HL Deb 15 July 1924 vol 58 cc541-52

Order of the Day for the House to be put into Committee read.

VISCOUNT CECIL OF CHELWOOD

My Lords, in moving that the House do now resolve itself into Committee perhaps your Lordships will allow me to say a word about the Amendments of which Notice has been given. There are a number of Amendments in the name of my noble and learned friend Lord Wrenbury. I can only express my gratitude to the noble and learned Lord for the care with which he has been through the Bill and for the Amendments he has proposed, all of which seem to my humble judgment to be improvements of the Bill. So far as I am concerned, I shall be very glad to accept the whole of those Amendments. With regard to the Amendments of which the noble Lord, Lord Strachie, has given Notice, they will come to be considered when we reach them. I beg to move.

Moved, That the House do now resolve itself into Committee.—(Viscount Cecil of Chelwood.)

On Question, Motion agreed to.

House in Committee accordingly:

[The EARL OF DONOUGHMORE in the Chair.]

Clause 1:

Power of companies to introduce co-partnership schemes.

1. Every company incorporated by Act of Parliament and every company registered under the Companies Acts, 1908 to 1917, shall (if not already so empowered) be deemed to have power without further authority of Parliament or application to any Court to introduce a scheme of co-partnership under which

  1. (a) any servant or employee of the company may, in addition to the salary or wages paid to such servant or employee in accordance with the standard or usual rate of salary or wages paid in the trade or business concerned to servants or employees of a like class, be Further remunerated either by the allotment to him of shares of the company credited or paid up in full or in part, or by giving him a share or interest in the profits of the company, or by a combination of two or more of these methods
  2. (b) provision may be made upon such terms and conditions as to numbers, method of election, qualification, powers, remuneration, duration of office and other matters, as the company in general meeting may approve for the election either by the employees of the company generally or by such of them as shall be duly qualified in that behalf of employee directors or an employee director to sit and represent the employees of the company upon the board of the company.

LORD WRENBURY moved, after "Every company incorporated by Act of Parliament," to insert "or by charter." The noble and learned Lord said: There are three ways in which companies may be incorporated—first, by Act of Parliament; secondly, by charter; and thirdly, by registration under the Companies Acts. The Bill as it stands, addressed, as it seems to me, in substance to all those classes of companies, is confined to the first and third, and the object of the first Amendment which stands in my name is to include the chartered companies. I beg to move.

Amendment moved— Page 1, line 7, after ("Parliament") insert ("or by charter'').—(Lord Wrenbury.)

On Question, Amendment agreed to.

LORD WRENBURY moved, to leave out "be deemed to" ["be deemed to have power"]. The noble and learned Lord said: The words "be deemed to" are convenient in some circumstances, as, for instance, supposing there be an Act of Parliament which relates to cattle and by a subsequent Act it is desired to enlarge it so as to include sheep, it is convenient to say that for the purposes of the first Act "sheep" shall be deemed to be "cattle." But that is not a consideration which applies to an empowering Statute, which this is. The words in the clause, are "shall if not already so empowered be deemed to have power." The purpose of the Bill, of course, is not that they shall be deemed to have power, but that they shall have it. They are granted the power. I beg to move to leave out "be deemed to," so as to confirm the granting of the power by the words "shall … have power."

Amendment moved— Page 1, line 9, leave out (" be deemed to ").—(Lord Wrenbury.)

On Question, Amendment agreed to.

LORD WRENBURY

The next Amendment is a mere drafting Amendment. Your Lordships will see that the clause runs at present "further authority of Parliament or application to any Court." That which has effect is not, of course, the application to the Court but the order of the Court. I suggest therefore that it should run without further authority of Parliament or order of any Court to introduce a scheme of co-partnership. and so on. I beg to move.

Amendment moved— Page 1, line 10, leave out (" application to")" and insert ("order of").—(Lord Wrenbury.)

On Question, Amendment agreed to.

