brought up, and read the First time.
      4.50 pm
      The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Michael Howard): I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker (Mr. Harold Walker): With this it will be convenient also to discuss the following Government amendments Nos. 27 to 31, and 88 to 92.
      Amendment No. 175, in page 142, line 35, at end insert—
      '(7) If the agency is a limited company incorporated in England. it must establish a place of business in Scotland or take such other steps as will render it amenable to the jurisdiction of the Scottish Courts'.
      Government amendments Nos. 182 and 231.
      Mr. Howard: A number of hon. Members have written to me about points which were raised by the Law Society of Scotland concerning the Bill. I am grateful to the society for the detailed consideration which it has given the Bill. The Government have always made it clear that the Bill would take account of the differences between the English and the Scottish financial and legal systems and that amendments would be tabled to fulfil this commitment.
      The new clause is designed to remove doubts as to whether actions could be brought against a designated agency, transferee body or competent authority in a part of the United Kingdom in which it did not have a place of business, or a registered office. There was particular doubt about whether any such organisation could be subjected to the jurisdiction of the Scottish courts. The Government have decided to bring forward this new clause which makes it clear that action against the relevant bodies may be brought in the courts in any part of the United Kingdom.
      The other amendments are mainly technical and designed to bring certain of the provisions in the Bill into line with the procedures and terminology used in the Scottish legal system.
      The aims behind the amendment tabled in the names of the right hon. and learned Member for Monklands,

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      East (Mr. Smith) and the hon. Member for Dagenham (Mr. Gould) are I believe already achieved by the Government new clause.
      Mr. Alex Fletcher: Will my hon. and learned Friend confirm that it has always been the intention of the Department and its Ministers — even before his tenure of office — to ensure that the differences in Scottish law are catered for in the legislation?
      Mr. Howard: No one will know better than my hon. Friend that that is the case. We owe much to my hon. Friend for his achievements in respect of this legislation. I am happy to confirm that the intention was always as he stated it to be.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 13

      OFFERS OF SHORT-DATED DEBENTURES
      'As respects debentures which, under the terms of issue, must be repaid within less than one year of the date of issue—

      (a) section 79(2) of the Companies Act 1985 (offer of debentures of oversea company deemed not to be an offer to the public if made to professional investor) shall apply for the purposes of Chapter I of Part III of that Act as well as for those of Chapter II of that Part; and

      (b) section 371(2) of the Companies Act (Northern Ireland) 1960 (corresponding provisions for Northern Ireland) shall apply for the purposes of Part If of that Act as well as for those of Part XI.'. —[Mr. Howard.]

      Brought up, and read the First time.
      Mr. Howard: I beg to move, that the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to take Government admendments Nos. 270 and 277.
      Mr. Howard: The amendments may appear rather technical but could have significant advantages for United Kingdom companies.
      The new clause will give United Kingdom companies the same freedom to issue sterling commercial paper as foreign companies currently enjoy under section 79(2) of the Companies Act 1985 and the corresponding Northern Ireland provision, and will facilitate the development of a new United Kingdom financial market in sterling commercial paper.
      SCP is a form of short-term negotiable debt which companies can issue as an alternative to bank borrowing. There is a flourishing market in the USA in the equivalent dollar. The development of a United Kingdom instruments market will give companies greater financial flexibility and be a welcome addition to the array of services provided by the City. My right hon. Friend the Chancellor of the Exchequer announced on 29 April that the Banking Act 1979 obstacles to issuing SCP would be relaxed, and that this amendment would be brought forward to extend the benefit of section 79(2) of the Companies Act to United Kingdom companies.
      SCP will be issued in minimum denominations of £500,000, and the market will effectively be limited to professionals. The requirement to issue a prospectus is thus inappropriate and unnecessary. Section 79(2) of the Companies Act already exempts offers to professionals by foreign companies but gives no comparable relief to
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      United Kingdom issuers. The new clause will rectify this anomaly and place United Kingdom issuers on the same footing.
      Mr. Bryan Gould: I found the Minister's explanation interesting. We shall certainly watch with interest the development of the market for commercial paper. Will the Minister say a word about the rather unusual timing arrangements that are effected by amendments Nos. 270 and 277?
      Mr. Howard: It is intended that these provisions should take affect immediately the legislation is on the statute book. We do not wish any delay if the new market is established and that is the reason behind the amendments to which the hon. Gentleman referred.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New clause 15

      DISCLOSURE OF INFORMATION UNDER ENACTMENTS RELATING TO FAIR TRADING, INSURANCE AND COMPANIES
      'The enactments mentioned in Schedule [Disclosure of information] to this Act shall have effect with the amendments there specified (which relate to the circumstances in which information obtained under those enactments may be disclosed).'—[Mr. Howard.]
      Brought up, and read the First time.
      Mr. Howard: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 246 to 250 and 274, 275 and 278.
      Mr. Howard: The clause and the associated group of amendments relates to the disclosure of information obtained under the Bill or under various existing statutes I shall not detain the House with an exhaustive account of these provisions, but I shall confine myself to outlining some of the main provisions.
      Our first aim is to permit financial and company regulators to share information while retaining appropriate protection against undesirable disclosure. We announced on Second Reading that we would bring forward amendments to this end. Amendments to the Banking Act 1979 will be tabled in another place, but our proposals to amend the Insurance Companies Act 1982 and the Companies Act 1985 are set out in this new schedule. It will be possible for information which is restricted under those two Acts to be disclosed in almost any of the circumstances in which information under the Bill may be disclosed by virtue of the gateways set out in clause 149. That will include assisting not only the various regulators under the Bill, but also, for example, the Bank of England and certain overseas regulators.
      Information obtained by inspectors appointed under the Companies Act 1985 is not restricted information. That Act expressly permits its disclosure in certain circumstances, but the amendment makes express provision to remove uncertainty about its disclosure in other circumstances. The amendments provide that persons appointed as inspectors may give any information acquired during their investigations to the Secretary of State, and the Secretary of State may direct them to do so. Once the information is in the hands of the Secretary of

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      State, he may disclose in any of the circumstances in which information which is restricted under the Companies Act may be disclosed. This will remove doubt as to whether the Secretary of State may disclose information or unpublished inspectors' reports in circumstances where it is clearly desirable that he should be able to do so.
      That is the effect of the provisions in relation to financial and companies regulation. The sharing of information is not intended to extend fully to authorities concerned with other matters, but special provision is required for competition purposes. I shall explain that and other specialised aspects of the clause and associated amendments if asked by any hon. Member.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New clause 16

      PENALTIES FOR FAILURE TO CO-OPERATE WITH S. I47 INVESTIGATIONS
      '(1) If any person —

      (a) refuses to comply with any request under subsection (3) of section 147 above; or

      (b) refuses to answer any question put to him by the inspectors appointed under that section with respect to any matter relevant for establishing whether or not any suspected contravention has occurred,

      the inspectors may certify that fact in writing to the court and the court may inquire into the case.
      (2) If, after hearing any witness who may be produced against or on behalf of the alleged offender and any statement which may be offered in defence, the court is satisfied that he did without reasonable excuse refuse to comply with such a request, the court may—

      (a) punish him in like manner as if he had been guilty of contempt of the court; or

      (b) direct that the Secretary of State may exercise his powers under this section in respect of him;

      and the court may give a direction under paragraph (b) above notwithstanding that the offender is not within the jurisdiction of the court if the court is satisfied that he was notified of his right to appear before the court and of the powers available under this section.
      (3) Where the court gives a direction under subsection (2) (b) above in respect of an authorised person the Secretary of State may serve a notice on him—

      (a) cancelling any authorisation of his to carry on investment business after the expiry of a specified period after the service of the notice;

      (b) disqualifying him from becoming authorised to carry on investment business after the expiry of that period;

      (c) restricting any authorisation of his in respect of investment business during that period to the Performance of contracts entered into before the notice comes into force;

      (d) prohibiting him from entering into transactions of a specified kind or entering into them except in specified circumstances or to a specified extent;

      (e) prohibiting him from soliciting business from persons of a specified kind or otherwise than from such persons; or

      (f) prohibiting him from carrying on business in a specified manner r otherwise than in a specified manner.

      (4) The period specified in such a notice as is mentioned in paragraphs (a) to (c) of subsection (3) above shall be such period as appears to the Secretary of State reasonable to enable the person on whom it is served to complete the performance of the contracts in question and to terminate such of them as are of a continuing nature.
      (5) Where the court gives a direction under subsection (2) (b) above in the case of an unauthorised person the Secretary
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      of State may direct that any authorised person who knowingly transacts investment business of a specified kind, or in specified circumstances or to a specified extent, with or on behalf of that unauthorised person shall be treated as having contravened rules made under Chapter V of Part I of this Act or, in the case of a person who is an authorised person by virtue of his membership of a recognised self-regulating organisation or recognised professional body, the rules of that organisation or body.
      (6) A person shall not be treated for the purposes of subsection (2) above as having a reasonable excuse for refusing to comply with a request in a case where the contravention or suspected contravention being investigated relates to dealing by him on the instructions or for the account of another person, by reason that at the time of the refusal—

      (a) he did not know the identity of that other person; or

      (b) he was subject to the law of a country or territory outside the United Kingdom which prohibited him from disclosing information relating to the dealing without the consent of that other person, if he might have btained that consent or obtained exemption from that law.

      (7) A notice served on a person under subsection (3) above may be revoked at any time by the Secretary of State by serving a revocation notice on him; and the Secretary of State shall revoke such a notice if it appears to him that he has agreed to comply with the request in question.
      (8) The revocation of such a notice as is mentioned in subsection (3)(a) above shall not have the effect of reviving the authorisation cancelled by the notice, except where the person would (apart from the notice) at the time of the revocation be an authorised person by virtue of his membership of a recognised self-regulating organisation or recognised professional body; but nothing in this subsection shall be construed as preventing any person who has been subject to such a notice from again becoming authorised after the revocation of the notice.
      (9) If it appears to the Secretary of State—

      (a) that a person on whom he serves a notice under subsection (3) above is an authorised person by virtue of an authorisation granted by a designated agency or by virtue of membership of a recognised self-regulating organisation or recognised professional body; or

      (b) that a person on whom he serves a revocation notice under subsection (7) above was such an authorised person at the time that the notice which is being revoked was served,

      he shall serve a copy of the notice on that agency, organisation or body.
      (10) The functions to which section 96 above applies shall include the functions of the Secretary of State under this section but any transfer of those functions shall be subject to a reservation that they are to be exercisable by him concurrently with the designated agency and so as to be exercisable by the agency subject to such conditions or restrictions as the Secretary of State may from time to time impose.'.—[Mr. Howard]
      Brought up, and read the First time.
      5 pm
      Mr. Howard: I beg to move, That the new clause be read a Second time.
      Mr. Deputy Speaker: With this, it will be convenient to take Government amendment No. 245.
      Mr. Howard: I undertook to my hon. Friend the Member for Suffolk, South (Mr. Yeo) to consider how to amend the Bill to enable pressure to be applied, within the proper limits of United Kingdom jurisdiction, to dispose offshore intermediaries to co-operate with investigations into suspected insider dealing on United Kingdom markets. This new clause fulfils that undertaking. If an offshore intermediary refuses to co-operate with an inspector, the inspector may refer the matter to the court.

      527
      If the court is satisfied that there is no reasonable excuse for the refusal, it may direct that the Secretary of State may use his powers.
      These powers take two forms, depending on whether or not the intermediary is authorised in this country. If the intermediary is not authorised, the Secretary of State may direct that authorised businesses shall not transact specified kinds of business for it. Thus, its access to United Kingdom markets may be restricted or completely cut off. Contraventions of the direction will be a regulatory offence. If the intermediary is authorised, the Secretary of State may serve a notice applying a range of sanctions from restrictions on its business to de-authorisation.
      I should say a few words about "reasonable excuses". Not knowing the identity of a principal will not be regarded as a "reasonable excuse". Nor will the existence of banking secrecy laws if the person might have obtained a waiver. The defence is intentionally drawn narrowly. The limit of the knowledge which it would be reasonable to expect a person to have will be taken into account in exercising the power. But the clause is based on the premise that if an overseas bank could know the identity of the principal behind a transaction on a United Kingdom market, who may have committed a criminal offence, but chooses not to find out, then it is reasonable for that bank to have restrictions imposed on its United Kingdom activities.
      Given the importance of this matter, I should add a few words about the way in which we propose to exercise this power. I have already explained that we propose to use it against intermediaries who have participated in transactions which have taken place in our markets without putting themselves in a position where they can give us the necessary assistance to ensure that such transactions are properly policed. Therefore, there is a close connection between our jurisdiction and what we propose to do.
      However, it has to be admitted that this clause can be operated so as to attach legal consequences to failure to answer inquiries abroad. Because of this aspect of the matter we propose to exercise this power with great care, moderation and restraint as indeed the Government have always argued should be done in these kind of circumstances. In particular, where arrangements are in place to ensure that the information we need can be obtained by other means through the co-operation of the relevant foreign authorities, we shall always resort to those means. It may be that the clause can be further refined to build in these necessary considerations. This is one of the matters that I shall be considering in this context.
      The new clause should prove a worthwhile addition to the powers of the investigators, and I commend it to the House.
      Mr. Gould: This is one of those welcome occasions when it is appropriate to congratulate the Minister on his response to an expression of opinion in Committee. It is perhaps foolish to be too sanguine in advance, until we see how the clause works out in practice. We have here a determined and fair response to the Committee's concern.
      It may be as well to remind the House just what the Committee was worried about. The Minister rightly referred to the views expressed by the hon. Member for Suffolk, South (Mr. Yeo), in which he was strongly supported by the Labour party. Nothing that has happened since the Committee sat has reduced our concern—indeed, the news from New York heightens it
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      —about the press reports and other evidence that insider dealing, which had been a criminal offence since 1980, had nevertheless continued to grow in scope. It has particularly flourished in the context of major takeover bids. There were reports current when the Committee was sitting of professional advisers to major companies who were parties to bids and using their insider knowledge to set themselves up and provide nominee shareholders and overseas companies, and then traded the shares of the companies to which they were advisers and of which they had insider knowledge.
      In Committee, it emerged that the Bill as drafted was inadequate to deal with such problems. The danger that we had to face, and which particularly worried the hon. Member for Suffolk, South, was that, as a consequence of the Committee's deliberations, it had become clear that the range of measures proposed as the Bill then stood was inadequate and that, in a sense, those who were engaged in this practice might be encouraged to believe that they could proceed without fear of any sanction.
      The measure contained in the new clause is an earnest of the Government's seriousness of purpose. I wish the provisions of the new clause well, and we shall watch it to see how well it works in practice. I fear that I cannot be absolutely confident that it will plug every loophole or be a total solution, but it is a substantial step forward. It is welcome to see that the Securities and Investments Board has concurrent jurisdiction in this matter, and that goes well in tandem with the other changes brought about in Committee, those giving the power to prosecute and investigate unauthorised persons.
      I conclude on the happy note of congratulating the Minister on introducing the new clause.
      Mr. William Cash: In respect of recognised professional bodies and the implications of this clause for them, I am hound to draw attention to the fact that the word "accountant" is used, but quite rightly without any definition that would necessarily confine the description to members of the chartered bodies concerned. This also happens in new clause 15. This is a matter of great importance and was considered in the evidence given in the early part of this century — in the 1930s — by the Institute of Chartered Accountants. My great-uncle gave evidence to the House of Commons on this very question. The conclusion was that in the course of the hearing, it had become clear that the word "accountant" by itself was almost meaningless. The description accompanying it was all-important, yet it was impossible to define what was covered by the word "accountancy".
      Persons other than those who are members of the chartered bodies—for example, the Society of Company and Commercial Accountants — have a grave concern about the provisions that will apply to them. Therefore, although most of the provisions refer to recognised professional bodies, arrangements will have to be made to ensure that those who are members of other accountancy bodies are not precluded simply because they are not chartered. It will be necessary to return to this matter at a later stage, but I wanted to make the reference in connection with this clause.
      Mr. Anthony Nelson: I congratulate my hon. and learned Friend the Minster, on moving the new clause, and I welcome its content. The House owes a debt. of gratitude to my hon. Friend, the Member for Suffolk,

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      South (Mr. Yeo). He cannot be here this afternoon, because he is in the Committee debating the Finance Bill I know that he would want it recorded that he took a close interest in this matter, and introduced the relevant amendment in Committee.
      I welcome the extension, provided for in the new clause, of the proposals in the Bill to deal in a tougher fashion with insider dealing, which is a great mischief that is more rife than is currently recognised. It is exceedingly difficult to detect and even more difficult to prosecute and convict for. Recent events, such as those highlighted by the hon. Member for Dagenham (Mr. Gould) in the United States, and, particularly, in the indictment of Mr. Levine, a former senior executive of Drexel Burnham, give one great cause for concern about the way in which offshore mediums are being used to cover up insider dealings.
      My hon. and learned Friend the Minister will know that I wrote to him about this matter recently, because it came to my attention that there is a special agreement between the Swiss banks and the Securities and Exchange Commission in the United States with the express intention of trying to release information on suspected cases of insider dealing. That seemed to be of relevance to the United Kingdom in the new financial climate in which we shall be operating.
      In Committee, we debated the difficulties of investigating or proving insider dealing where an offshore account or medium is used. Therefore, I drew to the attention of my hon. and learned Friend Agreement 16 between the Swiss Bankers Association and the Swiss banks generally, which was a gentleman's agreement relating to the handling of requests from the Securities and Exchange Commission in the United States for information on insider dealing and share transactions in the United States. There is no legal obligation for customers of a Swiss bank to signify their agreement to this clause, but if they fail to do so, the bank concerned may thereafter refuse to conduct security transactions with America for the client. If the SEC wishes to obtain information, its first recourse is to the police department of Switzerland, which, if it considers that there is prima facie evidence of insider trading, may approach the Swiss bank concerned to seek the disclosure of information under the terms of this agreement. In the last resort it is also possible, by invoking the provisions of this agreement, to freeze the assets of a customer with a Swiss bank account who is suspected of engaging in such activities, which are criminal activities here and in the United States.
      We have some provisions under the companies legislation and now in the Financial Services Bill, as amended by this new clause, to limit the extent to which insider dealing will take place and to make investigations in a more incisive way. We shall have to look again at this problem if the incidence of insider trading continues to grow. I understand that the Council of Europe, which includes the Swiss, has made some progress in drawing up a convention which will seek to tackle the problem of insider dealing as part of a false market. I understand that the Government are trying to strengthen their contacts to develop exchanges of information with regulatory authorities overseas.
      In his written reply my hon. and learned Friend the Minister was good enough to say that we may well have to look at this again. For the time being he feels that this
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      agreement may be of limited application to us. I hope that in his reply to this short debate on the new clause he will tell us that he will keep an open mind about ways in which at a supranational level we can investigate more incisively and productively than we have done in the past the mediums being used for these pernicious and criminal activities, which are a fraud perpetrated on all investors.
      Mr. Howard: I am grateful to the hon. Member for Dagenham (Mr. Gould) and my hon. Friend the Member for Chichester (Mr. Nelson) for the welcome that they have given the new clause. It is an earnest of our intentions to be serious about this pernicious abuse. I can give my hon. Friend the assurance that he seeks and tell him that we shall keep a close watch to see whether anything further that needs to be done can be done. I listened carefully to my hon. Friend the Member for Stafford (Mr. Cash) and I shall consider whether there is anything I can usefully add to what he already knows of my views on this matter.
      Question put and agreed to.
      Clause read a Second time and added to the Bill.

    New Clause 4

      REGISTER OF PERSONS EMPLOYED IN BUYING, SELLING OR ADVISING ON RIGHTS UNDER CONTRACTS OF INSURANCE, ETC
      '(1) The Secretary of State shall keep a register of individuals who appear to him to be employed or proposing to become employed in connection with buying, selling or advising on:—

      (a) rights under contracts of insurance falling within paragraph 10 of Schedule 1: and

      (b) units in collective investment schemes.

      (2) An application for entry on the register shall contain or be accompanied by such information as the Secretary of State may reasonably require for the purposes of determining whether to make a direction in respect of the applicant under section 54 of this Act, and such information shall, if the Secretary of State so requires, be in such form or verified in such manner as he may specify.
      (3) An entry in respect of a person in the register under this section shall include particulars of any direction made by the Secretary of State in respect of that person under section 54 of this Act and of any consent for that person's employment given by the Secretary of State./
      (4) The Secretary of State may make regulations requiring authorised persons to give him forthwith notice of such events in relation to individuals employed by them as mentioned in subsection (1) as are specified in the regulations and such information in respect of those events as is so specified.
      (5) The Secretary of State may make regulations requiring authorised persons to furnish him at such times or in respect of such periods as arc specified in the regulations with such information in relation to individuals employed by them as mentioned in subsection (1) as is so specified.
      (6) Regulations under this section may require information to be given in a specified form and to be verified in a specified manner.
      (7) The information contained in the entries included in the register kept under this section shall be open to inspection and the Secretary of State may publish the information contained in those entries in any form he thinks appropriate and may offer copies of any such information for sale.
      (8) The register kept by the Secretary of State under section 89(1)(e) of this Act need not include entries in respect of persons included in the register kept under this section unless the direction under section 54 (by virtue of which section 89(1) (e) applies) relates to or includes a kind of investment business other than that mentioned in subsection (1).
      (9)It shall be the duty of an authorised person and an exempt representative to take reasonable care not to employ

      531
      or continue to employ as mentioned in subsection (1) above any individual in respect of whom there is no entry in the register kept under this section.
      (10) In this section references to employment include references to employment otherwise than under a contract of service, and references to buying and selling are to be construed in accordance with paragraph 23 of Schedule 1.'. —[Sir William Clark.]
      Brought up, and read the First time.
      5.15 pm
      Sir William Clark: I beg to move, That the clause be read a Second time.
      This new clause seeks to establish a comprehensive register of all those employed or proposing to become employed in selling or advising on life assurance or collective investment schemes such as unit trusts. If we have a central register and if it became necessary to take from someone the authorisation to do those things, it would he extremely easy. Companies that advise on investment matters, such as insurance companies, building societies and the like, would themselves keep registers of those employees who were allowed to give advice to the general public. It is said that a central register would be exorbitantly costly, but I am not sure that I accept that point. Obviously, there would be no cost to the taxpayer because there would be a registration fee to cover the administrative costs and that fee would be paid by the applicable investment organisation.
      Clause 4(9) is the main part of the new clause and its powers parallel clause 54 in the Bill. A person who has given bad advice will be taken to task by his or her employer. The employer may decide that that person is no longer capable or competent to give advice. However, that prohibition would apply only in that company or organisation. If the person left the company and was employed somewhere else, he could start giving advice again. Companies are worried about that, because it may put employers in an impossible position. That is because employers would probably treat similar cases in different ways. One employer may tell his employee not to make the same mistake again. Obviously, an insurance company or building society would take upon itself the responsibility for the bad advice or the misadvice that had been given, whether wittingly or unwittingly.
      How many misdemeanours have to be committed before authorisation is removed from an organisation? I am sure my hon. and learned Friend the Minister has addressed his mind to that because it seems ridiculous to penalise a company when it is an individual who is at fault. Somehow, there must be a blacklist. How does one compile a blacklist if there is not some sort of central register?
      Mr. Paddy Ashdown: I am listening carefully to the hon. Member's argument. I am not clear whether he is proposing a requirement for entry to the register. Will it be an objective test of competence, or does he propose that entry to the register is purely on the gift of the company or, indeed, of the Secretary of State? I should like the hon. Gentleman to expand on how one is placed on the register and what it means in terms of competence. Will there be an objective standard by which entries will be judged?
      Sir William Clark: Of course there will be some test of competence. I am sure the hon. Member for Yeovil (Mr. Ashdown) appreciates that Back Benchers do not have the
      532
      facilities of parliamentary draftsmen, and for that reason it is possible that there is some ambiguity in the new clause. I am speaking about the spirit of the new clause. I realise, and I am sure my hon. and learned Friend the Minister realises, that the Marketing of Investments Board Organising Committee advocated a central register. I also realise that the National Consumer Council is against the new clause, but that council is against it for the wrong reasons. It thinks that a central register would give credence to anybody on that register. However, if there is a test of competence for entrants to the register, there is no difficulty.
      The Building Societies Association is against a register. The British Insurance Association agrees with it but has some reservations about the test of competence. I declare an interest because I am a consultant to the Life Insurance Association. It has 12,000 members working on the ground and is avidly in favour of the new clause and some sort of registration so that a blacklist can be identified immediately.
      If one can believe the leaks in the press over the past few days I am certain that at the top of the Minister's reply notes there is the word "Resist." If he resists, I should like him to give me the assurance that it is the Government's opinion that the Bill, as drafted, will be sufficient to protect the general public from blacklisted investment advisers and that immediately such persons would not be able to give advice anywhere. If he is certain that the Bill will do that, can he give me the assurance that if in future we find it is essential to have some sort of central register because the Act is not working and there are loopholes in it about non-registration, he will not only keep it under review, but will change the legislation? That would be necessary in order to protect the investments of many people.
      Mr. Gould: I listened with considerable interest to the hon. Member for Croydon, South (Sir W. Clark) and I had a great deal of sympathy for what he had to say about the new clause. It is worth recalling that the industry set up a consultative group, I think embracing virtually every body known to the industry, long before the Financial Services Bill hove into sight. That consultative group had gone a long way towards the proposal for the establishment of a register or licensing system.
      The Government then appointed MIBOC, a practitioner-based body which considered the whole issue and produced an extremely well thought out set of proposals which were duly modified, following extensive consultation with the industry. We then had the situation, which is unfortunate to say the least, in which the Government, having set up a body to obtain the industry's advice, then refused to accept it. Indeed, that has been overridden, so far as one can tell, by the advice of their civil servants, but, perhaps more significantly, by the representations made to it by that familiar combination of banks and building societies and other powerful institutions——
      Mr. Howard: And consumer bodies.
      Mr. Gould: I shall mention them in a moment. The Minister would do well if he could make the claim, without blushing, that it was the Consumers Association which had weighed with him rather than the banks and the building societies on this issue.

      533
      It is yet one further regrettable instance of how on so many occasions the major financial institutions, particularly the banks, tend to come along at the last moment and express a view which is then adopted by the Government contrary to the views and evidence of most other people.
      Mr. Tim Smith: That is an unrealistic assessment of the situation. The hon. Gentleman may be right about the banks and building societies, but he needs to recognise that in relation to MIBOC many other financial institutions had a vested interest in the scheme. Perhaps we should set those two up against each other and look at what the consumer bodies, who are supposed to represent investors, have to say about it.
      Mr. Could: I am content to accept the hon. Gentleman's endorsement of my point about banks and building societies. On MIBOC, I draw his attention to the fact that the Government set it up to provide them with exactly the advice that they are now rejecting.
      So far as one can judge from the Minister's public pronouncements on these matters, the major argument against the MIBOC proposal and against the register seems to be that of cost. Of course, investor protection costs money. If the argument about cost were thought to be overriding, we would not be legislating at all. The Financial Services Bill will cost money. To provide essential protection to the consumers—to investors who buy life insurance policies—will cost money. There is no question about that. However, the sum of money involved can be made to seem extremely large only by multiplying it by 200,000 or 300,000, because that is the number of people involved in selling life insurance. Per head the cost is marginal. As a proportion of the total cost of putting a salesman into the business of selling, the cost of putting him on the register and providing him with a course enabling him to pass a test of competence is so marginal as not to worry anybody. That seems a small price to pay for an essential and entirely desirable element of consumer protection.
      Without the register, the Government, the Secretary of State, and eventually the Securities and Investments Board, will have to rely for virtually their only weapon, apart from the general processes of authorisation. on the power provided by clause 54 — the disqualification power. I am encouraged at least to hear from Sir Kenneth Berrill that he intends to exercise that power rigorously. But even he could not conceal his disappointment at the Minister's announcement that registration is not to be proceeded with.
      The difficulty with the clause 54 power— this is an analogy drawn to my attention by a spokesman for the industry; I do not claim authorship —is that it is rather like abolishing the concept of the driving licence and saying that we can deal with any problems that arise by prosecuting those who are thought to have committed offences of dangerous driving. The difficulty with that is that people tend to be hurt in traffic accidents, just as they will be hurt if they are buying life assurance and other investments from people who have not been required to establish in some way their competence and probity.
      It is not to denigrate the industry unduly to point out that higher standards of competence and probity are desperately needed in this area. It is very much to the
      534
      industry's credit that it recognises that that is the case. It is most unfortunate that the Government, through a failure of will or for whatever reason, have failed to accept the advice which has been tendered to them.
      I conclude by echoing the appeal of the hon. Member for Croydon, South to the Minister. If he does not proceed with this, will he at least undertake to watch this area extremely closely? If he feels, as he may well be forced to conclude after a year or so, that higher standards and some test of competence is required, will he then be prepared to review the situation within a short period?
      Mr. Robert McCrindle: I have long held the view that true investor protection requires not only authorisation of the principal but also some form of licensing or registration of the individual acting on behalf of his principal. It is not sufficient to assume that the company to be authorised under the Bill will at all times be able to control the activities of its salesmen, yet that is what really matters to the customer.
      The ideal system may well contain a basic test of competence, to which my hon. Friend the Member for Croydon, South (Sir W. Clark) and the hon. Member for Yeovil (Mr. Ashdown) referred. It is sometimes thought that a basic test of competence is unnecessary, yet it is within my experience that the ability to differentiate between different types of life assurance policy is not always present among those who purport to advise an individual on what is arguably one of the more important financial transactions of his lifetime.
      It is surely also not expecting too much that some knowledge of personal taxation should be available to the customer through the individual who will either be an insurance company representative or an independent intermediary. It is surely not too much to expect that the company representative will have a full knowledge of his company's range of products and that an independent intermediary will have an understanding of what is available on the market. Such a basic test of competence is something to which we should be wholly attracted.
      Allied to that there should be, as the new clause suggests, a register and a black list for periodical publication. My fear is that one without the other will present an unbalanced aspect of investor protection. If I have a concern about the new clause as proposed, it is that it seems to propose that the Secretary of State should have a considerable involvement in the creation and the keeping of the register. However, it does not make it clear who, in his ideal situation, would be the provider of a competence test.
      Whether or not the new clause is acceptable to the Minister, I suggest that the obvious candidate to apply such a test of competence must surely be either the SIB, into which MIBOC will have been subsumed when the legislation becomes fully operative, or the self-regulating organisation.
      Therefore, I submit to my hon. and learned Friend the Minister that if the new clause is not acceptable as it stands because it involves the Secretary of State in collating and publishing information, perhaps the message should go out from the Minister that over a few years SROs will be urged to introduce such a licensing or registration system by themselves as they become more able to run a test of competence on their own account.
      If the Minister were prepared to back such a progressive introduction of such a scheme, he would have

      535
      widespread support, including, perhaps, as the Government understand it a little more, some of the consumer organisations which do not appear to like the idea so far put forward, almost entirely due to the cost. I have some reason to believe that the estimate of the cost of introducing such a system has been considerably exaggerated. Only yesterday, I had a conversation with a prospective member of an SRO, who expressed the opinion that there should be no great difficulty or cost in the progressive introduction of a test of competence allied to a system of registration or licensing.
      5.30 pm
      Those who have so far objected, apart from the consumer interest groups, are the building societies, the direct sales forces and the banks. I do not wish to cast aspersions on the sales forces of the banks or on the direct sales life assurance companies, which have served the public well during the past few years, but I am a little worried to discover that the building societies seem to be so vehement in their opposition to the idea of a test of competence because other legislation still going through Parliament will authorise them to move much more effectively and actively into life assurance and general insurance than has been the case. There are no prizes for guessing that they are already active in recruitment, and I have no doubt that many of the people whom they will recruit will be extremely estimable.
      However, without a test of competence, and remembering that building societies cannot be expected to have the experience in insurance that we expect and know them to have in mortgages, they might be guilty of recruiting some people who would he incapable of giving the advice that a consumer has a right to expect. I hope that my hon. and learned Friend the Minister will not be too influenced by institutions such as the building societies—rather, I hope, the reverse. I hope that he will accept my point that, especially in the case of the building societies, there is a strong argument for extending the consumer protection that underlies the legislation.
      I remain convinced that the prospect of an individual losing his licence, or losing his right to practice and to sell life assurance, would be a salutary discipline. I also believe that a representative of an authorised company who is not registered or licensed gives less than full investor protection. I appreciate that the legislation allows for the provision of a blacklist. I know that only yesterday Sir Kenneth Berrill. the chairman of the SIB, said that the clause would not be dormant, but would be fully acitivated under his leadership of the SIB. That is all very well, but a blacklist alone without a registration or licensing system — I hope that the Minister will forgive me for so describing it—is a little like closing the door after the deed is done.
      The idea suggested by my hon. Friend the Member for Croydon, South in his new clause, which regrettably, if press reports are to be believed, the Minister will he resisting, overlooks the fundamentally important aspect that it is good to have a blacklist. Few of us who have anything to do with insurance would wish to resist it, but a blacklist alone without a reasonable test of competence and a reasonable implication of probity on the part of the individual does not go far enough.
      The new clause may be the wrong method of protecting the consumer because it seems to bypass the SROs. I am sure that that could be put right in a way that would be
      536
      acceptable to my hon. Friend the Member for Croydon, South. The SROs should be charged to introduce a competence test and to create a register progressively over a period of three to five years. I hope that when my hon. and learned Friend the Minister replies he will say whether my suggestion, subject to its being a system under which the cost would be kept to the minimun, strikes a chord of response in him. I sincerely hope that it does. I approve of a blacklist to protect investors, but not one which stands alone. The blacklist should complement what in my judgment is a much more important aspect of investor protection.
      Mr. Ashdown: Not for the first time, I agreed with almost every point made by the hon. Member for Brentwood and Ongar (Mr. McCrindle) on insurance matters. However, I wish to expand upon some of them.
      I am grateful to the hon. Member for Croydon, South (Sir W. Clark), who moved the new clause, for saying that the principle enshrined in it was important, not necessarily its drafting or the words, because it falls significantly short of what I had wished to see, especially in relation to competence. A register that does not include, as an essential part, a test of competence which is objective and industrywide rather than established by the firm could mislead people instead of safeguarding them. I shall return to that matter later.
      In Committee, we discussed basic principles at some length. One basic principle in the Bill to which the Minister agreed is now enshrined in an amendment. It is the concept of tapering safeguards so that those who are most competent — who are at the top of the profession — would require fewer safeguards. The rule of caveat emptor would apply more precisely to them than to those at the bottom, most vulnerable end of the sector who have less knowledge and less competence in making judgments.
      No one in the entire area where we seek safeguards for investors who have little knowledge of affairs can be more easily misled than the people with whom insurance salesmen frequently deal. As we said in Committee, insurance salesmen conduct business not in offices but frequently in the comfortable and disarming environment of people's homes.
      If the Minister is to carry through the basic principle of tapering safeguards, it is essential that we afford those people greater safeguards about the advice that they will receive about competence and honesty than we do to others. The principle of the new clause is an important piece of armoury in that balance of safeguards. In the sale of insurance to private individuals, I have a strong suspicion that more damage is done through incompetence than through venality or dishonesty. I have no doubt that dishonest people exist in the insurance industry as they do in any other especially one which deals in such an environment and has such a large work force. However, I suggest that the number is small. There is not much evidence to suggest that that is the major problem. Incompetence probably does more damage in this area than in any other.
      If the Government introduced a blacklist, even if such a thing could exist without a register alongside it — I have practical doubts on that matter — they could at least in some measure deal with the problem of dishonesty, but they could not cope with the problem of incompetence., which in my judgment and that of others does much more damage.

      537
      Recently, there have been suggestions that one way of getting round this problem and coping with it in terms of establishing a level of competence would be to set up a test of competency after 18 months. That is a sensible suggestion, and I was worried to see that it was dropped from the latest MIBOC draft proposals. As the hon Member for Croydon, South and the hon. Member for Dagenham (Mr. Gould) said, it was dropped because of the cost that might be involved. A cost of £10 per insurance salesman was predicted. That may sound a lot, but, as the hon. Member for Dagenham said, it is as nothing compared with the costinvolved—in a typical case, 20 per cent. of premiums — in administration and commission for every individual during the entire term of the policy. Ten pounds is nothing, not even in relation to a handful of people who take out insurances, let alone in relation to the number of insurances that could be sold by salesmen during one month, let alone a year. That is a small price to pay for what will be a significant and. because the people concerned are most vulnerable, essential safeguard.
      I listened with interest to the Minister's reply to the hon. Member for Dagenham about why he had rejected MIBOC's and SIB's proposals. He asked us to believe that he rejected them because of the excellent work and suggestions made to him by the Consumers Association. His rejection had nothing to do with the banks and the other large, powerful organisations which recommended that course to him. At present we shall put aside unreasonable and inelegant suspicions on this matter.
      It is a matter of some confusion to us that the Minister has not accepted other recommendations put forward by the Consumer Association. He says with sincerity and with his hand on his heart that the Consumers Association has argued the case against this most powerfully and that he has listened to most of it.
      I ask the Minister to re-examine what the consumer associations have said. The National Consumer Council said that it did not want such a register for one reason — it could mislead the public on the matter of competence. The hon. Member for Croydon, South made it clear that he wishes a test of competence to become an essential element of such a register. The NCC's objection must fail if the register shows that the membership has such a level of competence, for the public would not be misled in the way that the NCC feared.
      The Consumers Association also told the Minister that it was opposed to a register. I ask the Minister to consider that carefully, because the Consumers Association says that it would be preferable to ban cold calling than to have a register. I agree with that. If the Minister agrees with the second part of the recommendation, does he also agree with the first? I am prepared to give way to the Minister in the hope that he will answer my question. If the Minister will tell the House that he is prepared to introduce a complete ban on cold calling, we may not need such a register. The Consumers Association made its recommendation on that basis.
      One is left with the inelegant suspicion that in this, as in so much else, the Minister was moved more by the power of the banks and those who have the most financial clout than by the Consumers Association. I hope that the Minister, will answer the Consumers Association's request for a ban on cold calling.
      538
      If the Minister, for reasons of drafting or other reasons, will not accept the new clause, I hope that he will look closely at the matter and will make recommendations to solve this problem. If he will not do that, will he make a clear declaration to the House that he will keep this important matter under close review?
      Mr. Cash: I raised the matter of competence many times in Committee, tabling a series of amendments to the schedules to introduce the concept of competence and of the qualifications of members of SROs. I expect that that matter will continue to be debated on later amendments.
      With respect to my hon. Friend the Member for Croydon, South (Sir W. Clark), may I say that the clause appears to have attracted an unusual amount of opposition. The Office of Fair Trading, the Consumers Association, the Linked Life Assurance Group, the Committee of London and Scottish Bankers, which has contacted me on the matter, the Pearl Assurance Group, the Co-operative Insurance Society, the Royal Liver Friendly Society, the Building Societies Association and the National Consumer Council have all appeared to take exception to the provisions. In view of the weight of opinion, and despite my hon. Friend's arguments, I do not believe that the new clause should be accepted.
      The chairman of the Chief Executive Officers' Committee of London and Scottish Bankers, Mr. Philip Wilkinson, said:
      "We are in favour of a list of rogue salesmen, but not of a huge index of reputable ones. This extra layer of bureaucracy proposed by the Board would only serve to create unnecessary cost with no discernible benefit … Our member banks are already highly selective in their recruitment and require rigorous standards to be met before allowing staff to advise the public on any financial matter. There are at least 50,000 staff involved, from time to time, in marketing and advising on life assurance and unit trusts, often as an integral part of a wider advisory service."
      Mr. McCrindle: Can my hon. Friend say whether any of the many objectors to the new clause objected also to my suggestion that the task should be given to the SROs, and that a register and some form of licensing should be introduced progressively? There is no sign that they would object to that.
      Mr. Cash: I listened with interest to my hon. Friend. He and I are ad idem on the test of competence, and we were together on that point in Committee. From the synopsis that I have of those organisations' views, I do not know whether they said other things too. The Committee of London and Scottish Bankers made its position perfectly clear. It stated:
      "The costs of registering them individually is likely to be over £2 million with an ongoing compliance cost of £1 million annually, a cost which would have to be borne by customers eventually."
      The banks support high standards of competence and probity——
      5.45 pm
      Mr. Ashdown: The hon. Gentleman said that one reason why he opposes the new clause is that the cost would have to be borne by the customer. Surely that is the case with all regulations. Costs are always borne eventually by the investor—the customer. If that is to be the reason for opposing the new clause, it must be a reason for opposing everything else.
      Mr. Cash: We might also have to pay the cost of having an alliance in due course. Costs occur in all matters; the

      539
      point made by the Committee of London and Scottish Bankers is fair and reasonable, and I fully support it. The sheer diversity of the methods of selling life assurance and unit trusts is a good reason for not having a universal register.
      Mr. Howard: I am grateful to my hon. Friend the Member for Stafford (Mr. Cash) for his support. He has correctly anticipated my position in relation to the new clause moved by my hon. Friend the Member for Croydon, South (Sir W. Clark).
      The hon. Members for Dagenham (Mr. Gould) and for Yeovil (Mr. Ashdown) have adopted a curious approach to our discussions both yesterday evening and this afternoon. They select what they regard as the basis upon which I reach decisions in these matters, and, on that false premise, mount an argument which diverges ever more rapidly from reality. I could put up with the fact that they credit me with having no independent judgment, but I must object when they select people to whom they say I listen on such matters, and ignore the fact that representations come from other bodies which are less easy for them to attack. In reaching my decisions, I pay careful attention to everything that is said, and, at the end of the day, I make my independent judgment on the basis of those representations.
      Bearing in mind, as one does in considering such suggestions, the existing powers in the Bill which will give substantial control over individuals employed by investment businesses, my judgment is that the suggestions put forward in the new clause are unnecessary and expensive. As the hon. Member for Yeovil said—it was not his most original thought—cost must be taken into account and all regulation is expensive. Although that is true, it does not relieve us of the responsibility of assessing the value of every proposal as against its cost. I sought to do that in relation to the proposals and, measured against that criterion, the proposals are found wanting.
      As those making representations on the proposals put forward by MIBOC said, there is a danger that the competence test could mislead. It was intended to be a basic test. There was a real danger that salesmen who had acquired that basic qualification could present it as a basis for advising consumers on matters far exceeding the competence to which the certificate testified. It would be rather like referring everyone who wished to travel to Crewe to obtain a ticket to Watford Junction.
      Of course it is right, as several hon. Members have pointed out, that clause 54 provides for a blacklist. We have already heard what has been said by Sir Kenneth Berrill about the way in which the powers in clause 54 are to be exercised. Indeed, I welcome his remarks. Clause 54 is intended to provide a real safeguard for the investor, and no doubt it will do so. My hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) mentioned the possibility of a register and a competence test being administered by SROs. There is no reason why they should not, if they think it appropriate, have a register for the businesses that they authorise or have a competence test. But for the reasons advanced, I believe that it is unnecessary to have a statutory central register with a statutory competence test.
      I can give the assurance sought by my hon. Friend the Member for Croydon, South. Of course we shall continue to keep the matter under close review. If evidence materialises to show that our judgment needs to be revised,
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      we shall not close our eyes to it. However, on the evidence so far presented, I must invite the House to reject the new clause.
      Sir William Clark: I am grateful to my hon. and learned Friend the Minister for his remarks. I think that the debate on this important subject has been worth while. However, I hope that my hon. and learned Friend did not think that I in any way implied that any undue pressure had been brought to bear on him. I regret the accusations that have been made to the effect that that might be so. I am delighted that my hon. and learned Friend has accepted that there could or might be evidence to the contrary, and that, if there is, he will keep the matter under close review. He has indicated that if the Bill, as drafted, is found to be inadequate, he will alter it to give the investor the necessary protection. Given that assurance by my hon. and learned Friend, I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New clause 14

      TAKEOVER PANEL
      '(1) The Secretary of State shall supervise the functions of the Takeover Panel in formulating publishing and applying the rules of the Takeover Code, and shall himself have power to make, modify and enforce the rules of the Takeover Code, either directly or through the agency of the Takeover Panel.
      (2) The rules of the Takeover Code shall take effect as if they were made by the Secretary of State under this Act.
      (3) The Secretary of State may exercise any of the functions described in this section notwithstanding that any or all of the persons affected by the exercise of such functions are not authorised persons for the purposes of this Act.
      (4) An authorised person who contravenes rules made or described under this section shall be treated as having contravened rules made under Chapter V of Part I of this Act or, in the case of a person who is an authorised person by virtue of his membership of a recognised self-regulating organisation or recognised professional body, as having contravened the rules of that organisation or body.
      (5) A person other than an authorised person who contravenes rules made or described under this section shall be guilty of an offence and liable—

      (a) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or both;

      (b) on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or both.'.—[Mr. Gould.]

      Brought up, and read the First time.
      Mr. Gould: I beg to move, That the clause be read a Second time.
      The Bill regulates the very wide area of virtually all the investment business conducted in the City. But it is, to say the least, odd and unfortunate that we are not dealing with one of the matters that has put the City into the headlines in recent weeks. I refer to the merger mania that has broken out in the City, which now involves billions of pounds and virtually all our major firms.
      The Bill is basically concerned with setting up a Securities and Investments Board to provide a structure of authorisation for investment business. But partly as a result of amendments in Committee, the SIB now deals with issues well beyond the scope of authorisation. For example, it deals with unauthorised persons and the investigation of insider dealing. It is, after all, entitled the Securities and Investment Board, and is not just concerned with investments. Its role as a securities authority should

      541
      incline the Minister and the House towards believing that it should accept some responsibility in the sphere of takeover bids.
      That view is advanced and supported by Professor Gower in his seminal report on the whole question of City regulation and administration. It is not as though the need for such rules is unrecognised. The need for rules to regulate procedures in takeover bids was recognised by the City itself as long ago as 1968, when it felt that it was very much under pressure, and it introduced for the first time the takeover code.
      It is appropriate to pay tribute to the work of the takeover code and of the panel that administers it. The question is not essentially the content of the rules but increasingly, and more pressingly, whether the voluntary arrangements underpinning those rules suffice. We face a new situation, and that is why we have this Bill. The City will now be dominated by huge, powerful new players, by new techniques in financing, and by grand takeover bids which this year already total, I believe, about £20 billion. Thus, the sums involved are massive. Yet apparently, judging from the Bill, we are not yet prepared to subject that one aspect of the City to statutory rules.
      The Takeover Panel and the rules of the takeover code will no longer be sufficient to keep control of the increasingly difficult situation. The crucial question is what will happen if the clear rules of the takeover code are breached. What sanctions will follow? What will happen to those in breach? We have a recent example. Only yesterday it was reported that in the context of Dixons' bid for Woolworth, the merchant bank Rothschild was severely rapped over the knuckles by the Takeover Panel for what was described as permitting a materially deficient profit forecast in the exchange of information relevant to that takeover battle. But having rapped the bank over the knuckles, what does the Takeover Panel do?
      One assumes that Rothschild is jealous of its reputation and that it will respond. One assumes that it did not welcome being rapped over the knuckles and that it will make an excuse, or will not repeat the mistake. However, what happens if those involved do not care so much about their reputation, are prepared to take such reprimands and to toss them aside, accepting them as the price for obtaining a lot of money? What would happen if Rothschild and other prominent and reputable City institutions were rapped over the knuckles so frequently because their practices were so endemic that standards fell so low that nobody took any notice of being rapped over the knuckles? We have seen that happen,in the City before under a regime of voluntary and self-regulation. In a rapidly changing period when huge sums of money are involved, new techniques are being introduced and huge new players are getting in on the act, how can a voluntary code keep control?
      Further evidence for that concern can be found in an article published in The Sunday Times by the financial journalist Ivan Fallon. He says:
      "In bid after hid these days there is evidence that a merchant bank shamelessly uses its fund management side to support its side in the battle, sometimes getting it to add to its holding, more often persuading it to vote its shares the right way. There are so many instances of odd purchases made by a merchant bank, on behalf of clients who
      542
      presumably never know how their money is being used, at key times in takeover bids that it seems to me the rules are being breached almost weekly."
      I do not say that that paints an accurate picture in every respect, but it is sufficiently accurate to worry many Opposition Members, and it should worry the Minister too.
      Recently, the Takeover Panel issued its own rules on Chinese walls to ensure that the practice described by that journalist does not occur during takeover bids. It is excellent that they should be published, but unlike the rules published by the SIB under the Bill the rules on Chinese walls have no effect. There is no sanction attached to them and no statutory back-up. The SIB issues its rules on Chinese walls, and, side by side, the Takeover Panel issues its rules for a similar purpose. It could hardly be argued that the rules issued by the Takeover Panel are less important than those of the SIB, as they deal with an extremely important aspect of City operations. Yet the Takeover Panel's rules lack that sanction or statutory authority.
      6 pm
      I believe that the clear and sensible solution to the problem is to do as Professor Gower originally recommended — to bring the Takeover Panel and therefore the rules of the takeover code within the framework created by the Bill. I believe that there is considerable support in the City for this view, and the Government have indicated their willingness to contemplate the solution. I am disappointed, to say the least, that apparently the Government have thought about it and decided to do nothing. I hope that, even at this late stage, they will take the opportunity to do something about an area that is going to be increasingly difficult to control. If they do not do something, I believe that we shall he storing up a disaster for the future.
      Mr. Fletcher: I am grateful to the hon. Member for Dagenham (Mr. Gould) for bringing this point before the House even, as he himself said in his closing remarks, at this late stage. It is unlikely that there will be any other new clauses or amendments as important as this proposal, but it would be quite wrong for the Bill to go further without the House at least expressing some views on the role of the Takeover Panel.
      I should like to take this opportunity to express my appreciation—if it will not damage him too much—of the masterful way in which the hon. Member for Dagenham has handled his brief on the Bill and, indeed, on a previous occasion on the Insolvency Bill on which I had the pleasure of working with him. Having said that, I do not go all the way with the proposal that he has placed before the House, for reasons that I shall describe briefly.
      It is hard to imagine that the panel can stand still while everything else in the City moves. Indeed, everything else moves with great speed. Yet it appears to be the considered view of the panel, to the best of my knowledge, that it can go on as it has done for some years, while everything else toughens up in terms of the regulation and overall practices of the City.
      I agree with the hon. Member for Dagenham that the panel has worked well over the years, but it cannot continue to work with club rules while all around there is a much higher degree of professionalism and, of course, a much higher degree of competition requiring tougher

      543
      and more professional regulations. These are, indeed, the criteria on which Government policy and the Bill are based.
      The panel has made no case of which I am aware as to why its activities should be an exception to the general rule and policy underlying the Government's approach to the City. Although the panel may not have changed its view about its role in the new City regime, I think that important parts of the City and industry would disagree with the panel in that respect. Even in the past few months, I believe that there has been some change in the operation of many practitioners in the City. I know that the SIB has enough on its plate to keep it going for some time, as has my hon. and learned Friend the Minister.
      While I am making what are probably the last remarks that I shall make on the Bill perhaps I may say that my hon. and learned Friend has done an excellent job in piloting the Bill through the House. He is not to blame for all its inadequacies. He has done a fine job. While he has been doing that, I have gone back to working for a living. I have been at the receiving end of regulatory decision-making of one kind or another, and it has been rather tough at times. I will spare the House my experiences of the last few months in this respect.
      I ask my hon. and learned Friend not to leave this final stone unturned, even if I did when I was in the Department. I do not wish to see the panel in a regulatory straitjacket. I think that if the proposal of the hon. Member for Dagenham were accepted, that would be the case. I should like to see a more professional and representative body than exists in the City at present. I believe that the executive should be stronger and have more authority. The executive and the panel should be comprised not simply of City practitioners sitting in judgment on themselves—indeed, that is a remark that I have heard frequently from City practitioners— but of the users of financial services — the victims of their decisions. The users, of course, are industrial and commercial businesses and the managers of those businesses, to whom the club rules of the panel are often something of a mystery. I know how anguished and frustrated they feel about some of the decisions that are made and the time that it can take to get any action following a decision.
      Again, I agree with the hon. Member for Dagenham in wondering what will happen if, as the competitive climate in the City grows, merchant banks and others—perhaps not the old guard or the sort of firms that we are used to in the City, but newcomers and big international players —are less likely to accept the club rules or the sort of ticking off that the panel gives in the hot situations that exist, particularly over mergers.
      My hon. and learned Friend will be delighted to hear that I have no proposal for legislation. In fact, I have no idea how the problem might be tackled at this late stage, except to suggest—this is nothing new or original, but it is worth while—a short, sharp, independent review of the panel's role and, most important, its authority.
      The panel plays a critical role in the City. I believe that it will be well worth while to re-examine this, particularly if its credibility is to be maintained as we move into this highly competitive situation in financial markets and services.
      My hon. and learned Friend will recall that, at the beginning of this legislative process, he was under some pressure to include Lloyd's in the Bill. I think that he
      544
      handled that extremely well and responsibly by appointing someone to examine Lloyd's in relation to legislation and the changes that the Government propose. That is naturally a bigger and more complicated task than examination of the panel. However, I believe that it would be better for the Department to hold an independent reexamination of the panel rather than to wait for a year or so, when things may have started to crumble. This is an area where a little foresight now might save a lot of trouble in a few months' time.
      Mr. Ian Wrigglesworth: I agree very much with what the hon. Member for Edinburgh, Central (Mr. Fletcher) has said about the panel and the need for it not to carry on as it is and has been doing, although, like him, I believe that it has done a very good job. Times are changing. Indeed, they have already changed in recent months, and, as everybody knows, they will change ever more later this year and next year.
      I do not think that the proposal in the new clause would put the Takeover Panel in a straitjacket. I am sure that the members of the SIB would not regard it as a straitjacket into which all the SROs must fit, conform and be restricted. Indeed, the system will not work if it operated in a rigid and inflexible manner. Therefore, the hon. Gentleman's conclusion is wrong. A review would only cause confusion in a situation that is already confused, and create great uncertainty. It is quite unnecessary when a solution is available such as that contained in the new clause.
      I support the proposal embodied in the new clause because the future responsibilities of the panel will be considerably greater and more important than at present. With the number of takeover bids now occuring and the changed behaviour to which the panel and the Director General of Fair Trading have already referred, we have had a taste of what is likely to happen after the big bang takes place. Life will become rougher and tougher in the City, so the Takeover Panel needs to be within the net of the regulatory framework, not out on a limb, if it is to perform its critical, central function.
      It is because the role of the panel is so critical that it should be contained within the new regulatory framework. In a sense, it is almost a vote of no confidence in the new framework if the panel is not contained within it. It is such an important part of the regulation of the City that to be outside the new framework would reflect badly and also confuse many people about the ability of the new regime to operate effectively. For the credibility of the new system and for the effectiveness of the future work of the panel, it must be included within the SIB's remit. It would be an anomaly were it to float free. There is great danger that there will be not only overlap and confusion but conflict between the bodies responsible for that area. Putting the panel within the ambit of the SIB would help to avoid such confusion and potential conflict.
      I hope that the Minister will not close the door completely on the proposal. I hope that, even at this late stage, it is possible for him to give some hope that this very important body will be seen to be part of the new framework, that it will come under the SIB and will form part of what everyone in this House — despite our various views—hopes will be a successful system of City regulation when the big bang comes.
      Mr. D. N. Campbell-Savours: I intend to be very brief. I had experience last year of abuse by one

      545
      company representing Scottish and Newcastle Breweries during the battle for the takeover of Matthew Brown Breweries— a major brewer in my constituency and in Blackburn. I hope that the Minister will take on board the comments of hon. Members about the great need for some form of regulatory control, especially to cover the operations of merchant banks involved in takeover decisions in advising their clients and securing shares on their behalf.
      6.15 pm
      I wish to draw attention to the Scottish and Newcastle takeover of Matthew Brown. When the abuse took place in the stock exchange on the afternoon of 11 December, I immediately came to the House to table an early-day motion to protect the interests of my constituents. In the new environment envisaged in the new clause, I believe that the early-day motion would have led to action against the companies concerned. The motion tells the story. It states:
      "That this House condemns the highly irregular activity and questionable practice of Scottish and Newcastle Breweries on the London Stock Exchange who at 3.30 p.m. on Wednesday 11th December extended their deadline for acceptances of the Scottish and Newcastle's offer for Matthew Brown's shares; recognises that by 3.30 p.m., the original deadline set by Scottish and Newcastle in their own offer document, the attempt to take over Matthew Brown had failed, with the acquisition of only 47 per cent. of Matthew Brown's shares; expresses profound concern over the fact that by subterfuge and with the use of irregularity Scottish and Newcastle secured a further 3 per cent. of Matthew Brown shares by 5 o'clock at which time they claimed control; welcomes the decision to convene the full City takeover panel on Thursday 12th December to carry out an inquiry into Scottish and Newcastle's activities; and believes that Scottish and Newcastle's predatory acquisition of Matthew Brown is to be condemned by all those who believe in fair dealing and fair play."
      I returned to the House to table the motion because I was advised by certain persons that it was important to make as much noise as possible to ensure that no decisions were ducked. I secured a number of interviews in the national media, including breakfast television, to provide publicity for the case prior to the Takeover Panel examining the matter in the City at 10 o'clock the following morning.
      I stayed up until 3 am. Indeed, I remember telephoning my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore) at 2 am on a matter relating to Lloyd's—and he was in bed. I was advised that it was important to make as much noise as possible to ensure that the panel dealt with the matter in a reasonable way and that no one could secure the takeover by what I described in my motion as "irregularity."
      What would have happened if the new clause had, in fact, been in legislation? I understand that the merchant banks advising Scottish and Newcastle would have found themselves in difficulty. They might have been in contravention of rules, which might have led to proceedings. If that had happened, I am sure they would have advised Scottish and Newcastle, prior to the 3.30 pm deadline, not to enter into such questionable activity. That would have avoided all the difficulty and hassle that I, a number of my hon. Friends and others experienced during the night of 11 December.
      I hope that the Minister will take on board my comments about that incident, and also those of my hon.
      546
      Friend the Member for Dagenham (Mr. Gould) about other incidents. There is a great deal of public concern. People want to feel sure that the rules are being complied with in every way. The Minister, by accepting the new clause, will have the opportunity to achieve precisely that.
      Mr. Howard: First, I thank my hon. Friend the Member for Edinburgh, Central (Mr. Fletcher) for his kind remarks during his contribution. I have paid tribute to him for his responsibility for the Bill and I am happy to join in the tribute which he paid to the hon. Member for Dagenham (Mr. Gould).
      The hon. Member for Dagenham referred to the Government's original attitude to the issue that is taken up by the new clause. I remind the House that the White Paper on financial services stated that the panel had been
      "a good example of self-regulation working in an important area of the securities market in the United Kingdom. The Government wish it to continue to do so. If practitioners and users of the securities market felt that statutory backing would be helpful, the Government would be willing to consider it."
      Following the publication of the White paper, we received representations from various bodies on this issue. Some favoured a degree of statutory backing, but many were opposed to it. The panel itself, on which many City organisations are represented, argued against statutory backing, as did the Governor of the Bank of England. In the light of the advice that we received, having approached the matter with an entirely open mind, as stated in the White Paper, the Government decided not to include provisions in the Bill on the regulation of takeovers. We believed, and continue to believe—our belief appears to be shared by most hon. Members who have contributed to this short debate—that the panel is doing a good job in regulating takeovers on a non-statutory basis and that it enjoys the support of the City. We announced our decision when the Bill was published in December and we have received no representations that the decision should he reversed.
      Experience indicates that the conduct of takeovers is an area which is best left, as far as possible, to self-regulation rather than statutory provision. The City code on takeovers and mergers, and its administration by the panel, compares favourably with the more legalistic approach that is adopted in the United States. There are few in the City, or in industry and commerce, who would wish to move towards the American model if we can possibly avoid it.
      I would argue that all the examples which have been cited by Opposition Members during the course of their observations strengthen the Government's case rather than detract from it. They have not been able to point to any example of anyone flouting the takeover panel. There may have been instances where, in the view of the panel, the code has been breached, but in those instances the panel has so ruled and the panel's decision has been accepted. As for the example cited by the hon. Member for Workington (Mr. Campbell-Savours), I would not care to speculate on the extent to which his experience on breakfast television may have influenced the decision of the panel. The fact is that the panel came to a decision which even the hon. Gentleman recognises was the right one to make.
      Mr. Campbell-Savours: What about the financial advisers? What happened to them?
      Mr. Howard: The point is that no attempt has been made to flout any decision of the panel. The panel's decisions have been respected.
      The hon. Member for Dagenham posed a hypothetical question and asked what might happen if a decision of the panel were to be flouted. I face that question and address it. The Bill already contains powers which could be used to support the takeover code. There are wide-ranging powers to make conduct of business rules for authorised businesses in part 1, chapter V and it would be possible to require authorised businesses acting for participants in the hid to conduct themselves in ways which would support the code. Under part IV, obligations could be placed on listed companies. Clause 138 in part V enables the conduct of offers to be regulated. There would also be an indirect impact even on unauthorised offerers or offerees because clause 52 severely limits the circumstances in which investment advertisements can be issued by someone who is not authorised.
      I suggest that the Takeover Panel is doing a good job and that there is every reason to suppose that it will continue to do so. I listened carefully to what was said by my hon. Friend the Member for Edinburgh, Central but I cannot go along with his argument that there is a need for a review of the sort for which he asked. I believe that there are powers in the Bill which could be used to support the code if necessary. It is on that basis that I invite the House to reject the new clause.
      Mr. Gould: I am grateful to the hon. Member for Edinburgh, Central (Mr. Fletcher) for his kind personal remarks and for his support in principle of the new clause. I understand his reluctance to commit himself to the detail of it. I am grateful also to my hon. Friend the Member for Workington (Mr. Campbell-Savours) and to the hon. Member for Stockton, South (Mr. Wrigglesworth) for their support for the new clause.
      I cannot welcome the Minister's response in the same terms. By relying upon the views expressed to him by practitioners and users of the takeover code, he was applying the wrong test. His obligation was to apply the test which he has adopted in other instances, that of the public interest and the proper regulation of the City. The Minister should not confine himself to those who in one respect or another have a vested interest in the situation as it exists.
      I think that the Minister missed the point of the example stated by my hon. Friend the Member for Workington. We believe that one of the beneficial consequences of effective regulation is that it has a prophylactic effect and deters the breaking of rules. That is not the same as coming along ex post facto, assuming that one is lucky enough to detect what has gone wrong and who was responsible, to issue a stern warning and no more. We want a proper system of rules, proper sanctions and proper penalties so that people are deterred from breach. What worries so many of us is the vast volume of breach that is taking place, which is largely undetected and unpunished.
      For all these reasons I fear that I cannot be satisfied——
      Mr. Campbell-Savours: Is this not an area to which the next Labour Government will have to return with new legislation? There are clear deficiencies, and it seems that the Government have no desire to deal with them.
      Mr. Gould: My hon. Friend is right. Irrespective of the colour of the next Government — I have a firm view about that which, I am glad to say, is shared by all commentators and opinion polls, which is that there will be a Labour Government—that Administration will be obliged to legislate in this area. The developments that will take place will demand nothing less. For all these reasons feel that we must press the matter to a Division.
      Question put, That the clause be read a Second time:—
      The House divided: Ayes 113, Noes 215.

      Division No. 221]

      [6.26pm

      AYES

      Adams, Allen (Paisley N)

      Kirkwood, Archy

      Alton, David

      Leadbitter, Ted

      Archer, Rt Hon Peter

      Leighton, Ronald

      Ashdown, Paddy

      Lewis, Terence (Worsley)

      Atkinson, N. (Tottenham)

      McCartney, Hugh

      Banks, Tony (Newham NW)

      McDonald, Dr Oonagh

      Barron, Kevin

      McKay, Allen (Penistone)

      Bell, Stuart

      McNamara, Kevin

      Bennett, A. (Dent'n & Red'sh)

      Madden, Max

      Blair, Anthony

      Meadowcroft, Michael

      Boyes, Roland

      Mikardo, Ian

      Bruce, Malcolm

      Millan, Rt Hon Bruce

      Caborn, Richard

      Mitchell, Austin (G't Grimsby)

      Callaghan, Rt Hon J.

      Nellist, David

      Callaghan, Jim (Heyw'd & M)

      Orme, Rt Hon Stanley

      Campbell-Savours, Dale

      Owen, Rt Hon Dr David

      Canavan, Dennis

      Park, George

      Carter-Jones, Lewis

      Parry, Robert

      Clarke, Thomas

      Pendry, Tom

      Clay, Robert

      Pike, Peter

      Clelland, David Gordon

      Powell, Raymond (Ogmore)

      Cocks, Rt Hon M. (Bristol S)

      Prescott, John

      Cohen, Harry

      Radice, Giles

      Coleman, Donald

      Randall, Stuart

      Cook, Frank (Stockton North)

      Redmond, Martin

      Cook, Robin F. (Livingston)

      Rees, Rt Hon M. (Leeds S)

      Corbyn, Jeremy

      Roberts, Allan (Bootle)

      Crowther, Stan

      Roberts, Ernest (Hackney N)

      Cunningham, Dr John

      Robertson, George

      Davies, Ronald (Caerphilly)

      Robinson, G. (Coventry NW)

      Davis, Terry (B'ham, H'ge H'l)

      Rogers, Allan

      Deakins, Eric

      Rowlands, Ted

      Dewar, Donald

      Sedgemore, Brian

      Dormand, Jack

      Sheerman, Barry

      Dubs, Alfred

      Sheldon, Rt Hon R.

      Eastham, Ken

      Shore, Rt Hon Peter

      Edwards, Bob (W'h'mpt'n SE)

      Short, Ms Clare (Ladywood)

      Fatchett, Derek

      Silkin, Rt Hon J.

      Faulds, Andrew

      Smith, C.(Isl'ton S & F'bury)

      Fields, T. (L'pool Broad Gn)

      Smith, Rt Hon J. (M'ds E)

      Fisher, Mark

      Snape, Peter

      Foot, Rt Hon Michael

      Soley, Clive

      Foulkes, George

      Spearing, Nigel

      Freeson, Rt Hon Reginald

      Steel, Rt Hon David

      Freud, Clement

      Stewart, Rt Hon D. (W Isles)

      Garrett, W. E.

      Straw, Jack

      George, Bruce

      Thomas, Dr R. (Carmarthen)

      Godman, Dr Norman

      Tinn, James

      Gould, Bryan

      Wareing, Robert

      Hamilton, James (M'well N)

      Williams, Rt Hon A.

      Hamilton, W. W. (Fife Central)

      Wilson, Gordon

      Hancock, Michael

      Winnick, David

      Haynes, Frank

      Woodall, Alec

      Hogg, N. (C'nauld & Kilsyth)

      Wrigglesworth, Ian

      Holland, Stuart (Vauxhall)

      Hoyle, Douglas

      Tellers for the Ayes:

      Janner, Hon Greville

      Mr. John McWilliam and Mr. Don Dixon.

      Kaufman, Rt Hon Gerald

      Kennedy, Charles

      NOES

      Alexander, Richard

      Ancram, Michael

      Alison, Rt Hon Michael

      Ashby, David

      Amess, David

      Aspinwall, Jack

      549

      Atkinson, David (B'm'th E)

      Griffiths, Peter (Portsm'th N)

      Baker, Nicholas (Dorset N)

      Ground, Patrick

      Baldry, Tony

      Grylls, Michael

      Banks, Robert (Harrogate)

      Gummer, Rt Hon John S

      Bellingham, Henry

      Hamilton, Hon A. (Epsom)

      Benyon, William

      Hamilton, Neil (Tatton)

      Best, Keith

      Hampson, Dr Keith

      Bevan, David Gilroy

      Hannam, John

      Biffen, Rt Hon John

      Hargreaves, Kenneth

      Biggs-Davison, Sir John

      Harris, David

      Blackburn, John

      Harvey, Robert

      Blaker, Rt Hon Sir Peter

      Haselhurst, Alan

      Body, Sir Richard

      Hawkins, C. (High Peak)

      Boscawen, Hon Robert

      Hawkins, Sir Paul (N'folk SW)

      Bottomley, Mrs Virginia

      Hayward, Robert

      Bowden, A. (Brighton K'to'n)

      Heathcoat-Amory, David

      Bowden, Gerald (Dulwich)

      Henderson, Barry

      Braine, Rt Hon Sir Bernard

      Heseltine, Rt Hon Michael

      Brandon-Bravo, Martin

      Hickmet, Richard

      Bright, Graham

      Hicks, Robert

      Brinton, Tim

      Higgins, Rt Hon Terence L.

      Brooke, Hon Peter

      Hill, James

      Brown, M. (Brigg & Cl'thpes)

      Hind, Kenneth

      Browne, John

      Hirst, Michael

      Bruinvels, Peter

      Hogg, Hon Douglas (Gr'th'm)

      Bryan, Sir Paul

      Holland, Sir Philip (Gedling)

      Budgen, Nick

      Holt, Richard

      Burt, Alistair

      Hordern, Sir Peter

      Butcher, John

      Howard, Michael

      Butler, Rt Hon Sir Adam

      Howell, Rt Hon D. (G'ldford)

      Butterfill, John

      Hunter, Andrew

      Carlisle, John (Luton N)

      Jenkin, Rt Hon Patrick

      Carlisle, Kenneth (Lincoln)

      Jessel, Toby

      Carlisle, Rt Hon M. (W'ton S)

      Johnson Smith, Sir Geoffrey

      Carttiss, Michael

      Jones, Robert (Herts W)

      Chapman, Sydney

      Kershaw, Sir Anthony

      Chope, Christopher

      Key, Robert

      Churchill, W. S.

      Knight, Greg (Derby N)

      Clark, Dr Michael (Rochford)

      Knowles, Michael

      Clark, Sir W. (Croydon S)

      Lamont, Norman

      Clarke, Rt Hon K. (Rushcliffe)

      Lang, Ian

      Clegg, Sir Walter

      Latham, Michael

      Colvin, Michael

      Lawler, Geoffrey

      Conway, Derek

      Lawrence, Ivan

      Coombs, Simon

      Lawson, Rt Hon Nigel

      Cope, John

      Lennox-Boyd, Hon Mark

      Couchman, James

      Lester, Jim

      Cranborne, Viscount

      Lightbown, David

      Crouch, David

      Lilley, Peter

      Currie, Mrs Edwina

      Lord, Michael

      Dickens, Geoffrey

      McCrindle, Robert

      Dicks, Terry

      McCurley, Mrs Anna

      Douglas-Hamilton, Lord J.

      MacGregor, Rt Hon John

      Dunn, Robert

      MacKay, John (Argyll & Bute)

      Durant, Tony

      Maclean, David John

      Edwards, Rt Hon N. (P'broke)

      McNair-Wilson, M. (N'bury)

      Emery, Sir Peter

      Major, John

      Evennett, David

      Marlow, Antony

      Fairbairn, Nicholas

      Mates, Michael

      Fallon, Michael

      Mather, Carol

      Farr, Sir John

      Maude, Hon Francis

      Finsberg, Sir Geoffrey

      Maxwell-Hyslop, Robin

      Fletcher, Alexander

      Meyer, Sir Anthony

      Forman, Nigel

      Miller, Hal (B'grove)

      Forsyth, Michael (Stirling)

      Moate, Roger

      Forth, Eric

      Moynihan, Hon C.

      Fowler, Rt Hon Norman

      Nelson, Anthony

      Fox, Marcus

      Newton, Tony

      Franks, Cecil

      Norris, Steven

      Fraser, Peter (Angus East)

      Onslow, Cranley

      Freeman, Roger

      Osborn, Sir John

      Galley, Roy

      Ottaway, Richard

      Gardner, Sir Edward (Fylde)

      Page, Sir John (Harrow W)

      Garel-Jones, Tristan

      Patten, J. (Oxf W & Abgdn)

      Goodhart, Sir Philip

      Pawsey, James

      Gorst, John

      Percival, Rt Hon Sir Ian

      Gow, Ian

      Powell, William (Corby)

      Grant, Sir Anthony

      Proctor, K. Harvey

      Greenway, Harry

      Rhodes James, Robert

      Griffiths, Sir Eldon

      Rhys Williams, Sir Brandon

      550

      Ridsdale, Sir Julian

      Twinn, Dr Ian

      Rossi, Sir Hugh

      van Straubenzee, Sir W.

      Rowe, Andrew

      Viggers, Peter

      Sainsbury, Hon Timothy

      Waddington, David

      Sayeed, Jonathan

      Wakeham, Rt Hon John

      Shelton, William (Streatham)

      Walden, George

      Sims, Roger

      Walker, Bill (T'side N)

      Skeet, Sir Trevor

      Waller, Gary

      Smith, Tim (Beaconsfield)

      Ward, John

      Soames, Hon Nicholas

      Wardle, C. (Bexhill)

      Spencer, Derek

      Watts, John

      Spicer, Jim (Dorset W)

      Wells, Bowen (Hertford)

      Squire, Robin

      Wells, Sir John (Maidstone)

      Stanbrook, Ivor

      Whitfield, John

      Steen, Anthony

      Whitney, Raymond

      Stern, Michael

      Wiggin, Jerry

      Stevens, Lewis (Nuneaton)

      Wilkinson, John

      Stewart, Allan (Eastwood)

      Winterton, Mrs Ann

      Stewart, Andrew (Sherwood)

      Wolfson, Mark

      Taylor, John (Solihull)

      Wood, Timothy

      Taylor, Teddy (S'end E)

      Yeo, Tim

      Temple-Morris, Peter

      Younger, Rt Hon George

      Thomas, Rt Hon Peter

      Thompson, Donald (Calder V)

      Tellers for the Noes:

      Thompson, Patrick (N'ich N)

      Mr. Peter Lloyd and Mr. Gerald Malone.

      Thorne, Neil (Ilford S)

      Thornton, Malcolm

      Question accordingly negatived.

    Clause 1

      INVESTMENTS AND INVESTMENT BUSINESS
      Mr. Howard: I beg to move amendment No. 2. in page 2, line 3, leave out from 'Schedule' to 'shall' in line 9 and insert
      'and is not excluded by Part III of that Schedule.
      (3) For the purposes of this Act a person carries on investment business in the United Kingdom if he—

      (a) carries on investment business from a permanent place of business in the United Kingdom; or

      (b) by way of business engages in the United Kingdom in any activity which falls within any paragraph in Part II of that Schedule and is not excluded by Part III or IIIA of that Schedule.

      (4) Part I to IIIA of that Schedule'.
      Mr. Deputy Speaker (Mr. Ernest Armstrong): With this it will he convenient to take Government amendment No. 19 and the amendments thereto: (a), line 7, at end insert
      'or with a person who, by reason of the number of occasions he enters into transactions of the kind in question, the consideration involved in those transactions or the circumstances in which they are entered into, may reasonably be taken to understand the risks involved'.
      (b),line 10, after 'exempted person', insert
      `or a person who may reasonably be taken to understand the risks involved'.

      (c),line 15, leave out 'authorised person or exempted'.

      (d). line 16, leave out 'the authorised'.

      (e), line 16, leave out from 'person' to end of line 17.

      Mr. Howard: When we discussed this subject in Committee some suggestions were made that the territorial scope of clause 1 was in some respects too broad and that there was a risk that if unamended the provisions of the Bill might drive away business from overseas which is very valuable to the balance of payments and which is not done with ordinary investors in this country. I undertook at that stage to consult and to bring forward amendments excluding from the scope of the Bill certain transactions entered into by overseas businesses. The amendments are the fruit of that consultation.

      551
      The amendments are designed to deal with two types of business. The first, which is covered by paragraph 22A of schedule 1, concerns business done here by an overseas person—that is, a person without a permanent place of investment business in the United Kingdom — with or through a qualified person. By "qualified person", I mean either an authorised person whose ordinary business involves transactions of the kind in question or an exempted person doing business in respect of which he is exempt. When the transaction is done with or through an authorised person, that person will be sufficiently expert to understand the risks involved in dealing with an overseas person who is not subject to the Bill. If he is acting for a client, it will be for the authorised person to look after his client and to have regard to his client's circumstances.
      The provision allowing transactions to be effected through an exempted person would also allow overseas persons to use the facilities of a recognised investment exchange without obtaining authorisation.
      The second type of business with which I was concerned was the sort of business where the overseas person made no effort to solicit business in the United Kingdom from unauthorised persons. This is the purpose of paragraph 22B. The effect of this paragraph will be to exclude from the definition of investment business certain activities undertaken by an overseas person. The exclusion will apply where the activity is engaged in either on the unsolicited initiative of a person in the United Kingdom or where the overseas person's client or customer is a person on whom he is permitted to cold-call or to whom he is permitted to send advertisements under the regulations to be made under the Bill. It is likely that these regulations will allow cold calling on and the sending of advertisements to professional and business investors and existing clients. I believe that that exclusion will meet the objectives underlying the amendments put forward by my hon. Friend the Member for Croydon, South.
      The provisions in the amendment would, I believe, meet most of the concerns which have been expressed about undermining the protection that the Bill will afford to investors. However, I would welcome comments on the extent to which they achieve the desired effect. This is a complex matter on which our deliberations are greatly assisted by the representations that we receive from interested parties. I believe that, overall, our proposals strike about the right balance, but I am prepared to consider further adjustments of the balance if a case can be made for them.
      Amendment agreed to.

    Schedule 1

      INVESTMENTS AND INVESTMENT BUSINESS
      Amendments made: No. 3, in page 130, line 14, at end insert
      ', industrial and provident societies or credit unions'.
      No. 4, in page 131, line 17, at end insert
      'or in respect of two or more different investments falling within paragraph 3 above and issued by the same person.'.
      No. 5, in page 131, line 19, after 'in', insert 'or securities of'.—[Mr. Howard.]
      Mr. Howard: I beg to move amendment No. 6, in page 132, leave out lines 30 to 39 and insert—
      552

      (a) the benefits under the contract are payable only on death or in respect of incapacity due to injury, sickness or infirmity;

      (b) no benefits are payable under the contract on a death (other than a death due to accident) unless it occurs within ten years of the date on which the life of the person in question was first insured under the contract or before that person attains a specified age not exceeding seventy years;

      (c)the contract has no surrender value or the consideration consists of a single premium and the surrender value does not exceed that premium: and

      (d)the contract does not make provision for its conversion or extension in a manner that would result in its ceasing to comply with paragraphs (a), (b) and (e) above.

      (2) Where the provisions of a contract of insurance are such that the effecting and carrying out of the contract—

      (a) constitutes both long term business within the meaning of the Insurance Companies Act 1982 and general business within the meaning of that Act; or

      (b)by virtue of section 1(3) of that Act constitutes long term business notwithstanding the inclusion of subsidiary general business provisions,

      references in this paragraph to rights and benefits under the contract are references only to such rights and benefits as are attributable to the provisions of the contract relating to long term business.'.
      The intention behind paragraph 10 of schedule 1 is to exclude from the definition of "investments" long-term insurance contracts whose sole purpose is protection against risk. However, the precise dividing line between those contracts which have an investment element and those which do not is obviously a somewhat difficult one to draw, given the complexities of the insurance market, and for that reason I was happy to acknowledge in Committee that we might not initially have got it exactly right in all respects. I promised, however, to consider the matter further, with a view to tabling appropriate amendments to the Bill on Report and I have now done that. The wording of the amendment reflects the result of extensive and wide-ranging consultations with a variety of interested parties, in an attempt to draw as accurate and as precise a dividing line as may be possible. The broad effect of the changes is to allow a slightly wider class of pure protection insurance contracts to qualify for exclusion but the exemption is of course, intended not to be available for any contract that would normally be regarded as an investment.
      Mr. Tim Smith: On 30 January I moved in Committee an amendment that was similar to the Government amendment. I am grateful to my hon. and learned Friend the Under-Secretary of State for the consultation that the Government undertook with interested parties on this matter. Those who have commented to me on the Government amendment have said that they are satisfied with the changes that the Government have made, and they are therefore duly grateful.
      Amendment agreed to.
      Mr. Ashdown: I beg to move amendment No. 7, in page 132, line 46, at end insert—
      '(11A) Real property of any type or description, except residential property, wherever situated and whether or not subject to encumbrances.'.
      The purpose of the amendment s to bring investment in non-domestic property within the meaning and the terms of the Bill—property relating to office buildings, shops, factories, agricultural land, and so on. The amendment closely follows on the proposals and recommendations put to me by the National Association

      553
      of Pension Funds. However, we have deliberately excluded residential property because we have no wish to draw every estate agent in the land within the ambit of the Bill.
      I do not pretend for one moment that this is a perfect solution. It is a balanced one which nevertheless is useful because it goes some way, in a sensible and reasonable way, towards recognising the type of investment decisions that can be taken and their impact in relation to property, without drawing in domestic property.
      The word "real" in the amendment is well understood. The National Association of Pension Funds advised us that it was normally used in the trade and its lawyers said that it was appropriate. It may well be that it is not the right term to use, in which case we shall be more than happy to accept an amendment. The principle is what is important.
      6.45 pm
      The pension funds have vast amounts of money invested in property. The Government have calculated that they have about £12 billion invested in property. According to the NAPF's 1984 survey, 10 per cent. of its portfolios are in that category. In the 1970s the investment in property was much higher — about 20 per cent. of portfolios. The percentage has now dropped, for reasons that we can well understand — for example, lower inflation and the recession in rental growth. That position could easily be reversed if inflation were to increase, as some say it might, if there were a rise in property prices, or if the Government simply stopped issuing index-linked bonds.
      Whatever the case in the future, at present substantial proportions of the portfolios of pension funds are invested in property. Few of those funds have their own property departments. They therefore rely heavily on agents of one sort or another for management and advice on acquisition and disposal. There is potential for severe conflicts of interest between clients of the same firm and between agents and the firms and their clients. The Royal Institution of Chartered Surveyors attempts, and in many cases does a good job, to regulate the market. I understand that on a number of occasions pension funds nevertheless have had to seek redress through the courts against property agents for breaches of duty under the law of agency.
      I have no doubt that every vested interest will oppose the amendment, and I suppose that one can understand that. I suggest that there is no reason why, given the impact and importance of decisions in this respect, conflicts of interest here should be treated differently from conflicts of interest anywhere else. The acquisition by larger conglomerates of some of the firms involved may lead to the wholy inconsistent position in the future in which one service offered by a conglomerate is regualated and another—on property advice—is not. There could be the stupid situation in which pension fund trustees meet a number of advisers sitting around the same table — say, an adviser on United Kingdom securities, an adviser on international securities and an adviser on property—some of whom are regulated and therefore fall under the Bill's provisions, but the property adviser escapes those provisions. We wish to bring that aspect within the scope of the Bill.
      554
      The exclusion of this provision from the legislation would be more understandable if property investment had not created problems in the past, but we know that that is not so. The early 1970s were marked by what one Conservative Prime Minister referred to as the "unacceptable face of capitalism"—directly, I recall, in relation to property investment.
      Mr. Tim Smith: It was in relation to Lonrho.
      Mr. Ashdown: I stand corrected, but it was certainly part of the same era. Without doubt, problems have been created in the past with respect to the law of agency. Without doubt, the scandal of the secondary banking crisis in the 1970s was created because of problems of property valuation.
      Our purpose is to bring such investment advice within the scope of the legislation and to prevent such a thing happening in the future. If the Under-Secretary of State intends resisting the amendment, we shall want to know that he will be ready and willing to extend the Bill's scope under the powers given in, for instance, clause 2, should such problems again arise.
      Mr. Howard: By the exercise of characteristically tortuous logic, the hon. Member for Yeovil (Mr. Ashdown) has passed from the identification of inaccurate reasons why I come to the decisions which I do to an identification of the vested interests which he suspects will oppose any amendment which he tables and which will accordingly doom that amendment. It is an interesting sign of the degree of accuracy with which his party approaches these matters. Any allegation may be made as long as it corresponds to a certain period, if it relates to the right era, and it does not matter whether it is inaccurate in every other respect. However, the general principle underlying the definition of investments in the Bill is that it excludes physical property which a potential purchaser can inspect and which passes under his direct control on purchase.
      A person wishing to buy a building can have it surveyed and establish its physical condition, the cost of any essential repairs and the likely maintenance costs. Once he has purchased it, he will he able directly to influence at least that part of its value which relates to its structural condition. This distinguishes real property from investments as defined in the Bill, where the purchaser acquires rights, directly or indirectly, in underlying assets which he generally cannot inspect or control.
      Two arguments have been advanced for including real property within the scope of the Bill. The first is that for large fund managers, such as insurance company and pension fund managers. property is an alternative store of value to investments as defined in the Bill, and that it should therefore be regulated in a similar fashion. The second is that property is frequently promoted and purchased as an "investment" in the sense of an asset which it is hoped to sell subsequently at a profit. But the problem with both these arguments is that they do not present a case for drawing the line at real property. Fund managers have other stores of value available, such as works of art. A wide range of things — for instance, stamps or limited edition porcelain plates — are promoted on the basis that they will rise in value, and are bought in that expectation, or at least that hope. It would be wholly impracticable to extend the scope of the Bill to cover all those areas.

      555
      Moreover, to include real property within the definition of investments would greatly increase, to no clear advantage, the range of businesses to which the Bill would apply. For instance, even with an exclusion for residential property, the mainstream activities of a large number of estate agents and property management agents and solicitors who undertake commercial conveyancing would be brought within the Bill's scope. What would be the benefit of doing so? To what sort of rules should they be subject? Clearly, rules drawn up to cover, for instance, the management of a portfolio of shares would be wholly inappropriate to the management of an office block as such.
      I believe that what has been called the touch-and-see principle is the right one to adopt when defining investments. The provisions of the Bill are inappropriate for physical objects and real property which pass under the direct control of the purchaser. I urge the House to reject the amendment.
      Mr. Ashdown: The opening of the Minister's speech, in which he sought to play the person not the argument, was rather typical of the rest of it because I was very dissatisfied with that. He failed to recognise the scale of the problem and sought to relate it to the same kind of area as, for example, advice on works of art when he knows that, by the Government's own figures, £12 billion is currently invested in pension funds in property. The scale is wholly different.
      It seems that the Minister has considerably underestimated the seriousness of this problem—in terms of scale, of the damage done to the probity of the City and to the economy in a previous age, and of the effect and possibility of its happening again. I found his remarks offensive in the early stages and downright complacent in the latter part of the speech. In the light of his reply, I am tempted to call a vote on this amendment. I shall not do so for one reason only. There is pressure on time and we are being asked to move things forward. I accede to that because I may want to call a vote later in the interests of the business of the House.
      We have put down a marker, and in the future we shall probably have good cause to remind the Minister, or some other person who holds his position, of it so that we can say that the complacency he has shown in this matter will be called into account later.
      Amendment negatived.
      Amendments made: No. 8, in page 133, line 21, leave out 'a' and insert 'an authorised'.
      No. 19, in page 135, line 23, at end insert—

    'PART IIIA
      ADDITIONAL EXCLUSIONS FOR PERSONS WITHOUT PERMANENT PLACE OF BUSINESS IN UNITED KINGDOM

        Transactions with or through authorised or exempted persons
        22A. —(1) Paragraph 12 above does not apply to any transaction by a person not falling within section 1(3)(a) of this Act ("an overseas person") with or through —

        (a) an authorised person whose ordinary business involves transactions of the kind in question;

        (b) an exempted person acting in the course of business in respect of which he is exempt.

        (2) Paragraph 13 above does not apply if the arrangements are made by an overseas person with, or the offer or agreement to make them is made by him to or with, an authorised person or an exempted person and the arrangements are with a view to the authorised person or exempted person entering into a transaction which is within
        556
        the ordinary business of the authorised person or, as the case may he, a transaction in respect of which the exempted person is exempt.

        Unsolicited or legitimately solicited transactions etc. with or for other persons
        22B. — (1) Paragraph 12 above does not apply to any transaction entered into by an overseas person as principal with, or as agent for, a person in the United Kingdom, paragraphs 13, 14 and 15 above do not apply to any offer made by an overseas person to or agreement made by him with a person in the United Kingdom and paragraph 15 above does not apply to any advice giver by an overseas person to a person in the United Kingdom it' the transaction, offer, agreement or advice is the result of —

        (a) an approach made to the overseas person by or on behalf of the person in the United Kingdom which either has not been in any way solicited by the overseas person or has been solicited by him in a way which has not contravened section 51 or 52 of this Act; or

        (b) an approach made by the overseas person which has not contravened either of sections.

        (2) Where the transaction is entered into by the overseas person as agent for a person in the United Kingdom, Subparagraph (1) above applies only if—

        (a) the other party is outside the United Kingdom; or

        (b) the other party is in the United Kingdom and the transaction is the result of such an approach by the other party as is mentioned in sub-paragraph (1)(a) above or of such an approach as is mentioned in sub-paragraph (1)(b) above.'. —[Mr. Howard.]

        Mr. Bruce Millan: I beg to move amendment No. 20, in page 135, line 23, at end insert—
        '22A Paragraphs 12, 13 and 15 anything done in connection with the purchase or sale of a business, or the assets of a business, offered for sale as a single entity.'.
        Mr. Deputy Speaker: With this it will be convenient also to consider the following amendments: No. 21, in page 135, line 23, at end insert—
        '22B Paragraphs 12, 13 and 15 above do not apply to anything done by a body incorporate in relation to the internal organisation of its own funds.'.
        No. 22, in page 135, line 23, it end insert—
        '22C Paragraphs 12 and 15 above do not apply to anything done by a company in relation to reconstruction of its own capital, except in a case where such reconstruction involves activities falling within paragraph 13 above.'.
        No. 24, in page 136, line 6 at end insert—
        '(3A) Advice given to a company in relation to the activities mentioned in subparagraph (3) above shall not be regarded as investment advice for the purposes of this schedule.'.
        Mr. Millan: I shall make it clear immediately that these four amendments are probing amendments because I want to have some clarification about schedule 1.
        The first amendment deals with the
        "purchase or sale of a business, or the assets of a business, offered for sale as a single entity."
        I know that in Committee the Minister said that this matter is excluded from the definition of investment in the Bill. However, to me and to professional people outside it is not at all clear where or how this matter is excluded in the Bill. It seems that some clarification is required. If the Minister can point to the words or passage in the Bill which deal with that item and satisfy us that it is adequately dealt with, fair enough. However, as far as I can see it is not currently dealt with explicitly in the Bill
        The other three amendments deal with advice on corporate finance given to companies. The Minister will know that the accountancy bodies have been rather concerned about which elements of corporate finance advice are caught by the Bill and which are excluded. That

        557
        is not clear at present. There is a misprint in amendment No. 21 because I have in mind a body corporate, not a "body incorporate" as is printed on the Amendment Paper. Since I am complaining about the lack of clarity elsewhere I feel that I should make that clear.
        There have been discussions between the Departments and the accountancy bodies on this matter and I have seen a letter written on 19 May from the Department. However, far from clarifying the position, the letter, if anything, makes it less clear than I had understood it to be. Obviously there is a need for some clarification, and that can be done only by an amendment to the Bill. It would obviously be undesirable for the Bill to reach the statute book with some doubt as to exactly what the schedule covers. It must be in everyone's interest that that should be put right before the Bill becomes an Act.
        Amendment No. 21 deals with the body corporate in relation to the internal organisation of its own funds. I am thinking specifically of whether advice in relation to that would be covered as investment advice in the schedule. I think that there would be a case for saying that it should not be covered because one is not dealing with an outside party which is being invited to invest. One is dealing with the internal organisation of the company's own funds. Of course, in itself that may involve a certain amount of investment advice on changing investments or financing arrangements and so on. I do not have a particular view as to whether that should be excluded. My amendment would say that it should be but, as I have said, it is a probing amendment. I am simply saying that we should know whether it is excluded or not. That is the important element in the amendment. There are arguments on both sides.
        Amendment No. 22 deals with the capital reconstruction of a company. There are different circumstances, whether it is a capital reconstruction which involves further investment from outside and further calls on shareholders, or whether it is capital reconstruction which does not involve that. Again, it is not covered exclusively in the schedule to the Bill and it is not clear to many professional people whether that is covered or not. In some circumstances investment advice in relation to capital reconstruction, should be covered by the Bill, and in others it should not. I do not want to be dogmatic about where the dividing line should be, if, indeed, there should be a dividing line at all. Accountants and other people involved in professional advice must know whether a particular activity is covered by the Bill.
        7 pm
        Amendment No. 24 deals with what is already an exclusion in the Bill. Schedule 1 paragraph 23(3) relates to the issue by a company of its shares, which is not regarded as falling within the schedule. That does not make clear the position of advice in relation to the issue by a company of its shares. That is not mentioned specifically in the schedule. It may be that, although the issue by a company of its shares is excluded, advice in relation to that is not excluded. Again, there are arguments on both sides about whether the matter should be included or excluded. My point is that there must be clarity so that professional advisers know exactly how they are placed in relation to the legislation.
        558
        I have chosen only three examples of matters involving advice on corporate finance. Many other matters may arise which are not dealt with clearly in the Bill. The way in which schedule 1 is drafted makes it extraordinarily difficult to table amendments which one can be reasonably confident will have the effect that one intends. I tabled the three amendments in order to ask the Minister for clarification or at least an undertaking that the matter will be reconsidered in the other place. Then we can be reasonably confident that when the Bill reaches the statute book we have it right, and those who will he involved will know what their responsibilities are.
        Mr. Tim Smith: I support the right hon. Member for Glasgow, Govan (Mr. Millan). His amendment No. 20 has the same object as my amendment No. 1, which was not selected for debate. The White Paper stated clearly:
        "Investments' will be defined to exclude … business, or the assets of a business, offered for sale as a single entity".
        It would be helpful to hear what progress my hon. and learned Friend the Minister has been able to make towards incorporating such a provision in the Bill.
        I know of the letter to which the right hon. Gentleman referred because I have seen a copy of it. It was intended to be helpful and to be a clarification, but it illustrated the complexities of the problem of corporate financial advice. That has been highlighted further by the fact that the Association of Corporate Treasurers has now written to many hon. Members saying that it has recently been suggested that its activities may be covered by the Bill. We are a long way from the original object of the Bill if it covers corporate treasury work, and I understand that the advice of the Department is that it does. Within a group there may be a subsidiary company with a minority holding, so I can see how that may be the case. If that is so, we are a long way from the original object of protecting domestic investors. Anything that can be done to clarify the Bill's ambit as precisely as possible before it becomes law cannot be other than the best possible course of action.
        Mr. Howard: I shall do my best to respond to the entirely reasonable requests of the right hon. Member for Glasgow, Govan (Mr. Millan) and my hon. Friend the Member for Beaconsfield (Mr. Smith) for further clarification of the points that they raised. I shall endeavour to provide a degree of further clarification or, failing that, to say how we propose to set about the task of providing further clarification.
        I can offer the right hon. Gentleman some reassurance on two points regarding amendment No. 20. First, the sale of the assets of a business will not normally constitute an investment activity, so a person whose business it was to arrange the transfer of assets, such as plant and machinery, from one proprietor to another would not be caught by the Bill. Secondly, the Bill would not catch a privately arranged sale by shareholders of their shares to a new proprietor or proprietors. However, the Bill as drafted would catch someone who advises on such transactions by way of business or is a transfer agent whose business is to arrange sales of the shares of small companies with few shareholders — often members of the same family — to new proprietors.
        We are sympathetic to the idea of excluding such activities from the scope of the Bill, but the difficulty comes when one starts to try to define the transactions to be excluded. It would, for instance, be possible to provide an exclusion when a transfer agent advises on or arranges

        559
        the sale by one person of the entire issued share capital of a company, or virtually the entire capital because there must always he two shareholders in a limited company, to another person. But that would be of limited use. Frequently, there will be more than one person on one or other side of the transaction, and the transaction may not involve all the shares, either because those wanting to sell do not own all the shares or because they want to retain an interest in the company, which they may, after all, have founded.
        If one tries to accommodate such transactions a number of other questions quickly arise. Should there be a limit on the number of people involved on each side of the transaction, and if so, what should it be? Should it be a requirement that the people on one side were connected to each other in some way, and if so, how? What should be the minimum proportion of shares that would have to be transferred for the exclusion to apply? I hope that the whole House will agree that these are not easy questions to answer.
        Obviously, there is no point in providing an exclusion if it is so limited as to be of no value to advisers and transfer agents. Equally, we must avoid opening up unacceptable loopholes. The references in the right hon. Gentleman's amendments to the sale of a "business" are not apt to the sale of shares in a business, and the amendment does not answer the important questions I have mentioned. But we have certainly not ruled out amendments to deal with the point, and I would welcome any suggestions as to how they might be framed so as to achieve a satisfactory balance between two objectives that conflict to some extent. If a satisfactory definition can he found, the Government would certainly be prepared to bring forward amendments in another place.
        The remaining amendments deal with the position under the Bill of corporate treasurers and advisers on corporate finance. It might he helpful if I deal with them separately.
        In addition to what has been said today, I have received some representations about the impact of the Bill on corporate treasurers. I accept that the present exclusion in schedule 1 for own-account dealings may not deal adequately with the problem of transactions undertaken by a company with or for another company in the same group. There may also be problems when a corporate treasurer deals with professional and business investors overseas. I propose to consider what needs to be done to deal with these problems, and the Government will bring forward amendments in another place.
        The term "corporate finance" is broad and rather vague. It includes activities which are clearly within, and ought to be within, the definition of investment business, as well as activities which are outside that definition and others which fall close to the borderline. It may be possible to exclude from the definition certain restricted categories of corporate finance advice, such as the particular activity identified in amendment No. 24 of advising a company on the issue of its shares. I would be very willing to consider any other proposals which might help to clarify the boundary of investment business without opening up unacceptable loopholes. But I should repeat that some of the activities of the larger corporate finance advisers are clearly within the scope of the Bill, and I would not be prepared to exclude them completely.
        Mr. Millan: The Minister has just told us that this is a difficult problem and that he does not have the answers to some of my points——
        Mr. Howard: Yet.
        Mr. Millan: I am not entirely confident from his speech whether he ever will have the answers to these particular problems. I am sure that the professional bodies outside will want to read his speech carefully. It is clear that some amendments to the schedule will be required, and it is unsatisfactory for the House that we do not have them at this stage. Obviously, it is not possible to judge what the amendments are likely to be and whether they will be acceptable because we shall not nave an opportunity to see them.
        Mr. Gould: Does my right hon. Friend share my surprise that, given that the Bill had its genesis some time ago and was foreshadowed by a substantial report, we still have not had answers to these important questions?
        Mr. Millan: It is surprising because one would have thought that these questions would have had to be answered before the Bill was drafted beyond its preliminary stage. The Bill should explain what it covers, what an investment is and what is investment advice. Everything else in the Bill depends on such definitions.
        This is the core of the Bill. Although these amendments may appear to be technical, we are dealing with the definition of matters upon which the whole Bill hangs. The professional bodies, will, as I have said, wish to consider what the Minister has said and I hope that there will be further discussions. I admit that these problems are difficult and I am in no way minimising the difficulties of producing the correct definitions.
        I accept the Minister's point that we do not wish to have exclusions in the schedule which would allow loopholes. I would certainly support that. I have made the point, and the Minister accepted this, that there must be further amendments. I hope that the discussions which will no doubt take place, will eventually produce a reasonably satisfactory and comprehensive solution. In the meantime, I beg to ask leave to withdraw the amendment.
        Amendment, by leave, withdrawn.
        Amendments made: No. 23, in page 136, line 1, after 'shares', insert 'or share warrants'.
        No. 25, in page 136, line 8, leave out first 'and'.
        No. 26, in page 136, line 9, at end insert—
        'and "share warrants" means any investment which falls within paragraph 4 above and relates to shares in the company concerned.'—[Mr. Howard]

    Clause 6

      INJUNCTIONS AND RESTITUTIONS ORDERS
      Amendments made: No. 27, in page 4, line 33, after 'injunction', insert
      'or, in Scotland, an interdict'.
      No. 28, in page 4, line 42, after 'below', insert—
      'or, in relation to Scotland, under subsection (4A) below'.
      No. 29, in page 5, line 20, at end insert—
      '(4A) The court may under this subsection order the person concerned to pay to the applicant such sum as appears to the court to be just having regard to the considerations mentioned in paragraphs (a) to (c) of subsection (4) above.'.
      No. 30, in page 5, line 22, after '(4)', insert 'or (4A)'.
      No. 31, in page 5, line 41, leave out subsection (8)—[Mr. Howard.]

    Schedule 2

      REQUIREMENTS FOR RECOGNITION OF SELF-REGULATING ORGANISATION
      Amendments made: No. 32, in page 137, line 32, after 'agency', insert 'a transferee body'.
      Mr. Howard: I beg to move amendment No. 33, in page 137, line 42, at end insert—
      '(2) The arrangements shall not be regarded as satisfying the requirements of this paragraph unless the persons responsible for those matters include a sufficient number of persons who are independent of the organisation and its members.'.
      As I said when this paragraph was discussed in Committee, I entirely accept the need for effective independent representation on governing bodies of recognised self-regulating organisations so as to ensure that proper account is taken of the interests of users and of the general public. The Bill is intended to ensure such representation. It was suggested in Committee that the requirement ought to be spelt out more explicitly in the Bill, and I undertook to consider that. The amendment reflects that consideration, and I commend it to the House.
      Mr. Gould: The Opposition recognise that the element of independence is spelt out in the amendment. That is desirable and welcome. However, we must register our slight disappointment at the use of the word "sufficient". It seems to be a meaningless word in the context, and we would have preferred a word such as "substantial" or "significant", which might have made more sense to the judges if ever they were required to decide upon the matter.
      Mr. Ashdown: To reinforce the point, I recall during the Committee debating the matter at some length with the Minister. We finally extracted from him, with the pain of extracting an elephant's tooth, in relation to the SIB the words a "significant proportion". Why can the SIB have a "significant proportion" whereas for the SRO it is reduced to a "sufficient proportion"? Will the Minister tell us what the difference is in numerical terms between "significant" and "sufficient"? What does "sufficient" mean? "Sufficient" is a weak and almost meaningless word for a very important matter.
      Mr. Howard: It would defeat the object of the terms used in these clauses if they were capable of being reduced to a specific arithmetical quantity in the way suggested by the hon. Member for Yeovil (Mr. Ashdown). I have introduced the amendment in its present terms to accord the maximum flexibility while meeting the objective which was common to both sides in the Standing Committee.
      Amendment agreed to.

    Clause 11

      REVOCATION OF RECOGNITION
      Amendment made: No. 34, in page 8, line 14, leave out
      'of its obligations under this Act';
      and insert
      'obligation to which it is subject by virtue of this Act'—[Mr. Howard.]

    Clause 12

      COMPLIANCE ORDERS
      Amendments made: No. 35, in page 9. line 24, at beginning insert '(a)'.
      No. 36, in page 9, line 26, after 'organisations' insert
      '; or

      (b) that a recognised organisation has failed to comply with any obligation to which it is subject by virtue of this Act,'.

      No. 37, in page 9, line 29, leave out from first 'that' to 'is' in line 32 and insert —
      'subsection (3) of section 10 or the requirement in question is not satisfied or, as the case may be, that the organisation has failed to comply with the obligation in question it may order the organisation to take such steps as the court directs for securing that that subsection or requirement is satisfied or that that obligation'.
      No. 38, in page 9, line 35, leave out clause 13. —[Mr. Howard.]

    Clause 14

      NOTIFICATION REQUIREMENTS
      Mr. Howard: I beg to move Government amendment No. 39, in page 10, leave out lines 13 to 45 and insert—
      '14—(l) The Secretary of State may make regulations requiring a recognised organisation to give him forthwith notice of the occurrence of such events relating to the organisation or its members as are specified in the regulations and such information in respect of those events as is so specified.
      (2)The Secretary of State may make regulations requiring a recognised organisation to furnish him at such times or in respect of such periods as are specified in the regulations with such information relating to the organisation or its members as is so specified.
      (3)The notices and information required to be given or furnished under the foregoing provisions of this section shall be such as the Secretary of State may reasonably require for the exercise of his functions under this Act.
      (4)Regulations under the foregoing provisions of this section may require information to be given in a specified form and to be verified in a specified manner.'.
      Mr. Deputy Speaker: With this it will be convenient also to consider Government amendments Nos. 40, 41, 61, 62, 126, 160, 191 and 192.
      Mr. Howard: These are largely technical amendments. Self-regulating organisations will need to provide a wide variety of information to the Secretary of State or designated agency. Clause 14 and other provisions specify some of this information in great detail by leaving other elements to be prescribed in regulations.
      On reflection, we feel that it would be preferable to have a genuine regulation-making power under the Bill so that the requirements can be more easily adapted to changing circumstances. We have also concluded that the Secretary of State or designated agency might need recognised investment exchanges and clearing houses to notify information other than that specified in subsections (1) and (2) of clause 39. Amendment No. 61 therefore gives a similar regulation-making power to that given in the case of self-regulating organisations.
      Amendment agreed to.
      Amendments made: No. 40, in page 11, line 1, after 'notice', insert
      'or information required to be given or furnished'.
      No. 41, in page 11, line 11, after insert ',or of regulations under,'.
      No. 42, in page 11, line 11, leave out from 'offence' to end of line 15. —[Mr. Howard.]

    Clause 19

      REVOCATION OF RECOGNITION
      Amendment 'made: No. 43, in page 13, line 15, leave out
      'of its obligations under this Act'
      and insert—
      'obligation to which it is subject by virtue of this Act.'—[Mr. Howard.]

    Clause 20
      NOTIFICATION REQUIREMENTS
      Amendment made: No. 44, in page 14, line 4, leave out from 'offence' to end of line 7. —[Mr. Howard]
    Clause 22

      REGISTERED FRIENDLY SOCIETIES
      Amendments made: No. 45, in page 14, line 21, after 'registered', insert
      'within the meaning of that Act'.
      No. 46, in page 14, line 22, leave out 'under that Act'.
      No. 47, in page 14, line 32, after 'registered', insert 'or deemed to be registered'. —Mr. Howard.]

    Clause 23

      OPERATORS OF RECOGNISED SCHEMES
      Amendments made: No. 48, in page 15, line 2, after 'operator', insert 'or trustee'.
      No. 49, in page 15, line 4, after 'operating', insert 'or acting as trustees in relation to'. —[Mr. Howard]

    Clause 26

      GRANT AND REFUSAL OF AUTHORISATION
      7.15 pm
      Mr. Ashdown: I beg to move amendment No. 50, in page 16, line 5, at beginning insert
      'Subject to subsection (2A) below,'.
      Mr. Deputy Speaker: With this it will be convenient to consider amendment 51, in page 16, line 10, at end insert—
      '(2A) The Secretary of State may refuse the application if he considers that it is unnecessary having regard to the existence of one or more self-regulating organisations which are concerned with investment business of a kind with which the applicant is concerned and which have been or are likely to be recognised under section 10 above.'.
      Mr. Ashdown: The purpose of amendments Nos. 50 and 51 is to give a reserve power to refuse direct registration should the Secretary of State wish to do that.
      Many hon. Members will recognise—this point arose in Committee and it has been a subject for discussion elsewhere — that there is a danger of too much direct registration with the SIB. If that were to happen, the SIB would be swamped and its effectiveness would be undermined. It might even be possible for a group of would-be members of any SRO deliberately to undermine
      564
      that SRO by seeking direct registration with the SIB. The amendment copes with that by allowing the Secretary of State the powers to refuse direct registration or to delegate those powers in the case of an existing SRO.
      As the Bill stands, it is possible for members of an SRO who found the rules too onerous or too rigidly enforced or who found the fees too high to remove themselves from the SRO and either apply to another SRO or to seek direct registration with an SIB. That could destroy the SRO concerned. It would also negate the whole principle of self-regulation because people would be able to apply to the superior body for direct registration and so undermine the effectiveness of the SRO.
      That is the basis of amendment No. 50 and that is the danger which the amendment addresses. The power that we seek is sensible and is essentially a reserve power.
      Mr. Tim Smith: Is the SIB seeking this power?
      Mr. Ashdown: I am not aware whether the SIB is seeking this power. However, that is a rational judgment. The dangers that I have outlined which may confront us in future make a case for the power. I know that other hon. Members will agree with that.
      Mr. Nelson: I have a measure of sympathy for the intent behind the amendment, as I made clear in Committee. I fear that the regime may be thwarted by people who, for a variety of reasons, apply to the designated agency instead of the SRO. The latter is the desirable course and maintains the integrity of the system of regime supervision as foreseen in the White Paper.
      My hon. and learned Friend the Minister, in Committee, appeared to state that the cost and rules of either the Secretary of State or the SIB as designated agency might be so onerous as to provide a substantial disincentive for anyone to seek authorisation by that route. That needs repetition on Report. That is the major point of resistance to the amendments.
      I am worried that people may treat an application for SIB authorisation as a court of appeal against refusal by an SRO to grant an authorisation. In some circumstances, many operators in the market may feel that the higher cost of attaining authorisation from the SIB is well worth while because they do not have to be subject to the day-to-day monitoring which certain SROs will and should impose. Those who seek protection under the framework as designated should be given sufficient reassurance to allow the amendments to be dropped, or my hon. Friend the Minister should later accept something along these lines.
      Mr. Gould: This is a matter which we also argued in Committee. We have some sympathy with the amendment, for the reasons that have already been given.
      There is a danger that the Securities and Investments Board's structure will be rendered unworkable because individuals, who are perhaps professional people, whose professional bodies do not seek recognition are obliged to seek authorisation or because some of the very large institutions decide that it is the simpler means of getting authorisation, preferring it to joining three or four SROs. I remain of the view that it would be worth while as a precautionary measure to have a reserve power such as this.
      I suspect that the Minister, having heard these arguments before, will not be persuaded by hearing them

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      again. I nevertheless hope that he will recognise the danger and that he does not live to regret overlooking this opportunity.
      Mr. Howard: The hon. Member for Dagenham (Mr. Gould) says that, having failed to be persuaded by these arguments in Committee, it is unlikely that I shall be persuaded by them this evening. He is correct.
      I am sure that most businesses will choose to become authorised through membership of an SRO. These bodies form the cornerstone of practitioner-based regulation. They will be close to the market place and best placed to adapt the requirements for investor protection into rules which are relevant and practical for the investment activity with which they are concerned. Their familiarity with the needs of the investment businesses that they regulate will help them to devise effective monitoring and enforcement arrangements which do not impose unnecessary burdens on the businesses.
      I am confident that most businesses will regard SRO authorisation as the most practicable route for them. In addition, it may well be found that the cost of direct authorisation is higher than that chargeable for SRO membership and that control by an inevitably remoter body will be less efficient for a business.
      Why should a power of the sort described in the amendment be contemplated to back up the attractions of SRO membership? I believe that any coercion over the route by which a business may choose to become authorised is inappropriate. SROs will be private bodies, exercising powers over their membership by the contractual agreement between them. If powers are taken which could in effect be used to direct individual businesses to apply to join SROs, the status of those bodies cannot help but be changed. I do not believe that they should be forced to consider and, if fit and proper, to admit to membership applicants who do not want to become members.
      Mr. Campbell-Savours: Does not the Minister understand that the amendment proposes only a reserve power? It is not imposing anything. Can he not see it in those terms?
      Mr. Howard: I am suggesting that the exercise of that power would be inappropriate. If one takes the view that the exercise of such a power would be inappropriate—I am setting out the reasons—there is no call even for a reserve power. The conflict to which I have referred would inevitably be a cause for friction, and the success of self-regulation depends on voluntary acceptance of the spirit as well as the letter of the rules. An unwilling member is unlikely to have that sort of attitude.
      Equally, the business may feel that an SRO is not the right body to regulate its activities, that its charges are excessive or that its rule book or methods present problems for the business's activities. Why should the agency be able to upset the business's commercial judgment and force it to apply to an SRO?
      I realise that there is concern among some conglomerates that they may have to join several SROs for various aspects of their business and that this will be costly and bureaucratic. The proposals from the SIB for the creation of a lead regulator which would be responsible for handling overall financial surveillance should be adequate
      566
      to minimise duplication of effort and over-bureaucracy. Even conglomerates should find SRO membership a convenient route for authorisation.
      I do not believe that large numbers of businesses will want to seek direct authorisation, but even if they did I do not agree that they would swamp the agency or that the system could not work, although the agency would have to take on more staff to consider applications and to monitor businesses thereafter. By building up its resources, and with practitioners on the board and staff, the agency would be able to cope. I hope and expect that most businesses will join SROs, but if they do not the system that we are proposing is flexible enough to deal with them. The amendment would remove the right of a business to choose how to get its authorisation. We should preserve that freedom of choice, and I invite the House to reject the amendment.
      Mr. Ashdown: I must again express some sadness at the Minister's reply. He said, rather revealingly, that the arguments that had been put to him had not persuaded him to change his mind. We know that no powerful bodies are behind the arguments and that they must stand by themselves.
      I am grateful to the hon. Member for Chichester (Mr. Nelson) for his properly qualified support and to the hon. Member for Dagenham (Mr. Gould) for his support. The hon. Member for Dagenham said — the Minister admitted it — that conglomerates might be required to register with three or four SROs. That will put cost burdens on them. The direct registration procedure might prove less expensive and less bureaucratically onerous.
      The Minister said that he believed that most businesses would regard SROs as their appropriate route for authorisation. I agree. I envisage most businesses taking that route. As the hon. Member for Workington (Mr. Campbell-Savours) said, we are suggesting a reserve power. Firms might well choose a different route.
      The Minister has set his face against the amendment. He ended with a curious statement — he said that we would remove a right and force businesses. That is not what we intend. We are suggesting a reserve power for use in exceptional circumstances. By rejecting the amendment, the Minister has left open the possibility of a chain of events which may cause him to change his mind.
      Amendment negatived.
      Mr. Howard: I beg to move amendment No. 52, in page 16, line 15, leave out 'exempt' and insert 'appointed'.
      Mr. Deputy Speaker: With this it may be convenient to consider Government amendments Nos. 64 to 68, 70, 71, 76, 84 to 86, 162 to 164, 193 and 262.
      Mr. Howard: In reply to a similar amendment which was proposed in Committee by my hon. Friend the Member for Beaconsfield (Mr. Smith), I accepted that the phrase "exempt representative" might not be the best one to use in relation to the people covered by clause 41 in so far as it tended to suggest that they were not to be subject to the Bill's provisions at all. This is not, of course, the case. Since the conduct of an exempt representative is treated under clause 41 as the conduct of his principal for the purposes mentioned in the clause, the exempt representative would have to comply with whatever provisions of the Bill or rules and regulations made under

      567
      it as would have applied to his principal. The only exemption is from the requirement separately to become authorised.
      Nevertheless, I am aware that the phrase has tended to give rise to an understandable misconception regarding the precise status of the persons covered by clause 41, and I accordingly undertook in Committee to consider an alternative expression that might convey a rather clearer indication of that status. The phrase "appointed representative" was proposed by my hon. Friend the Member for Beaconsfield and is, I believe, the one that best achieves that objective.
      Amendment agreed to.

    Clause 30

      AUTHORISATION IN OTHER MEMBER STATE
      Mr. Howard: I beg to move amendment No. 53, in page 19, line 13, after 'question', insert '(a)'.
      Mr. Deputy Speaker: With this it may be convenient to consider Government amendments Nos. 54 to 56 and 170.
      7.30 pm
      Mr. Howard: The purpose of these amendments is to remove some of the uncertainty about the circumstances in which the provisions of the clause conferring authorisation on certain member state nationals have effect.
      I should recall at the outset that clause 30 reflects an existing right under the EEC treaty. The central principle is that a national of any member state is allowed under the treaty to provide services in any member state without being made subject to restrictions which cannot be justified on the basis of certain principles. The ones which are relevant are that the requirements must be objectively necessary and proportionate to the ends to be achieved and that requirements must not duplicate requirements in the member state of establishment which provide substantially the same safeguards. In other words, the law must take account of the safeguards afforded by other member states. That is why clause 30 confers authorisation on persons authorised in other member states whose authorisation procedures provide safeguards equivalent to those provided under the Bill.
      The application of this last principle means that the clause must apply whenever, as a matter of fact, there is equivalence between the regimes in question—a matter which can ultimately be decided only by the courts. However, I accept that such a provision could give rise to unwelcome uncertainty, and the purpose of these amendments is to reduce this uncertainty.
      The first area of uncertainty concerns harmonised regimes such as exist in the case of life insurance. The whole purpose of harmonised regimes is to allow the products in question to be sold throughout the Community, regardless of their member state of origin. The purpose of the new subsection (3)(d) is to make it clear that the authorisation conferred by the clause applies to a person who is authorised in another member state under a harmonised regime. By virtue of the new subsection (5), to take advantage of this authorisation a person must possess a certificate issued by his home
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      authorities confirming that the relevant provisions of the law in that state conform to the relevant harmonisation directive.
      The second leg of the main amendment provides for the Secretary of State to issue a certificate to the effect that the provisions of the law of another member state satisfy the equivalence criterion. The existence of such a certificate would be conclusive proof that the equivalence criterion was satisfied and that a person authorised under the relevant provisions was authorised in the United Kingdom. The power to issue such a certificate would not be transferable to the designated agency. In view of the international implications of the exercise of the power I think that it should he reserved to the Secretary of State.
      The amendments would not remove all the uncertainty about clause 30. For the reasons I have explained, the absence of a certificate issued by the Secretary of State could not be conclusive proof' that the equivalence requirement was not satisfied. A person authorised under some other provisions might still be authorised under clause 30 to carry on investment business in the United Kingdom. This possibility must be kept open if we are to comply with our Community obligations. However, I believe that the amendments would have the effect of clarifying considerably the application of clause 30.
      Because of this remaining uncertainty, and to meet some of the concern expressed in Committee, we have provided that the notice required under clause 31 must be given at least seven days before a person authorised by virtue of clause 30 begins to carry on investment business in the United Kingdom. This will allow the Secretary of State or designated agency time to consider the notice and to seek an injunction restraining the person from carrying on investment business if he or it believes that the person is not in fact authorised under clause 30, or to use the intervention powers if the notice suggests that the person is intending to carry on investment activities not covered by his home state authorisation and it would not be in the interests of investors to allow him to do so.
      Mr. Gould: We welcome these amendments, but the Minister will recall that one of the matters arising under clause 30 which concerned the Committee was that the clause appeared, at least on our reading, to be wider in effect than was actually required by our EEC treaty obligations. The Minister will recall that we were exercised by the example of a person authorised to act as art insurance broker in Greece who thereby authorised to act for all investment business purposes in this country. Will the Minister confirm that he has studied that question but has decided to do nothing about it?
      Mr. Howard: After I studied that question, I came to the conclusion that it was not appropriate to take action, for the reasons I expressed when the matter was debated in Committee.
      Amendment agreed to.
      Amendment made: No. 54, in page 19, line 18, at end insert
      '; or

      (b) satisfy the conditions laid down by a Community instrument for the co-ordination or approximation of the laws, regulations or administrative provisions of member States relating to the carrying on of investment business or investment business of the relevant kind.

      (4) A certificate issued by the Secretary of State and for the time being in force to the effect that the provisions of the law

      569
      of a member state comply with the requirements of subsection (3)(a) above, either as respects all investment business or as respects investment business of a particular kind, shall be conclusive evidence of that matter but the absence or revocation of such a certificate shall not he regarded as indicating that those requirements are not complied with.
      (5) This section shall not apply to a person by virtue of paragraph (b) of subsection (3) above unless the authority by which he is authorised to carry on the investment business in question certifies that he is authorised to do so under a law which complies with the requirements of that paragraph.'. —[Mr. Howard.]

    Clause 31

      NOTICE OF COMMENCEMENT OF BUSINESS
      Amendments made: No. 55, in page 19, line 20, after 'unless,' insert
      'not less than seven days'.
      No. 56, in page 19, line 39, at end insert—
      '(2A) A notice by a person claiming to be authorised by virtue of subsection (3)(b) of section 30 above shall be accompanied by a copy of the certificate required by subsection (5) of that section.'.;[Mr. Howard.]

    Clause 36

      GRANT AND REVOCATION OF RECOGNITION
      Amendments made: No. 57, in page 23, line 17, leave out
      'of its obligations under this Act'
      and insert—
      'obligation to which it is subject by virtue of this Act'.
      No. 58, in page 23, line 24, leave out from 'requirements' to 'there' in line 26 and insert—
      'and obligations referred to in subsection (7) above as it has effect in relation to the requirements and obligations'. —[Mr. Howard.]

    Clause 38

      GRANT AND REVOCATION OF RECOGNITION
      Amendments made: No. 59, in page 24, leave out line 42 and insert—
      'obligation to which it is subject by virtue of this Act:'.
      No. 60, in page 25, line 6, leave out from 'requirements' to 'there' in line 8 and insert—
      'and obligations referred to in subsection (7) above as it has effect in relation to the requirements and obligations'. —[Mr. Howard.]

    Clause 39

      NOTIFICATION REQUIREMENTS
      Amendments made: No. 61, in page 25, line 9, after '39' insert —
      '(lA) The Secretary of State may make regulations requiring a recognised investment exchange or recognised clearing house to give him forthwith notice of the occurrence of such events relating to the exchange or clearing house as are specified in the regulations and such information in respect of those events as is so specified.
      (1B) The Secretary of State may make regulations requiring a recognised investment exchange or recognised clearing house to give him forthwith notice of the occurrence of periods as are specified in the regulations with such information relating to the exchange or clearing house as is so specified.
      (1C) The notices and information required to be given or furnished under the foregoing provisions of this section shall be such as the Secretary of State may reasonably require for the exercise of his functions under this Act.
      570
      (1D) Regulations under the foregoing provisions of this section may require information to be given in a specified form and to be verified in a specified manner.'.
      No. 62, in page 25, line 22, leave out 'this section' and insert—
      'subsection (1) or (2) above'. —[Mr. Howard.]

    Clause 40

      LLOYD'S
      Mr. Gould: I beg to move amendment No. 63, in page 25, line 28, leave out clause 40.
      In Committee we had a thorough debate on whether Lloyd's should be within the Bill. I have no intention of rehearsing fully all the arguments which were expressed on that occasion. It is important that the House, the City and the public should have an opportunity to hear the issue ventilated once more so that it may be judged on its merits. For that reason, we tabled our amendment and we are delighted it has been selected.
      The fundamental point is that Lloyd's is deliberately excluded from the Bill. The Bill regulates investment business. As such business is carried out at Lloyd's, by normal principles it should therefore be within the Bill. Clause 40 makes a specific exclusion in favour of Lloyd's and that is the starting point of the argument. In my view, the onus should be on those who drafted the measure rather than on those who have argued that, based on the general principle, Lloyd's should be within the Bill.
      At first sight, most people would be surprised that Lloyd's has been singled out for this special treatment. If one asks the public or those in the City which institution cried out most for regulation, I am sure the answer would be Lloyd's. Lloyd's has been the source of outrageous scandals and has caused much public concern. Lloyd's is the epitome of self-regulation, and therefore the epitome of what can go wrong. On the face of it, Lloyd's is an odd candidate for special treatment.
      Other institutions — the stock exchange or the Eurobond market— which could legitimately state that they have a clean record and have done well over recent years, could ask why they are being picked upon. Such protestations are rejected, and I believe that is correct. But it is curious that Lloyd's, which cannot assert such a good record—it has a spotty and blemished record—should receive special treatment.
      One of the arguments advanced in favour of this special treatment is that Lloyd's is already regulated as an insurance business by the Department of Trade and Industry. Almost every other institution covered by the Finance Bill is regulated by some other agency. That is true of the friendly societies, the building societies, the insurance companies and the professionals.
      It is argued that Lloyd's is covered by the Lloyd's Act 1982 and that is why it is excluded from the Bill. The 1982 Act was simply an assertion of self-regulation. We have now decided that self-regulation, especially in the light of all that has happened in the City since 1982, is no longer enough. It does not produce acceptable results and cannot be relied upon. Why is self-regulation allowed to stand for Lloyd's when it is clear that it is inadequate?
      It is also argued that because Lloyd's, since the beginning of 1983, has put its house in order, it should not be criticised for defalcations and other offences which were committed before that date. We were able to detail many

      571
      aspects of Lloyd's record since 1983 which led us to have little confidence in the view that Lloyd's had learnt anything about the dangers of self-regulation.
      I do not propose to dwell on those matters, because most hon. Members will be familiar with them. However, there is the whole question of Lloyd's failure to regulate in the case of the PCW syndicate and its attitude to those of its members who suffered substantial losses in consequence of the fraud and theft and the trading pattern which ensued due to those frauds and thefts. Lloyd's has frustrated and obstructed its members and investors from pursuing legitimate remedies.
      Mr. John Butterfill: We touched on this yesterday, but I would like to stress again that I have no personal interest in Lloyd's. The hon. Gentleman is again making assertions for which there seem to be no firm foundations. I understand that Lloyd's has made proposals to deal with the fraud element in the PCW syndicate. The subject of the dispute between Lloyd's and some of its names concerns the subsequent management of the syndicate and whether that management was prudent or rash—underwriting risky business—thereby creating further losses for those names. That is quite different, and the hon. Gentleman is surely misleading the House when he suggests that Lloyd's was responsible for both aspects.
      Mr. Gould: It may be that the hon. Gentleman's almost unique position—a Conservative Back Bencher with no links with Lloyd's — has led him to be more than credulous in these matters. What he has described is a device used by Lloyd's to escape its responsibilities. It is true that Lloyd's has attempted to draw a line after 1982. It has argued that all that happened before that date was theft and fraud, but that all that happened after that was due to ordinary trading losses. The fact is that those trading losses were incurred because the crooks chose to underwrite business with no regard for the long-term consequencies. All they were interested in doing was maximising the short-term premium income so that they could cover their tracks and give themselves time to get away — and that is what happened. The PCW names have been pursuing their claim and have met nothing but obstruction from Lloyd's.
      Mr. Buttertill rose——
      Mr. Gould: I shall not give way again because we had a substantial debate on this in Committee.
      I remind the House of a matter of immediate and central significance. Lloyd's, in its preparedness to frustrate a decent and honourable solution of the PCW affair, went to the length of deliberately misleading the hon. Member for Edinburgh, Central (Mr. Fletcher) when he was a Minister at the Department of Trade and Industry, to the extent that he was induced to come to the House and tell us a deliberate—not on his part—lie. I say that advisedly. He was given facts and figures that must have been known by those who gave them to him to be false and were subsequently demonstrated to be false.
      For those who are looking puzzled, I remind the House that the statement made by the hon. Member for Edinburgh, Central concerned a number of those who were alleged to have passed the solvency test among those who were names in the PCW syndicate. That does not
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      build confidence in the reliability and honour of Lloyd's or in its sense of responsibility, or show that it has learnt any lessons as a consequence of its unfortunate experience.
      I could go on. I could refer to the argument with the Inland Revenue, which had to insist that a whole series of activities by Lloyd's members were designed specifically to avoid tax and could not be tolerated. I could point to the circumstances and reasons for the resignation of the then chief executive, appointed by the Governor of the Bank of England to clean up Lloyd's. In other words, there are many signs that, after 1983, Lloyd's is still not to be trusted to look after its own affairs.
      The one remaining argument and explanation as to why Lloyd's should be excluded from the Bill, contrary to all the general principles that have been laid down, is the one that the Under-Secretary who will reply to the debate advanced in Committee: the admittedly unusual feature that investors in Lloyd's— its members or names— are a section of the investing public whose interests are, in some senses, in direct conflict with those of another section of the public—the policyholders. While accepting that in any conflict between the interests of the investors and those of policyholders, it must he the latter that prevail—to do it justice, that has always been Lloyd's policy, quite rightly — it cannot be argued that the price of meeting and protecting the interests of policyholders is necessary that investors at Lloyd's must have their affairs dealt with at a standard lower than and different from that accepted and recognised as appropriate throughout every other part of the City. I cannot believe that that argument would be seriously supported or advanced by the members of Lloyd's Council or Lloyd's.
      True to my undertaking that I would not rehearse at length the arguments that I put in Committee, I hope that I have conveyed enough to suggest that we still believe—if anything, our belief is strengthened by these events—that it is an outrage, a scandal and a dereliction of duty that Lloyd's should be excluded from the Bill. Lloyd's remains the last bastion of private privilege in the City—the last private fiefdom. Unless it is brought within the Bill, it will be impossible to take the Bill seriously.
      Mr. Nicholas Baker: I have not had the privilege of hearing the arguments rehearsed in Committee by the hon. Member for Dagenham (Mr. Gould), but he has been extremely selective in the points that he. admittedly briefly, has put for why Lloyd's should be included in the Bill. The major point that he keeps reiterating is that members of Lloyd's are investors, and that, as I know very well because I declare my interest as a member, is exactly what members of Lloyd's are not. Investors are people who deposit a sum of money and usually get someone else to deal with their money on their behalf, hoping that their investment will increase in that way. Members of Lloyd's are not like that. They are actively engaged in trading, and the fact that some of them take rather less interest in monitoring their trade and ask fewer questions than they should have done, is well known. However, it does not alter the fact that, for tax and in reality, they are traders and not investors.
      7.45 pm
      Mr. Gould: I intervene to save the hon. Gentleman further embarrassment. If he will take the trouble to read the speech made by the Under-Secretary in Committee, he will see the clearest possible, and extremely helpful,

      573
      exposition of the three respects in which the business undertaken at Lloyd's by Lloyd's underwriters and by the Lloyd's Council is investment business within the definition of the Bill.
      Mr. Baker: I am answering the point as to whether members of Lloyd's are investors, and they are not. My hon. Friend has a certain view, but the purpose of the Bill is to protect investors. That was the title of the papers by Professor Gower that originally were the background for the Bill.
      Mr. Ashdown: If the hon. Gentleman will not accept the opinion of the Under-Secretary on this matter, perhaps he will be prepared to comment on the remarks of his hon. Friend the Member for Wiltshire, North (Mr. Needham) who complained vigorously in the papers because he was clearly informed that this was a safe investment. Is it not odd that the hon. Member should be out of kilter not only with the Minister but with one of his hon. Friends?
      Mr. Baker: If my hon. Friend said that, he was wrong. I am talking about what an investor is. He is someone who in principle is not doing what a member of Lloyd's is doing.
      Those who joined as members of Lloyd's, as I did, post 1982, had every reason for concern about the risks that they took, which are completely different to those taken by investors. They have had the confidence to join because of the provisions of the 1982 Act. I have not heard the hon. Member for Dagenham present any case to the House, although he may have done so in Committee, to show in which respects the powers given to the Lloyd's Council by the 1982 Act are deficient, or how the exercise of those powers has been deficient. He has quoted a number of incidents, most of which do not relate to whether the 1982 Act was sufficient for the governance of Lloyd's.
      I took confidence. I have another interest to declare because I was one of the promoters of the 1982 Bill. I had at that stage no interest in Lloyd's, but I felt that, in helping to promote the Bill, I was doing something that would give a new framework for the governance of Lloyd's, and that is what we have. In doing that, we had the support of the Committee chaired expertly and successfully by the hon. Member for Oldham, West (Mr. Meacher). He did an extremely good job to see that the rules that Lloyd's would have to apply were tightly defined.
      The Lloyds Act 1982 does not offer protection that is any less than members of Lloyd's or the public would derive if Lloyd's were within the ambit of the Bill. If that later turns out to be the case, there will be other opportunities to legislate. There is a good argument for allowing the 1982 Lloyd's Act to do what it was intended to do and to govern in a self-regulating manner those who work in and are members of Lloyd's. It would he wrong and inappropriate for Lloyd's to be brought within the ambit of the Bill.
      Mr. Ashdown: It is with some chagrin and no great enthusiasm that I have to tell the hon. Member for Dagenham (Mr. Gould) that while I share his deep anxiety about the way in which Lloyd's is run, and have listened to him putting his impressive case both eloquently and powerfully in Committee and in this debate, I shall not join him tonight in the Lobby.
      Mr. Campbell-Savours: Who is under pressure from the large institutions now?
      Mr. Ashdown: The hon. Member for Workington (Mr. Campbell-Savours) talks about big city institutions. I shall happily give way to him if he would like to name one big city institution that would be prepared to put any kind of pressure on me. I shall be delighted to hear of it and perhaps I shall be knocking on its door tomorrow.
      Mr. Campbell-Savours: Perhaps the hon. Gentleman will tell us if my accusation is correct. Is it not true that a number of very senior people in the Liberal party are members of Lloyd's? Would he like me to give their names?
      Mr. Ashdown: I can assure the hon. Member for Workington that if that is the case I do not know either the number or the names. As I recall, the hon. Member who is the adviser to the Leader of the Opposition is also a member of Lloyd's. I cannot remember his name but I believe that the hon. Member for Dagenham (Mr. Gould) knows perfectly well who I am talking about and no doubt Government Members know as well. If the hon. Member for Workington is unaware of the name he ought to make himself aware of it fairly fast before he casts aspersions on others. As far as I know, not one of my hon. Friends is in that position.
      The reason I say, with some lack of enthusiasm, that I will not be able to go through the Lobbies with the hon. Member for Dagenham and his right hon. and hon. Friends is not akin to the rather tortuous and theological reasons put forward by the hon. Member for Dorset, North (Mr. Baker) or indeed for the equally tortuous and theological reasons that will be put forward by the Minister if his reply is anything like last time. My reason is quite simply that I do not believe an appropriate way to deal with the problems of Lloyd's is by bringing Lloyd's within the scope of the Bill.
      I do not differ in a single word from the hon. Member for Dagenham in the way that he outlined those problems and their impact on the probity of the whole City. I differ from his opinion on the matter because we would be better advised to deal with the problem that he has so carefully outlined by directly amending the Lloyds Act 1982. That would be better than to bring Lloyd's within the ambit of the Bill.
      Having said that, it is incumbent on me to say how I wish to see that done. We all know that the Neill inquiry is currently sitting, and I moved an amendment in Committee which sought to give a sort of year's grace until we saw what Neill recommended. The answers that the Neill inquiry should provide are not about whether to do something but about what needs to be done. I have no doubt that something needs to be done, and if the Neill inquiry were to say that nothing should be done, it may well be that it would be right to vote with the hon. Member for Dagenham, because to do nothing about that problem will give rise to considerable difficulties.
      I wish to see the problems of Lloyd's resolved through five separate forms of change in policy and that could be done under the Lloyd's Act 1982. We need to tackle directly the reinsurance system and we will have to introduce some system of licensing for reinsurance. There needs to be closer monitoring of the agencies, and that monitoring should include the power of spot checks. There also needs to be closer monitoring of the funds, especially

      575
      the personal reserve funds, so that those can be not just checked on 31 December but audited on an efficient basis throughout the year. We need to tackle the problem of conflict of interests, recognising that in the PCW scandal the underwriter not only wrote the reinsurances but managed the company that employed them.
      Mr. McCrindle: If the hon. Gentleman sees as one of the solutions to what he poses as the Lloyd's dilemma as the licensing of reinsurers, what steps would he take to license those many reinsurers who are outside these shores?
      Mr. Ashdown: The hon. Member for Brentwood and Ongar (Mr. McCrindle) has asked a fair question. I did not go into that kind of detail because I did not think it was appropriate. However, he asked the question and I shall give him a reply. It would not be difficult for those people in reputable companies in places like the United States, Canada and Australia to have reciprocal agreements which would ensure that those licences were effective. In such cases as offshore reinsurance houses which are not directly licenced there ought to be some kind of authority required to use those agencies for reinsurance. It would be proper and appropriate for auditors to report back and reassure those people who have placed money through Lloyd's in that sector that the reinsurances have been carried out correctly.
      It is important to cope with the conflicts of interest that I have discussed, and vitally important that the Secretary of State should be able to appoint. and be accountable in the House for, the chief executive of Lloyd's. Those are the things that should be done, and for that reason I support the sentiment of the hon. Member for Dagenham, but bringing Lloyd's into the ambit of this Bill would create a special new dimension of problem for the SIB in its early days and create a situation which would be cumbersome and difficult to manage. Of course it would not swamp the SIB, but it would certainly inhibit the formation in the SIB of the kind of action which would be effective to control the market place. That will be difficult enough to do within the time frame anyway.
      Mr. Gould: I am puzzled by the hon. Gentleman's last point. Does he not expect that we are asking the SIB to rely upon SROs which do not yet exist? Why should Lloyd's, which proclaims that it has a wonderful record of self-regulation, pose such a problem to the SIB?
      Mr. Ashdown: The hon. Member for Dagenham has carried out his research carefully and well and has been deeply immersed in this subject for some time. No doubt he has spoken to Sir Kenneth Berrill on this very matter. Of course we should not accept Sir Kenneth Berrill's word as the last word on the subject, but the hon. Gentleman may know as well as I do that Sir Kenneth has said that to take on Lloyd's would overstretch the capacity of the SIB precisely because the SIB's main task is to get the other SROs off the ground within the time frame that is available. Sir Kenneth Berrill is a reasonable judge of these matters and I am impressed by his arguments.
      It is not just a matter of taking over an existing SRO in the case of Lloyd's, but a matter of taking over a malfunctioning inefficient SRO that is not fulfilling its opportunities and its rules effectively. That will overstretch the resources available to the SIB. I share the description of Lloyd's given by the hon. Member for Dagenham, and
      576
      I share his concern about the damage that that has created. I have to depart from him on my point about waiting for the Neill inquiry report and then properly and appropriate amending the Lloyds Act 1982. That is the better way to bring about the reforms that he and I agree are essential.
      Mr. Brian Sedgemore: I do not intend to detain the House by rehearsing the arguments that were put forward in Committee. I can help the hon. Member for Yeovil (Mr. Ashdown) and the House reporting the main conclusions of the Neill inquiry. First of all, I should like to say how we reached those conclusions. When this Bill was introduced into Parliament, there was the threat of a Back-Bench revolt by some Government Members and the Neill inquiry was set up to buy time and to buy them off. Sir Patrick Neill has effectively concluded his inquiry and has reported that he believes there are a number of aspects about the situation at Lloyd's that need to be cleared up. He is not sure whether or not changes will be required to the Lloyds Act 1982.
      Sir Patrick has also reported that he does not believe that it would be appropriate to bring Lloyd's within the ambit of the Financial Services Bill or to bring it under the aegis of the Securities and Investments Board. Nor does he believe that it would be appropriate for any other body to be put over the existing Lloyd's machinery.
      Sir Patrick was in effect asked to carry out a political task by the British establishment. He has performed that political task. He has reported to tie British establishment and the British establishment is grateful. I understand that it will not be long before Sir Patrick reports the findings to the Minister who will then be able to come to the House and question me about them.
      Mr. Nicholas Baker: The hon. Gentleman is obviously a member of the British establishment. Could he let me have a copy of the report?
      8 pm
      Mr. Sedgemore: The hon. Gentleman is one of those with whom I sympathise. He is out in the cold and in order to find out what is going on in the British establishment one literally needs contacts in the highest places. What I have just told the hon. Gentleman is the truth. I hope that the report will not be too long delayed. There are a number of hon. Members in the House who know those facts and I hope that it will not be too long before the Minister is informed. Then we can have a fuller discussion about the individual points which Sir Patrick has raised.
      Mr. Baker: The Minister apparently is not part of the British establishment.
      Mr. Sedgemore: That may well be right. This Minister is not part of the British establishment, as I understand it.
      I realised that this was the kind of report that Sir Patrick was going to produce when I was going through the questions of one of the witnesses who was being questioned by the Neill committee This does not contain the report, but Mr. Dennis Allport who, as everybody knows, is one of the members of the Committee, seemed to me, in asking a rather elongated question, to give expression to all the kind of worries that Labour Members have.

      577
      I simply read out that one question that Mr. Allport asked of the witness at the hearing who gave me the papers and to whom I have spoken on a number of occasions. Mr. Allport said:
      "If you set up a body, say, along the lines of the SIB to overview Lloyd's, that would involve a degree of much more stringent control. Do you not think that that might detract from some of the strengths of Lloyd's, namely its flexibility and the fact that it works? I readily accept there have been some awful scandals and real nonsenses, but they are the sort of headline grabbing stuff. During that period, though, nevertheless the balance of payments of this country has been greatly enhanced by the fact that Lloyd's exists at all. Despite all that has happened, it has a very big reputation still, and still does a very significant amount of business. If in fact you brought in over Lloyd's some regulatory agency of the type that you are mentioning, what arc your views as to the extent to which that could undermine the way Lloyd's do business?"
      I find that statement by Mr. Dennis Allport deeply disturbing, because he begins by saying that he does not want stringent control and that is bizarre. He goes on to draw a fantastic logical non sequitur which is that somehow if one has more stringent control by putting a body over Lloyd's, that would damage the balance of payments. That, as I put to one of the top members of the British establishment yesterday, is simply nonsense. Nobody in his right mind could make that assertion. What he is really saying is, "Yes, we have had a number of scandals and we are a hit upset about those, but let us forget all that and let's get on with the Lloyd's Act 1982."
      The only other point that I want to make is simply that my hon. Friend the Member for Dagenham (Mr. Gould) was right. I am not worried about the Stock Exchange because I constantly contrast what I believe to be the integrity of the people who run the Stock Exchange with what is happening among those who are fairly near and at, or were at, the top of Lloyd's, and a number of them are still fairly near the top of the Lloyd's tree. It is difficult for the public and Parliament to trust them. On Second Reading I outlined some of the difficulties of trust that had occurred — I do not want to go through that again — over Sir Peter Green, a past chairman of Lloyd's, in relation to the case of Unimar. When I submitted some evidence to Sir Patrick Neill I raised that issue with him. I said that it had all been going on for seven years and that seems to be too long to find out the truth of what happened.
      I was able to produce in the House papers which suggested, I put it no higher, that there was a prima facie case of serious dishonesty in this case. I picked up my Sunday Telegraph, which is not a paper that I usually read, but I am told that its news reporting is accurate—I am told that it is another establishment paper—and I saw an article by Christopher Elliott which said that the Department of Trade and Industry had completed its report on Unimar. It says here that there were serious criticisms of Sir Peter Green and senior members of Lloyd's — that is the same argument that we are adducing in this Bill—and that the report is going to the Director of Public Prosecutions.
      I am happy to tell the House that a Minister at the Department of Trade and Industry, whom I thank, said, in answer to a question from me asking him to publish the report, that he will do so as soon as possible. I congratulate
      578
      him on that. The Attorney-General has said that he now has that report into Minet Holdings plc and WMD underwriting agency and he is considering what goes on.
      Labour Members are concerned with many other things which we have set out before. We are deeply disturbed at the kind of attitudes developed by the kind of people at the top of Lloyd's who have been running that particular part of the City. Of all the bodies which one might exclude on that one ground alone, it is extraordinary that Lloyd's should be the one that is excluded. Something must be done either about the Lloyd's Act or about changing it.
      I have just been talking about Unimar and the seven-year delay. It is right to ask how one licenses the reinsurers when they are set up offshore. How would that have been done in the Bellew Parry Raven case? Those companies were set up in Bermuda by Bermudan lawyers who were the directors and shareholders. It is virtually impossible. But those companies were founded in 1970 and it is now 1986 — 16 years on. My understanding is that Lloyd's has asked its solicitors to draw up charges against the people involved. It will be another two or three years before those charges have been heard. There will be an appeal and that will take another year. The papers may go to the Director of Public Prosecutions and we shall be in the 1990s before we know anything about what went on.
      What is the purpose of having a regulatory organisation when it can take 20 years before we can draw the appropriate lessons from what went on. Of course it is nonsense. Of course it is a scandal. Of course it is unsatisfactory.
      Mr. Butterfill: I had not intended to speak on this issue, but I shall do so briefly simply to say that I am rather surprised at the Opposition's attitude on this. The relevant point here is that the general public should he protected by legislation. That is the purpose of the Bill. Lloyd's is impacting most upon the general public amongst those who take out insurance.
      All that Labour Members have done is to say that there have been one, two, three or possibly four bad apples in Lloyd's. Of course, there are in any organisation, but the really important point that the House should consider, and the message that I hope will go out from the House if we have any concern for the standing of the City, its wellbeing and Britain's overseas earnings, is that no person who has taken up insurance with Lloyd's has lost any money as a result of any of the scandals. All insured persons have had their claims met in full. That is what is important for the insurance industry and for those who use the British insurance industry from overseas to understand. There is no risk to them. There have been a few bad apples, but the overriding important thing is that the public has not been prejudiced in any way.
      Mr. Campbell-Savours: The hon. Member for Bournemouth, West (Mr. Butterfill) has got it all wrong. There are 25,000 investors in Lloyd's and they are named in a book that I have in my office. Of the investors, 99·9 per cent. recurring regard themselves as investors. Apart from those who are politically motivated, the investors look to the House of Commons to provide adequate investor protection arrangements to cover their interests. That is why the Labour party, without the support of the Liberal party, has for sometime relentlessly pressed for the inclusion of Lloyd's in the financial legislation.
      Mr. Butterfill: Can the hon. Gentleman name one of them? Apart from the PCW syndicate, who has asked for the legislation?
      Mr. Campbell-Savours: The problem is that many Lloyd's investors speak of their affairs in confidence. I have seen correspondence to and from hon. Members expressing anxiety about arrangements in Lloyd's. I do not intend to identify the hon. Members involved. If the hon. Gentleman has done his homework, he will have seen the correspondence. There are hon. Members present tonight who have also seen that correspondence. We all know that there is anxiety among investors.
      It is crucial that we take action in that area. The framework of the legislation is the way forward.
      The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher): I address my opening remarks to my hon. Friend the Member for Dorset, North (Mr. Baker), because I would not wish him to leave the debate with the impression that there is something between us as regards the definition of the mainstream business of Lloyd's. Of course the mainstream business of Lloyd's is insurance and the underwriting of risks. My hon. Friend may not have benefited from the advantage of participating in our long debates on Lloyd's in Committee and may not be fully aware of clause 67, which says, to paraphrase a well-known American songwriter, "It ain't what you do, it's the way that you do it."
      It is the way in which Lloyd's conducts its business, not so much the product in which it trades, that can be defined as a collective investment scheme. That may be regarded as a somewhat semantic point, but it is worth emphasising because I would not wish my hon. Friend to think that Ministers suffer under some misapprehension as to the type of product in which Lloyd's trades.
      It is no surprise that the amendment should have been moved. It concerns one of the major differences across the Floor of the House. As hon. Members will know, the Neill inquiry is well under way; Sir Patrick and his colleagues have been at work for some months. They have received many written submissions and are taking oral evidence. We look forward to their report.
      I digress briefly to remark on the interesting and incredible observation made by the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore). He tried to tempt us to give some details of the preliminary findings of the Neill inquiry's investigations.
      Mr. Sedgemore: The Minister has got it wrong.
      Mr. Butcher: I can only assume that that is why the hon. Gentleman made his speech in the terms that he did.
      Sir Patrick was originally asked to present his conclusions by the summer. The Neill inquiry has received a considerable volume of written material and is in the midst of taking oral evidence. It is unlikely that it will have completed taking that evidence before the middle of July. Where the hon. Gentleman gets the idea that a report is simmering away to which he has exclusive access, I do not know. Nor do my officials in the Department have any idea of the report's conclusions.
      Mr. Sedgemore: I shall tell the Minister at the back of the Chair afterwards. I shall give him the person's name.
      Mr. Butcher: I would be grateful to the hon. Gentleman, but he has made a career of making this sort of observation. I refer him not only to the need to make
      580
      those observations in public when it is desirable, but to put evidence to the Director of Public Prosecutions, which he has not done in the past, in a manner that will help him to bring prosecutions rather than divert his energies from serious investigations to chase the hares which the hon. Gentleman starts running. To pursue the investigations may he counter-productive. I refer to a letter written to the hon. Gentleman by the fraud investigator which he chose to make public.
      8.15 pm
      The Neill inquiry will need time to consider the substantial body of evidence. It is essential that it has the opportunity to analyse the issues thoroughly. Because of that, the inquiry said, and we have agreed, that we should not expect its report until the autumn. As we originally announced, it will then be published.
      On Second Reading and in Committee, we debated Lloyd's at length. The Government's case remains that, although we are well aware of the problems that have arisen at Lloyd's, it has, as recently as 1982, set up its new regulatory structure. It is not right to condemn that newly reformed structure now. We set up the Neill inquiry to consider whether the system set up to protect the interests of members of Lloyd's provides comparable protection to the system we shall set up under the Bill for investors in general. Until we have Sir Patrick's conclusion, it would be wrong to proceed further.
      I remind the House that in December, before the Neill inquiry was set up, the Prime minister said that we were watching events at Lloyd's closely and would not hesitate to take whatever legislative or other action was necessary. We have set up an inquiry and expressed our will to act should our consideration of the conclusions of the inquiry show that to be necessary.
      Against that background, the Opposition's repeated demand to apply the Bill to Lloyd's is unjust and unwise. It is unjust because, having set up the Neill inquiry, we must allow it to do its work and not pre-empt its conclusions. Deleting clause 40 amounts to that, because it would subject underwriting agents of Lloyd's to a new and separate regime from that in the Lloyd's Act. It is unwise because, as we explanied at some length in Committee, the Bill is not a suitable instrument for the protection of members of Lloyd's.
      It might help the House if I briefly deployed elements of that case again. The Bill is about the protection of investors. The business of Lloyd's is complex, and the legislation governing it must have regard to two factors: first, the protection of the members of Lloyd's as investors in insurance business; but, secondly, and more importantly, the protection of the ordinary holders of Lloyd's insurance policies. The paramount public interest is to ensure that insurers meet their liabilities, and in that Lloyd's has been singularly successful.
      Those two aims — investor and policyholder protection— must often conflict. A we I-known example of the conflict which lies at the heart of Lloyd's is the principle of unlimited liability, or the ultimate punt as it has been called by some commentators. The unlimited liability of members of Lloyd's to meet claims is an important protection for policyholders, but it is hard to appreciate it as a measure of investor protection for the members of Lloyd's. The regulation of Lloyd's must be carefully balanced between those two antagonistic aims. Simply throwing the activities of Lloyd's into the Financial

      581
      Services Bill, as the amendment proposes, will not achieve that balance. A special regime to integrate the two systems would be required to achieve that balance.
      We have drawn attention to the length and complexity of schedule 8, which achieves that balance with long-term insurance companies where investor protection on marketing matters covered by the Bill must be balanced with the regulation of solvency under the Insurance Companies Acts by my Department. The schedule is long and complex, but it deals with a far simpler problem, not least because in the case of long-term insurance companies the investors and policyholders whom we are trying to protect are the same people. At Lloyd's they are not.
      I hope that the House will therefore wait for the report of the Neill inquiry before reaching any conclusions. I appreciate that the hon. Member for Hackney, South and Shoreditch will probably say that he wrote half of it. I hope that the House will also accept that this Bill is not the appropriate vehicle for regulating Lloyd's, and I advise hon. Members to reject the amendment.
      Mr. Campbell-Savours: On a point of order, Mr. Deputy Speaker. Before any Division, will you enlighten the House about the position of those hon. Members who are members of Lloyd's and who wish to vote?
      Mr. Deputy Speaker (Sir Paul Dean): I remind the House of a ruling given by Mr. Speaker on this very point at an earlier stage, namely, that this is a matter of public policy, and every hon. Member is entitled to exercise his vote.
      Mr. Gould: I shall be brief. The Minister is to be congratulated in that his argument that we must wait for the Neill report before addressing the question whether Lloyd's should come within the terms of the Bill is a magnificent example of back to front reasoning. The one point on which I agreed with him was that this remains an issue that divides the two sides of the House. I regret that we shall not have the support of the Liberals in the Lobby, but we shall give effect to the divide that separates us on this issue by pressing the amendment to a Division.
      Question put, That the amendment be made:
      The House divided: Ayes 42, Noes 164.

      Division No. 222]

      [8.20 pm

      AYES

      Archer, Rt Hon Peter

      Holland, Stuart (Vauxhall)

      Atkinson, N. (Tottenham)

      Hoyle, Douglas

      Banks, Tony (Newham NW)

      Hughes, Dr Mark (Durham)

      Bennett, A. (Dent'n & Red'sh)

      Leighton, Ronald

      Campbell-Savours, Dale

      Lewis, Terence (Worsley)

      Carter-Jones, Lewis

      McDonald, Dr Oonagh

      Cocks, Rt Hon M. (Bristol S)

      Madden, Max

      Cohen, Harry

      Millan, Rt Hon Bruce

      Cook, Frank (Stockton North)

      Nellist, David

      Cook, Robin F. (Livingston)

      Orme, Rt Hon Stanley

      Crowther, Stan

      Pike, Peter

      Davis, Terry (B'ham, H'ge H'l)

      Roberts, Allan (Bootle)

      Deakins, Eric

      Robinson, G. (Coventry NW)

      Dewar, Donald

      Sheerman, Barry

      Dormand, Jack

      Smith, Rt Hon J. (M'ds E)

      Faulds, Andrew

      Spearing, Nigel

      Field, Frank (Birkenhead)

      Stewart, Rt Hon D. (W Isles)

      Fisher, Mark

      Wilson, Gordon

      Foster, Derek

      Winnick, David

      Freeson, Rt Hon Reginald

      Gould, Bryan

      Tellers for the Ayes:

      Haynes, Frank

      Mr. Allen McKay and Mr. John McWilliam.

      Hogg, N. (C'nauld & Kilsyth)

      582

      NOES

      Amess, David

      Hickmet, Richard

      Ancram, Michael

      Hill, James

      Ashby, David

      Hind, Kenneth

      Aspinwall, Jack

      Hirst, Michael

      Atkinson, David (B'm'th E)

      Hogg, Hon Douglas (Gr'th'm)

      Baker, Nicholas (Dorset N)

      Holt, Richard

      Baldry, Tony

      Howard, Michael

      Bellingham, Henry

      Hunter, Andrew

      Benyon, William

      Jenkin, Rt Hon Patrick

      Bevan, David Gilroy

      Jessel, Toby

      Biggs-Davison, Sir John

      Jones, Robert (Herts W)

      Blackburn, John

      Joseph, Rt Hon Sir Keith

      Blaker, Rt Hon Sir Peter

      Key, Robert

      Boscawen, Hon Robert

      King, Rt Hon Tom

      Bottomley, Peter

      Knight, Greg (Derby N)

      Bottomley, Mrs Virginia

      Knowles, Michael

      Bowden, A. (Brighton K'to'n)

      Lang, Ian

      Bowden, Gerald (Dulwich)

      Lawler, Geoffrey

      Brandon-Bravo, Martin

      Lawrence, Ivan

      Bright, Graham

      Leigh, Edward (Gainsbor'gh)

      Brinton, Tim

      Lester, Jim

      Brooke, Hon Peter

      Lightbown, David

      Brown, M. (Brigg & Cl"thpes)

      Lilley, Peter

      Browne, John

      Lloyd, Peter (Fareham)

      Bruinvels, Peter

      McCrindle, Robert

      Budgen, Nick

      MacKay, John (Argyll & Bute)

      Burt, Alistair

      McNair-Wilson, M. (N'bury)

      Butcher, John

      Major, John

      Butler, Rt Hon Sir Adam

      Malone, Gerald

      Butterfill, John

      Marlow, Antony

      Carlisle, John (Luton N)

      Mather, Carol

      Carttiss, Michael

      Maxwell-Hyslop, Robin

      Cash, William

      Meyer, Sir Anthony

      Chapman, Sydney

      Miller, Hal (B'grove)

      Chope, Christopher

      Mitchell, David (Hants NW)

      Churchill, W. S.

      Montgomery, Sir Fergus

      Clark, Dr Michael (Rochford)

      Nelson, Anthony

      Clark, Sir W. (Croydon S)

      Newton, Tony

      Clegg, Sir Walter

      Osborn, Sir John

      Conway, Derek

      Ottaway, Richard

      Coombs, Simon

      Page, Sir John (Harrow W)

      Cope, John

      Percival, Rt Hon Sir Ian

      Corrie, John

      Powell, William (Corby)

      Couchman, James

      Proctor, K. Harvey

      Cranborne, Viscount

      Rhodes James, Robert

      Crouch, David

      Ridsdale, Sir Julian

      Currie, Mrs Edwina

      Rossi, Sir Hugh

      Dicks, Terry

      Rowe, Andrew

      Douglas-Hamilton, Lord J.

      Sayeed, Jonathan

      Dunn, Robert

      Shelton, William (Streatham)

      Emery, Sir Peter

      Shepherd, Colin (Hereford)

      Evennett, David

      Shepherd, Richard (Aldridge)

      Fallon, Michael

      Sims, Roger

      Fletcher, Alexander

      Skeet, Sir Trevor

      Forman, Nigel

      Smith, Tim (Beaconsfield)

      Forsyth, Michael (Stirling)

      Spencer, Derek

      Forth, Eric

      Spicer, Jim (Dorset W)

      Fox, Marcus

      Steen, Anthony

      Fraser, Peter (Angus East)

      Stern, Michael

      Freeman, Roger

      Stevens, Lewis (Nuneaton)

      Galley, Roy

      Stewart, Allan (Eastwood)

      Gardner, Sir Edward (Fylde)

      Stewart, Andrew (Sherwood)

      Garel-Jones, Tristan

      Taylor, John (Solihull)

      Glyn, Dr Alan

      Taylor, Teddy (S'end E)

      Goodhart, Sir Philip

      Temple-Morris, Peter

      Gorst, John

      Thomas, Rt Hon Peter

      Greenway, Harry

      Thompson, Donald (Calder V)

      Griffiths, Sir Eldon

      Thompson, Patrick (N'ich N)

      Griffiths, Peter (Portsm'th N)

      Thorne, Neil (Ilford S)

      Gummer, Rt Hon John S

      Thornton, Malcolm

      Hamilton, Hon A. (Epsom)

      Thurnham, Peter

      Hamilton, Neil (Tatton)

      Twinn, Dr Ian

      Hampson, Dr Keith

      van Straubenzee, Sir W.

      Hargreaves, Kenneth

      Viggers, Peter

      Harris, David

      Waller, Gary

      Harvey, Robert

      Ward, John

      Hawkins, C. (High Peak)

      Wardle, C. (Bexhill)

      Hayward, Robert

      Watts, John

      Heathcoat-Amory, David

      Wells, Bowen (Hertford)

      583

      Whitfield, John

      Yeo, Tim

      Wiggin, Jerry

      Wilkinson, John

      Tellers for the Noes:

      Winterton, Mrs Ann

      Mr. Mark Lennox-Boyd and

      Wolfson, Mark

      Mr. Tim Sainsbury.

      Wood, Timothy

      Question accordingly negatived.

    Clause 41

      EXEMPT REPRESENTATIVES
      Amendments made: No. 64, in page 25, line 33, leave out 'exempt' and insert 'appointed'.
      No. 65, in page 25, line 36, leave out 'exempt' and insert 'appointed'.
      No. 66, in page 26, line 7, leave out 'exempt' and insert 'appointed'.
      No. 67, in page 26, line 16, leave out 'exempt' and insert 'appointed'.
      No. 68, in page 26, line 27, leave out 'exempt' and insert 'appointed'. —[Mr. Howard.]
      8.30 pm
      Mr. Nelson: I beg to move amendment No. 69, in page 26, line 29, at end insert—
      '(5A) The regulations made for the purpose of this section shall make provision to require exempt representatives to inform any person whom they procure to enter into an investment agreement that the cost or premiums payable under each individual agreement will be the same whether that agreement be entered into through the exempt representative or any authorised person.'.
      The amendment seeks to extend the disclosure requirements on company representatives of insurance and life assurance agreements. In so doing, it seeks to extend the principle of equivalence, about which much has been said in Committee and prior to the introduction of the Bill.
      Clause 41, which deals with exempt representatives, was the subject of a good deal of debate in Committee. It was in that debate that a number of Members, particularly Conservative Members, drew attention to their continuing concern about product bias and company bias and in particular the large number of representations that they had received from many independent intermediaries as well as others involved in the sale of life assurance agreements involving investment about the prejudicial impact of the clause and the other arrangements that were being made to try to ensure more adequate standards of disclosure.
      As a result of acceptance by my hon. and learned Friend of some of the disquiet felt, he played, I believe, an important and instrumental part in urging MIBOC to come forward with a document on how it saw the arrangements for the supervision and the status of the various people who would be involved in these activities.
      The document was published in April and, despite some misgivings of practitioners and commentators, has received a broad degree of support for what was proposed. This applies in particular to its conclusion that should be a polarisation imposed regarding the activities of company representatives and independent intermediaries by which the traditional role and activities of the tied agent who might represent a number of different companies would be ended. There would be only two sorts of practitioner in the
      584
      market and, potentially, knocking on Aunt Agatha's door — the company representative and the independent intermediary.
      It was also proposed in the document that disclosure provisions on commission should attach to the categories of salesmen and representatives They would be required to say that the commission they would be receiving fell within a commissions agreement that it was hoped— it still is hoped — to establish between the various life companies operating in this sphere with company representatives. They would have to declare the actual commission in comparison with the commissions agreement; that is, if it were more than the commissions agreement, they would have to state the amount cif commission that they were receiving and compare it with the amount of commission under the commissions agreement if it had been established.
      In making these proposals. MIBOC drew attention, I think rightly, to the fundamental difference in status between a company representatives and an independent intermediary. The latter is unambiguously a representative of the company, owes no allegiance to anyone other than the company and is overtly out to sell its investment products and life insurance products while the independent intermediary by his very nature is an agent of the investing member of the public and is in a quite different position from the company representative. Many of the disclosure provisions and other requirements placed upon these two categories flow from that fundamental difference. I think that this is well put in the document and is widely accepted.
      The document proposals have gone quite a long way to alleviate some of the deeply felt fears of independent intermediaries about the extent to which they would be placed in a prejudicial position in the market place, in particular by having to declare a commission, whereas those who were company representatives would have no similar requirement placed upon them. It is exceedingly difficult for a member of the public who has never before been subject of any such approaches or sales tactics to know that there is any difference in status of the people who knock at their door trying to sell them exactly the same investment product. However, it is important to establish this difference for the purposes of supervision and proper regulation of the market.
      It was feared by independent intermediaries that the requirement on them to declare their commission without a similar requirement on company representatives would be a serious negative sales factor and might deter many people from placing their investment for life assurance through independent intermedianes because it will be felt that a better deal will be done by going to the company direct or dealing through an employee or company representative of the life assurance company concerned.
      Concern was also expressed by independent inter-mediaries and many Members of Parliament prior to Committee consideration of the Bill about the principle of equivalence. This principle should be cherished, and we should be careful not to introduce into the market place different requirements on categories of people selling exactly the same product.
      Since the publication of the MIBOC document, there have been expressions of concern as to whether there will be a commissions agreement at all. It is feared that insufficent agreement will be reached among the principal companies involved; that, if there is an agreement, many

      585
      people will fall outside it, or that it will not be written into the rules of the SRO or insisted upon by the SIB so that to all intents and purposes there will be no commissions agreement.
      If that is so, one of the fundamental points behind the MIBOC proposals falls away, and we are left again with a prejudicial position for independent intermediaries in the market place. They will still be required to disclose their commission whereas the company representatives, in the absence of a commissions agreement, will have to declare the commission, but in their case it will be a very small amount. The remuneration that they receive may be a variety of other benefits — salary, bonus or a cheap mortgage that they receive from their company. Therefore, the commission that they have to declare will be very small. Yet that position will be quite unrepresentative for members of the investing public because the cost to them of entering into the agreement, whether through the company representative or an independent intermediary, will be exactly the same.
      Like other hon. Members, I have received a great deal of representation from those affected, both during the Committee stage and subsequently. There might be a case for an amendment along the lines of that which I have tabled, which seeks to place a duty on exempt representatives to notify investors that the cost of entering into an investment agreement, by way of premium or cost involved, will be exactly the same whether they do it through a company representative, direct with the company concerned or through an independent intermediary.
      The advantage of the amendment is that it extends the principle of equivalence, it does not blemish the integrity of MIBOC proposals and, last but not least, it is even more important if no commissions agreement is established. If the amendment were accepted, I hope that it would not be read by the companies as an alternative to a commissions agreement — the amendment is an addition to that. Basically, under the present proposals an independent intermediary must declare his commission, while a company representative does not have to do so, but say only that it falls within certain minimum standards agreed in the industry. Under the amendment, he would have to say that the commission that he received fell within that standard, but must point out to the public that from whomever they buy their investment agreement, it will cost them exactly the same. Therefore, all practitioners in the market will be obliged to point out to the public that while they are rightly declaring the commission, it will not be cheaper to buy that investment agreement through anyone else. By having a statutory or some other firm duty placed upon them so to declare, we will substantially overcome the negative sales factor about which many independent intermediaries still complain, despite the production of this document.
      I hope that my hon. and learned Friend the Minister will favourably consider my amendment. I ask him to say to what extent he considers the commissions agreement, according to latest information, to be likely or unlikely, and to what extent he feels, even if he is unable to accede in law to the amendment — I claim no rectitude of drafting — there may be other means of achieving the same purpose. The purpose can surely be unobjectionable as it will seek in large measure to rectify a wrong and a
      586
      grievance that are still felt by many people who offer members of the public an important service that should not be prejudiced in the way that I fear it otherwise will be.
      Sir Peter Blaker: I have no financial interest in the amendment, but my son is a finance broker and I am grateful to him for stimulating me into taking an interest in this important matter. I entirely support my hon. Friend the Member for Chichester (Mr. Nelson). I wish to make one or two supplementary points.
      I welcome the proposal for polarisation in the latest MIBOC document — it is a useful step forward. However, I believe that those proposals, or whatever arrangements may be made, could go further in the directions of consumer protection and fair competition. My hon. Friend has described the proposals as they differentiate between independent intermediaries and company representatives on the matter of disclosure. I believe that they are not fair as between those two groups.
      I have had the benefit of discussions with MIBOC, to which I pay tribute as it has been extremely helpful in clarifying for me the position. It has confirmed that there is still a great deal of anguish among the independent intermediaries. Even if a commissions agreement is made — I endorse wht my hon. Friend said about the importance of that — as things now stand I do not believe that the present proposals will be satisfactory.
      8.45 pm
      I believe that equivalence can be achieved on the lines of the principle contained in the amendment, even if its exact wording may not be precisely right. What objections can be made to our proposal? A distinction is made between independent intermediaries and company representatives in respect of the law of agency. I accept that their positions are different, but that is beside the point—it need not prevent us from ensuring that better information is provided to the consumer and that there is a fairer system of competition between the two parts of the industry.
      The second objection to complete equivalence between the two parts of the industry is contained in paragraph 77 of the latest MIBOC document. That shows that there are practical considerations that make that difficult. Very often the commission earned by the company representative is on an entirely different basis from that earned by the independent intermediary. That is a valid point.
      My hon. Friend and I are trying to bypass that problem. We are focusing not on commission earned but on charges, costs or premiums. Those charges, costs or premiums are the same to the client whatever channel may be used to make the contract.
      I have three letters from leading life companies on that point. One is from Allied Dunbar, which states:
      "I confirm that none of the charges under our policies are geared to the introducing source."
      Another, from Royal Life Insurance, states:
      "the charges levied on my Unit Linked products are defined at the outset and are irrespective of the source of the introduction to the company he it on independent intermediary, a company sales person or a direct enquiry."
      This is true also of with-profits policies. Another letter from Legal and General (Unit Assurance) Limited is on similar lines. We have the opportunity to obtain real equivalence by taking advantage of that fact.
      I wish to say a little more about the question of a commissions agreement. When my hon. and learned

      587
      Friend replies I hope that he will tell us what he feels are the prospects for obtaining such an agreement. MIBOC says that I cannot assume that there will be such an agreement. Many of those who were concerned about the matter during the Bill's Committee stage assumed that there was certain to be such an agreement.
      One reason why we cannot be sure that there will be an agreement is that it will depend not on the independent intermediaries, who will be directly affected by whether or not there is an agreement, but on the decision of the life companies. furthermore, MIBOC says that it would feel it essential, if there is to be an agreement, that it should be supported by the vast majority of the life companies. But their interests may not be the same as those of the independent intermediaries. Incidentally, they will be members of different SROs so there will not be a common membership.
      In recent years there has been a trend towards more and more direct sales, and it is quite legitimate for the life companies to aim for that. However, we would be wrong to create an artificial disadvantage for the independent intermediaries. That is really what is presently proposed. I am all in favour of fair competition, and so are the independent intermediaries with whom I have discussed the matter, but I believe that it would be wrong to have an artificial bias against the independent intermediaries.
      The chairman of the MIBOC is the chairman of one of the principal life companies which concentrates on direct sales. He has had a distinguished and successful career and I make no criticism of him. I merely say that it will be unfortunate, bearing that in mind, if there is seen to be a lack of equivalence and a bias against independent intermediaries. It is important in that context that there should be real equivalence. Justice must be done and it must be seen by everyone concerned, including independent intermediaries, to be done.
      We have raised two problems which it is important should be resolved. We have the question whether there will be a commissions agreement and there must be real equivalence between the two sides of the industry. When my hon. and learned Friend the Minister replies, I hope that he will give us some reassurance about the probability of there being an agreement. I hope also that he will be able to give us an undertaking that he will do what he can to ensure that there is proper equivalence either in the Bill itself, or by the use of the powers which are available to him under the Bill.
      Mr. McCrindle: I shall take a very few minutes of the time of the House to add my voice to those of my hon. Friend the Member for Chichester (Mr. Nelson) and my right hon. Friend the Member for Blackpool, South (Sir P. Blaker) in support of the amendments.
      During the rather lengthy passage of the Bill through the House, much time has rightly been spent on investor protection. A good deal of attention has been paid also to creating a fair and competitive atmosphere within which different agencies and different types of person will have an equal opportunity of selling to the public. This approach to equivalence is justified and the amendment turns our attention yet again to this subject.
      There is a good deal of confusion in the public mind, and probably in the minds of a number of Members, about commission and how it is paid. For example, there is an assumption that it must be cheaper to purchase product A direct from the company which produces it rather than
      588
      by buying the same product through an independent intermediary. The aim of the amendment is to make it a requirement that it is communicated to the prospective purchaser that that is not so. It is the gross premium which is important, because that is what the purchaser of the policy will pay irrespective of the agency through which he purchases it, and in all instances it will be precisely the same. To require that some statement to that effect be made comes a great deal closer to the equivalence of which I have spoken.
      Not surprisingly, there may be a tendency among insurance company representatives who are attempting to sell their products by approaching the public direct to imply, or even sometimes to state out of ignorance, that the price of the product is not always the same. I do not think that those representatives should be able to take advantage of being able to make statements of that sort. If the amendment were to be added to the Bill, they would be unable to do so.
      A good deal of time was spent in Committee discussing disclosure, and I think that the Committee was wise to spend its time in that way. I have always been mildly sceptical about the use to which information on the commissions payable on a policy would be made, or could be made, by the prospective purchaser of a policy. Nevertheless, that element of disclosure is being required, and I accept that.
      This is an appropriate juncture to ask, as my right hon. Friend the Member for Blackpool, South has done, about the present status of the proposed industry agreement on commissions. The House will recall that the idea is that, if such an agreement can be reached and if an independent intermediary is not receiving more than the commission laid down within the agreement, specific disclosure will not be required. The assumption that there is something inevitable about the commission's agreement must be heavily discounted. The House will remember the register of life assurance commissions. That was a voluntary effort and the result was something on broadly the same lines as that which we are discussing when we talk about an industry agreement.
      ROLAC was brought to life. but it limped for a long time. Even when it saw the light of day, many companies refused to become members of it Let us assume that there are 150 companies on the British market. If no more than 30 of them were to come together to form a commissions agreement, does my hon. and learned Friend think that that would be acceptable? Is these a minimum level below which he would consider it would not be worth referring to such an agreement as an industry agreement? If it is impossible for the appropriate SRO to bring together a sufficient number of companies to create an agreement, could the SIB step in and require the SRO to take further steps, or could it take steps itself to create a commission's agreement?
      We must contemplate the possibility that ultimately there will be no agreement and on possibility of reaching one. In the circumstances, we an entitled to know tonight, as we come close to the end of the consideration of the Bill in this place, just what would happen in the circumstances that I have outlined. Would we revert to no obligatory disclosure, which is the present position, or would there be, through some clause or subsection which I have overlooked, an automatic requirement for full disclosure, which is not the compromise that the MIBOC presented? It was wise of my hon. Friend the Member for Chichester

      589
      to move the amendment and I hope that it will be added to the Bill. If that is not possible for some reason, I hope that my hon. and learned Friend the Minister will address himself to some of the important considerations to which I have referred.
      Mr. Howard: My right hon. and hon. Friends have done the House a service in giving us the opportunity to discuss the important issue of the regulation of insurance intermediaries under the Bill. I hope that they will not press the amendment to a Division because, as I shall explain, it suffers from a number of defects. Nonetheless, I hope that I can offer them some comfort on the substance of it.
      I am grateful to my right hon. and hon. Friends for the welcome which they gave to the MIBOC document. I take this opportunity of paying tribute to the MIBOC for responding so effectively and so quickly to the request which I made of it in Committee. I made that request at a time when it was anticipated that Report and Third Reading might take place at a rather earlier stage than they have. The MIBOC responded most energetically to my request and I am happy to have this opportunity of paying tribute to it.
      Mr. Gould: As I do not propose to make any substantive contribution to the debate, I wish to associate the Opposition with the tribute which the Minister has paid to the MIBOC.
      Mr. Howard: I am grateful to the hon. Gentleman.
      I shall explain briefly some of the problems with the amendment. Clause 41 is a general clause, the main point of which is to put appointed representatives—that is, essentially self-employed persons working for an authorised business under a contract for services—in the same position as employees of an authorised business. We expect that the majority of people who will become appointed representatives will be insurance and unit trust salesmen, but it is a clause of general application and representatives will be appointed outside the area of insurance.
      9 pm
      If one considers that point one can see a real problem with the amendment. There may be all sorts of investment agreements that those appointed representatives may lead their customer into, and the cost or premiums payable could be very different if the same agreements were sold by authorised businesses. I am sure that the House would not want to require appointed representatives to make an untrue statement. There may indeed be no way in which the appointed representative could know what cost or premiums were payable under investment agreements offered by authorised businesses.
      Apart from being in one sense too general for its purpose, the amendment is in another sense too specific. It relates only to appointed representatives. It would have no implications for salesmen employed directly by insurance companies. Yet I am sure that my right hon. and hon. Friends would agree that if there is merit in the proposal they are making, it should apply, to use MIBOC's jargon, to all company representatives, whether employed or self-employed. Depending on the particular
      590
      wording of the statement to be made, there might even be a case for requiring independent intermediaries to make an equivalent statement.
      Turning to the substance of the amendment, the issue of the rules to regulate insurance intermediaries, whether independent or company representatives, raises some difficult questions and has aroused a good deal of comment from interested parties. I expect that we shall have a fuller discussion on those questions when we come to the Government amendments to schedule 6, nos. 176 and 177, which were prompted by the useful discussion we had in Committee on the subject. However, let me make it clear that I consider it important that the different rules which are applied to the different functions of insurance broking and representing an insurance company do not in practice give one or the other an unfair competitive advantage in the market place. That was the basic point that underlines the observations made by my right hon. and hon. Friends.
      It has been suggested that that could happen because company representatives might suggest that they do not receive commission and might imply that the customer thereby gets a better deal by acting through them. A representative who did this would, I suggest, have to be very careful not to commit a breach of the conduct of business rules, or even a criminal offence, by misleading the consumer.
      My right hon. and hon. Friends have made an interesting proposal on the sort of statement company representatives should make. It is a proposal which I shall want to reflect on further and doubtless MIBOC shall want to do so also. As the comments I made earlier on the amendment suggest, this is a difficult area on which to draw up rules. As I understand it, although premiums of on policies are now generally the same whether policies are bought through company representatives or independent intermediaries—that point was made by my right hon. Friend the Member for Blackpool, South (Sir P. Blaker) —there is no guarantee that this is always the case or that it will continue to be so.
      One would have to consider what sort of statement might be made when the premiums paid differed depending on the particular sales outlet. One would also want to consider whether companies might seek to get round a rule of this sort by changing the premiums they charged to favour their preferred sales outlet. In the case of companies which specialised either in selling through independent intermediaries or company representatives, a comparison might be drawn up which could be misleading to the consumer. On the other hand, it is Government policy to leave companies' pricing policies to market forces and for them not to be Government controlled.
      At first sight, the ideas of my right hon. and hon. Friends seem interesting, and I shall want to have them pursued. MIBOC is at the moment drawing up conduct of business rules on which it will be consulting. I shall ask it to consider whether there is a case for a rule to meet the concerns of hon. Members. May I stress that detailed rules of this sort are for the board to make. We in this House are unlikely to arrive at formulae in which practitioners will be unable to find loopholes.
      My right hon. and hon. Friends raised the likelihood of a commissions agreement. My right hon. Friend the Member for Blackpool, South asked what the chances were of a voluntary commissions agreement for independent intermediaries. In the White Paper on

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      financial services, the Government clearly envisaged that, subject to the competition regime, there could be such an agreement, with disclosure by reference to it. Since then, MIBOC has considered the issue and has concluded that disclosure that commission is within a voluntary industry agreement is of more use to the investor than full disclosure, since under the latter the investor would not have a clear idea whether his agent was receiving more commission on a particular policy than was generally the case on competing policies.
      We expect that the SRO for insurance companies and unit trusts will include a commissions agreement as a part of its rules, although members of the SRO would be free not to abide by the agreement. For those who did, disclosure would be by reference to it, and for those who did not full disclosure would be made. The Life Assurance and Unit Trust Regulatory Organisation—LAUTRO— which as hon. Members may know is seeking to become the self-regulating organisation in this area, has plans for such a system. In this it has the support of the majority of the life offices, which have already come together in the Registry of Life Assurance Commissions, with a view to establishing a voluntary commissions agreement.
      Companies representing about 80 per cent. of the market have given their support to ROLAC. Apart from their concern for the impact of excessive competition in commissions on the impartiality of intermediaries' advice, they are also, of course, concerned by its impact on their finances. That concern would be shared by all insurance companies. We have grounds to expect that there will be a considerable incentive for those companies to enter into the type of agreement desired by all my right hon. and hon. Friends who have spoken. I hope that the totality of the matters to which I have referred will give a good deal of comfort to my colleagues. In those circumstances, I hope that my hon. Friend the Member for Chichester (Mr. Nelson) is prepared to withdraw the amendment.
      Mr. Nelson: I am obliged to my hon. and learned Friend the Under-Secretary of State for his important and helpful response. I was especially pleased that lie emphasised at the beginning of his remarks the importance that he attaches, as do many of us, to the principle of equivalence. if he attaches importance to that principle and holds it paramount, as he appeared to do, I hope that, by inviting the MIBOC to consider this matter again, a way can be found to redress what some of us perceive to be a continuing problem.
      My hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) asked what will happen if there is no agreement. That question was not fully answered. If there is no commissions agreement, the basis of the polarisation proposal falls away. If there is no commissions agreement, there is no basis on which company representatives have to make a meaningful declaration. The principle is therefore substantially undermined.
      Although I share the hope that there are sufficient incentives and time to reach such an agreement, we must bear in mind that it may not be reached, or it may not be reached adequately. In either event, there are urgent and compelling reasons for the MIBOC to consider writing into its rules and proposals a provision along the lines of the amendment. I take it that the endorsement in principle, rather than in drafting, that my hon. and learned Friend has given to the amendment will be taken fully into
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      account. I have no doubt that we shall return to the matter in the later stages of the Bill. Many of us will keep a watching brief on that aspect.
      I think that we have been given sufficient reassurances to allow me to withdraw the amendment. My hon. and learned Friend has responded fully and helpfully to the initiative. Therefore, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Amendments made: No. 70, in page 26, line 30, leave out 'exempt' and insert 'appointed'.
      No. 71, in page 26, line 37, leave out 'exempt' and insert 'appointed'.—[Mr. Butcher.]

    Clause 42

      MISCELLANEOUS P:EMPTIONS
      Amendments made: No. 72, in page 27, line 7, at end insert—
      '(cc) the Accountant of Court when acting in the exercise of his functions in connection with the consignation or deposite of sums of money;'.
      No. 73, in page 27, line 17, at end insert—
      '(gg) a sheriff clerk when acting in the exercise of his functions in connection with the consignation or deposit of sums of money;'. —[Mr. Butcher.]
      Mr. Tim Smith: I beg to move amendment No. 74, in page 27, line 32, at end insert—
      '(k) a person acting as an authorised insolvency practitioner within the meaning of section 3 or section 5 of the Insolvency Act 1985.'
      The amendment would add to the list of various people referred to in clause 42. The White Paper said that the functions of insolvency practitioners would be a type of activity that did not require authorisation to be obtained. It said that insolvency practitioners were
      "often obliged … to dispose of investments included among the assets under their control. They will be required to be licensed under the Insolvency Bill now before Parliament."
      That is now the Insolvency Act 1985. The implication was that the legislation would regulate the activities of insolvency practitioners.
      I raised this matter in Standing Committee with my hon. and learned Friend the Under-Secretary of State. He said that the matter was still being considered. What progress has been made in formulatting an exception which could be introduced by the Government?
      Mr. Butcher: I am grateful to my hon. Friend the Member for Beaconsfield (Mr. Smith) for raising this issue. I shall take this opportunity to explain some of the complexities of the points he has raised.
      There are two main situations we need to consider. First, there is the position of an insolvency practitioner who is acting as liquidator or administrator for a company which is not an investment business but which may have to dispose of assets which include investments. In such a case the liquidator or administrator is in the same position as the former directors. Therefore he would be covered by the exemptions for selling investments as a principal and would not normally need to be authorised.
      Secondly, there is the position of an insolvency practitioner who is concerned with the winding up of an authorised investment business. That is a much more complicated issue and I am still considering the implications for the Bill of the various provisions of the Insolvency Act 1985 and the numerous problems which

      593
      will arise if an authorised business has to be wound up. The position of insolvency practitioners has to be considered in this context. If the investment business is a company and the regulator decides to allow its authorisation to continue in order to be able to continue to use its intervention powers to protect investors, once again the liquidator or administrator will be in much the same position as the former directors and, like them, will not be required to be personally authorised.
      If the business concerned is a partnership or sole trader, the position is more complicated. If investment business is to be continued—for example, to complete outstanding commitments — is it right to exclude the insolvency practitioner concerned from the authorisation requirement? Such a practitioner may have no relevant experience. We need to consider those points further and will, if necessary, table amendments in another place.
      With those comments, I hope that my hon. Friend the Member for Beaconsfield will feel that it would be timely to withdraw his amendment.
      Mr. Tim Smith: This is the first time we have had a full explanation of the difficulties. It is helpful and it will be read with interest by those outside. On that basis, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.

    Clause 44

      MISLEADING STATEMENTS AND PRACTICES
      Amendment made: No. 75, in page 28, line 27, at end insert —
      '(2A) In proceedings brought against any person for an offence under subsection (2) above it shall be a defence for him to prove that he reasonably believed that his act or conduct would not create an impression that was false or misleading as to the matters mentioned in that subsection.'. —[Mr. Howard.]

    Clause 45
      CONDUCT OF BUSINESS RULES
      Amendment made: No. 76, in page 29, line 32, leave out 'exempt' and insert 'appointed'. —[Mr. Howard.]
    Clause 47

      CANCELLATION RULES
      Amendment proposed: No. 77, in page 31, line 25, after '(2)', insert
      'Without prejudice to the generality of subsection (1) above,'.
      Mr. Deputy SpeakerWith this it will be convenient to consider Government amendment No. 78.
      Mr. Cash: I have had a communication from the Committee of London and Scottish Bankers with regard to the proposals contained in these amendments, with particular respect to the question of clients' money. Clause 50 provides for the Secretary of State to make regulations with regard to clients' money. It is a matter upon which the committee has written to the Minister in the past and I would particularly like to hear what he has to say because the banks feel that they will be placed in an invidious position if clause 50 is enacted without amendment.
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      The banks' difficulties arise from the uncertain state of the law in relation to the operation of trust accounts, including clients' accounts. I believe that there are many complicated legal matters which arise in that context, which I do not think it would be helpful to go into. I believe that at this stage the Minister is in full possession of the facts and, if he is not, I am sure that during the course of the proceedings in another place this matter could be looked into and a suitable opportunity taken to put things right.
      The banks are seriously concerned that the bank holding the clients' account in an authorised firm could be held liable if the firm does not conduct the account in accordance with the rules, and losses result to its clients.
      The banks seek statutory protection on the same lines as they already enjoy in respect of solicitors' clients' accounts. I understand that, although a letter has been written to the Department in respect of this matter, the Department has not yet replied. The indications are that the answer will be in the negative. I understand that if the Department does not produce a satisfactory outcome to this question, it is highly probable—indeed certain—that the committee will press the matter vigorously in another place.
      Mr. Howard: I have heard with great interest what my hon. Friend the Member for Stafford (Mr. Cash) has said on this matter. The representations to which he referred are being carefully considered. That is why no reply has yet been forthcoming from the Department to those who made the representations. Clearly, if the Department is persuaded by those representations, we shall introduce an amendment in another place. I understand the import of my hon. Friend's remarks to be that if we do not, others will, and we must look forward to the outcome of any debate in the other place with interest and expectation.
      Amendment agreed to.

    Clause 50

      CLIENTS' MONEY
      Amendments made: No. 78, in page 34, line 1 leave out
      'Regulations under this section may in particular' and insert
      'Without prejudice to the generality of subsection (1) above, regulations under this section may'.
      No. 79, in page 34, line 17, leave out 'and interest thereon'.
      No. 83, in page 34, line 27, leave out from 'retention' to end of line 28 and insert
      ', to such extent and in such cases as may be specified in regulations, of so much of clients' money as represents interest.'. —[Mr. Howard.]
      9.15 pm
      Mr. Tim Smith: On a point of order, Mr. Deputy Speaker. I rose to speak when you called amendment No. 79.
      Mr. Deputy Speaker: I am extremely sorry, but I did not notice the hon. Gentleman. If he stood up, I apologise to him. We have now moved on to amendment No. 80, which is in his name.
      Mr. Smith: I beg to move amendment No. 80, in page 34, line 18, leave out 'audited by an auditor' and insert 'examined by an accountant'.
      Mr. Deputy Speaker: With this it will be convenient to take the following amendments: No. 81, in page 34. line 20, leave out 'auditor' and insert 'accountant'.
      No. 82, in page 34, line 23, after 'whether', insert 'in his opinion'.
      Mr. Smith: I was a little concerned about the cavalier way in which the Government dealt with amendment No.79, because it reversed an amendment made in Committee following a Division in which I was supported by my hon. Friend the Member for Chicester (Mr. Nelson). As the majority of the Committee wanted three words included in the Bill and as amendment No. 79 deletes them, some explanation would have been welcome. It is not worth making a great fuss about this, but a little explanation would have been pleasant.
      I do not want to say much on amendment No. 80, because the Minister was very helpful on this matter in Committee. He said that he was sympathic to the three points contained in the three amendments. I hope that his sympathy may be converted into acceptance of them.
      Mr. Cash: The word "accountant" is an expression which does not necessarily refer to a chartered accountant. I have already made that point and I do not want to labour it, but at this stage it is important to put it on the record again.
      Mr. Howard: I hope that my hon. Friend the Member for Stafford (Mr. Cash) will forgive me if I do not repeat the reply which I gave to the point which he raised earlier.
      Regarding the first point raised by my hon. Friend the Member for Beaconsfield (Mr. Smith), amendments Nos. 79 and 83, to which he referred, sought to incorporate into clause 50 more satisfactorily the amendment passed in Committee. We have always intended that Clause 50 should allow regulations to be made concerning interest on clients' money. That would include requiring accounts and records in respect of that interest to be kept. We accept that there is room for clarification and that has been done in two ways.
      Firstly, as part of the general tidying up of rule-making powers in part V, we have made it clear that the list of powers in subsection (2) is without prejudice to the generality of subsection (1). Secondly, the new formulation of subsection (2)(f) makes it clear that the phrase "clients' money" embraces interest. Generally, regulations under clause 50 will, therefore, clearly be capable of being made in respect of interest. In view of this approach the amendment to subsection (2)(d) is unnecessary. That is why amendment No. 79 removes the change made in Committee at my hon. Friend's behest.
      My hon. Friend is correct, regarding amendments Nos. 80, 81 and 82, in reminding the House that I expressed my sympathy for his argument in Committee and I am happy to——
      Mr. Cash: Does my hon. and learned Friend take the point that the words "in his opinion" which are contained in those amendments would be going over the top in almost any circumstances? We could not have a matter of such importance being determined as a matter of law by the "opinion". I am sure that my hon. and learned Friend understands what the wording "in his opinion" means, and that he would find it unacceptable.
      Mr. Howard: I hope that my hon. Friend is referring to the amendments that we have excised from the Bill and not
      596
      to the amendments to which I have referred and which the Government are prepared to accept. If that is the case, and I believe that it is, I confirm that I am happy to accept the amendments.
      Amendment agreed to.
      Amendments made: No. 81, in page 34, line 20, leave out 'auditor' and insert 'accountant'.
      No. 82, in page 34, line 23, after 'whether'. insert 'in his opinion'.
      No. 83, in page 34, line 27, leave out from 'retention' to end of line 28 and insert
      ', to such extent and in such cases as may be specified in regulations, of so much of clients' money as represents interest.'.—[Mr. Howard.]

    Clause 51

      UNSOLICITED CALLS
      Amendments made: No. 84, in page 35, line 34, leave out 'exempt' and insert 'appointed'
      No. 85, in page 35, line 37, leave out 'exempt' anti insert —[Mr.Howard.]

    Clause 54
      EMPLOYMENT OF PROHIBITED PERSONS
      Amendment made: No. 86, in page 40, line 35, leave out 'exempt' and insert 'appointed' —[Mr. Howard.]
    Clause 55

      PUBLIC STATEMENT AS TO PERSON'S MISCONDUCT
      Amendment made: No. 87, in page 41, line 21, at end insert —
      '(5) Where a case is not required to be referred to the Tribunal by a person on whom a notice is served under this section the Secretary of State shall, at the expiration of the period within which such a requirement can be made, give that person written notice that the statement is or is not to be published; and if it is to be published the Secretary of State shall after publication send a copy of it to that person and to any person on whom a copy of he notice under subsection (2) above was served.'. —[Mr. Howard.]

    Clause 56

      INJUNCTIONS AND RESTITUTION ORDERS.
      Amendments made:No 88, in page 42, line 1, after `injunction', insert 'or, in Scotland, an interdict'.
      No. 89, in page 42, line 14, after 'below', insert
      'or, in relation to Scotland, under sub-section (4A) below'.
      No. 90, in page 42, line 31, at end insert —
      '(4A) The court may under this subsection order the person concerned to pay to the applicant such sum as appears to the court to be just having regard to the considerations mentioned in paragraphs (a) to (c) of subsection (4) above.'.
      No. 91, in page 42, line 33, after '(4)', insert '(4A)'.
      No. 92, in page 43, line 5, leave out subsection (8). — [Mr. Howard]

    Clause 65

      NOTICES
      Amendment made,No. 93, in page 46, line 39, at end insert—
      '; and any such notice may, if the Secretary of State thinks fit, include a statement of the reasons for which the prohibition or requirement was imposed, rescinded or varied.'. —[Mr. Howard]

    Clause 67

      INTERPRETATION
      Amendments made: No. 94, in page 47, line 37, leave out from 'provide' to 'for' in line 38.
      No. 95, in page 47, line 40, after 'property', insert 'in question'.
      No. 96, in page 47, line 42, leave out from 'unless' to 'the' in line 43.
      No. 97, in page 48, line 25. leave out from 'arrangements' to 'of' in line 27 and insert—
      'under which the rights or interests of the participants are investments falling within paragraph 5'.
      No. 98, in page 48, line 41, after 'by', insert 'or on behalf of'.
      No. 99, in page 49, line 2, leave out 'its management of those funds' and insert 'the management of those funds by or on behalf of that body'.
      No. 100, in page 49, line 5, leave out from 'in' to end of line 12 and insert —
      'or securities of that body which—

      (i) the participants are entitled to have redeemed or repurchased by, or out of funds provided by, that body; or

      (ii) the body ensures can be sold by the participants on an investment exchange at a price related to the value of the property to which they relate:.

      No. 101, in page 49, line 12, at end insert—
      ' "trustee", in relation to a unit trust scheme, means the person holding the property in question on trust for the participants and, in relation to a collective investment scheme constituted under the law of a country or territory outside the United Kingdom, means any person who (whether or not under a trust) is entrusted with the custody of the property in question—[Mr. Howard.]

    Clause 68

      RESTRICTIONS ON PROMOTION
      Amendments made: No. 102, in page 49, line 25, after 'issued', insert 'in the United Kingdom'.
      No. 103, in page 49, line 31, leave out 'any person' and insert
      'or procure any person in the United Kingdom'.
      No. 104, in page 49, line 35, leave out from 'apply' to end of line 36 and insert
      'if the advertisement is issued to or the person mentioned in paragraph (b) of that subsection is—'.
      No. 105, in page 49, line 37, leave out 'to'.
      No. 106, in page 49, line 38, leave out 'to'.
      No. 107, in page 50, line 1, leave out 'an advertisement issued or to advice given' and insert 'anything done'.
      No. 108, in page 50, line 6, at end insert—
      '(4) For the purposes of this section an advertisement issued outside the United Kingdom shall be treated as issued in the United Kingdom if it is made available to persons in the United Kingdom otherwise than in a newspaper, journal, magazine or other periodical publication published and circulating principally outside the United Kingdom.'. —[Mr. Howard.]

    Clause 69
      APPLICATIONS FOR AUTHORISATION
      Amendment made: No. 109, in page 50, line 19, leave out subsection (3).
    Clause 70

      AUTHORISATION ORDERS
      Amendments made: No. 110, in page 50, line 35, leave out 'and a copy of the trust deed'.
      No. 111, in page 50, line 37, after 'if, insert '(a)'.
      No. 112, in page 50, line 40, at end insert
      ;and

      (b) he has been furnished with a copy of the trust deed and a cerficate signed by a solicitor to the effect that it complies with such of those requirements as relate to its contents.'.

      No. 113, in page 51, line 6, leave out 'and'.
      No. 114, in page 51, line 7, at end insert
      'and, if the manager is incorporated in another member State, the scheme must not be one which satisfies the requirements prescribed for the purposes of section 78 below.'.
      No. 115, in page 51, line 10, after 'by', insert 'or under'.
      No. 116, in page 51, line 11, after 'by', insert 'or under'.
      No. 117, in page 51, line 22, leave out 'a stock' and insert 'an investment'. —[Mr. Howard.]

    Clause 71
      REVOCATION OF AUTHORISATION
      Amendment made: No. 118, in page 51, line 37, at end insert 'or potential participants'. —[Mr. Howard.]
    Clause 72

      REPRESENTATIONS AGAINST REFUSAL OR REVOCATION
      Amendment made: No. 119, in page 52, line 25, after 'give', insert—
      'the applicants or, as the case may be'.—[Mr. Howard.]

    Clause 73

      CONSTITUTION AND MANAGEMENT
      Amendments made: No. 120, in page 52, line 41, after 'rights', insert 'and obligations'.
      No. 121, in page 53, line 10, leave out 'of the manager of the scheme' and insert
      'exercisable in relation to the scheme'.
      No. 122, page 53, line 20, leave out from 'but' to `independently' in line 21 and insert
      'regulations under this section shall be binding on the manager, trustee and participants'.
      No. 123, in page 53, line 22, at end insert —
      '(3A) Regulations under this section shall not impose limits on the remuneration payable to the manager of a scheme.'. —[Mr. Howard.]

    Clause 74

      ALTERATION OF SCHEMES AND CHANGES OF MANAGER OR TRUSTEE
      Amendments made: No. 124 in page 53, line 30, after `alteration', insert
      involving a change in the trust deed'.
      No. 125, in page 53, line 32, leave out 'alteration will not affect the compliance of the scheme' and insert

      599
      'change will not affect the compliance of the deed'.
      No. 126, in page 54. line 11, leave out subsection (4). —[Mr. Howard.]

    Clause 75

      RESTRICTIONS ON ACTIVITIES OF MANAGER
      Amendments made: No. 127, in page 54, line 22, leave out from '(ii)' to 'body' in line 25 and insert
      'an open-ended investment company or any other'.
      No. 128, in page 54, line 28, after `by', insert 'or on behalf of.
      No. 129, in page 54, line 28, at end insert
      '; or

      (iii) any other collective investment scheme under which the contributions of the participants and the profits or income out of which payments are to he made to them are pooled; —[Mr. Howard.]

    Clause 79

      SCHEMES AUTHORISED IN DESIGNATED COUNTRIES OR TERRITORIES
      Amendments made: No. 130, in page 57, line 16, leave out from 'is' to end of line 18 and insert
      'of a class specified by the order.'.
      No. 131, in page 57, leave out lines 34 to 37 and insert —

      '(a) shall contain the address of a place in the United Kingdom for the service on the operator of notices or other documents required or authorised to be served on him under this Act; and

      (b) shall contain or be accompanied by such information and documents as may be prescribed.'.

      No. 132, in page 57, line 45, at end insert—
      '(6A) Section 77 above shall have effect in relation to a scheme recognised under this section as it has effect in relation to an authorised unit trust scheme, taking references to the manager as references to the operator; and regulations made by virtue of this subsection may make provision whereby compliance with any requirements imposed by or under the law of a country or territory designated under this section is treated as compliance with any requirement of the regulations.' —[Mr. Howard.]

    Clause 80

      OTHER OVERSEAS SCHEMES
      Amendments made: No. 133, in page 58, line 9, leave out paragraph (b) and insert

      '(b) does not satisfy the requirements mentioned in section 78(1) above and in relation to which there is no relevant order under section 79(1) above'.

      No. 134, in page 58, line 17, leave out from '(3)' to `must' in line 18 and insert
      'Subject to subsection (3A) below, the operator and the trustee, if any,'.
      No. 135, in page 58, line 22, after 'by', insert 'or associated with.'
      No. 136, in page 58, line 24, leave out paragraph (b).
      No. 137, in page 58, line 29, at end insert—
      '(3A) Subsection (3) above does not apply to an operator or trustee who is an authorised person and not prohibited from acting as operator or trustee, as the case may be, by or under rules under section 45 above, by or under the rules of any recognised self-regulating organisation of which he is a member or by any prohibition imposed under section 60 above.'.
      No. 138, in page 58, line 30, leave out from '(4)' to 'and' in line 31 and insert—
      'If the operator is not an authorised person he must have a representative in the United Kingdom who is an authorised person and has power to act generally for the operator'.
      No. 139, in page 58, line 42, leave out 'a stock' and insert `an investment'.
      No. 140, in page 59, line 2, leave out from 'section' to '; and' in line 4.
      No. 141, in page 59, line 5, 2, at end insert—
      ', taking references to the manager as references to the operator'.
      No. 142, in page 59, line 6, leave out subsection (8).
      No. 142A, in page 59, line 15, leave out from first 'operator' to second `the' in line 16 and insert—
      'and with the omission of the requirement relating to the solicitor's certificate; and if the operator or trustee of any such scheme is to be replaced the operator, as the case may be, the trustee or, in either case'.
      No. 143, in page 59, line 18, leave out subsection (10) and insert—
      `(10) Section 77 above shall have effect in relation to a scheme recognised under this section as it has effect in relation to an authorised unit trust scheme, taking references to the manager as references to the operator.'. —[Mr. Howard.]

    Clause 81

      INVESTIGATIONS
      Amendment proposed: No. 144, in page 59, line 26, after `operator', insert `or trustee'. —[Mr. Howard.]
      Mr. Deputy Speaker: With this it may be convenient to discuss Government amendments Nos. 145 to 148.
      Mr. Cash: I have one question in regard to legal privilege in proceedings in the High Court. I notice that clause 81(5) may require a lawyer to furnish the name and address of his client. I do not wish to make a great deal of this but it raises matters which may prove to be worth pursuing in another place. My hon. and learned Friend the Minister will be familiar with the problems that arise. I understand, however, that my hon. Friend the Under-Secretary of State is to reply. Hi: is nevertheless a friend. I should be grateful if he could examine this matter in due course and perhaps drop me a note about it. It raises matters concerning the disclosure of information about clients.
      Mr. Butcher: I am the only non-lawyer spokesman on the Front Benches. I shall loot into my hon. Friend's anxiety and write to him. En the aftermath of that correspondence, we will no doubt be able to decide whether we should take further action in another place.
      Amendment agreed to.
      Amendments made: No. 145, in page 59, line 29, leave out from `operator' to end of lire 31 and insert
      'or trustee of, any other collective investment scheme,'.
      No. 146, in page 59, line 38, after second 'or, inser—
      'or of the manager, trustee or operator of,'.
      No. 147, in page 59, line 42, leave out
      'Section 433(2) and sections 434 to 437 of the Companies Act 1985'
      and insert—
      `Sections 434 to 436 of the Companies Act 1985 (production of documents and evidence to inspectors)'.
      No. 148, in page 60, line 10, at end insert—
      `(5) A person shall not under t us section be required to disclose any information or produce any document which he would be entitled to refuse to disclose or produce on grounds, of legal professional privilege in proceedings in the High Court or on grounds of confidentiality as between client and professional legal adviser in proceedings in the Court of Session except that a lawyer may Ire required to furnish the name and address of his client.

      601
      (6) Where a person claims a lien on a document its production under this section shall be without prejudice to the lien.
      (7) Nothing in this section shall require a person carrying on the business of banking to disclose any information or produce any document relating to the affairs of a customer unless—

      (a) the customer is a person who the inspector has reason to believe may be able to give information relevant to the investigation; and

      (b) the Secretary of State is satisfied that the disclosure or production is necessary for the purposes of the investigation.

      (8) An inspector appointed under this section may, and if so directed by the Secretary of State shall, make interim reports to the Secretary of State and on the conclusion of his investigation shall make a final report to him.'. — [Mr. Howard.]

    Schedule 4

      THE FINANCIAL SERVICES TRIBUNAL
      Amendments made: No. 149, in page 140, line 1, leave out 'and' and insert—
      ', for the awarding of costs (or, in Scotland, expenses) and for'.
      No. 150, in page 140, line 2, at end insert—
      '(2) The Tribunal may appoint counsel or a solicitor to assist it in proceedings before the Tribunal.'. — [Mr. Howard.]

    Clause 84

      REFERENCES TO THE TRIBUNAL
      Amendments made: No. 151, in page 61, line 23, leave out 'or 54(4)' and insert',54(4) or 55(2)'.
      No. 152, in page 61, line 27, leave out
      'or to give the direction'
      and insert
      ', give the direction or publish the statement'.
      No. 153, in page 61, line 28, at end insert—
      '(2A) The Secretary of State need not refer a matter to the Tribunal at the request of the person on whom a notice is served under section 65 above if—

      (a) that matter is the refusal of an application for the rescission or variation of a prohibition or requirement and within the period mentioned in subsection (1) above he—

      (i) decides to grant the application; and

      (ii) gives written notice of his decision to that person; or

      (b) that matter is the imposition or variation of a prohibition or requirement, being a prohibition, requirement or variation which has not yet taken effect, and within the period mentioned in subsection (1) above and before the prohibition, requirement or variation takes effect he—

      (i) decides to rescind the prohibition or requirement or decides not to make the variation; and

      (ii) gives written notice of his decision to that person.'.

      No. 154, in page 61, leave out lines 35 to 40 and insert
      'and at any time within the period mentioned in subsection (1) above the Secretary of State serves a new notice on that person in substitution for that previously served, then if the substituted notice complies with subsection (4) below, subsection (1) above shall have effect in relation to the substituted notice instead of the original notice and as if the period there mentioned were twenty-eight days after the date of service of the original notice or fourteen days after the date of service of the substituted notice, whichever ends later'.
      No. 155, in page 62, line 2, leave out 'may propose' and insert
      'complies with this subsection if it proposes'.
      No. 156, in page 62, line 7, leave out 'may propose' and insert
      'complies with this subsection if it proposes'.
      No. 157, in page 62, line 10, leave out subsection (5). —[Mr. Howard.]

    Clause 87

      WITHDRAWAL OF REFERENCES
      Amendments made: No. 158, in page 63, line 27, leave out from 'under' to end of line 30 and insert
      'any of the provisions mentioned in subsection (1)(a) of section 84 if he—

      (a) decides as mentioned in subsection (2)(a) or (2A) (a)(i) or (b)(i) of that section; and

      (b) gives such a notice as is mentioned in subsection (2) (b) or (2A)(a)(ii) or (b)(ii) of that section;

      but a reference shall not be withdrawn by virtue of such a decision and notice as are mentioned in paragraph (b) of subsection (2A) unless the decision is made and the notice is given before the prohibition, requirement or variation has taken effect.'
      No. 159, in page 63, line 44, leave out 'or 33' and insert 33 or 55'. —[Mr. Howard.]

    Clause 89
      REGISTER OF AUTHORISED PERSONS AND RECOGNISED ORGANISATIONS ETC.
      Amendment made: No. 160, in page 65, line 12, leave out third 'the' and insert `any'. —[Mr. Howard.]
    Clause 91
      POWER TO CALL FOR INFORMATION
      Amendment made: No. 161, in page 67, line 29, leave out 'this section' and insert 'subsection (1) above'. —[Mr. Howard.]
    Clause 92

      INVESTIGATION POWERS
      Amendments made: No. 162, in page 67, line 41, leave out 'exempt' and insert 'appointed'.
      No. 163, in page 69, line 7, leave out 'exempt' and insert 'appointed'.
      No. 164, in page 69, line 17, leave out 'exempt' and insert 'appointed'. —[Mr. Howard.]

    Clause 96

      POWER TO TRANSFER FUNCTIONS TO DESIGNATED AGENCY
      Amendment proposed: No. 165, in page 71, line 41, leave out
      'the Securities and Investment Board'
      and insert
      'a body corporate has been established which'. — [Mr. Howard.]
      Mr. Deputy Speaker: With this it may be convenient toconsider the following: Government amendment No. 166.
      Amendment No. 167, in page 72, line 5, at end insert

      603
      '(1A) Upon the making of an order under subsection (1) above, the Securities and Investments Board shall cease to be a limited company and shall become a statutory body created under this Act.',
      Government amendments Nos. 168, 169, 171 to 173, 213, 253, 255, 256 and 258.
      Mr. Gould: It may be as well to give you the opportunity to pause for breath, Mr. Deputy Speaker. I should like to speak in support of amendment No. 167.
      The Government amendments in this group give effect to the solution at which the Committee arrived on the central issue of the Bill—the status and functions of the SIB. It is fair and proper to recognise that the Committee achieved a great deal in this respect. We named the board which had hitherto hidden coyly behind the description of "designated agency" and we increased its powers in respect of its ability to impose rule changes, to prosecute, to investigate unauthorised persons, to deal with matters such as insider dealing and even in regard to obtaining a warrant for powers of search.
      None of that could have been achieved without the support, and often direction, of Conservative members of the Committee. It was an excellent example of a Committee working towards a constructive common purpose. It is perhaps not surprising that the paths of the two sides of the House diverge here as we regret, even now, that, for current ideological reasons, the Government have not been able to bring themselves to give the SIB proper status in the Bill. The Government will not accept that this is the obvious solution and that it has been adopted by virtually every other leading capital market in the Western world. The bulk of City opinion now accepts that it is a solution that is desirable, or at least inevitable. This solution would have enabled the Committee and the House to avoid many of the problems which have preoccupied us throughout our deliberations.
      9.30 pm
      I agree wholeheartedly with the arguments advanced some months ago by the Financial Times in a leading article, when it expressed the view that if we had begun with a statutory commission we could have spent our time making sure that it operated with proper flexibility and sensitivity, instead of starting at the other end with a body which was not propery constituted and did not have adequate powers. Consequently, we have had to spend our time attempting to increase those powers.
      This evening we have had a short debate on the powers of the Securities and Investments Board which direct applicants to go to the appropriate self-regulating organisation. That board may have been more appropriate and commended itself to the Government and their supporters if we had begun with the clear understanding that the SIB, bearing in mind its delicate relationship with the SROs, was to be the dominant partner.
      The Government's failure in this respect leaves the Bill inadequate to deal with its purpose. The Bill, and the Government's thinking which underpins it, simply do not grasp the scale of the change which will overcome the City. Many of the old safeguards over institutions are being swept away. Huge new conglomerates with powerful new players, enormous financial power—much more power than anything previously seen — will muscle into the City. Those people will be used to playing to the whistle, and it is vital that they are in no doubt as to who will blow the whistle, in what circumstances and with what effect.
      604
      The City will become a place of intense competition. The new, immensely powerful institutions will be competing with each other for a limited volume of business. When we have to endure an inevitable bear market, there will be a great deal of blood on the carpet. It will be at that moment that corners will be cut and rules broken. The structure of the Bill will be put to the test and, as it stands at the moment, it is inadequate to meet that test.
      At present, we are asked to support a structure in which a private company supervises arrange of self-regulating organisations, most of which have no experience or resources to undertake this ask, and some of the organisations do not even exist. It is a complicated structure—a delicate balance which, in general terms, we have supported. It is asking too much to place all the weight on the self-regulating organisations when, at the apex of the structure, there is nothing more substantial than a private company, limited by guarantees.
      The fact that we have a Securities and Investments Board which needs a special dispnesation to drop the word "limited" from its title gives the wrong message to people in the City. It is a wrong psychological simile. It is a typically muddled British compromise. It shows that we have not yet grasped the scale of the task and duty that we face. It signals to those who operate in the City that we have not taken the problem seriously.
      Mr. Cash rose——
      Mr. Gould: No, I will not give way; I am about to finish.
      The City, without a proper regulatory authority at the heart of the system, will be at a disadvantage in comparison with other financial markets. That is the prime reason why, when we come to Third Reading, we shall be obliged to vote against the Bill. It is the same reason which will oblige us to legislate again on the matter when we return to government.
      Mr. Campbell-Savours: I wish to speak briefly to add my support to the comments of my hon. Friend the Member for Dagenham (Mr. Gould). I feel extremely strongly about this matter, and I think that the Minister has totally misread public opinion. The Minister does not understand that the British put lie will never stomach a private policing operation in the City of London. A private company, no different from Securicor, will be responsible for policing City institutions.
      We know that the measure of that organisation will come in the crisis in the City. All the signs are that the big bang will provide for excesses that the country will expect the City and its institutions to root out. The problem is that when the British people find out that it is impossible to root out these things, perhaps even with a publicly instituted form of control commission, they will blame whatever private arrangements have been made for City policing.
      The Minister has it within his power, even at this late stage, to accept this amendment. As I understand it, it simply provides that he retains the right to substitute the limited company that is provides for in the Bill with some form of statutory body. This is reasonable proposition. It gives the Minister the opportunity, without further legislation, to change the very nature of the structure that is being set up today. If he dons not, he will find that, within a year or two, he will be standing at the Dispatch

      605
      Box defending, or perhaps even the converse, attacking what has gone on in the City. He will be defending a private policing arrangement that has been set up to monitor the City, but that the public are unable to understand. He has it within his power, and he would be sensible, in his conduct of the debate, to take on board the comments that have been made by me and by my hon. Friend the Member for Dagenham.
      Mr. Nelson: Unlike Labour Members, I believe that my hon. and learned Friend the Under-Secretary of State has moved in compliance with the wishes expressed by both sides in Committee and has come forward with proposals that will be durable and will enjoy the respect of the investing public. It is important that we seek to make the legislation work so that it can do what is intended. In seeking to achieve that objective, it is important that the SIB should have statutory recognition, the powers to investigate, to bring prosecutions in certain circumstances, to change the rules, if necessary, in the self-regulatory bodies, and to enjoy immunity, all of which have been conferred on it by the Bill.
      The amendments moved in Committee were argued against because the SIB will be a private sector body, but they are extensive and important powers in terms of investor protection. As the SIB can enjoy the benefits of being a private sector body, not being subject to the public sector borrowing requirement, the state panoply of regulation, and so on. we may have the best of both worlds. Even if Labour Members suspect that we have not, it is at least worth a serious try.
      I pay tribute to my hon. and learned Friend the Minister for the objective and sincere way in which he has sought to understand the objectives of those of us who have moved amendments. Without becoming entrenched, he has responded democratically and pragmatically to the interests of investors and of good and effective legislation. For those reasons, I warmly welcome the Government's amendments.
      Mr. Howard: I am grateful to my hon. Friend the Member for Chichester (Mr. Nelson) for his observations and I am delighted that I have been able to identify a solution to the problem on which we spent so much time in committee. We recognised the legitimate concerns expressed during our proceedings upstairs by my hon Friends the Members for Chichester and for Beaconsfield (Mr. Smith), and others. We have still managed to retain the flexibility and effectiveness that are so crucial to the concept that we have sought to put in place in the regulatory structure.
      It is uncharacteristically intellectually feeble of the hon. Member for Dagenham (Mr. Gould) to have failed to face up to the real difficulties that would flow in terms of restraints on public spending and borrowing, which would have inhibited the creation of an effective regulatory body. He has mouthed from beginning to end of our consideration of this matter the phrase "statutory commission" without ever coming clean and explaining precisely what it is that he had in mind.
      At the risk of introducing a note of controversy into our deliberations, I have to say that I utterly reject any accusations of dogma or doctrine by the hon. Member for Dagenham. I accuse him of failing to face the central issues
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      at the heart of this discussion. I am delighted to have arrived at a solution which meets the legitimate concerns of my hon. Friends.
      Mr. Gould: I am listening with fascination to the Minister's diatribe. Presumably this embraces every other statutory body which this Government and other Governments have created in Britain, and applies to every other statutory body fulfilling precisely these functions in every capital market in the world in which Britain is competing.
      Mr. Howard: It will not do for the hon. Gentleman to attempt to sidestep the argument in that way. We are considering a specific solution to a specific problem, and we have devised what I think is the most effective solution to that problem. I hope and expect that it will work. On that basis I commend the amendment to the House.
      Amendment agreed to.
      Amendments made: No. 166, in page 72, line 5, at end insert—
      '(1A) The body to which functions are transferred by the first order made under subsection (1) above shall be the body known as The Securities and Investments Board Limited if it appears to the Secretary of State that it is able and willing to discharge them, that the requirements mentioned in paragraph (b) of that subsection are satisfied in the case of that body and that he is not precluded from making the order by the subsequent provisions of this section or Chapter XII of this Part of this Act.'.
      No. 168, in page 72, line 7, leave out 'the' and insert 'a'.
      No. 169, in page 72, line 10, leave out 'subsections (4) and (5)' and insert 'subsection (4)'.
      No. 170, in page 72, line 14, at end inser—
      '(aa) Section 30(4); '.
      No. 171, in page 72, line 17, leave out '79(1) or 81' and insert 'or 79(1)'.
      No. 172, in page 72, line 19, leave out subsection (5).
      No. 173, in page 72, line 41, at end insert
      'and any transfer of a function under section 81, 92 or 93 shall be subject to such a reservation.'.—[Mr. Howard.]

    Schedule 6

      PRINCIPLES APPLICABLE TO DESIGNATED AGENCY'S RULES AND REGULATIONS
      Mr. Howard: I beg to move, in page 143, line 17, at end insert—
      'including information as to any commissions or other inducements received or receivable from a third party in connection with any such transaction.'.
      Mr. Speaker: With this, it will be convenient to take Government amendment No. 177.
      Mr. Butterfill: In Standing Committee when we discussed the problems that arise from disclosure, our main preoccupation was with disclosure of commission. I and the hon. Member for Dagenham (Mr. Gould) voiced doubts in Committee that commissions were not the only things about which we ought to be concerned. We made the point that we ought to ensure that the public knew the totality of costs being charged to an insurance policy, and how these could affect the interests of a policyholder. We made it clear in that debate that it could be confusing or even misleading to focus exclusively on commission because insurance companies selling in a direct way might well incur substantial marketing costs through such things as television advertising and advertising in newspapers, and that all such costs would be loaded on to the policies.

      607
      We felt that there was a need for something more than mere disclosure of commission, and for that reason I tabled an amendment which was supported by a large number of my hon. Friends, and a similar amendment was tabled by the hon. Member for Dagenham which was supported by a number of his hon. Friends. It became quite clear in Committee that we enjoyed the support of my hon. and learned Friend the Minister, who undertook to consider the matter in detail and to bring forward an amendment at this stage. I am pleased to say that my hon. and learned Friend has been as good as his word and has brought forward two amendments which substantially meet the anxieties expressed in Standing Committee.
      When these matters were discussed in Standing Committee I made it clear that I did not think it was right for us to try to lay down the detailed rules, but that we should merely lay down the ground rules. I am pleased to see that that is exactly what my hon. and learned Friend the Minister has done in his amendments.
      9.45 pm
      However, we must consider the amendments in the light of the proposals that have now been published by MIBOC for the regulation of salesmen and the general regulation of the marketing of life assurance and unit trusts which is contained in its latest document, "Life Assurance and Unit Trusts and the Investor", published in April this year.
      Here we have some difficulty. First, I must say that I congratulate MIBOC on the way in which it met many of the other concerns of the Committee. In some cases it has met them most ingeniously, and, indeed, improved upon some of the suggestions that were made in Committee. But in the one area of disclosure it has failed to meet the concerns that were expressed in Committee. It is worth illustrating that by reference to some correspondence which I have had on the subject.
      First, can we identify those areas where further disclosure ought to be available? Information should be available about what proportion of the payments for a premium will go towards the company's costs, which we have already identified, and what proportion will be invested on behalf of the policy holder.
      Secondly, we should know what effective rate of interest is being offered by the insurance company in the case of the amount that will accumulate towards a given sum. In every other form of investment there is an indication of the interest which is being paid, but that is not done by insurance companies.
      My concerns on this matter are not unique. Indeed, I have had a large number of letters from not only members of the public who are concerned in these matters, but also people throughout the insurance industry, not just one section of the industry, but a wide cross-section. For example, I have had correspondence from people engaged in computer systems relating to the analysis of policies. I have had letters from people who are involved in the marketing of insurance policies. I have had letters from people who are actuaries, engaged in the insurance industry. It may be worth quoting from some of the letters that I have received.
      Let me read a letter that I have received from one of the leading Scottish companies involved in the personal and corporate financial services sector which is relevant to the view that we should take of the MIBOC document. It says:
      "Dear Mr. Butterfill, We among others, forwarded our comments on the consultative document published by MIBOC earlier in the year. On that occasion there was time
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      for a consultation; on this occasion, time is short, and I therefore hope that our observations on the latest document will assist you in appraisal.
      Members of the standing committee are to be congratulated for grasping so quickly the complex subject and not allowing the wool to be pr lied over their eyes by an industry expert on this practice. We were particularly impressed by the insistence on the disclosure of all marketing and administrative charges within a product, not just the commission.
      The vested interests represented on the Board will continue to water down your proposals if possible. Perhaps there should be a statutory requirement for, at least, provision of estimated surrender values bas( d on industry — standard assumptions."
      I am pleased to say that that aspect has been largely met.
      The letter went on:
      "We still feel that the con mission system is the root cause of the industry's problems. but perhaps full disclosure of charges will persuade the industry to modify an indefensible system.
      We still feel that MIBOC is still trying to fudge the issue. If it is possible to come up with a means of product disclosure for with-profits policies, then it is possible to devise a method of commissions disclosure for company representatives as well as independent intermediaries. The battle over polarisation appears to have been won, however, although the definition of 'introducer' is a puss bledoophole that should be plugged.
      We thank you for helping to clean up such a rotten mess. Yours sincerely."
      That puts it more strongly and colourfully than I would have put it, but it shows that many of those in the insurance industry are unhappy with the latest MIBOC proposals.
      That letter was fairly typical of much of the correspondence that I received It is worth quoting the view of the National Consumer Council. On 5 June it wrote to me saying:
      "On 21 April SIB and MIBOC published their response to issues raised during Committee, Stage on disclosure of commissions and charges and the status of salesmen. We welcome the proposal that those selling life assurance or unit trusts will have to be either independent intermediaries or company representatives (restricted to the selling of the products of one company or group). However, we do not believe that SIB-MIBOC proposals for the disclosure of commissions and charges go far enough. It is our view that there should be full disclosure of commissions by independent intermediaries whether or not there is an industry agreement on maximum commissions. We also feel that consumers purchasing policies from company representatives should be made aware of the amount of. heir premiums which are absorbed by selling costs. These are, in effect, a charge on the policy and should be included in the disclosure of charges, surrender values etc. so that consumers are able to assess the value for money of the investment they arc being offered."
      That is the point made in the amendments of my hon. and learned Friend the Minister.
      All the controversy has provoked a quite extraordinary response from the Association of British Insurers, which produced u news sheet that I believe has been sent to the vast majority of hon. Members, Much of it is concerned with rubbishing the comments that I and other hon. Members made in Committee. It is worth taking up some of the points that it makes in the news sheet. It claims that we have unfairly stated its position and that as regards the right to share in profits there is some definition, because it is written into the articles of association of most insurance companies.
      Earlier, I said that I had received correspondence from members of the actuarial profession. I have with me a letter that I received from a consulting actuary who is also

      609
      a research fellow in actuarial studies at one of our leading universities. In his letter, he points out that that claim by the insurance companies is somewhat spurious. At the risk of boring the House, I shall quote from his letter. He writes:
      "Around about the beginning of this century with-profits premium rates were approximately 10 per cent. higher than the equivalent non-profit rates. This with-profits policyholder was this taking a chance that he would get approximately 10 per cent. less than he was paying for. In practice, his reward for taking this chance was that he would get a little more than he paid for in the form of bonuses. Bonus additions were expected to form 10–20 per cent. of his final policy proceeds. This seems quite a sensible system really.
      Since then, interest rates have increased dramatically. The result is that non-profit premium rates have reduced substantially over that period. On the other hand, for a given sum assured, with-profit rates have stayed fairly constant. The bonus rates have risen substantially to take up the slack. The result is that at present under a typical policy only approximately 40 per cent. or 50 per cent. of the eventual proceeds are guaranteed; the rest is bonuses. This has the advantage of being admirably flexible. For example, it allows the life offices to invest heavily in equities which they probably could not do under the old system.
      However, one of the side-effects of this has been to increase substantially the share of the premiums which ends with the insurance company's shareholders. As I explained at our meeting, for a typical proprietary office, the surplus declared at each valuation might be split in the ratio 90 per cent. to policyholders and 10 per cent. to the shareholders. The ratio is fixed for each company. At the start of the century approximately 20 per cent. of a typical policy's proceeds consisted of bonuses which had been declared out of surplus. It may be seen that, at that time, the shareholders' share of the total policy proceeds was approximately 22 per cent. ie. 10 per cent. of the 20 per cent. Under present conditions the shareholders might expect to receive approximately 6 per cent. of the policy proceeds, ie 10 per cent. of 60 per cent. 60 per cent. is the part of the policy proceeds which has emerged as surplus over the term, of a typical policy under current conditions."
      This means that the return to the shareholders has trebled over that period.
      "The position is further complicated by the type of valuation method required (a net premium valuation at an artificially low rate of interest which would tend. in general, to increase the proportion attributable to shareholders.)"
      The Association of British insurers and MIBOC are saying that what we asked for by way of detailed disclosure is not reasonable, cannot be done at fair cost and would be confusing to the investor. All I can do is to say that some members of the industry—the better members—are already doing substantially what we ask.
      I invite hon. Members to look at what the Scottish Amicable does at present. This is one of the better insurance companies with which, I am pleased to say, I have a policy. The Scottish Amicable booklet gives a bar chart entitled "What happens to your premiums". On that bar chart are shown the proportions as to commission, expenses and taxation. All this could be reasonably done by most members of the industry. Indeed, this example could be improved upon. I offer it as a model, and hope that my hon. and learned Friend will urge it upon MIBOC.
      Mr. Howard: My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) began by paying tribute to MIBOC and congratulating it on its latest document. Given those remarks, I confess that I was disappointed that he did not dissociate himself more robustly from the remarks of his correspondent who went on to accuse MIBOC of fudging the issue. I do not believe
      610
      that MIBOC has fudged the issue. It is committed to full disclosure of charges wherever possible. It believes that disclosure of expenses on with-profits policies is not practicable. I have no doubt that, if it can be shown that such disclosure is practicable, MIBOC will carefully consider the matter and fully explore the material that has been made available to my hon. Friend.
      However, the bar chart to which my hon. Friend referred, and which he held up for the edification of the House, if it is the same bar chart that he showed to me earlier, refers to the proportion of profits, expenses and so on in relation of the whole of the fund of the insurance company concerned and not to any particular policy. That is, of course, an entirely different matter.
      Mr. Butterfill: I am grateful to my hon. and learned Friend for pointing that out. I said that it was not entirely what I had hoped for, but that it gave an illustration of what could be done. I agree that it relates to the whole of the fund and that is its deficiency. Nevertheless, I am advised that a similar bar chart could be done for each product.
      Mr. Howard: It does not follow from the fact that one has a bar chart for the fund as a whole that it can be done for particular policies. To say that one does not entirely meet the other leaves a fairly wide gap in the argument.
      Schedule 6, as improved by the amendment, is deliberately flexible. It speaks in terms of the rules making proper provision. What proper provision is at any one time must take account of what is practicable at that time. Systems for allocation costs within insurance companies may well change and develop. What is not immediately practicable may later become so. There is, therefore, some scope for evolution in this area. Even if MIBOC is not capable fully of responding to my hon. Friend's concerns in its initial rules, it may be possible in the years ahead, as methods improve and one can identify the breakdown of premiums in the way that my hon. Friend would like to see, for the rules to be changed subsequently.
      I commend schedule 6 as amended to the House, as conferring the flexibility that I think is needed and proper to provide the requisite degree of consumer protection in this area.
      Amendment agreed to.
      Amendment made: No. 177, in page 143, line 20, at end insert —
      `6A. The conduct of business rules, or those rules and rules under section 47 of this Act, must make proper provision for requiring an authorised person who in the course of carrying on investment business enters or offers to enter into a transaction in respect of an investment with any person, or gives any person advice about such a transaction, to give that person such information as to the nature of the investment and the financial implications of the transaction as will enable him to make an informed decision.'.
      It being Ten o'clock, further consideration of the Bill stood adjourned.

    BUSINESS OF THE HOUSE
    Ordered,
    That, at this day's sitting, the Financial Services Bill may he proceeded with, though opposed, until any hour. —[Mr. Durant.]

    Financial Services Bill
    As amended (in the Standing Committee), again considered.
    Mr. Howard: I beg to move amendment No. 178, in page 143, line 31, at end insert—
    'Classes of investors
    10. The conduct of business rules and other rules and regulations made under Chapter V of Part I of this Act must take proper account of the fact that provisions that arc appropriate for regulating the conduct of business in relation to some classes of investors may not (by reason of their knowledge, experience or otherwise) be appropriate in relation to others.'
    This amendment has been proposed in order to add a new principle to schedule 6 to the Bill. This would enable the Secretary of State to refuse to transfer rule-making functions to an agency if he did not consider that the rules made by the agency took proper account of the fact that different provisions are appropriate for the regulation of the conduct of business in respect of different classes of investors. Different provisions are needed depending on the characteristics of different investors.
    This addition to schedule 6 provides a clear signpost to the designated agency to draw up its rules and regulations so as to reflect the differing skills, knowledge, resources and experience of different investors. The rules should, therefore, be flexible in the means by which they ensure adequate investor protection and the orderly conduct of the market. The variable should be not the entitlement to investor protection but the means whereby it is secured.
    I am well aware of the concern that has been expressed in the City and elsewhere that the weight of regulation may drive business overseas. I do not share that pessimism. Certain basic safeguards, such as honesty and fair dealing, should apply to all investment business and are essential if the United Kingdom is to maintain and, indeed, enhance its position as one of the world's leading financial centres. At the same time, we fully recognise the dangers of overregulation. That is why the regulatory framework encourages practitioner-based regulation through the recognised self-regulating organisations and professional bodies.
    By virtue of clause 162, the Bill already enables different rules to be made for different cases. The new principle introduced in this amendment requires that the Secretary of State be satisfied that the designated agency has paid proper regard to the different means by which appropriate investor protection can be provided in respect of different categories of investor. For example, some categories of business or professional investor will not need the full panoply of the rules to protect their interests. The House will know that the draft rules which the Securities and Investments Board has been publishing during recent months already distinguish between what are defined as business investors and other investors, a category which will include the less sophisticated, private investor.
    I welcome that approach. The principle to be incorporated in schedule 6 should, therefore, offer reassurance to those who have been concerned lest this approach might not be followed in future.
    Mr. Gould: We accept that there are different categories of investors who possibly need different levels or mechanisms to protect their interests.
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    I ask the Minister to bear in mind two matters. First, I hope that the new provision in schedule 6 will not be allowed to operate as some sort of pretext to exempt, for example, the Eurobond market from effective regulation.
    Secondly, will the Minister bear in mind that boundaries change between the professional investor and the smaller and less experienced investor, which require a great deal of flexibility in approach? Those boundaries must be watched carefully as the less experienced investor is tempted to move into new areas.
    Amendment agreed to.

    Schedule 7

      DESIGNATED AGENCIES: STATUS AND EXERCISE OF TRANSFERRED FL NCTIONS
      Amendments made: No. 175, in page 144, leave out lines 28 to 33.
      No. 182, in page 145, line 36, after 'evidence', insert
      'or, in Scotland, sufficient evidence'.
      No. 183, in page 146, line 18, leave out sub-paragraph (2) and insert—
      'Consultation
      12A. — (1) Before making any rules or regulations by virtue of functions transferred to is by a delegation order a designated agency shall, subject to sub-paragraphs (2) and (3) below, publish the proposed rules and regulations in such manner as appears to the agency to be best calculated to bring them to the attention of the public, together with a statement that representations in respect of the proposals can be made to the agency within a specified period; and before making the rules or regulations the agency snail have regard to any representations duly made in accordance with that statement.
      (2) Sub-paragraph (1) above does not apply in any case in which the agency considers that the delay involved in complying with that sub-paragraph would be prejudicial to the interests of investors.
      (3) Sub-paragraph (1) above does not apply to the making of any rule or regulation if it is in the same terms (or substantially the same terms) as a proposed rule or regulation which was furnished by the agency to the Secretary of State for the purposes of section 96(8) of this Act.'. —[Mr. Howard.]

    Clause 99

      REPORTS AND ACCOUNTS
      Mr. Ashdown: I beg to move amendment No. 184, in page 74, line 32, at end insert
      '; and every delegation order in respect of a designated agency shall cease to have effect at the end of the period of 28 days beginning with the day on which a report relating to the discharge of the functions trasferred to that designated agency is laid before Parliament under this section, unless before the end of that period that report is approved by a resolution of each House of Parliament.'.
      The purpose of the amendment can be stated quite briefly. It is to enshrine within the legislation the right of Parliament to debate a report — for which there is provision elsewhere in the legislation—that will be laid before the House on an annual basis. This is a matter of some importance, but it is one that can be dealth with briefly. I am seeking to probe and if the Minister will provide some useful words on the matter, I shall be satisfied.
      We are dealing with a framework which has been changed substantially. It has already been said that there are no fewer than 278 amendments, of which 249 are in in the name of the Government. We all know that there are more amendments to come in another place.

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      The real effectiveness of the general and overall structure which conducts the important function of regulating the financial services industry will not be known from the Bill and cannot be known from that source. That is because much of the framework needs to be filled in by the rules. Until the rules are drawn and properly enacted, we shall not be able to judge what the effect of the legislation will be.
      It is clear that we are moving into uncharted waters. As the hon. Member for Dagenham (Mr. Gould) said, nowhere else in the world have we set up a self-regulating body to regulate capital markets. I believe that it is the right solution in this instance, but I would rather see a stronger body than that which is proposed. It must he said that previous self-regulating bodies that have operated in the City, such as Lloyd's, have been manifestly unsucessful in regulating matters properly and effectively, and some would say that the same can be said of the stock exchange. Massive immunities are to be granted, and the stock exchange will now join the committee of Lloyd's, the Post Office, and the armed forces when fighting an enemy as the only bodies in Britain which have complete immunity from claims from ordinary members of the public for damages. That is an extremely significant immunity. My colleagues and I would say that it is too great an immunity, but that argument has been advanced already.
      We are entering uncharted waters in another sense, because we know that ahead of us is the big bang. Indeterminate factors will come into play and no one can predict exactly what will happen after the big bang takes place. It will be important to create a structure which is flexible and capable of being able to respond to and meet the needs that may be created. There are many who believe—I am one of them and I suspect that there are others on the Opposition Benches, and even some on the Government Benches — that the balance that the Minister has sought to draw is to fight the last war, not the next one, against City corruption.
      We must be flexible. The House has a right to comment yearly on what has taken place to ensure that the important institutions of our financial services industry, which have served Britain so magnificently in the past and are such an essential part of our economy, are regulated in a proper and appropriate fashion. I hope that the Minister recognises that we are moving into a difficult area and that it will be important to debate the issues that arise. He has gone a great deal towards allowing that to happen. In Committee, he said:
      "The agency is required to submit an annual report which must be laid before Parliament, and which Parliament will no doubt wish to debate." — [Official Report, Standing Committee E, 6 March 1986; c. 534.]
      I hope that the Minister will make a statement of equal clarity this evening. I hope also that he will say that he believes that it will be important, certainly in the early years, for Parliament to have the opportunity to debate the reports. If he says that it is important for the House to have that opportunity, I shall be satisfied. It is important that that should be so, especially in the early years of the development of such an important institution.
      Mr. Howard: Many bodies are required to produce annual reports which have to be laid before Parliament. It would be extraordinary for legislation to require that all such reports be debated and approved if dire consequences
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      were to be avoided. If we followed such an approach generally, there would be little time left for debates on other matters. It would be open to Parliament to debate a particular report of the agency if that were desired, and I am sure that it would often want to do so. It would not be sensible to provide that every report must be debated, regardless of whether such use of parliamentary time is justified. I invite the House to reject the amendment.
      Mr. Ashdown: I do not wish to prolong the debate, but the Minister has dismissed the amendment with rather less care and consideration than we expect of him. He was more forthcoming in Committee. I hope that he will recognise that it is important that the House should have an opportunity to debate the annual reports, especially in the early years. The financial services structure which he is putting into place will be extremely important. In the light of his comments in Committee, rather than those which he has just made, and in the interests of getting on to Third Reading as soon as possible, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.

    Clause 102

      MODIFICATION OF S. 101 WHERE RECOGNITION FUNCTION IS TRANSFERRED
      Amendment made: No. 185, in page 78, line 4, leave out from beginning to 'in' in line 3 and insert
      'subsection (3) of section 101 above he may, notwithstanding the delegation order, himself exercise the power conferred by paragraph (a) of that subsection or direct the designated agency to exercise the power conferred by paragraph (b) or (c) of that subsection'. —[Mr. Howard.]

    Clause 104

      REPORTS BY DIRECTOR GENERAL OF FAIR TRADING
      Amendments made: No. 186, in page 79, leave out lines 31 to 35 and insert
      'the matter specified in the notice of which a copy is sent to him under subsection (3) above'.
      No. 187, in page 79, line 38, leave out in' and insert 'before'.
      No. 188, in page 79, line 39, after 'above', insert
      'by reason of that matter'. —[Mr. Howard.]

    Clause 109

      SUPPLEMENTARY PROVISIONS
      Amendment made: No. 189, in page 83, line 21, after '109', insert—
      '(1A) Before the Secretary of State exercises a power under section 101(3)(b) or (c) above, his power to refuse leave under section 102(2) above or his power to give a direction under section 102(4) above in respect of a self-regulating organisation, investment exchange or clearing house, or his power under section 103(3)(b) above in respect of a designated agency, he shall —

      (a) give written notice of his intention do do so to the organisation, exchange, clearing house or agency and take such steps (whether by publication or otherwise) as he thinks appropriate for bringing the notice to the attention of any other person who in his opinion is likely to he affected by the exercise of the power; and

      (b) have regard to any representation made within such time as he considers reasonable by the organisation, exchange, clearing house or agency or by any such other person.

      615
      (1B) A notice under subsection (1A) above shall give particulars of the manner in which the Secretary of State proposes to exercise the power in question and state the reasons for which he proposes to act; and the statement of reasons may include matters contained in any report received by him under section 104 above.'. —[Mr. Howard.]

    Schedule 8

      REGULATED INSURANCE COMPANIES
      Amendment made: No. 190, in page 147, leave out lines 2 and 3 and insert—
      `2 —(1) An insurance company to which section 21 of this Act applies shall not he an authorised person except by virtue of that section.
      (1A) If an insurance company to which Part II of the Insurance Companies Act 1982 applies but to which section
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      21 of this Act does not apply becomes an authorised person by virtue of any other provision of this Act it shall be an authorised person only as respects the management of the investments of any pension fund which is established solely for the benefit of the officers or employees and their dependants of that company or of any other body corporate in the same group as that company.
      (1B) An insurance company to which section 30 of this Act applies shall not, so long as it is an authorised person by virtue of that section, be an authorised person by virtue of any other provision of this Act.'. —[Mr. Howard.]

    Financial Services Bill
      Schedule 9
        FRIENDLY SOCIETIES
        Amendments made: No. 194, in page 151, line 27, leave out from beginning to end of line 14 on page 152 and insert —
        PART I

          SELF-REGULATING ORGANISATIONS FOR FRIENDLY SOCIETIES
          Preliminary
          . In this Schedule—
          "a regulated friendly society" means a society which is an authorised person by virtue of section 22 of this Act as respects such investment business as is mentioned in that section;
          "regulated business", in relation to a regulated friendly society, means investment business as respects which the society is authorised by virtue of that section;
          "a self-regulating organisation for friendly societies" means a self-regulating organisation which is permitted under its rules to admit regulated friendly societies as members and to regulate the carrying on by such societies of regulated business;
          "a recognised self-regulating organisation for friendly societies" means a body declared by an order of the Registrar for the time being in force to he a recognised self-regulating organisation for friendly societies for the purposes of this Schedule;
          "a member society" means a regulated friendly society which is a member of an appropriate recognised self-regulating organisation for friendly societies and is subject to its rules in carrying on all its regulated business and, for the purposes of this definition, "an appropriate recognised self-regulating organisation for friendly societies" means —

          (a) in the case of any such society as is mentioned in section 22(1) of this Act, an organisation declared by an order of the Chief Registrar of friendly societies for the time being in force to be a recognised self-regulating organisation for friendly societies for the purposes of this Schedule; and

          (b) in the case of any such society as is mentioned in section 22(2) of this Act, an organisation declared by an order of the Registrar of Friendly Societies for Northern Ireland for the time being in force to be such an organisation;

          "the Registrar" means—

          (a) in relation to any such society as is mentioned in section 22(1) of this Act, or to any self-regulating organisation for friendly societies which has applied for or been granted a recognition order made by him, the Chief Registrar of friendly societies; and

          (b) in relation to any such society as is mentioned in section 22(2) of this Act, or to any self-regulating organisation for friendly societies which has applied for or been granted a recognition order made by him, the Registrar of Friendly Societies for Northern Ireland.

          Recognition
          2. — (1) A self-regulating organisation for friendly societies may apply to the Chief Registrar of Friendly Societies or the Registrar of Friendly Societies for Northern Ireland for an order declaring it to be a recognised self-regulating organisation for friendly societies for the purposes of this Schedule.
          (2) An application under sub-paragraph (1) above—

          (a) shall be made in such manner as the Registrar may direct; and

          (b) shall be accompanied by such information as the Registrar may reasonably require for the purpose of determining the application.

          (3) At any time after receiving an application and before determining it the Registrar may require the applicant to furnish additional information.
          618
          (4) The directions and requirements given or imposed under sub-paragraphs (2) and (3) above may differ as between different applications.
          (5) Any information to be furnished to the Registrar under this paragraph shall, if he so requires, be in such form or verified in such manner as he may specify.
          (6) Every application shall be accompanied by a copy of the applicant's rules and of any guidance issued by the applicant which is intended to have continuing effect and is issued in writing or other legible form.
          2A. —(1) If, on an application duly made in accordance with paragraph 2 above and after being furnished with all such information as he may require under that paragraph, it appears to the Registrar from that information and having regard to any other information in his possession that the requirements mentioned in paragraph 2B below are satisfied as respects that organisation. he may, with the consent of the Secretary of State and subject to sub-paragraph (2) below, make an order ("a recognition order") declaring the applicant to be a recognised self-regulating organisation for friendly societies.
          (2) Where the Registrar proposes to grant an application for a recognition order he shall send to the Secretary of State a copy of the application together with a copy of the rules and any guidance accompanying the application and the Secretary of State shall not consent to the making of the recognition order unless he is satisfied that the rules and guidance of which copies have been sent to him under this sub-paragraph do not have, and are not intended or likely to have, to any significant extent the effect of restricting, distorting or preventing competition or, if they have or are intended or likely to have that effect to any significant extent, that the effect is not greater than is necessary for the protection of investors.
          (3) Section 104 of this Act shall apply in relation to the decision whether to consent to the making of a recognition order under this paragraph as it applies to the decisions mentioned in subsection (1) of that section.
          (4) The Registrar may refuse to make a recognition order in respect of an organisation if he considers that its recognition is unnecessary having regard to the existence of one or more other organisations which are concerned with such investment business as is mentioned in section 22 of this Act and which have been or are likely to be recognised under this paragraph.
          (5) Where the Registrar refuses an application for a recognition order he shall give the applicant a written notice to that effect specifying a requirement which in the opinion of the Registrar is not satisfied, stating that the application is refused on the ground mentioned in sub-paragraph (4) above or stating that the Secretary of State has refused to consent to the making of the order.
          (6) A recognition order shall state the date on which it takes effect.
          2B.—(1) The requirements referred to in paragraph 2A above are that mentioned in sub-paragraph (2) below and those set out in paragraphs 2 to 7 of Schedule 2 to this Act as modified in sub-paragraphs (3) and (4) below.
          (2) The rules of the organisation must take proper account of the Friendly Societies Act 1974 or, as the case may be, the Friendly Societies Act (Northern Ireland) 1970.
          (3) In paragraph 3 of Schedule 2—

          (a) in sub-paragraph (1) for the reference to Chapter V of Part I of this Act there shall be substituted a reference to paragraphs 4 to 11 below; and

          (b) in sub-paragraph (2) for the reference to Chapter VI of that Part there shall be substituted a reference to the powers exercisable by the Registrar by virtue of paragraph 12 below.

          (4) In paragraph 4—

          (a) for the references to Chapter V of Part I of this Act there shall be substituted references to paragraphs 4 to 11 below; and

          (b) in sub-paragraph (1A) for the reference to members of a recognised self-regulating organisation or recognised professional body there shall be substituted a reference to members of a self-regulating organisation for friendly societies.

          Revocation of recognition
          2C. — (1) A recognition order may be revoked by a further order made by the Registrar if at any time it appears to him —

          (a) that any requirement mentioned in paragraph 2B(1) above is not satisfied in the case of the organisation to which the recognition order relates ("the recognised organisation");

          (b) that the recognised organisation has failed to comply with any obligation to which it is subject by virtue of this Act; or

          (c) that the continued recognition of the organisation is undesirable having regard to the existence of one or more other organisations which have been or are to be recognised under paragraph 2A above.

          (2) Subsections (2) to (9) of section 11 of this Act shall have effect in relation to the revocation of a recognition order under subsection (1) of that section but with the substitution for references to the Secretary of State for references to the Registrar.
          Compliance orders
          2D —(1) If at any time it appears to the Registrar—

          (a) that any requirement mentioned in paragraph 2B above is not satisfied in the case of a recognised organisation; or

          (b) that a recognised organisation has failed to comply with any obligation to which it is subject by virtue of this Act,

          he may, instead of revoking the recognition order under paragraph 2C above, make an application to the court under this paragraph.
          (2) If on any such application the court decides that the requirement in question is not satisfied or, as the case may be, that the organisation has failed to comply with the obligation in question it may order the organisation concerned to take such steps as the court directs for securing that that requirement is satisfied or that that obligation is complied with.
          (3) The jurisdiction conferred by this section shall be exercisable by the High Court and the Court of Session.
          2E. —(1) If at any time it appears to the Registrar that the rules of a recognised organisation do not satisfy the requirements of paragraph 3(1) of Schedule 2 to this Act as modified by paragraph 2B(3) above he may, instead of revoking the recognition order or making an application under paragraph 2D above, direct the organisation to alter, or himself alter, its rules in such manner as he considers necessary for securing that the rules satisfy those requirements.
          (2) Before giving a direction or making any alteration under this paragraph the Registrar shall consult the organisation concerned.
          (3) Any direction given under sub-paragraph (I) above shall, on the application of the Registrar, be enforceable by mandamus or, in Scotland, by an order for specific performance under section 91 of the Court of Session Act 1868.
          (4) A recognised organisation whose rules have been altered by or pursuant to a direction given by the Registrar under sub-paragraph (1) above may apply to the court and if the court is satisfied

          (a) that the rules without the alteration satisfied the requirements mentioned in that sub-paragraph; or

          (b) that other alterations proposed by the organisation would result in the rules satisfying those requirements,

          the court may set aside the alteration made by or pursuant to the direction given by the Registrar and, in a case within paragraph (b) above, order the organisation to make the alterations proposed by it; but the setting aside of an alteration under this sub-paragraph shall not affect its previous operation.
          (5) The jurisdiction conferred by sub-paragraph (4) above shall be exerciseable by the High Court and the Court of Session.
          (6) The fact that the rules of a recognised organisation have been altered by or pursuant to a direction given by the Registrar, or pursuant to an order made by the court, under this paragraph shall not preclude their subsequent alteration or revocation by that organisation.
          620
          2F. —(1) The Registrar or the Secretary of State may make regulations requiring a recognised organisation to give the Registrar or, as the case may be, the Secretary of Stale forthwith notice of the occurrence of such events relating to the organisation or its members as are specified in the regulations and such information in respect of those events as is so specified.
          (2) The Registrar or the Secretary of State may make regulations requiring a recognised organisation to furnish the Registrar or, as the case may be, the Secretary of State at such times or in respect of such periods as are specified in the regulations with such information relating to the organisation or its members as is so specified.
          (3) The notices and information required to be given or furnished under the foregoing provisions of this paragraph shall be such as the Registrar or, as the case may be, the Secretary of State may reasonably require for the exercise of his functions under this Act.
          (4) Regulations under the foregoing provisions of this paragraph may require information to be given in a specified form and to be verified in a specified manner.
          (5) A notice or information required to be given or furnished under the foregoing provisions of this paragraph shall be given in writing or in such other manner as the Registrar or, as the case may be, the Secretary of State may approve.
          (6) Where a recognised organisation amends, revokes or adds to its rules or guidance it shall within seven days give the Registrar written notice of the amendment, revocation or addition; but notice need not be given of the revocation of guidance other than such as is mentioned in paragraph 2(6) above or of any amendment of or addition to guidance which does not result in or consist of such guidance as is there mentioned.
          (7) The Registrar shall send the Secretary of State a copy of any notice given to him under sub-paragraph (6) above.
          (8) Contravention of this paragraph shall not be an offence.
          2G. — (1) A recognised self-regulating organisation for friendly societies shall not exercise any powers for purposes corresponding to those of the powers exercisable by the Registrar by virtue of paragraph 12 below in relation to a regulated friendly society unless it has given reasonable notice of its intention to do so to the Registrar and informed him—

          (a) of the manner in which and the date on or after which it intends to exercise the power; and

          (b) in the case of a proposal to impose a prohibition or requirement, of the reason why it proposes to act and its reasons for considering that that reason exists and that it is necessary to impose the prohibition or requirement.

          (2) A recognised self-regulating organisation for friendly societies shall not exercise any power to which sub-paragraph (1)(a) above applies if before the date given in the notice in pursuance of that sub-paragraph the Registrar has served on it a notice in writing directing it not to do so; and the Registrar may serve such a notice if he considers it is desirable for protecting members or potential members of the society against the risk that it may be unable to meet its liabilities or to fulfil the reasonable expectations of its members or potential members.
          Prevention of restrictive practices
          2H. — (1) The powers conferred by sub-paragraph (2) below shall be exercisable by the Secretary of State if at any time it appears to him that

          (a) any rules made or guidance issued by a recognised self-regulating organisation for friendly societies;

          (b) any practices of any such organisation; or

          (c) any practices of persons who are members of, or otherwise subject to the rules made by, any such organisation.

          have, or are intended or likely to have, to a significant extent the effect of restricting, distorting or preventing competition and that that effect is greater than is necessary for the protection of investors.
          (2) The powers exercisable under this sub-paragraph are to direct the Registrar—

          (a) to revoke the recognition order of the organisation;

          621

          (b) to direct the organisation to take specified steps for the purpose of securing that the rules, guidance or practices in question do not have the effect mentioned in sub-paragraph (1) above;

          (c) to make alterations in the rules for that purpose;

          and subsections (2) to (5), (7) and (9) of section 11 of this Act, as applied by sub-paragraph (2) of paragraph 2C above, shall have effect in relation to the revocation of a recognition order by virtue of a direction under this sub-paragraph as they have effect in relation to the revocation of such an order under subparagraph (1) of that paragraph.
          (3) The practices referred to in paragraph (b) of subparagraph (1) above arc practices of the organisation in its capacity as such; and the practices referred to in paragraph (c) of that sub-paragraph are practices in relation to business in respect of which the persons in question are subject to the rules of the organisation and which are required or contemplated by its rules or guidance or otherwise attributable to its conduct in its capacity as such.
          (4) The fact that any rules made by a recognised self-regulating organisation for friendly societies have been altered pursuant to a direction given by the Secretary of State under this paragraph shall not preclude their subsequent alteration or revocation by that organisation.
          (5) Subsections (3) to (6) of section 104 of this Act shall apply for the purposes of this paragraph as if—

          (a) the reference to a notice in subsection (3) included a notice received under paragraph 2F(7) above or 22A(4) below;

          (b) the reference to the Secretary of State's powers in subsection (4) included his powers under paragraph 2H(2) above; and

          (c) the reference to practices in subsection (5) included such practices as are mentioned in paragraph 2H(1) above.

          Fees
          21. — (1) An applicant for a recognition order under paragraph 2A above shall pay such fees in respect of his application as may he required by a scheme made and published by the Registrar; and no application for such an order shall be regarded as duly made unless this subparagraph is complied with.
          (2) Subsections (2) to (4) of section 94 of this Act apply to a scheme under subparagraph (1) above as they apply to a scheme under subsection (1) of that section.
          (3) Every recognised self-regulating organisation for friendly societies shall pay such periodical fees to the Registrar as he may by regulations prescribe.
          Application of provisions of this Act
          2J. —(1) Subject to sub-paragraph (2) below, sections 89(1)(c), 106, 107, 108, 109(4), 149(1)(l). [Exemption. from liability for damages] 152 and 156(4) of this Act and paragraph 3(3) of Schedule 5 to this Act shall apply in relation to recognised self-regulating organisations for friendly societies as they apply in relation to recognised self-regulating organisations.
          (2) In its application by virtue of sub-paragraph (1) above section 108(1) of this Act shall have effect as if the reference to section 101(2) were a reference to paragraph 2H(1) above.
          (3) In its application by virtue of sub-paragraph (1) above subsection (2) of section [Exemption from liability for damages]of this Act shall have effect as if—

          (a) the reference in paragraph (a) to paragraphs 1 to 6 of Schedule 2 were to paragraphs 2 to 6 of that Schedule; and

          (b) paragraph (d) referred to the powers of the organisation under paragraph 12(4) below.

          (4) A direction under subsection (1) of section 152 of this Act as it applies by virtue of sub-paragraph (1) above shall direct the Registrar to direct the organisation not to take or, as the case may be, to take the action in question; and where the function of making or revoking a recognition order in respect of a self-regulating organisation for friendly societies is exercisable by a transferee body any direction under that subsection as it applies as aforesaid shall be a direction requiring the Registrar to direct the transferee body to give the organisation such a direction as it specified in the direction given by the Secretary of State.
          622
          (5) Subsection (4) of that section shall not apply to a direction given to the Registrar by virtue of this paragraph.

        PART II

          REGISTRAR'S POWERS IN RELATION TO REGULATED FRIENDLY SOCIETIES'.
          No. 195, in page 152, line 17, after second 'in', insert 'this Part of.
          No. 196, in page 152, line 26, after 'society', insert 'other than a member society'.
          No. 197, in page 153, line 18, at end insert 'other than member societies'.
          No. 198, in page 153, line 26, after 'society', insert 'other than a member society'.
          No. 199, in page 153, line 34, after 'society', insert 'other than a member society'.
          No. 200, in page 153, line 45, leave out from 'anything' to end of line 49 and insert
          'done by such a society in the course of or in consequence of an unsolicited call which, as respects the society, constitutes the carrying on of regulated business, if it is permitted to be done by the society in those circumstances—

          (a) in the case of a member society, by the rules of the recognised self-regulating organisation for friendly societies of which it is a member; and

          (b) in any other case, by regulations made by the Registrar with the consent of the Secretary of State.'.

          No. 201, in page 154, line 2, after 'society', insert 'other than a member society'.
          No. 202, in page 154, leave out lines 20 and 21. No. 203, in page 154, line 21, at end insert—
          '(v) the rules of a recognised self-regulating organisation for friendly societies in relation to which it is a member society.'.
          No. 204, in page 154, line 37, after 'paragraph', insert '(a)'.
          No. 205, in page 154. line 39, after 'or'. insert `(b) a contravention of.
          No. 206, in page 154, line 39, at end insert
          'or

          (c) a contravention by a member society of any rules of the recognised self-regulating organisation for friendly societies of which it is a member relating to a matter in respect of which rules or regulations have been or could he made under this Schedule or any such requirement could be imposed,'.

          No. 207, in page 155, line 21, at end insert—
          '(4) The powers conferred by this paragraph shall not be exercisable in relation to a member society, except that the powers conferred by virtue of section 62( I )(b) of this Act may on any of the grounds mentioned in sub-paragraph (2) above be exercised in relation to a member society at the request of the organisation in relation to which it is a member society.'.
          No. 208, in page 155, line 23, after 'society', insert
          '(other than a member society) or any self-regulating organisation for friendly societies'.
          No. 209, in page 156, line 1, leave out paragraph 15.
          No. 210, in page 156, line 11, leave out from first 'of' to end of line 13 and insert—

          (i) this Act or any rules or regulations made under it;

          (ii) any requirement imposed under paragraph 13 above;

          (iii) the rules of a recognised self-regulating organisation for friendly societies in relation to which it is a member society; or'.

          No. 211, in page 156, line 37, leave out from first 'or to end of line 39 and insert—

          (i) this Act or any rules or regulations made under it;

          (ii) any requirement imposed under paragraph 13 above;

          (iii) the rules of a recognised self-regulating organisation for friendly societies in relation to which it is a member society; or'.

          No. 212, in page 157, line 11, at end insert—

        'PART III

          TRANSFER OF REGISTRAR'S FUNCTIONS'.
          No. 213, in page 157, line 23, at end insert—
          '(1A) The body to which functions are transferred by the first order made under sub-paragraph (1) above shall be the body known as the Securities and Investments Board Limited if the Secretary of State consents to the making of the order and it appears to the Registrar that that body is able and willing to discharge those functions, that the requirements mentioned in paragraph (b) of that sub-paragraph arc satisfied in the case of that body and that he is not precluded from making the order by the following provisions of this paragraph or paragraph 19 or 20 below.'.
          No. 214, in page 157, line 35, leave out 'sub-paragraph (5)' and insert 'sub-paragraphs (5) and (6A)'.
          No. 215, in page 157, line 37, leave out '4' and insert `2'
          No. 216, in page 158, line 4, at end insert—
          '(6A) A transfer order—

          (a) may reserve to the Registrar the function of revoking a recognition order in respect of a self-regulating organisation for friendly societies on the ground that the requirement mentioned in paragraph 2B(2) above is not satisfied; and

          (b) shall not transfer to a transferee body the function of revoking any such recognition order on the ground that the organisation has contravened the provisions of paragraph 2G above.

          No. 217, in page 159, line 1, leave out from 'the' to 'paragraph' in line 3 and insert
          `reference to section 96(8)(6) of this Act there shall be substituted a reference to'.
          No. 218, in page 159, line 6, leave out 'paragraphs 1(2) and (3) and 4(2)' and insert 'paragraph 1(2) and (3)'.
          No. 219, in page 159, line 11, at end insert—
          '(d) paragraph 12A(3) shall have effect as if the reference to section 96(8) were a reference to paragraph 19(1) above.'.
          No. 220, in page 159, line 18, at end insert—
          '22A.—(1) This paragraph applies where the function of making or revoking a recognition order in respect of a self-regulating organisation for friendly societies is exercisable by a transferee body.
          (2) Paragraph 2A(2) above shall have effect as if the first reference to the Secretary of State included a reference to the Registrar.
          (3) The transferee body shall not regard the requirement mentioned in paragraph 2B(2) as satisfied unless the Registrar has certified that he also regards it as satisfied.
          (4) A transferee body shall send the Registrar and the Secretary of State a copy of any notice received by it under paragraph 2F(6) above.
          (5) Where the Secretary of State exercises any of the powers conferred by paragraph 2H(2) above in relation to an organisation the Registrar shall direct the transferee body to take the appropriate action in relation to that organisation.'
          No. 221, in page 160, line 7, leave out '106, 108 and'.
          No. 222, in page 160, line 27, leave out 'Section 109(1)'and insert
          'For the powers referred to in subsection (IA) of section 109 there shall be substituted references to the powers under paragraphs 21–42)(b) or (c) or 2A(2) above or the power mentioned in paragraph 25(3)(b) above and subsection (1) of that section.'.
          No. 223, in page 161, leave out line 3 and insert—

        `PART IV

          MISCELLANEOUS AND SUPPLEMENTAL
          26A. In the case of an application for authorisation under section 25 of this Act made by a society which is registered under the Friendly Societies Act 1974 within the meaning of that Act or is registered or deemed to be registered under the Friendly Societies Act (Northern Ireland) 1970 ("a registered society"), section 26(3)(b) of this Act shall have effect as if it referred only to any person who is a trustee, manager or member of the committee of the society.
          26B. Where the other person mentioned in paragraph (c) of the definition of "connected person" in section 92(9) of this Act is a registered society that paragraph shall have effect with the substitution for the words from "member" onwards of the words "trustee, manager (A member of the committee of the society".
          26C. In relation to any such document as is mentioned in subsection (1) of section 161 of this Act which is required or authorised to be given to or served on a registered society —

          (a) subsection (3)(c) of that section shall have effect with the substitution for the words from "member" onwards of the words "`trustee, manager or member of the committee of the society"; and

          (b) subsection (4)(c) of that section shall have effect as if for the words from -member" onwards there were substituted the words "trustee, manager or member of the committee of the society, the office which is its registered office in accordance with its rules".'.

          No. 224, in page 161, line 8, after '28', insert
          `The proviso to section 32(1) cf the Industrial Assurance Act 1923,'.
          No. 225, in page 161, line 8, leave out 'and'.
          No. 226, in page 161, line 10, after '1970', insert
          'and Article 36(2) of the Industrial Assurance (Northern Ireland) Order 1979'.
          No. 227, in page 161, line 10, leave out from 'dispute' to end of line 13 and insert
          `to which there apply any rules such as are mentioned in section 45(2)(j) of this Act which have been made by the Registrar under paragraph 4 above or any corresponding rules made by a self-regulating company for friendly societies; but where those rules relate only to part of the matters in dispute—

          (a) this paragraph shall not preclude the reference to the Registrar of the matters to which the rules do not relate; and

          (b) the Registrar may, if he thinks fit, delegate his functions under section 77 of the said Act of 1974 or, as the case may be, section 65 of the said Act of 1970 in respect of those other matters so as to enable all the matters in dispute to be determined in accordance with the rules.'.

          No. 228, in page 161, line 25, after 'and', insert
          `the Statutory Instruments Act 1946 shall apply to any such power as if the Chief Registrar of friendly societies were a Minister of the Crown.
          (2)'. —[Mr. Howard.]

    Clause 118

      APPLICATIONS FOR LISTING
      Amendments made: No. 229, in page 90, line 35, after 'societies', insert
      ',industrial and provident societies or credit unions'.
      No. 230, in page 91 line 37, leave out subsection (9) —[Mr. Howard.]

    Clause 129

      LISTING RULES: GENERAL PROVISIONS
      Amendment made: No. 231, page 199, line 7, after `evidence' insert:
      `or, in Scotland, sufficient evidence'. —[Mr. Howard.]

    Clause 130
      QUESTIONS AS TO PREVIOUS CONVICTIONS
      Amendment made: No. 232, in page 99, line 15, leave out clause 130. —[Mr. Howard.]
    Schedule 10
      TAKEOVER OFFERS:

        PROVISIONS SUBSTITUTED FOR SECTIONS 428, 429 AND 43o OF COMPANIES ACT I985
        Amendments made: No. 233, in page 162, line 34, leave out 'the announcement of.
        No. 234, in page 163, line 35, leave out subsection (8) and insert—
        '(8) Where during the period within which a takeover offer can be accepted the offeror acquires or contracts to acquire any of the shares to which the offer relates but otherwise than by virtue of acceptances of the offer, then, if—

        (a) the value of the consideration for which they are acquired or contracted to be acquired ("the acquisition consideration") does not at that time exceed the value of the consideration specified in the terms of the offer; or

        (b) those terms are subsequently revised so that when the revision is announced the value of the acquisition consideration, at the time mentioned in paragraph (a)above, no longer exceeds the value of the consideration specified in those terms,

        the offeror shall be treated for the purposes of this section as having acquired or contracted to acquire those shares by virtue of acceptances of the offer; but in any other case those shares shall be treated as excluded from those to which the offer relates.'
        No. 235, in page 164, line 48, leave out from '(5)' to 'and' in line 49.
        No. 236, in page 165, line 3, leave out subsection (10) and insert—
        '(10) Any sum received by a company under paragraph (b) of subsection (5), and any dividend or other sum accruing from any other consideration received by a company under that paragraph, shall be paid into a separate bank account, being an account the balance on which bears interest at an appropriate rate and can be withdrawn by such notice (if any) as is appropriate.
        No. 237, in page 165, line 9, after 'enquiry', insert—
        'made at such intervals as are reasonable'.
        No. 238, in page 165, line 12, leave out from 'received' to end of line 13 and insert—
        'or the company is wound up the consideration (together with any interest, dividend or other benefit that has accrued from it) shall be paid into court.
        (12) In relation to a company registered in Scotland, subsections (13) and (14) shall apply in place of subsection (11).
        (13) Where after reasonable enquiry made at such intervals as are reasonable the person entitled to any consideration held on trust by virtue of subsection (9) cannot be found and twelve years have elapsed since the consideration was received or the company is wound up—

        (a) the trust shall terminate;

        (b) the company or, as the case may be, the liquidator shall sell any consideration other than cash and any benefit other than cash that has accrued from the consideration; and

        (c) a sum representing—

        (i) the consideration so far as it is cash;

        (ii) the proceeds of any sale under paragraph (b) above; and

        (iii) any interest, dividend or other benefit that has accrued from the consideration,

        626
        shall be deposited in the name of the Accountant of Court in a bank account such as is referred to in subsection (10) and the receipt for the deposit shall he transmitted to the Accountant of Court.
        (14) Section 58 of the Bankruptcy (Scotland) Act 1985 (so far as consistent with this Act) shall apply with any necessary modifications to sums deposited under subsection (13) as that section applies to sums deposited under section 57(1)(a) of that Act.
        (15) The expenses of any such enquiry as is mentioned in subsection (11) or (13) may be defrayed out of the money or other property held on trust for the person or persons to whom the enquiry relates.'.
        No. 239, in page 166, line 21, leave out from first 'the' to end of line 27 and insert
        'holder of the shares may indicate his choice when requiring the offer to acquire them and the notice given to the holder under section 430A(3)—

        (a) shall give particulars of the choice and of the rights conferred by this subsection; and

        (b) may state which consideration specified in the offer is to be taken as applying in default of his indicating a choice;'.

        No. 240, in page 167, line 9, after 'costs', insert 'or expenses'.
        No. 241, in page 167, line 33, leave out 'known shareholders' and insert
        'shareholders who have been traced but'.
        No 242, in page 167, line 36, leave out from 'jointly' to end of line 42 and insert
        'and in that event this Part of this Act has effect with the following modifications.
        (2) The conditions for the exercise of the rights conferred by sections 429 and 430A shall be satisfied by the joint offerors acquiring or contracting to acquire the necessary shares jointly (as respects acquisitions by virtue of acceptances of the offer) and either jointly or separately (in other cases); and, subject to the following provisions, the rights and obligations of the offeror under those sections and sections 430 and 430B shall he respectively joint rights and joint and several obligations of the joint offerors.
        (3) It shall be a sufficient compliance with any provision of those sections requiring or authorising a notice or other document to be given or sent by or to the joint offerors that it is given or sent by or to any of them; but the statutory declaration required by section 429(4) shall be made by all of them and, in the case of a joint offeror being a company, signed by a director of that company.
        (4) In sections 428, 430(8) and 430E references to the offeror shall he construed as references to the joint offerors or any of them.
        (5) In section 430(6) and (7) references to the offeror shall be construed as references to the joint offerors or such of them as they may determine.
        (6) In sections 430(4)(a) and 430B(4)(a) references to the offeror being no longer able to provide the relevant consideration shall he construed as references to none of the joint offerors being able to do so.
        (7) In section 430C references to the offeror shall be construed as references to the join offerors except that any application under subsection (3) or (5) may be made by any of them and the reference in subsection (5)(a) to the offeror having been unable to trace one or more of the persons holding shares shall be construed as a reference to none of the offerors having been able to do so.'.
        No. 243, in page 167, line 47, leave out from 'but' to end of line 2 on page 168 and insert
        `, subject to subsection (1A), shares which any such associate holds or has contracted to acquire, whether at the time when the offer is made or subsequently, shall be disregarded for the purposes of any reference in this Part of this Act to the shares to which a takeover offer relates.
        (1A) Where during the period within which a takeover offer can be accepted any associate of the offeror acquires or contracts to acquire any of the shares to which the offer relates, then, if the condition specified in subsection (8)(a) or

        627
        (b) of section 429 is satisfied as respects those shares they shall be treated for the purposes of that section as shares to which the offer relates.'. —[Mr. Howard.]

    Clause 147

      INVESTIGATIONS INTO INSIDER DEALING
      Amendments made: No. 244, in page 109, line 28, leave out 'books or'. —
      No. 245, in page 109, line 40, leave out subsection (5). —[Mr. Howard.]

    Clause 149

      EXEMPTIONS FROM RESTRICTIONS ON CLOSURE
      Amendments made: No. 246, in page 112, line 16, leave out 'under' and
      `arising under or by virtue of.
      No. 247, in page 113, line 8, at end insert—
      '(jj) for the purpose of enabling or assisting an official receiver to discharge his functions under the enactment relating to insolvency or for the purpose of enabling or assisting a body which is for the time being a recognised professional body for the purposes of section: 3 of the Insolvency Act 1985 to discharge its functions as such;'.
      No. 248, in page 113, line 15, at end insert—
      '(ll) with a view to the institution of, or otherwise for the purposes of, any disciplinary proceedings relating to the exercise by a solicitor, auditor, accountant, valuer or actuary of his professional duties;'.
      No. 249, in page 114, line 22, at end insert—
      '(6A) Section 148 above shall not preclude the disclosure of information by the Dierector General of Fair Trading or any officer or servant of his or any person obtaining the information directly or indirectly from the Director or any such officer or servant if the information was obtained by the director or any such officer or servant for the purposes of or in the discharge of his functions under this Act (whether or not he was the primary recipient of the information within the meaning of section 148 above) and the dislosure is made—

      (a) for the purpose of enabling or assisting the Director, the Secretary of State or any other Minister, the Monopolies and Mergers Commission or any Northern Ireland department to discharge any function conferred on him or them by the Fair Trading Act 1973 (other than Part II or III of that Act), the Restrictive Trade Practices Act 1976 or the Competition Act 1980; or

      (b) for the purposes of any civl proceedings under any of those provisions;

      and information shall not be treated as restricted information for the purposes of section 148 above if it has been made available to the public by virtue of this subsection.
      (6B) The Secretary of State may by order modify the application of any provision of this section so as—

      (a) to prevent the dislosure by virtue of that provision; or

      (b) to restrict the extent to which disclosure is permitted by virtue of that provision,

      of information received by a person specified in the order pursuant to a Community obligation from a person exercising functions in relation to collective investment schemes who is also so specified.'.
      No. 250, in page 114, line 23, after '(3)', insert 'or (6B)'. —[Mr. Howard.]

    Clause 151
      RECIPROCITY
      Amendment made: No. 251, in page 114, line 37, leave out Clause 151. —[Mr. Howard.]
    Clause 155

      DISCLOSURE OF INTERESTS IN SHARES: INTEREST HELD BY MARKET MAKER
      Amendment made: No. 252, in page 120, line 27, at end insert
      '; and an interest of such a person in shares is an exempt interest if he carries on business as a market maker in the United Kingdom, is subject to such rules in the carrying on of that business and holds the interest for the purposes of that business.'.—[Mr. Howard.]

    Clause 157
      INVESTIGATION OF UNAUTHORISED PERSONS
      Amendment made: No. 253, in page 122, line 1, leave out Clause 157.1. —[Mr. Howard]
    Clause 158

      PROSECUTIONS
      Amendments made: No. 254, in page 122, line 5. after '114', insert 'or (Banking business)'.
      No. 255, in page 122, line 6, leave out from 'by' to second 'or' in line 7 and insert:
      'or with the consent of the Secretary of State'.
      No. 256, in page 122, line 9, after 'by', insert:
      'or with the consent or.
      No. 257, in page 122, line 20. at end insert—
      '(2A) Proceedings in respect of an offence under section (Banking business) above shall not be instituted—

      (a) in England and Wales, except by or with the consent of the Treasury or the Director of Public Prosecutions; or

      (b) in Northern Ireland, except by or with the consent of the Treasury or the Director of Public Prosecutions for Northern Ireland.'.

      No. 258, in page 122, line 20, at end insert—
      '(3) The functions to which section 96 above applies shall include the function of the Secretary of State under subsection (1) above to institute proceedings but any transfer of that function shall be subject to a reservation that it is to be exercisable by him concurrently with the designated agency and so as to be exercisable by the agency subject to such conditions or restrictions as the Secretary of State may from time to time impose:. —[Mr. Howard.]

    Clause 163

      INTERPRETATION
      Amendments made: No. 259, in page 125, line 12, at end insert—
      '"appointed representative" has the meaning given in section 41 above;'.
      No. 260, in page 125, leave out lines 36 and 37.
      No. 261, in page 125, line 43, at end insert—
      '"guidance", in relation to a self-regulating organisation, professional body, investment exchange, clearing house or designated agency, has the meaning given in section 8(4), 16(4), 35(3), 37(3) or 96(11) above;'.
      No. 262, in page 126, line 32 leave out 'exempt' and insert 'appointed'.
      No. 263, in page 127, line 10, at end insert—

      629
      '"recognised self-regulating organisation for friendly societies" has the meaning given in paragraph I of Schedule 9 to this Act.'.
      No. 264, in page 127, line 12, after 'organisation', insert
      'self-regulating organisation for friendly societies'.
      No. 265, in page 127, line 13, at end insert—
      '"registered friendly society" means—

      (a) a society which is a friendly society within the meaning of section 7(1)(a) of the Friendly Societies Act 1974 and is registered within the meaning of that Act; or

      (b) a society which is a friendly society within the meaning of section 1(1)(a) of the Friendly Societies Act (Northern Ireland) 1970 and is registered or deemed to be registered under that Act;'.

      No. 266, in page 127, line 13, at end insert—
      '"rules", in relation to a self-regulating organsation, professional body, investment exchange or clearing house, has the meaning given in section 8(3), 16(3), 35(2) or 37(2) above;'.
      No. 267, in page 127, line 16, at end insert' —
      '"trustee", in relation to a collective investment scheme, has the meaning giving in section 67(7) above;'.
      No. 268, in page 128, line 6, at end insert—
      '(4) In this Act, except in relation to a unit trust scheme or a registered friendly society, "manager" means an employee who—

      (a) under the immediate authority of his employer is responsible, either alone or jointly with one or more other persons, for the conduct of his employer's business; or

      (b) under the immediate authority of his employer or of a person who is a manager by virtue of paragraph (a) above exercises managerial functions or is responsible for maintaining accounts or other records of his employer;

      and, where the employer is not an individual, references in this subsection to the authority of the employer are references to the authority, in the case of a body corporate, of the directors, in the case of a partnership, of the partners and, in the case of an unincorporated association, of its officers or the members of its governing body.'. —[Mr. Howard.]

    Clause 165

      NORTHERN IRELAND
      Amendment made: No. 269, in page 128, line 39, leave out from 'and' to end of line 40 and insert
      'any fees received under this Act by the Registrar of Friendly Societies for Northern Ireland shall be paid into the Consolidated Fund of Northern Ireland.'. —[Mr. Howard.]

    Clause 166

      COMMENCEMENT AND TRANSITIONAL PROVISIONS
      Amendment made: No. 270, in page 129, line 3, at end insert
      `(2) Subsection (1) above does not apply to section (Offers of short-dated debentures) which shall come into force when this Act is passed.'.

    Schedule 11

      TRANSITIONAL PROVISIONS
      Amendment made: No. 271, in page 172, line 11, at end insert —
      'Recognised collective investment schemes
      6A. —(1) If at any time before the coming into force of section 78 of this Act it appears to the Secretary of State that the law of a member State other than the United Kingdom confers rights on the managers and trustees of authorised unit trust schemes entitling them to carry on in that State on termse
      630
      quivalent to those of that section —

      (a) investment business which consists in operating or acting as trustee in relation to such schemes; and

      (b) any investment business which is carried on by them in connection with or for the purposes of such schemes,

      he may by order direct that schemes constituted in that State which satisfy such requirements as are specified in the order shall be recognised schemes for the purposes of this Act.
      (2) Subsections (2) to (9) of section 78 of this Act shall have effect in relation to any scheme recognised by virtue of this paragraph; and the references in sections 23 and 163(1) of this Act to a scheme recognised under section 78, and in section 68(1) of this Act to a scheme recognised under Chapter VII of Part I of this Act, shall include references to any scheme recognised by virtue of this paragraph.
      (3) In section 78(3)(a) as applied by sub-paragraph (2) above the reference to the rights conferred by any relevant Community instrument shall be construed as a reference to the rights conferred by virtue of an order made under this pa ra graph'. —[Mr. Howard.]

    Schedule 12
      CONSEQUENTIAL AMENDMENTS
      Amendment made: No. 272, in page 173, line 3, leave out 'E' and insert 'F'. —[Mr. Howard.]
    New Schedule
      RESTRICTION OF REHABILITATION OF OFFENDERS ACT I974
        PART I

          EXEMPTED PROCEEDINGS
          1. Any proceedings with respect to a decision or proposed decision of the Secretary of State or a designated agency—

          (a) refusing, withdrawing or suspending an authorisation;

          (b) refusing an application under section 27(4) of this Act;

          (c) giving a direction under section 54 of this Act or refusing an application for consent or for the variation of a consent under that section;

          (d) exercising a power under Chapter VI of Part I of this Act or refusing an application for the rescission or variation of a prohibition or requirement imposed under that Chapter;

          (e) refusing to make or revoking an order declaring a collective investment scheme to be an authorised unit trust scheme or a recognised scheme.

          2. Any procedings with respect to a decision or proposed decision of a recognised self-regulating organisation or recognised professional body—

          (a) refusing or suspending a person's membership of the organisation or body;

          (b) expelling a member of the organisation or body;

          (c) exercising a power of the organisation for purposes corresponding to those of Chapter VI of Part I of this Act.

          3. Any proceedings with respect to a decision or proposed decision of the competent authority under Part IV of this Act refusing an application for listing or to discontinue or suspend the listing of any securities.
          4. Any proceedings with respect to a decision or a proposed decision of the Chief Registrar of friendly societies, the Registrar of Friendly Societies for Northern Ireland or a transferee body, exercising a power exercisable by virtue of paragraph 12 of Schedule 9 to this Act or refusing an application for the rescission or variation of a prohibition or requirement imposed in the exercise of such a power.
          5. Any proceedings with respect to a decision or a proposed decision of a recognised self-regulating organisation for friendly societies—

          (a) refusing or suspending a society's membership of the organisation;

          631

          (b) expelling a member of the organisation;

          (c) exercising a power of the organisation for the purposes corresponding to those for which powers arc exercisable by the Registrar by virtue of paragraph 12 of Schedule 9 to this Act.

        PART II

          EXEMPTED QUESTIONS
          Person pulling question

          Individual to whom question relates

          1. The Secretary of State or a designated agency.

          (a) An authorised person.

          (b) An applicant for authorisation under section 25 of this Act.

          (c) A person whose authorisation is suspended.

          (d) The operator or trustee of a recognised scheme or a collective investment scheme in respect of which a notice has been given by the operator under section 79(3) or an application made under section 80 of this Act.

          (e) An individual who is an associate of a person (whether or not an individual) described in paragraph (a), (b), (c) or (d) above.

          2. A recognised self-regulating organisation or recognised professional body.

          (a) A member of the organisation or body.

          (b) An applicant for membership of the organisation or body.

          (c) A person whose membership of the organisation or body is suspended.

          (d) An individual who is an associate of a person (whether or not an individual) described in paragraph (a), (b) or (c) above.

          3. A person (whether or not an individual) described in paragraph 1(a), (b), (c) or (d) or paragraph 2(b) or (c) above.

          An individual who is or is seeking to become an associate of the person in column 1.

          4. The competent authority or any other person.

          An individual from or in respect of whom information is sought in connection with an application for listing under Part IV of this Act.

          5. The competent authority.

          An individual who is or is seeking to become an associate of the issuer of securities listed under Part IV of this Act and from or in respect of whom information is sought which the issuer of the securities is required to furnish under listing rules.

          6. The Chief Registrar of friendly societies, the Registrar of Friendly Societies for Northern Ireland or a transferee body.

          An individual who is an associate of a society which is authorised under section 22 of this Act.

          7. A recognised self-regulating organisation for friendly societies.

          An individual who is an associate of a member or an applicant for membership of the organisation or of a society whose membership of the organisation is suspended.

        PART III

          EXEMPTED ACTIONS
          Person taking action

          Exempted action

          1. The Secretary of State, a designated agency, a recognised self-regulating organisation, a recognised professional body or the competent authority.

          Any such decision or proposed decision as is mentioned in Part 1 of this Schedule.

          2. A person (whether or not an individual) described in paragraph 1(a), (b), (c) or (d) or paragraph 2(b) or (c) of Part II of this Schedule.

          Dismissing or excluding an individual from being or becoming an associate of the person in column 1.

          3. The issuer of securities listed or subject to an application for listing under Part IV of this Act.

          Dismissing or excluding an individual from being or becoming an associate of the issuer.

          4. The Chief Registrar of friendly societies, the Registrar of Friendly Societies for Northern Ireland, a transferee body or a recognised self-regulating organisation for friendly societies.

          Any such decision or proposed decision as is mentioned in Part I of this Schedule.

        PART IV

          SUPPLEMENTAL
          1. In Part I of this Schedule proceedings- includes any proceedings within the meaning of section 4 of the Rehabilitation of Offenders Act 1974.
          2. In Parts II and III of this Schedule —

          (a) references to an applicant for authorisation or membership are references to an applicant who has not yet been informed of the decision on his application;

          (b) references to an application for listing under Part IV of this Act are references to an application the decision on which has n 3t yet been communicated to the applicant and which is not taken by virtue of section 120(6) of this Act to have been refused.

          3. Paragraph 1(d) of Part II of this Schedule and so much of paragraph 1(e) as relates to it —

          (a) apply only if the question is put to elicit information for the purpose of determining whether the operator or trustee is a fit and proper person to act as operator or trustee of the scheme in question;

          (b) apply in the case of a scheme in respect of which a notice has been given under subsection (3) of section 79 only until the end of the period within which the operator may receive a notification from the Secretary of State under that subsection or, if earlier, the receipt by him of such a notification;

          (c) apply in the case of a scheme in respect of which an application has been made under section 81) only until the applicant has been informed of the decision of the application.'.;[Mr. Channon.]

          Brought up, read the First and Second time, and added to the Bill.

    New Schedule

      'DISCLOSURE OF INFORMATION
      1. In section 133(2)(a) of the Pair Trading Act 1973 after the words "the Telecommunications Act 1984" there shall be inserted the words "or Chapter XII of Part I of the Financial Services Act 1986".
      2. In section 41(1)(a) of the Restrictive Trade Practices Act 1976 after the words "the Telecommunications Act 1984" there shall be inserted the worth "or Chapter XII of the Financial Services Act 1986".
      3. At the end of section 19(3) of the Competition Act 1980 there shall he inserted—
      "(h) Chapter XII of Part I of the Financial Services Act 1986".
      4. For subsections (1) and (2) of section 47A of the Insurance Companies Act 1982 there shall be substituted—
      "(1) Subject to the following provisions of this section, no information relating to the business or other affairs of any person which has been obtained under section 44(2) to (4) above shall be disclosed without the consent of the person from whom the information was obtained and, if different, the person to whom it relates.
      (2) Subsection (1) above shall not preclude the disclosure of information to any person who is a competent authority for the purposes of section 449 of the Companies Act 1985.
      (2A) Subsection (I) above shall not preclude the disclosure of information as mentioned in any of the paragraphs except (k) of subsection (1) of section 149 of the Financial Services Act 1986 or in subsection (3) or (4) of that section or as mentioned in section 449(1) of the Companies Act 1985.
      (2B) Subsection (1) above shall not preclude the disclosure of any such information as is mentioned in section 149(5) of the Financial Services Act 1986 by any person who by virtue of that section is not precluded by section 148 of that Act from disclosing it."
      5. After subsection (1) of section 437 of the Companies Act 1985 there shall be inserted—
      "(1A) Any persons who have been appointed under section 431 or 432 may at any time and, if the Secretary of State directs them to do so, shall inform him of any matters coming to their knowledge of their investigations:"
      and subsection (2) of section 433 of that Act shall he omitted.
      6. In section 446 of that Act—

      (a) in subsection (3) for the word "436" there shall be substituted the word "437"; and

      (b) subsection 5 shall be omitted.

      7.—(1) In subsection ( 1) of section 449 of that Act—

      (a) for paragraphs (a) and (b) there shall be substituted—

      "(a) with a view to the institution of or otherwise for the purposes of criminal proceedings;".

      (b) for paragraph (d) there shall be substituted—

      "(d) for the purpose of enabling or assisting the Secretary of State to exercise any of his functions under this Act, the Insider Dealing Act, the Prevention of Fraud (Investments) Act 1958, the Insurance Companies Act 1982, the Insolvency Act 1985 or the Financial Services Act 1986,

      (dd) for the purposes of enabling or assisting the Department of Economic Development for Northern Ireland to exercise any powers conferred on it by the enactments relating to companies or insolvency or for the purpose of enabling or assisting any inspector appointed by it under the enactments relating to companies to discharge his functions".

      (c) after paragraph (e) there shall be inserted—

      "(f) for the purpose of enabling or assisting the Bank of England to discharge its functions under the Banking Act 1979 or any other functions,

      (g) for the purpose of enabling or assisting the Deposit Protection Board to discharge its functions under that Act,

      (h) for any purpose mentioned in section 149(1) (b), (e) (h) (l) or (m) of the Financial Services Act 1986,

      (i) for the purpose of enabling or assisting the Industrial Assurance Commissioner or the Industrial Assurance Commissioner for Northern Ireland to discharge his functions under the enactments relating to industrial assurance,

      (j) for the purpose of enabling or assisting the Insurance Brokers Registration Council to discharge its functions under the Insurance Brokers (Registration) Act 1977,

      634

      (k) for the purpose of enabling or assisting. an official receiver to discharge his functions under the enactments relating to insolvency or for the purpose of enabling or assisting a body which is for the time being a recognised professional body for the purposes of section 3 of the Insolvency Act 1985 to discharge its functions as such.

      (l) with a view to the institution of, or otherwise for the purposes of, any disciplinary proceedings relating to the exercise by a solicitor, auditor, accountant, valuer or actuary of his professional duties,

      (m) for the purpose of enabling or assisting an authority in a country or territory outside the United Kingdom to exercise corresponding supervisory functions.".

      2 After subsection (1) of that section there shall be inserted—
      "(1A) In subsection (1) above 'corresponding supervisory functions' means functions corresponding to those of the Secretary of State or the competent authority under the Financial Services Act 1986 or to those of the Secretary of State under the Insurance Companies Act 1982 or to those of the Bank of England under the Banking Act 1979 or any other functions in connection with the rules of law corresponding to the provisions of the Insider Dealing Act or Part VII of the Financial Services Act 1986.
      (1B) Subject to subsection (1C), subsection (1) shall not preclude publication or disclosure for the purpose of enabling or assisting any public or other authority for the time being designated for the purposes of this section by the Secretary of State by an order in a statutory instrument to discharge any functions which are specified in the order.
      (1C) An order under subsection (1B) designating an authority for the purpose of that subsection may—

      (a) impose conditions subject to which the publication or disclosure of any information or document is permitted by the subsection; and

      (b) otherwise restrict the circumstances in which that subsection permits publication or disclosure.

      (1D) Subsection (1) shall not preclude the publication or disclosure of any such information as is mentioned in section 149(5) of the Financial Services Act 1986 by any person who by virtue of that section is not precluded by section 148 of that Act from disclosing it."
      (3) For subsection (3) of that section (competent authorities) there shall he substituted—
      "(3) For the purposes of this section each of the following is a competent authority—

      (a) the Secretary of State,

      (b) the Department of Economic Development for Northern Ireland and any officer of that Department,

      (c) an inspector appointed under this Part by the Secretary of State,

      (d) the Treasury and any officer of the Treasury,

      (e) the bank of England and any officer or servant of the Bank,

      (f) the Lord Advocate,

      (g) the director of Public Prosecutions, and the Director of Public Prosecutions for Northern Ireland,

      (h) any designated agency or transferee body within the meaning of the Financial Services Act 1986 and any officer or servant of such an agency or body,

      (i) any person appointed or authorised to exercise any powers under section 81, 93 or 147 of the Financial Services Act 1986 and any officer or servant of such a person,

      (j) the Chief Registrar of Friendly Societies and the Registrar of Friendly Societies for Northern Ireland and any officer or servant of either of them,

      635

      (k) the Industrial Assurance Commissioner and the Industrial Assurance Commissioner for Northern Ireland and any officer of either of them,

      (l) any constable,

      (m) any procurator fiscal.

      (4) A statutory instrument containing an order under subsection (1B) is subject to annulment in pursuance of a resolution of either House of Parliament.".
      8. After section 451 of that Act there shall be inserted—
      "Disclosure of information by Secretary of State.
      451A. The Secretary of State may, if he thinks fit, disclose any information obtained under this Part of this Act—

      (a) to any person who is a competent authority for the purposes of section 449, or

      (b) in any circumstances in which or for any purpose for which that section does not preclude the disclosure of the information to which it applies.".'.—[ Mr. Channon.]

      Brought up, read the First and Second time, and added to the Bill.

    Schedule 13

      REPEALS AND REVOCATIONS
      Amendments made:: No. 275, in page 175, line 30, at end insert—

      'Section 433(2)

      Section 446(5).'.

      No. 276, in page 175, line 41, column 3, at beginning insert—

      'Section 7.'.

      No. 277, in page 175, line 46, at end insert—

      1986 c.

      The Financial Services Act 1986

      Section (Offers of short-dated debentures). [Mr. Howard.]

    Title
    Amendment made: No. 278, in page 1, line 6, after 'dealing', insert
    'to make provision as to the disclosure of information obtained under enactments relating to fair trading, companies and insurance'.—[Mr. Howard.]
    10.11 pm,
    Mr. Howard: I beg to move, That the Bill be now read the Third time.
    The House will understand why I am moving the Third Reading and not the Secretary of State for Trade and Industry as planned. I know that my right hon. Friend and his family have the deepest sympathy of the House in their tragic loss.
    The Bill is a most important measure. The foundations of the Bill were laid in the White Paper on Financial Services in the United Kingdom published in January 1985. I should like to pay the warmest tributes to my right hon. Friend the Chancellor of the Duchy of Lancaster and my hon. Friend the Member for Edinburgh, Central (Mr. Fletcher) for their work on the White Paper, which was the precursor of the Bill. I also thank my right hon. and learned Friend the Member for Richmond, Yorks (Mr. Brittan) for his work.
    The importance of the Bill reflects the importance to the British economy of the financial services sector. In many of the financial services the City of London is the international market leader — for example, in international banking where London handles a quarter of the world total of bank lending, in the Eurobond market, and in insurance.
    636
    The maintenance of a strong British invisibles sector is an objective of considerable importance to the British Government. But more than in almost any other industry the maintenance of London's position rests upon its reputation for integrity and fait dealing. That is why the Government attach the highest priority to the rooting out of financial malpractice. By establishing a new practitioner-based regulatory system within a statutory framework, the Bill will play a major part in stamping out unfair and dishonest practice.
    We have been concerned to create a tough and effective regime which will provide investors with a high level of protection, whilst at the same time avoiding a right bureaucratic structure incapable of adapting with the market. Our system of regulation has to be both effective and flexible. The balance is a fine one. We are convinced that in this Bill we have got it right.
    Throughout we have always made it clear that our own views were not rigid and immovable. We have invited and welcomed comments and suggestions. I am most grateful to all those outside and inside the House—especially members of the Standing Committee—for the time and effort they have devoted to helping us get the legislation right. In Committee, we had many long debates. There were moments of humour and drama, and there was the odd defeat here and there. Undoubtedly, the Bill is better for the Committee's consideration.
    We have accepted the proposal to give a special recognition in the Bill to the Securities and Investments Board, which hopes to become the designated agency. We have agreed to strengthen the powers of the designated agency over the recognised self-regulating organisations and to transfer more of the Secretary of State's powers to the designated agency. We have deliberately not created a statutory commission but have preserved the vital flexibility of the system. We have strengthened the effective enforcement of the provisions of the Bill by granting immunity to recognised self-regulating organisations. On other points, we are still consulting.
    We are now ready to send to the other place a Bill setting out clearly the basic intitutional shape and the powers of our proposed new regulatory structure, with the weight of this House behind it. I commend the Bill to the House.
    10.14 pm
    Mr. Ashdown: The Government foresaw, as early as 1981, the need for comprehensive legislation to protect the investors when it asked Professor Gower to report. It is not surprising that with all that planning, in June 1986, the Government still propose major amendments to the Bill. making it extremely difficult to farm a balanced judgment as to whether or not the Bill is adequate. Doubtless, we shall be told that it is all part of flexibility and open-mindedness. Frankly, it looks to me much more like muddleheadedness, confusion and retreat in the face of the vested interested groups which must not be offended prior to passing the plate round to replenish the Conservative coffers.
    On Second Reading, I welcomed the fact that the Government had brought forward a Bill to reform the City of London but said that it was not possible to welcome the Bill, as it was then constituted, as an istrument of that intention. Since then, we have fought for a balance, which must be struck, between the need to protect investors and the avoidance of regulations that are too onerous and

    637
    would only force users of the City of London to go elsewhere, thus causing loss of a great source of wealth for this country.
    The Standing Committee, of which I was privileged to be a member, worked constructively. I pay tribute to the way in which the Minister and his staff took care to inform us all with the various briefing notes, which were invaluable.
    I do not complain about the basic structure which has been proposed. There is flexibility in the arrangement. Had we legislated for similar flexibility when the Lloyd's Bill was before us, much trouble could have been prevented. There is nothing wrong with the SROs and professional bodies supervising the day-to-day activities of authorised or other persons overseen by the Securities and Investments Board. I am not happy, however, with the fact that the SIB will account for its stewardship in an annual report which, as things stand, we shall have no right to debate, certainly in the early years.
    My doubts and worries really start when we look at the flesh that covers this structure. Regulation will be by rules laid down by the SIB. The Bill contains certain guidelines for these rules, but such guidelines can mean all things to all men. When we tried in Committee to obtain commitments on specific matters, we were told that that was not for primary legislation but was for the rules. Therefore, we shall have no say on the content of the rules, that being solely a matter for the Secretary of State or the SIB.
    At this stage it is difficult to discover what the rules will be, for those that are available appear to be at best in draft, at second best in a consultative stage, and at worst not yet thought of. What I have seen in respect of competence tests, disclosure by insurance companies of commissions and surrender values, and cold calling fills me with a degree of apprehension, because they seem to lean over backwards time and again in favour of the practitioner. That is not good enough as far as I am concerned; nor will it be good enough, for instance, for the hon. Member for Chichester (Mr. Nelson), who delivered a clear exposition on this matter on Second Reading. He stated:
    "The principle function of both the designated agency and the SROs should not be to provide an easy working machine which is not subjected to criticism. Their principle objective is to protect investors.—[Official Report, 14 January 1986; Vol. 89, c. 991.]
    I could not agree more. But what guarantee is there that the Secretary of State will take that attitude when he examines the rules? Even if he did, what enforcement powers are there? It is one thing to have rules; it is another to apply them; and it is yet another to ensure their proper application and enforcement. Although I am happy that the SIB now has the power to insist on rules for the SROs, I very much regret that the Secretary of State has not seen fit to give it direct powers of enforcement. Apparently, he is happy for the SIB to rely on an application to the courts —probably a slow and ponderous procedure at best—or to invoke the nuclear deterrent of a revocation of recognition.
    It is with equal regret that I note, despite a useful debate on clause 20 in Committee, that the Secretary of State has now decided not to give the SIB "intermediate powers" over recognised professional bodies. The quality of the work that the SIB will do, even inside what I regard to be
    638
    its too limited powers, will in large part depend on the quality and type of persons appointed to it and the quality of the information available to them.
    I make two complaints on that score. First, I am extremely unhappy that the Governor of the Bank of England has a veto. It is unnecessary, and it turns out to be present for political purposes.
    Mr. Nelson indicated assent.
    Mr. Ashdown: I am glad to have the hon. Gentleman's agreement. He made an effective contribution in Standing Committee on that point.
    My second complaint concerns user and independent representations on the SIB. In debating schedule 5 we managed — in a process that must be something like drawing a tooth from an elephant—to get the Minister to say that he expected a "significant proportion" of the board members to be independent people. "Significant" and "independent" are words capable of wide interpretation. I shall not be satisfied that my view is the same as the Government's until I have seen what is meant, and I probably shall not do that until after the Bill is enacted. I will not regard two or three names plucked from the list of the retired or the great and the good as meeting that requirement. Much the same comments could be made about the user content of the SROs.
    Even if I am dissatisfied with the way in which members are appointed to the SIB and with the information available to them, I appreciate that the board's activities have to be paid for. I can see the force in the argument that if the board might be paid from state funds, it does have, in one sense, greater independence from those it is regulating. I am even more persuaded by the argument that if it is paid for by the City it avoids the clammy hand, or perhaps under this Government I should say dry hand, of the Treasury from falling on its activities. However, there must be a safeguard, and that safeguard should ensure that the city cannot limit funds to reduce the regulator's effectiveness. It was for that reason that I wanted the Secretary of State to have the reserve power to prescribe fees if he thought that insufficient resources had been made available for regulation. That power was denied.
    I shall touch briefly on three other points of concern. I shall deal with them briefly not because they lack importance, far from it, but because time is limited and the measure we are considering is very substantial. I cannot be entirely happy with the scope of the immunity granted to SROs, in particular immunity from damage claimed by investors themselves. That seems to significantly diminish the safeguards to investors. I believe that going further than the clear consensus of the Committee, which crossed all parties, in favour of immunity for the regulators but not going so far as immunity for investors, will be a decision which will return to haunt the Minister in years to come when there will be some problems. This Government will be blamed, rightly or wrongly, for taking a decision which went against the consensus, spanning all parties, which they could have enjoyed in response to pressure from the larger vested interest groups. Whether that is correct or not is irrelevant. That will be the charge levelled.
    I think that there are serious omissions from the Bill in respect of activities covered. I would have liked to have seen real property—by that I mean office blocks, shops,

    639
    factories and agricultural land—covered in schedule 1, because such assets are held extensively by pension funds and, therefore, appear indirectly in the savings of millions.
    In its present form the Bill will not cope with the growing complexities of the financial services industry, or expecially with the big bang, which is round the corner. I shall make a prediction to the Minister. The Bill will have to be changed in order to strengthen it and that will cause a period of instability in the City precisely when the Government wish to cause a period of stability. That will happen in due course. Whether that will happen sooner or later I do not know, but happen it will. If change is to be left in the hands of some, it may well end, as the hon. Member for Dagenham (Mr. Gould) has predicted, as a state organisation. It may be that if we get into that position it will be so difficult to unravel and resolve that that might be the only way left open to us.
    In that sense, I believe that the Bill, as it is currently presented, represents a missed opportunity. The crux of the Bill has always been, and has been properly identified by all as being the balance to be struck between maintaining the efficiency and flexibility necessary for the practitioners and the safeguards necessary for investors to ensure probity. The Bill, in its final form, comes down, as I suppose we might always have suspected with a Conservative Government, far too much on the side of the City and far too little on the side of the small investor.
    10.24 pm
    Mr. Gould: We welcomed the introduction of this Bill, we recognised the need for it and we agreed with the principle and broad structure of it. In particular, we thought that it was right to strike a balance between statutory regulations and a statutory framework and a substantial element of self-regulation. That was our starting point. I think that it is fair to say that, as we proceeded with the Bill, especially in Committee, we made substantial improvements to it.
    The Minister was generous in his recognition of the work of the Committee, sometimes against opposition from Conservative Members or, at least, his civil servants. The Committee managed to make major improvements to the working of the Bill. It is fair to pay tribute to Conservative Members, as well as to my hon. Friends and the hon. Member for Yeovil (Mr. Ashdown) for managing to construct the sort of all-party consensus which was our objective from the outset and which produced an unusually constructive approach to the matter.
    It is a matter for regret that, having agreed in principle with the Bill at the outset and having played our part in making the Bill a better measure, we continue to regard the Bill as a missed opportunity. It is defective, not only in the myriad small ways which the hon. Member for Yeovil enumerated, but in major matters. It does not cover the ground that it should cover. The exclusion of Lloyd's is a blot on the Bill and the Government. The failure to put in place a proper independent statutory commission will be regretted by the Government and is already being regretted by the City. Because we believe that those failings are important, we shall return to them when we return to Government and we shall vote against Third Reading tonight.
    Question put, That the Bill be now read the Third time:—
    The House divided: Ayes 142, Noes 24.

    Division No. 223]

    [10.28 pm

    AYES

    Amess, David

    Hogg, Hon Douglas (Gr'th'm)

    Ancram, Michael

    Holt, Richard

    Ashby, David

    Howard, Michael

    Atkinson, David (B'm'th E)

    Hunt, David (Wirral W)

    Baker, Rt Hon K. (Mole Vall'y)

    Jenkin, Rt Hon Patrick

    Baker, Nicholas (Dorset N)

    Jessel, Toby

    Baldry, Tony

    Jones, Robert (Herts W)

    Bellingham, Henry

    Key, Robert

    Benyon, William

    Knight, Greg (Derby N)

    Bevan, David Gilroy

    Knowles, Michael

    Biggs-Davison, Sir John

    Lang, Ian

    Blackburn, John

    Lawler, Geoffrey

    Blaker, Rt Hon Sir Peter

    Lennox-Boyd, Hon Mark

    Boscawen, Hon Robert

    Lester, Jim

    Bottomley, Peter

    Lightbown, David

    Bottomley, Mrs Virginia

    Lilley, Peter

    Bowden, Gerald (Dulwich)

    Lloyd, Peter (Fareham)

    Braine, Rt Hon Sir Bernard

    McCrindle, Robert

    Bright, Graham

    MacKay, John (Argyll & Bute)

    Brinton, Tim

    Maclean, David John

    Brooke, Hon Peter

    McNair-Wilson, M. (N'bury)

    Browne, John

    Malone, Gerald

    Bruinvels, Peter

    Mather, Carol

    Buck, Sir Antony

    Maxwell-Hyslop, Robin

    Burt, Alistair

    Meyer, Sir Anthony

    Butcher, John

    Miller, Hal (B'grove)

    Butler, Rt Hon Sir Adam

    Mitchell, David (Hants NW)

    Butterfill, John

    Nelson, Anthony

    Carlisle, John (Luton N)

    Newton, Tony

    Carttiss, Michael

    Ottaway, Richard

    Cash, William

    Page, Sir John (Harrow W)

    Chapman, Sydney

    Parkinson, Rt Hon Cecil

    Chope, Christopher

    Percival, Rt Hon Sir Ian

    Churchill, W. S.

    Powell, William (Corby)

    Clark, Dr Michael (Rochford)

    Proctor, K. Harvey

    Conway, Derek

    Rhodes James, Robert

    Coombs, Simon

    Roe, Mrs Marion

    Cope, John

    Rowe, Andrew

    Corrie, John

    Sainsbury, Hon Timothy

    Couchman, James

    Sayeed, Jonathan

    Crouch, David

    Shelton, William (Streatham)

    Currie, Mrs Edwina

    Shepherd, Colin (Hereford)

    Dicks, Terry

    Sims, Roger

    Douglas-Hamilton, Lord J.

    Smith, Tim (Beaconsfield)

    Dover, Den

    Spencer, Derek

    Dunn, Robert

    Stern, Michael

    Durant, Tony

    Stevens, Lewis (Nuneaton)

    Evennett, David

    Stewart, Allan (Eastwood)

    Fallon, Michael

    Stewart, Andrew (Sherwood)

    Fletcher, Alexander

    Taylor, Teddy (S'end E)

    Forman, Nigel

    Tebbit, Rt Hon Norman

    Forsyth, Michael (Stirling)

    Temple-Morris, Peter

    Forth, Eric

    Thomas, Rt Hon Peter

    Fox, Marcus

    Thompson, Donald (Calder V)

    Fraser, Peter (Angus East)

    Thompson, Patrick (N'ich N)

    Freeman, Roger

    Thorne, Neil (Ilford S)

    Galley, Roy

    Thurnham, Peter

    Garel-Jones, Tristan

    Twinn, Dr Ian

    Glyn, Dr Alan

    van Straubenzee, Sir W.

    Goodhart, Sir Philip

    Viggers, Peter

    Gorst, John

    Waidle, C. (Bexhill)

    Greenway, Harry

    Watts, John

    Griffiths, Sir Eldon

    Wells, Bowen (Hertford)

    Griffiths, Peter (Portsm'th N)

    Wiggin, Jerry

    Gummer, Rt Hon John S

    Wilkinson, John

    Hargreaves, Kenneth

    Winterton, Mrs Ann

    Harris, David

    Wolfson, Mark

    Harvey, Robert

    Wood, Timothy

    Hawkins, Sir Paul (N'folk SW)

    Yeo, Tim

    Hayward, Robert

    Hickmet, Richard

    Tellers for the Ayes:

    Hind, Kenneth

    Mr. Archie Hamilton and

    Hirst, Michael

    Mr. Francis Maude.

    NOES

    Ashdown, Paddy

    Bennett, A. (Dent'n & Red'sh)

    Banks, Tony (Newham NW)

    Campbell-Savours, Dale

    641

    Cocks, Rt Hon M. (Bristol S)

    Nellist, David

    Cook, Robin F. (Livingston)

    Orme, Rt Hon Stanley

    Davis, Terry (B'ham, H'ge H'l)

    Pike, Peter

    Dewar, Donald

    Raynsford, Nick

    Field, Frank (Birkenhead)

    Sheerman, Barry

    Gould, Bryan

    Shields, Mrs Elizabeth

    Hogg, N. (C'nauld & Kilsyth)

    Smith, Rt Hon J. (M'ds E)

    Hoyle, Douglas

    Wallace, James

    Hughes, Simon (Southwark)

    McDonald, Dr Oonagh

    Tellers for the Noes:

    McWilliam, John

    Mr. Frank Haynes and

    Millan, Rt Hon Bruce

    Mr. Allen McKay.

    Question accordingly agreed to.
    Bill accordingly read the Third time, and passed.

    Patronage (Benefices)
    Queen's Consent, on behalf of the Crown, having been signified.
    10.36 pm
    Sir William van Straubenzee: I beg to move,
    That the Patronage (Benefices) Measure, passed by the General Synod of the Church of England, be presented to Her Majesty for Her Royal Assent in the form in which the said Measure was laid before Parliament
    I must first declare a personal interest, in that I am the patron of a living. The House well knows that such matters can no longer be passed for any financial consideration—quite rightly—and have not been for many years, so I have no financial interest to declare. Nevertheless, I wish the House to be aware of my personal interest.
    At this hour, I think that the House would like me to explain the Measure, but not at inordinate length. The Measure is very different from that which originally saw the light of day some years ago and which, as some of us here recall, excited considerable opposition and anxiety. It sought, in whole or in part, to abolish patronage.
    I think that it was wise for there to be a period of consultation and reconsideration. What is now before us is a very different Measure. It retains the right of patronage, although it makes what I believe are several improvements in the law which I shall describe briefly.
    The House has the advantage in these matters of the report of the Ecclesiastical Committee, the legislative Committee of the General Synod and, in recent years, the verbatim report of the proceedings before the Ecclesiastical Committee which, painstakingly, as with other measures, studied this measure and decided to report to both Houses that it was expedient.
    The measure has four purposes, the first of which is to establish certainty. I hope that this purpose was secured by expert approval. Part I, schedule I, to the measure provides for a register and lays down careful regulations about how that register should he established. The provisions concerning the register deal with the right to appeal and other measures which, I am sure, the House would not wish me to spell out in detail.
    At present there is no central register. I hope that all hon. Members would agree that it is beneficial to those in parishes, to the diocesan bishops and to patrons that there should be a conclusive register.
    The second purpose of the Measure is to confirm and put in legislative form the collegiality and partnership which is now the accepted pratice, in most cases, when appointments are being considered. Over the years I have been responsible for one parish, then for a parish with another joined to it and lastly responsible for a parish with colleagues in a joint patronage. We would never have considered it possible to proceed without careful consultations with the laity of the parishes concerned. We carried out such consultation at all stages. Hon. Members will be aware of certain rights which are given to parochial church councils.
    Part II of the measure provides, in legislative form, for the provision of collegiality, consultation and partnership when dealing with the appointment of the new incumbent. If some hon. Members are rather concerned at the unnecessary elaboration of those arrangements, may I say that it is possible, if there is consent on all sides, to dispose of those arrangements. It is necessary to have such

    643
    provisions in the cases—I hope they are few—when a person is disposed not to operate the provisions. It is right for the House to make sure that those rights are enshrined in law. I attach considerable importance to the third purpose of the Bill. I find it offensive that, in the 1980s, there should be only two classes of persons, Roman Catholics and Jews, who are specifically identified as persons who may not exercise right of presentation. We all understand the historical reasons for this, but I do not think it accords with the attitudes of the 20th century. I shall be happy to see that go. In precisely the same way as I as an Anglican would not expect to play an effective and active role in the appointment to some position of importance in another church, it is not unreasonable that the person concerned, who will exercise his right of patronage, shall be able to say that he is a communicant member, as defined, of the Church of England.
    I make it clear that the person concerned does not lose the right of patronage. It is the question of the presentation at the time in question, so if it were, for example, in a family—this is real to me in my family—it would at a later stage, or as the case might be. I hope that the House will feel that it accords far more with the general approach and attitudes of the present day that this narrow discrimination should be eliminated. Nevertheless, there should be a requirement for the person exercising the right of presentation to be a communicant member of the church to which he or she is appointing somebody of great importance to the active congregation concerned.
    Sir John Page: Having served with my hon. Friend on the Ecclesiastical Committee, I should know what he means by the term "presentation". But will he explain it?
    Sir William van Straubenzee: I was seeking to distinguish, but doubtless very inadequately, between the fact that a patron remains a patron, whether or not there is a vacancy, and that a person who is not a communicant member of the Church of England remains a patron regardless of that fact. If there comes a vacancy and either he or she has to exercise that right, that is the moment at which they have to say that they are a communicant member of the Church. Do I properly explain that?
    Mr. Peter Bruinvels: In those circumstances, does the bishop have more power or less in the right to a presentation where the patron is not a communicant member of the Church of England, so that the bishop would be the one to nominate the incumbant?
    Sir William van Straubenzee: No, Sir, I think not. The position of the bishop is the same in both circumstances, so he has neither more nor less power. A right is invested in the patron who is not a communicant member to nominate one who is. That nomination is a matter for the patron concerned, and has nothing to do with the bishop. I hope that my hon. Friend feels that that is a satisfactory answer. I am glad to see that my hon. Friend is nodding his assent.
    It is inevitable that when we start on an operation such as this there will be considerable number of anomalies in the law that need bringing up to date. I can illustrate this. It is because it is correctly no longer possible, nor has it been by a decision of Parliament made many years ago, for an advowson to be bought or sold, so equally it is no longer appropriate for certain rights to be associated with
    644
    property that can be bought and sold, and to which is attached an advowson, because the advowson no longer has any financial importance, nor would the House feel that it should. Such matters are dealt with in the fourth purpose of the measure.
    I feel sure that the House appreciates that the Ecclesiastical Committee, to my certain knowledge because I am a member of it, looked at this matter most exhaustively and carefully and decided to report to Parliament that the Measure is expedient. I have the figures but I will not bore the House by reciting them. It was overwhelmingly approved. I see that the voting figures record only four House of Clergy against, and no voting against in the House of Bishops or the House of Laity by the General Synod.
    I hope that the House will feel that I have trodden a middle course between treating the House merely as a rubber stamp — which I would never do, because it certainly is not a rubber stamp far Church legislation and I hope never will be—and taking too long. I commend the Measure to the House.
    10.51 pm
    Mr. J. Enoch Powell: Firstly, may I dispose of a procedural point which is also in a sense a constitutional point, that was first established some two years ago, I think, in connection with the Appointment of Bishops Measure. It is that we were privileged to have with us for a short time at the commencement of the debate the chairman of the Conservative party. He was in dinner dress in order to signify the Queen's consent to our entering upon these proceedings. It is, of course, upon the advice of the Government that the Queen's consent is given and that was intimated by the distinguished source from which the message was conveyed to us this evening.
    I place on record again as was done emphatically two years ago, the fact that no Government approval of the Measure, no espousal of the Measure by the Government, is implied in their providing the assistance to the House of the Queen's consent to our entering upon the matter. It is merely the means by which the Government facilitate the consideration by the House of Measures that come to it from the General Synod. There is no party issue or Government interest, and I assume that the Government would certainly not intend in any way to use their influence for or against such a Measure. In this context, the Government, as the Government, are very properly neutral.
    One major matter arises from this measure and it was dealt with faithfully by the hon. Member for Wokingham (Sir W. van Straubenzee). It is the change in the religious qualifications for the excercise of the function of patronage. Hitherto, that exercise has been forbidden exclusively to Roman Catholics and to Jews. I see no reason why either a Roman Catholic or a Jew could not exercise the lay functions of a lay patron in the filling of a living with as much consideration and as much wisdom and propriety as anyone else. I agree entirely with the hon. Member for Wokingham that this was an invidious limitation and it was high time that it was removed. The Synod has not proceeded by way of removing that limitation. It has not proceeded to enfranchise in the matter Jews and Roman Catholics. On the contrary, it has disfranchised everbody except Anglicans who have taken communion according to the rites of the Church of England or the rites of a church in communion with the

    645
    Church of England within the preceding 12 months. A religious test of that nature has been imposed upon the exercise of a function of patronage.
    The Ecclestiastical Committee was clearly horrified by the possibility that an indulgence which everybody would wish to be extended to a lay patron who was a Roman Catholic or a Jew should be exercised, heaven forfend, by a Methodist or a Baptist. I stop there for a moment to invite the House to contemplate the horrific consequences of a lay patron who happened to be a Baptist actually proceeding to exercise the functions of patronage. But that was not all, because further horrors were envisaged by the Ecclesiastical Committee to the effect that it might be a Mohammedan, a Hindu or a athiest who, but for the provisions in the Measure, could exercise the functions of a patron.
    There is an important issue at stake here. We are dealing with the functions of lay patrons, who may be, by the process of acquisition of the advowsons, of any religion or of none, and the Synod of the Church of England has told the House that it is its wish that that function should be limited to those who are confessionally members of the Church of England. That was candidly brought out by the hon. Member for Wokingham, who said that in exactly the same way—I noted his words, because I do not agree that the way is exactly the same — he as an Anglican would not expect to exercise a function in making appointments in any other church. Indeed not, but we are dealing with the Church of England, which is the established church of this land—the church which is the possession of all who inhabit England. Therefore, the considerations that should apply to the exclusion of persons who are not Anglicans from the exercise of the rights of patronage are different from those which would apply in the private and interior arrangements of any other church or sect.
    Indeed, the Bill—admittedly on a small scale—is an example of the tendency, which I fear is implicit in many of the procedures of the General Synod, to approximate the Church of England to a sect and, to that extent, to deprive it of the character of universality in the realm of England, which is one of its characteristic and beneficent marks.
    It is not right to impose a confessional test upon the exercise of the right of ownership of this hereditament of the patronage or advowson. If we do that, we raise several questions. This is not the only or the most important context in which advice may be given, or steps may be taken, in relation to appointments in the Church of England by persons who are not necessarily members of the church. Will we be told that it is the view of the General Synod that all those who are responsible for acting to make appointments in the Church of England should be communicant members of the Church of England? That would be a decisive declaration that the Church of England had become a sect, and had ceased to be the national church under the headship of the Crown in Parliament.
    There are wide and far-reaching implications in this apparently minor adjustment in the qualifications for the exercise of the right of patronage. That departure and its implications should be signalised on the occasion of this measure, so that we shall not be told in future—I am afraid that it is becoming a characteristic of the
    646
    proceedings of the General Synod in regard to Parliament that a small encroachment is made and is then claimed as a precedent — that we have created a precedent for saying that, in other respects, appointments and steps leading to them in the Church of England may be made only by persons, and advice may be offered only by persons who are communicant members of the Church of England.
    Mr. Simon Hughes: I have listened carefully to the right hon. Gentleman's remarks. Does not his arguement imply that there is a defect in the current practice of the Church of England, which when someone seeks membership requires that person to renounce membership of other Christian churches by formal statement before being admitted into the Church of England? That is inconsistent with the principle of universality or national church that he was expounding.
    Mr. Powell: The hon. Gentleman has told me something of which I was unaware. I was unaware that any such act of renunciation was required of parents who bring a child for baptism, or even of those who present themselves for the first time to receive holy communion in the Anglican church. It may or may not be that the hon. Member is well informed. I am not aware that there is such exclusivity in the nature of membership of the Church of England in such a deed of renunciation that has to be made before a person resident in England can exercise his legal right to the ministrations of the Church of England.
    Mr. Frank Field: Adults seeking membership to the church who belong to other parts of the church are asked to accept the 39 articles. Given what some of those articles say, it may well cover the point made by the hon. Member for Southwark and Bermondsey (Mr. Hughes).
    Mr. J. Enoch Powell: I am much obliged.
    11 pm
    Mr. William Powell: I wish to associate myself with the central theme of the remarks made by the right hon. Member for South Down (Mr. Powell). There is not the slightest doubt in my mind that we have on all occasions to assert in the House that the Church of England is a national, not a sectional, church. We must on all occasions that we can articulate the primacy of the Crown in Parliament in the regulation of the affairs of the Church of England. The Church of England is not a sectional church. It can never be so. If it ever wishes to become so, it will simply fall apart into its own individual elements, and it will count for nothing in the country.
    For myself, I find it impossible to oppose the measure. However, in saying that, I must tell my hon. Friend the Member for Wokingham (Sir W. van Straubenzee) that in my opinion it is a quite unnecessary measure. As we have been told, it has had a long period of gestation. On several occasions in its gestation. its final form has been very uncertain. It has veered one way and then another way. Fortunately, as has been pointed out, what we now have is a sensible measure. In its gestation, I think it had every prospect of being a very foolish measure but sense has prevailed.
    Nevertheless, over this long period of gestation, a considerable amount of time has been taken up first in Convocation—that shows how old it is—then in Synod

    647
    and in various committees, trying to work out what would be the best method of securing a general patronage law for the Church of England. I am not aware of any evidence at present which shows that such a measure is necessary. I am not aware of any substantial abuse of existing procedures which compels changes to be made. It would have been a very good thing if Convocation and then Synod had decided to leave well alone, but they chose not to.
    I assert further that in all these synodical discussions and committees involving people travelling up to London no doubt from all over the country, considerable sums of money have been spent over the years. That money would have been much better spent within the Church of England in securing a wider number of clergy and deploying that clergy in parishes throughout the country.
    The fundamental of the Church of England is that it is a parochial church. All its strength lies within its parishes, and not within a synod, a committee or even within a diocese as a diocese. The particular character of the Church of England lies within the parochial ministry.
    I for one—and I know that I am not alone—would wish that all the resources of the Church be devoted to parochial church life and to the preparation and training of the clergy to ensure that the clergy is available, and not to the running of the General Synod, the staffing of the General Synod, the running of its committees and so on.
    Mr. Simon Hughes: We understand the issue about the cost of administering any body as large as the Church of England. However, I trust that the hon. Gentleman will accept that there is great merit in national debate, both temporal and spiritual, and for the Church to be seen to come together to pronounce on matters of importance to the nation. Since the synods back to Whitby and even further, there has been great merit in the Church coming together to seek a common mind. When it does so, as it did recently on the matter of the Sunday trading with almost total unaminity, it has a substantial effect on the affairs of this place and of the nation. Surely we should not renounce that.
    Mr. Powell: I am grateful to the hon. Gentleman for that intervention. I am aware that in the Church of England there are different traditions and groups of people who attach different degrees of importance to various elements within it. I speak as the son of a clergyman. It is 50 years since he was ordained and he has spent 44 years in the same parish. He finds the idea of the national Synod simply preposterous. Not everyone takes that view, but some do — and they should not be ignored. It is not just one obscure country clergyman who takes that view, but vey many.
    One danger within the Church of England is that those in the synod had come to believe that the synod is the only thing that matters. One of the very great dangers is for example, that episcopal promotion is now almost entirely granted to those who take part in the affairs of the synod——
    Mr. David Crouch: It always was.
    Mr. Powell: I see that my hon. Friend the Member for Canterbury (Mr. Crouch) is here, and it is appropriate that he should seek to intervene, albeit from a sedentary position. However, he is not correct—it has not always
    648
    been the case. Many of the greatest pastors of the Church of England have played no part in the convocational synodical discussions.
    The greatest danger that threatens parochial life in the Church of England is the way in which episcopal patronage is being exercised. In the days when there were far many more lay patrons, there was an opportunity for independence—for the parson's freehold to grant the independence — which meant that everything was not dependent on the one fountain, which was the bishop of the diocese, and increasingly area bishops within diocese; yet they have no authority in law to exercise the functions that they are increasingly delegated.
    Some 40 per cent. of patrons are bishops, but in rural England where parishes are increasingly doubled, trebled and quadrupled—even five, six and seven parishes are put together, as has happened in east Anglia and many other parts of the country — invariably there are different patrons, and then the patronage actually conies to be exercised by the bishop of the diocese. Therefore, although in 40 per cent. the patron is actually the bishop, he is really exercising the patronage in a great many more cases.
    It goes one step further. One of the major changes in the Church of Englnd in the past generation has been that the clergy no longer stay in their parishes for a measurable length of time. In any parish church in the country one can see the long incumbancies through the 18th, 19th and early 20th century— but for the post-war era, they are for only three, four or five years. There are parishes close to the parish that my father has he d for nearly five decades where there have been 11 changes of incumbant during that time. Bishops are the very people who are sending a man to one parish and then moving him on, and then on again. It means that it is impossible to establish the stability in the parish that holds together the community of the Church of England, which is the very strengh of the church in the parish.
    Bishops are not exercising their patronage in a way which is necessarily in the best interests of the parishes, and that concerns me more than anything else. They are entitled to make a judgment, of course, and their resources may not be as adequate as they would wish. One of the depressing features in the Church of England in the past generation has been that the quality of the men who come forward for ordination has not always been as high as in earlier times. I revert again to the case of my father, about which I have personal knowledge. He held a parish in Oxfordshire just before the second world war and he was the only clergyman in the rural deanery who was not a doctor. It is inconceivable now that there could be a rural deanery in which a dozen or more clergymen were all doctors of divinity, music or whatever. The decline in the clergy is there for all to see, and the Church of England has declined with it.
    Beyond that, the feature of the measure which worries me are the circumstances in which the bishop of the diocese comes into conflict — perhaps an unspoken conflict, but a real one—with the wishes of the parish when it comes to the appointment of a new incumbent. The old battles between the lay patron and the incumbent that were taken up in Victorian novels in the time of Lady Catherine de Bourg have passed, and we find now that patronage is increasingly exercised by the bishops.
    In the parish in which I live new incumbents have been twice appointed in the past decade by the bishop of the

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    diocese, and on each occasion contrary to the wishes of the parochial church council. I have not the slightest doubt that on each occasion the bishop of the diocese had good reason for wanting to make the appointment, but on each occasion his wishes clashed with those of the parochial church council.
    What are we left with when that happens in rural England? The parish is told, "If you do not have this man, it is likely that your parish will be joined with another and the prospective clergyman will live in a vicarage or rectory some three, four or five miles away and not in the vicarage or rectory of the community." When that happens, the people feel that they are under an obligation to take what is on offer.
    Mr. Harry Greenway: I have some sympathy with what my hon. Friend is saying, but is it not fair to say that under the measure the lay representatives of the parochial church council will be involved in the selection of the new incumbent and will have a veto over the appointment? Does the measure not say that? It does not set out how the representatives will be chosen, whether they will be mandated and how they will operate, and I think it should, but I think it says that the representations of the parochial church council will have an involvement.
    Mr. Powell: My hon. Friend is right, but beyond that there is something more subtle. Let us suppose that they exercise their veto and the bishop of the diocese says, "There is nobody else who I can offer you"? There may then be another prolonged vacancy. If there is a prolonged vacancy, especially in a small parish, it is likely that the congregation will begin to fall apart. Members of the congregation will drift off to other churches. Long vacancies are bad, especially in small parishes, and they must be avoided. If the issue is pushed to the point of veto, there is a danger that the parish will end up with nothing. That is what worries many parishes as they face ever changing circumstances with new clergymen being appointed to them.
    I was brought up to believe in the principle that if it is not necessary to change, there should be no change. I must tell my hon. Friend the Member for Wokingham that in this instance I cannot find the evidence upon which we should make changes. Accordingly, I think that it would be better to leave things as they are. Having said that, I think that with the important constitutional provisos which the right hon. Member for South Down has articulated and which I fully support, it would not be right to oppose the measure.
    11.15 pm
    Mr. Frank Field: Many hon. Members will be in considerable sympathy with the views expressed by the hon. Member for Corby (Mr. William Powell). However, I had difficulty trying to relate what he said to the measure before us. He made some good points, but others were really a cry to understand how the Church of England has declined in they way it has. I fear that it will take more than an hour and a half of parliamentary time to reverse that decline.
    Before the debate bagan, I would have put all the money I have on it being an uncontroversial debate. That
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    may be a sign of my frail judgment, or it may be a sign of how interesting this place is—that debates can take off and get a momentum of their own.
    I have put aside what I wanted to say. Instead, I shall address myself to the main point made by the right hon. Member for South Down (Mr. Powell). He knows—other hon. Members may not — that on the issue of whether the Church of England should remain a national church, he and I stand shoulder to shoulder. I am destressed at the tendency of the Church to move itself to a sect and to have that cosiness that comes with it.
    There is a point of difference between the right hon. Gentleman and I this evening, because I support the Measure. I maintain, as the right hon. Gentleman does, that the Church is a national church and has a mission to the whole nation. Regarding the internal runnings of the Church, we must take on board the difference between the present position and that which existed 100 or 200 years ago. At that time, it was acceptable for a national church to allow other people, apart from the two categories outlined by the Second Church Estates Commissioner, to appoint clergy to livings in the Church of England, when few people in other parts of the Church held that privilege.
    Today, it is possible to argue that we should have the exclusive right to appoint people to livings in the Church of England— in other words, practising communicants of that part of the Church — and at the same time maintain that we have a mission to the nation and oppose the Synod when it, as it often does, goes down the path of trying to move the Church to the status of a sect.
    The hon. Member for Corby believes that the Synod is a waste of time and resources. When the next elections for the Synod are held, it may be possible for people who hold that view to try to get elected. Then they could try to lessen the number of Synod meetings. If one looks at other parts of the Anglican communion, one sees that Synods do not have to meet three times a year. I sympathise with those who want to see, in certain circumstances stronger leadership from the bishops. I sympathise when they say that they are often bogged down in activities and with committees of the General Synod.
    I accept the inconsistencies. I do not put that stronger in the line I take.
    Conservative Members expressed their agreement, facially, when the point was made that we are against bishops possessing more power of appointment. As a libertarian, part of me supports that line. As a church which believes in the apostolic succession and obviously gives a certain command to the bishops in the governing of the Church, I feel that to some extent it is overshadowed by the Synod.
    I put aside the points I wanted to make to argue with the main point put by the right hon. Member for South Down. As so often happens in these debates, the answers that one gives are not always as neat as one would wish. I recall a statement made by Aneurin Bevan in the Chamber after listening to the then Prime Minister, Neville Chamberlain. He said, that it was like a trip around Woolworth — everything was in place and nothing was priced over sixpence. In this life, it is difficult to get everything in place and have nothing priced over sixpence.
    Given the circumstances in which the Church finds itself and given that the Church would be better to spend less of its time reforming its internal arrangements, I do not think that on this issue it has done a bad job. I said that I thought that this would be an uncontroversial

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    measure. I notice that, with some sense of timing, the Vote Office today published the women deacons Measure. I thought that I would he able to say that this Measure would be passed peacefully. I do not think that that will happen with the second Measure. Indeed, I am not sure even about this one now
    11.20 pm
    Mr. Peter Bruinvels: I must declare an interest as a current member of the General Synod. I greatly enjoy serving on it, and it is not surprising that I do not find it a waste of time. It might be an expensive body to run, but so far I do not think that I have charged my local diocesan synod too much, if anything. I must declare also that I have voted on this measure in the past, both on the Guildford diocesan synod and in my local Dorking deanery synod. I am also a member of the board of patrons in the diocese. That does not mean that I agree with everything in the Measure. We are talking about the established Church of England, which is the property of its people and of the Crown. It is only right that such a Measure should come before the House, because there are 11,500 benefices, 28 per cent. of which are in the hands of individual patrons.
    I am concerned that the bishops seem to have more and more power. But I make no critcism of the bishops. There is much to be commended in the historical role of a patron. The village life, with the patron in his personal pew and certain responsibilities, is to be admired. Patrons have a historical right to appoint those people whom they believe to be best suited to their benefice.
    Under clause 8 a registered patron must be a communicant of the Church of England. I believe that, as long as a person is not an atheist, he should have the right to act as a registered patron. I regret that a representative has to be found to stand in for him if he is not a communicant of the Church.
    The restrictions imposed in the Measure are understandable, but an existing patron—I hope that my hon. Friend the Second Church Estates Commissioner will explain this to me—experiences no such restriction. It is true that many patrons have held their positions for years, but I believe that they should be allowed to continue as patrons. Many churches in Leicester villages are still in tha hands of patrons. One patron has five churches under his command.
    As for the registration of patrons, any diocesan handbook lists them and their names are found also in Crockfords. The facts are there already. I cannot unerstand why it is necessary to register patrons when they are already registered. Under the Measure, a patron who cannot make the necessary declaration will not be able to exercise that important right to present. With the united benefices that now exist, his role becomes even more important.
    I am especially concerned about the patron's representative. He may be a church warden, who cannot serve as one of the two lay representatives. I am afraid that the patron's representative may on many occasions, be a bishop. That seems to be taking power away from the communicants and giving more power to the bishops. We admire bishops for what they have to do but I do not want to see a magic circle, with the bishop's favoured people coming forward. Indeed, I believe that, to a large extent, the patron understands the communicants and the
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    residents of the parish far more than the bishop. The bishop is far more concerned with issues other than local parochial matters.
    The votes in the synod, before I became a member, made it clear that all members or the laity voted in favour of the Measure. The vote was 121 to nil. Only four of the 138 clergy voted against it. I would say, "They would, wouldn't they". It is interesting, having been a member of the synod for eight months, to see how certain members of the clergy perform in front o their bishops, obviously in the hope of preferment in the long run. Some are commendably independent. However, it is almost a closed shop and it seems that the people being promoted and getting new benefices tend to be those who are most supportive of the bishop. I welcome independence in the Church of England, but I am a little worried about that.
    There are not enough people coming forward to the Ministry and it is important to get the right kind of people. It is a calling and in controversial questions recently it was clear that, unfortunately, some parents of prospective clergy are deterring their sons from coming forward. It is a calling but there is, of course, a financial increment involved. It is a sad fact but it is necessary because clergy must be able to survive.
    The patronage Measures are getting more complex and confusing. I rather like the Trollope way of church life. There was a bit of mystery. Certain favoured people came forward, but I want to ensure that the traditionalists are brought forward for presentation. I know that this measure retains the right of patronage and I know that consultation of the laity will still exist. However, I want the laity to be independent of bishops. I want them to work with the bishops but it is the church wardens who know what is best for their parish. The church wardens, in conjunction with the patron, can decide the future of that church.
    Members on both sides of the House agree that a long interregnum is a serious matter. It can damage the future of the Church and these matters have to be speedily resolved. The Average wait for a new incumbent seems to be about eight months, sometimes longer. That is too long. Therefore, we must speed up the way in which incumbants are selected.
    The historical relationship is important. The role of the bishop would be purely in a consultative capacity. Sometimes the bishops do not get on with the patrons. The bishop may be new to the diocese and the patron and his family may have been their for centuries. The bishop must pay far more attention to the views of the patron.
    The rights to presentation must be carefully monitored, as they must be when the church warden is given the role of presentation. The universities, the Lord Chancellor and representatives of the Crown have a number of rights as patrons. It seems that anyone cm be a patron. There is nothing wrong with that; but who is really representative of the Church? Most of the patrons I know have a total interest in the church of England. However, some patrons are the exception and do not wish to get involved in the running of the Church and that is why the Measure has been brought forward. It is right that we should have the Measure for them but not as a general rule. The patron must be a believer, but he must get on well with the church wardens. He will appoint them as the parish representatives, but both of them must listen to what the paraochial church council would like.

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    Clause 14 gives the power to the bishops to appoint a priest to the benefice. I would much prefer to see more emphasis put on clause 15, with the patron appointing his personal choice. However, clause 15 provides for the approval of the bishop. We should consider that because we must maintain the independence of mind which some patrons have had and which has preserved the Church of England from the modern laissez-faire approach, which is more Socialist than Christian.
    We must also consider the role of the archbishop. Sometimes difficulties arise, and the archbishop must review the position. I hope that the need to introduce an archbishop to resolve a disagreement never arises. Existing patrons must be allowed to continue their good work.
    The measure is complex, and having heard some of my colleagues speak I am tempted to wonder why it is necessary. Indeed, has not the Church of England been getting along nicely? We should encourage more people into the ministry so that we have a wider selection of candidates. The number of people applying for the Advisory Council for the Church's Ministry has so deteriorated that the Church should develop its skills in promoting itself in the market and encouraging more believers to come forward.
    Clause 8, on the exercise and rights of presentation, should be noted with interest. The appointment of today's clergy is important to preserve the impartiality of the Church of England and the Christian faith which needs guidance, our help and prayers. We must ensure that the right type of people properly represent the Church. If the wrong people are appointed now, they could be bishops in 20 years' time, and where would the Church of England be then?
    11.31 pm
    Mr. Simon Hughes: All those interested in this matter, and certainly all those who are members of the Church of England by admission, baptism or confirmation, will agree with the last point made by the hon. Member for Leicester. East (Mr. Bruinvels). He may not always get such cross-party support.
    The substantive issue is how one manages — I am fully aware that it is not only within the lot of men and women to manage—the advancement of the ministry within the Church, and how one seeks by every measure possible to increase the number of people able to give full-time ministry to the Christian gospel in this land. We are doing pretty badly regarding the number of those who are full-time ministers and the number who believe in the Christian faith.
    Two colleagues from the House—who in this context and I hope on other occasions the Official Report will permit me to call my hon. Friends, although they are not party colleagues— the hon. Members for Burnley (Mr. Pike) and for Bury, North (Mr. Bury), and I were in the Anglican church in the Alexandra township outside Johannesburg in South Africa a week and a half ago. We were reminded of the enthusiasm and commitment to the Church and gospel there, despite the most horrendous adversity. Between apparently 75 and 80 per cent. of the 27 million population of South Africa still proclaim their belief and adherence to Christianity—as a result in large parts of the missionary work of the past few centuries.
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    When one compares that with the level of Christian adherence here—there is another debate about the link between the Christian belief and the political system——
    Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. I am anxious to be tolerant, but the hon. Gentleman must relate his remarks to the measure before the House.
    Mr. Hughes: My point is that we have a challenge to meet because our ability to bring ministers into the Church is certainly more limited and increasingly insufficient to meet the needs of Britain.
    The hon. Member for Wokingham (Sir W. van Straubenzee) introduced the debate with his customary efficiency and expertise, for which the House will be grateful. I shall deal in turn with each of the four matters to which he alluded.
    The first purpose was to establish certainty. It was the simple administrative matter of providing that a record be kept of patrons thoughout the Church. Everyone would welcome that.
    The report that was supplied to the House by the Ecclesiastical Committee noted that the matter before the House is
    "the only major area of the law of the Church of England in which, since 1945 there has not been a Measure designed to modernise and update the law."
    Clearly, the measure is also a technical matter. We are told that part of the fourth purpose of the measures is to amend and repeal 35 statutes which go back to the 16th century. It would consolidate the law. I hope that everyone will benefit from a measure that makes the law in this area much clearer. It would be specifically more useful where people were looking for the names and the lists of patrons.
    The second and third expressed purposes are the most crucial. The hon. Member for Birkenhead (Mr. Field) has said that the debate has centred upon certain important issues, despite the breadth of the measure. The second purpose was described in the opening speech as having the intention of affirming collegiality and partnership. Without going into the history of the matter in detail, the report from the Ecclesiastical Committee confirms that the debate on this subject has had a long history in the Church, dating back for decades.
    For many years. the Church went in a different direction.
    In the mid-1970s the Synod voted on the system of patronage that it had inherited. It came close to carrying an amendment calling for the abolition of patronage. The amendment was carried in the houses of clergy and laity and was lost only in the House of Bishops, because of a tied vote.
    I started to consider the matter from the premise that patronage and, thereby the ability of lay people to appoint clergy irrespective of the lay person's position of seniority in the Church, was something that we should do away with. However, I realised that when the Church was divided on the issue it was more important for the Church to achieve unity. The Church has done that. According to the figures available to us only a total of four votes were cast against the Measure in the three Houses as a whole.
    I take the view—I respect those of others, as I know do all Members of the House—that when the Church of England takes a clear view, then the House should seek to interfere with that with the greatest reluctance. But the more controversial a matter might be in the Synod and in its result, the more right it is that we should examine it in

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    the House. I say that without betraying my views on the much more controversial subject of the principle of the relationship between the House and the Church of England. That discussion is not for now.
    I believe that, given that the Church has found great unity in seeking the right direction and change, we must support the principle of a partnership between the patron, the bishop and the local people. That must be the right way to reconcile the conflicting interests that the hon. Member for Corby (Mr. Powell) and others have regarded as often important and useful. Clearly, it is important not to have regular occurrences of a situation in which a bishop proposes for a living someone who the local people find unacceptable. That situation does not make for a good community or relationship between pastoral leadership and congregation.
    Occasionally, it is right for a bishop to press the congregation further than they would wish to go. I was somewhat perturbed by one argument put forward by the hon. Member for Corby, which seemed to suggest his lack of conviction in the competence and wisdom of bishops in their appointments. I do not wish to engage now in that debate, other than to refer to it. However, if that is his concern and the bishops are thought not to be sensitive, that should teach us something about the advice given and the methods by which the bishops should properly have a clear view and understanding of the pastoral needs of his diocese. He should be well equipped to make appointments according to its needs and the changing situations. I hope that there is no suggestion within the Church that people are losing confidence in the ability of the episcopate to make those crucial decisions.
    The solution proposed combines the wisdom and authority of the bishops with the ability of the people to participate. Being a Liberal, I mischievously thought that it would be wrong — having decided originally as my premise that the patronage system should disappear, but believing in community politics— not to allow the local community to have as much say as possible. I feel that I have now found my rightful position in party political terms—inasmuch as they can ever apply to matters of this sort—by believing that it is right to maintain this partnership.
    Another matter that has clearly troubled the House is that of the third purpose—credibility. How appropriate is it for appointments to be made by patrons who are not either Christians or members of the Church of England? I am unhappy that a patron who is neither a Christian nor a communicant member of the Church of England, nor of a church in relationship in communion terms with the Church of England, should have the right to pass that over to somebody of the same designation.
    Somebody of a totally different faith, with no particular interest in this inherited right as a patron, might not show any care in the nomination of the member of clergy in question. Such a person might nominate the first candidate who happened, by that definition, to be qualified. In such cases, I should prefer the patronage entitlement to revert to the bishop, rather than have it rest with the nominee of the patron, the patron being a person who might not be a Christian, but alone a member of the Church of England.
    A linked question is whether it is right for a patron who is not a member of the Church of England to have the right of patronage. That issue was explored by the right hon.
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    Member for South Down (Mr. Powell) when he spoke of the relationship between the universality or nationality of the Church and the denominations of the other churches.
    The Gospel makes it clear that there is one Church, one faith and one Lord. I am not a denominationalist, although I accept that people have chosen to group themselves into denominations mainly because of the feelings and practices with which they feel comfortable. Having agreed, for the unity of the Church, to maintain the role of patrons, we should not seek to disqualify patrons from exercising that patronage if they assert and affirm the one true Christian faith.
    I hope, in those circumstances, that they will show equal concern, as Christians, for spiritual leadership in the Church. They have a responsibility, though it may not be to the Church of their denomination, to exercise their activities with great care.
    I support this instrument because it has been required by the Church for a long time. It will allow progress to be made along the lines suggested by the hon. Member for Wokingham. I hope, above all that in considering the views of this House, the Church will be encouraged to strive even harder to meet the desperate need that still exists in Britain for more people to be called into the ministry of the Church. I hope, too, that the ministry will be ever more empowered to do le work that, more now than ever, we need the Church to perform.
    11.44 pm
    Dr. John G. Blackburn: This is my first opportunity to pay a warm and generous tribute to my hon. Friend the Member for Wokingham (Sir W. van Straubenzee) on the manner in which he presented the Measure and for the opportunity, which I count as a great privilege, to serve with him on the Ecclesiastical Committee for seven years.
    I should like to relate my speech to the 191st report of the Ecclesiastical Committee, which concerns the matter under debate. I do not accept that the Measure has been a waste of time and energy. It is an important and reforming Measure, and the last in a long line to appear before the Ecclesiastical Committee. It has a major role to play in the future life and work of the Church, especially pastoral care.
    I expressed my support for the Measure when the Committee studied it diligently. It embodies some 35 measures that go back four centuries. Clause 1 establishes a register. That is important for credibility. It will be open for the public to examine it. The Measure comes at a historic time for the Church of England. It is established and wide, but I am glad that it still encompasses the evangelical traditions that I hold so dear. The Church's credibility has been tarnished. but the Measure corrects that.
    The General Synod considered the Measure and voted as follows: the House of Bishops, 15 Ayes and no Noes, the House of Clergy, 134 Ayes and four Noes and the House of Laity 121 Ayes and no Noes.
    The measure has received considerable debate within the Synod in an attempt to produce that which is good and that which will stand the test of time. When the measure came before the Ecclesiastical Committee I and other members of the Committee—they have spoken with so much knowledge tonight—considered it in great detail. II am delighted to say that the measure in not just the best we could do but I unashamedly hold the view that it is a

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    good and reforming measure. The measure will bring with it credibility and in that spirit I wholeheartedly support the measure.
    In ecclesiastical terms I must get used to describing the measure as expedient. That was the view of the Synod. In simple terms I wish the measure God's speed. I am quitely confident that it will prove to be a considerable blessing to the Church and the work it undertakes. Some of the criticisms which have been made about patronage do not appear to have anything to do with the measure which is before us.
    My simple and perhaps puritanical view is that there is no greater calling on any man than to be called of God. That being so, I am sure that such men will be called and that they will restore this nation to the Christian faith which it sadly appears to have left. This is one of the most important measures dealt with in the Ecclesiastic Committee. I commend it to the House and pray for its assent.
    11.51 pm
    Mr. Harry Greenway: I apoligise for leaving the House for a short time. I find it fascinating that, under this Measure, a patron may be simple-minded but still a communicant member of the Church of England. People are excommunicated automatically only if they are definitely insane. Those who are simple-minded are acceptable communicants of the Church and are able to present someone to a living, but those who are in total possession of their faculties but who practise a different faith are not able to do so. I point out the fascination of that situation to the House. I agree with the right hon. Member for South Down (Mr. Powell). my hon. Friend the Member for Corby (Mr. Powell) and the hon. Member for Birkenhead (Mr. Field) on this matter.
    The measure is unclear about the role of the laity. It does say that parochial church councils should be represented when considering an appointment and that its representatives should have a veto over an appointment. It does not say how those representatives will be appointed, whether they are to be mandated or whether they report back to the Church council. Effectively the veto lies with the church council and I agree with that. Such lay involvement should relate to the whole of the parochial church councils.
    When the laity have not been involved, or to a small degree only, with appointments, some such appointments are disasterous because the laity of the Church have not accepted the individual because he is incompatible with them. I hope that, one day, the Synod will consider the role of archbishops and bishops when instituting people to livings.
    There was a remarkable story of Canon Newell Long, who was appointed by a patron to the living of St. Aidan's, Birmingham, but the then Bishop of Birmingham, Ernest Barnes, refused to institute on the grounds of his Tractarian views, and there was an enormous battle between the Church and the Bishop of Birmingham. Eventually, the Archbishop of the day instituted the priest in Lambeth chapel, but still the bishop refused to recognise or accept the priest. It was a painful and sad situation, to. which the Synod never faced up.
    Under this measure, the Synod could have picked up such matters, because there are still occasions when
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    bishops say that if a certain person is appointed, they are not sure that they could institute them. These matters do not come out in the open very much, but they exist, and it is tiresome, wrong and dangerous that they do, and something should be done about it. I hope that the Synod will one day face up to this question, which is even more important than the one with which we have dealt this evening.
    11.57 pm
    Sir William van Straubenzee: With the leave of the House, I shall reply to what has been a most helpful debate. The House will acquit me if I do so briefly because it will realise that if the House is to come to a decision tonight, which I sense is the general wish, I have to do so within a general constraint of time, according to our Standing Orders.
    I am obliged to hon. Members on both sides of the House who have been good enough to take part in the debate. If my hon. Friend the Member for Ealing, North (Mr. Greenway) will look closely at clause 11, he will see how the lay representatives operate, and he will see that they are representatives and not delegates. That is a difference of which we in this House are rather specially conscious because we pride ourselves on being not delegates but representatives. I hope that when he studies clause 11 my hon. Friend will feel that there is a good deal in it for the lay representation.
    Rightly, the House has concerned itself with the point initially raised by the right hon. Member for South Down (Mr. Powell), which concerns the exercise of the right of patronage by a patron who is not a communicant member of the Church of England. I make clear the difference between the ownership of the patronage, on the one hand, and the exercise of the right in any particular vacancy, on the other. I hope and believe that this is not a narrow point.
    The right hon. Member used the word "ownership" —I made a careful note of this—and said that it would lapse if the patron was not a communicant member of the Church of England. That is an uncharacteristic slip on his part. for we know him to be an exact person in the use of his words. The ownership continues, if necessary, from generation to generation. This is part of the historical nature of the Church of England as it is constituted, and as I approve of it, although not all would do so. I accept that there comes a point when such a person has to exercise in the vacancy concerned his or her right of presentation, and this is what is set out in the Measure. I realise that there have been some doubts about this.
    I agree with the hon. Member for Southwark and Bermondsey (Mr. Hughes) that these are matters of judgment, but I should be relucant, in such an eventuality, to see such a right revert to the bishop. However, I recognise that these are matters of judgment. I much prefer the right of the patron concerned to appoint a representative who is a communicant member of the Church.
    I warmly agree with my hon. Friend the Member for Corby (Mr. Powell) and other hon. Members that the role of the lay patron in the Church of England is immensely important. I agree with that wholeheartedly. Once again I have to record my personal interest, but my hon. Friend the Member for Corby knows about that. The role of a lay

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    patron can be important and often is important, and for that reason I want to strengthen the role. I want to ensure that it can be ascertained without peradventure.
    My hon. Friend the Member for Leicester, East (Mr. Bruinvels) made a most helpful speech, but I do not think that the register in Crockfords is by any means complete. It is interesting to note that the register will eventually be completed and this in itself will strengthen the role of the lay patron. The other provisions of the Measure also help.
    The lay patron is often a person with local knowledge, and is sometimes a bastion against a diocesan bishop who may want to move a man who, as the phrase goes, "has problems." The diocesan bishop may want to move such a person to a parish for reasons which may be quite right from his point of view but which are not helpful from the point of view of parochial life in the parish concerned. My hon. Friend the Member for Corby and I are united in anything that will strengthen, as this Measure does, the position of the private patron.
    We all listened with great interest and respect to my hon. Friend the Member for Corby, who told us about the long years of devoted service given to one parish by his father. It brought back to mind, although not from personal recollection, my grandfather's grandfather in my village who was the rector of his parish for 51 years. It was his proud boast that he could drink any gentleman in his county under the table. That is a measure of hospitality that I try hard to maintain. Long service has much to commend it, but equally I see the great benefit nowadays of a proper period of service and then an equal period of splendid service in another parish.
    I hope that I have answered the main points raised. The fact that I have not answered at greater length will be understood by the House. Hon. Members will appreciate my problem and will acquit me of discourtesy. I warmly commend the Measure to the House.
    Question put and agreed to.
    Resolved,
    That the Patronage (Benefices) Measure, passed by the General Synod of the Church of England, be presented to Her Majesty for Her Royal Assent in the form in which the said Measure was laid before Parliament.

    Filey Coastguard
    Motion made, and Question proposed, That this House do now adjourn.—[Mr. Archie Hamilton.]
    12.4 am
    Mrs. Elizabeth Shields: The subject of the retention of the coastguard at Filey has been causing widespread concern to many people, both locally and elsewhere. More than a century ago — in 1862 to be precise — a coastguard station was first established to keep guard over the bay at Filey. The geographical features of Filey comprise seven miles of sandy beaches which end in three miles of cliff about 300 ft high at the north end, which is towards Scarborough. The bay is attractive to yachtsmen, canoeists, fishermen, swimmers and divers, but it contains some treacherous undercurrents with which only skilled people can successfully contend.
    The necessity of keeping a coastguard at Filey must not be underestimated. The population of Filey and its environs is vastly increased each year during the summer months when as many as 100,000 or 150,000 visitors make their way to this popular seaside resort.
    The bay is watched over by a full-time coastguard from a specially constructed lookout window built in the coastguard station. The visual importance of that lookout cannot be overemphasised. Scarborough borough council, Filey town council, and the Filey district home and water safety committee, as well as the Filey auxiliary coastguards, have expressed anxiety about the proposals, which are regarded as just another part of the general erosion of visual watchkeeping to which opposition has already been expressed. Several hundred residents and tourists who visit Filey regularly each year have also written to me on the matter.
    The number of reportable incidents—those requiring external assistance, such as the lifeboat, helicopter, police or ambulance — illustrates the extent to which the coastguard helps the public. During the past four years, there has been an average of 33 incidents each summer, and this year to date there have been 10 incidents. The number of incidents that are avoided because of the physical presence of the coastguard is considerably more. Part of the his job is the prevention of accidents —warning people not to surf or swim or advising against putting a boat out to sea. It is impossible to quantify the incidents prevented that might otherwise have ended in tragedy.
    Not only visitors use the sea at Filey bay. There is a fishing fleet of 16 cobbles, which put out to sea regularly throughout the year, and in the appropriate season there are an additional 13 salmon boats. During the summer months, six fishing boats take parties of anglers out to enjoy their pastime, and dozens of small boats sail in the bay, most of them without radios. All are kept under surveillance by the unremitting efforts of the full-time coastguard.
    Another worrying factor is that the proposed reorganisation will lay the major responsibility for replacement cover on the Filey auxiliary coastguards. That is not a practical idea, since most of the auxiliaries are in full-time employment and would be unable to provide the overall weekly cover required in the summer.
    The personnel at Filey have already been reduced drastically. In 1982, there were three coastguards. Two have subsequently retired and not been replaced. A year

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    ago, there were as many as 25 auxiliaries. Today, there are only 11, and I understand that there is little possibility of enlisting more members to the auxiliary. Yet the responsibility for that bay is no less.
    It is absurd to say that by merging the sectors of Scarborough and Filey and depriving the latter of its full-time vigilante, the residents of the town, the tourists and fishermen will,
    "detect an improvement in the standards of coverage."
    This is a prime example of remote bureacrats playing with maps and budgets, without taking into consideration the real local case. I wonder whether the Minister has visited Filey and is conversant with the geography, tides and dangers of the area. I should be delighted to show him round Filey, if necessary.
    No money will be saved by transferring the service to Scarborough, although money will have to be spent on converting the toll house at Scarborough when there is already a purpose-built station at Filey. Scarborough also has a harbour master and lifeguards. Neither of those facilities is available at Filey.
    One of the most important factors is the excellent Royal National Lifeboat Institution, whose members were not informed of the decision to remove the coastguard, with whom they work in close conjunction. During operations, the RNLI relies heavily on the expertise of the coastguard, who acts as a co-ordinator and monitor for its boats when they are out in the bay.
    In his letter, the deputy chief coastguard assured me:
    "When it is necessary to provide watch locally at Filey, it will be set, whether on the advice of the auxiliary-in-charge, the Sector Officer or the watch at Bridlington."
    Without the visual aid, immediate knowledge of incidents in the bay will be delayed. The Filey auxiliary-in-charge lives in Scarborough. The sector officer, who will spend only two days a week at Filey, will also be based at Scarborough, and the watch at Bridlington is equally remote. Perhaps the Scarborough coastguard will be omniscient as well as omnipresent.
    The most important issue in all this is safety — the safety of human life, be it that of a child or an adult. I beg the hon. Gentleman to make this his main priority.
    12.9 am
    The Minister of State, Department of Transport (Mr. David Mitchell): I congratulate the hon. Member for Ryedale (Mrs. Shields) on her good fortune in securing this Adjournment debate.
    I welcome the opportunity to explain to the House the circumstances surrounding the change in one coastguard officer's duties at Filey and to demonstrate that, in consequence, there will be no reduction in coastguard coverage on the coastline in the hon. Lady's constituency.
    However, I am somewhat perplexed about why the hon. Lady has sought this opportunity to raise the matter on the Floor of the House since Adjournment debates normally follow correspondence in which Ministers have failed to satisfy the Member of Parliament concerned. In this case the hon. Lady wrote to the chief coastguard on 23 April, the letter was received on 28 April, and it was replied to on 2 May. Nothing more was heard until there was a telephone call on or about 3 June to say that the hon. Lady or her office had mislaid the reply to the letter and asking for a copy, which was sent to the House of
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    Commons on 3 June. I make no criticism of the hon. Lady for having apparently lost the letter—it can happen to any of us.
    I wonder whether the hon. Lady sought this Adjournment debate in the time when the letter had been mislaid. I say that because, when my hon. Friends the Members for Scarborough (Sir M. Shaw), and for Bridlington (Mr. Townend) and the hon. Member for Kingston upon Hull, East (Mr. Prescott) and the right hon. Member for Barnsley, Central (Mr. Mason) all raised this matter with Ministers, they received a full response which, I think, clarified the matter.
    In her letter on Monday this week to the Secretary of State, the hon. Lady, as in her speech tonight, expressed concern about what she calls the Government's plan to close the vital coastguard service station. The Government have no such plan, they never had and there is no intention to close it, as I would gladly have told the hon. Lady, and will confirm in reply to her letter of Monday this week.
    It may help the House if I explain the coastguard organisation. The United Kingdom coastline is divided into coastguard districts, each under the control of a coastguard rescue centre manned 24 hours a day with constant monitoring of radio distress channels and a 999 telephone system. I was concerned—as, no doubt, the hon. Lady is — that the hon. Lady had to refer, no doubt quite rightly, to the fact that boats go out to sea without VHF radio. It is a relatively inexpensive piece of equipment, and I hope that she will join me in urging all who take boats to sea to carry VHF radio because it is their lifeline to the coastguard and to the rescue service that comes with the coastguard.
    The hon. Lady will well know that, slightly further north of the lookout point to which she referred at Filey, there is a ridge of cliff beyond which the coastguard cannot see. No matter whether he stands over the telescope or elsewhere, he cannot see it. That illustrates the value and importance of boats having VHF radio. I hope that all Members will seek opportunities to remind those who take out boats that they should ensure that they have VHF radio. It is a small cost for making life more secure.
    I can assure the hon. Lady that any part of the coast can be placed under visual surveillance if required, and visual watch is ordered whenever required. That applies especially during bank holidays, when there are many more amateur sailors about—in which number I include myself — which obviously requires more visual watch because of the higher risk involved.
    Each of the districts to which I referred — the coastguard districts under the control of a coastguard rescue centre manned 24 hours a day—is divided into sectors with a regular coastguard as sector officer, responsible for recruitment, training, overseeing and administration of the auxiliary coastguards who form the local coastguard company for the unit. The sector officer is not intended to man a watch. He recruits, he trains, and he organises.
    The system can well be illustrated by a recent incident off Filey on Saturday 10 May, with which the hon. Lady is familiar. A sailing dinghy capsised, throwing four people into the water. I know the coast a little further north than Filey quite well; the water is very cold and it is necessary to get people out of it very quickly. They did not have lifebelts or any suiting to protect them against the cold. The incident was reported by a 999 call to the coastguard rescue centre at 14.23 hours. It immediately alerted the

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    Filey auxiliary coastguard manning the Filey marine rescue unit. The unit, led by Mr. Parrish, arrived on the scene in five minutes, and having assessed the position arranged the launch of the Filey inshore lifeboat. It was launched at 14.32 hours and, seven minutes later, had effected rescue, no doubt to the relief of the local windsurfer and his friend who had assisted, and, needless to say, to the immense gratitude of those who were in dire trouble in the water. I think that we would all wish to thank Mr. Parrish and his team for what they did and also the RNLI for its sterling and, as always, reliable work.
    As I said, the sector officer's job is not to man the watch. He was on that day, having a day off. The first that he knew of the incident was when the RNLI fired its maroons for the inshore lifeboat. The crew already in the boathouse had been alerted by the coastguard through radio pagers; thus the rescue was fully under way without the participation of the sector coastguard. That is no criticism of him, for that is the way that the system is designed to work. In fact, Mr. Cother, the sector officer, although off duty, came as soon as the maroon launching the lifeboat was heard. I would like to thank him for that, and I am sure that the hon. Lady would also wish to do so.
    I turn now from the way that the system was supposed to work and did work to the small staffing change that is to take place at Filey. In future, the sector covered by the sector coastguard officer will have 40 auxiliaries in three companies, one of which will be at Filey, and will consist of 14 auxiliares—exactly the same number as now. The lookout is not being closed; it will be used as required. The marine rescue unit remains. The only difference will be that the regular sector officer responsible, not for watchkeeping but for recruitment. training and arranging duties, will he stationed in Scarborough. No one can realistically claim that it should take one man to recruit, train and organise 14 auxiliaries— it does not anywhere else.
    It has been claimed that the purpose of this reallocation of duties is to save money. The hon. Lady did not say that,
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    but it has been claimed in her local papers. I wish to make it clear that this rationalization is to enable increased manning to be provided on the Humber estuary. There is a great deal more activity there. There are various forms of danger and there is mixed shipping. I can assure the House that the sector officer, Mr. Cother, to whom I have already referred, will not lose his employment. He will be offered an alternative post in the coastguard service where he will be more fully employed.
    Swimmers do not come within coastguard duties and many local authorities recoglise this by providing lifeguards, who mark safe batting beaches, and watch over them. If the local coastguard unit is aware of a problem, however, it will always Leek to help. At Filey, the 14-strong company remains. It is there for any duties which it may be called upon to perform. I cannot too strongly emphasise that there will be no reduction in coast guard services to those in trouble on the sea in the Filey area.
    The hon. Lady referred to the proposed changes in her letter — she made a somewhat similar reference in her speech—having
    "an incalculable effect on the fishing and tourist industries."
    If I may say so, that is going over the top a bit. Will there be an incalculable effect in putting the Filey auxiliaries under a different coastguard officer for the purpose of training and rostering? It would stem that the position has been misunderstood and that the hon. Lady's assertion cannot be taken seriously.
    As the Minister who at one time had direct responsibility for HM Coastguard, I pay tribute to it for its constant watchfulness round the clock. Regular and auxiliary coastguards alike do a wonderful job right round our coast, including Filey, and will continue to do so. The House and those who go down to the sea in ships, boats, dinghies, and in these days surfboards as well, have every reason to say thank you to them. I believe that that is the right note on which to end this short debate.
    Question put and agreed to.
    Adjourned accordingly at twenty-two minutes past Twelve o'clock.