LORD WRENBURY moved, in paragraph (a), to leave out "credited or paid up in full or in part" and insert "carrying a special right of dividend so long as he continues to hold the shares and to be a servant or employee of the company." The noble and learned Lord said: This is an Amendment really of some substance. It was always a principle of the Companies Acts that the capital of a company should be not a fiction but a fact. I remember very well the fierce contests which used to rage, in my own early days at the Bar, over Section 25 of the Companies Act, 1867, which your Lordships may remember was a section which provided that every share in any company shall be deemed to be subject to the payment of the whole amount thereof in cash unless the same shall have been otherwise determined by a contract duly filed at or before the issue of such share. Over almost every word in that section controversy raged. It was debated as to what was the issue of the share, and what was meant by "at or before the issue of a share." Could you register a contract to say that with £5 you could pay up shares to the extent of £50? Could you register a contract to the effect that property which was only worth £100 should be deemed to pay up shares to the extent of £1,000? And so on. It was debated to and fro over every word of the section. But at the bottom of it all was still this, that it was thought right that the capital of a company should be a reality and not a fiction; that a £10 share should represent £10 either paid in money, or paid in something which was taken as equivalent to money.

The words of this Bill are: by the allotment to him "— that is, the employee— of shares of the company credited or paid up in full or in part.

That would imply that he may have a share paid up in full or in part without paying for it. That is really contrary to a principle which is well-established. Exactly the same result can be achieved in another way. Supposing you give it a servant of the company a share of a very small nominal amount, say, one shilling, and he really pays his shilling upon it; you can get what you want by giving him the right in respect of that shilling share to as much dividend as if he had paid, say, £10 or £50 for the share. I therefore propose to leave out the words "credited or paid up in full or in part" and to substitute for them the words on the Paper. Of course, this servant's share ought not to be capable of being transferred to some other person who is not a servant of the company so as to carry the special right of dividend. Therefore, it ought to be for so long as the employee continues to hold the share. It must be in his own hand and not in the hands of another. And if he continues to hold he must also remain the servant of the company so as to be qualified to receive that benefit. I beg to move.

Amendment moved— Page 1, line 19, leave out ("credited or paid up in full or in part ") and insert the said new words.—(Lord Wrenbury.)

VISCOUNT CECIL OF CHELWOOD

This is the only Amendment of my noble and learned friend about which I had, in my ignorance, a little hesitation. But I certainly should not think of resisting an Amendment of this character coming from a noble and learned Lord of his authority in this particular subject. The conception was that the services of the employee were to be the consideration for which the shares were to be allotted, and I see the advantage of my noble and learned friend's way of doing this and therefore accept, the Amendment.

On Question, Amendment agreed to.

LORD WRENBUEY moved, near the end of paragraph (b), to leave out "and represent the employees of the company." The noble and learned Lord said: This, perhaps, is merely sentiment. What occurs to me is that if a man is a director he is a director of the company and his business is to observe his duty towards the company whose affairs he has to direct. I rather crane at saying that this man is to go on the board to represent a particular class. He is not there to represent a particular class—the employees of the company—as distinct from anybody else. Therefore, J would prefer, unless the noble Viscount wishes the contrary, to leave out the words quoted and not tar the director with a particular description as being there as a person who has to attend to the advantage of a particular class of shareholder". I beg to move.

Amendment moved— Page 2, lines 5 and 6, leave out (" and represent the employees of the company ").—(Lord Wrenbury.)

On Question, Amendment agreed to.

Clause 1, as amended, agreed to.

Clause, 2:

2. Companies or corporations not formed for the purpose of profit, including municipal corporations or county councils, shall (if not already so empowered) he deemed to have power without further authority of Parliament or application to any court to issue regulations providing for the payment to any servant or employee of such company, corporation or public body, in addition to the salary or wages paid to him in accordance with the standard or usual rote of salary or wages applicable to his case, of a bonus on the amount by which the actual expenditure in the department or branch of service in which such servant or employee is employed is less than the estimated expenditure of such department or I ranch, provided that in the case of municipal corporations or county councils, or other public body, having power to levy rates, such regulations shall be of no effect until approved by the Minister of Health.

LORD WRENBURY moved to omit "or" at the begining of the clause and after "corporations" insert "and public bodies." The noble and learned Lord said: This is merely a drafting Amendment. I beg to move.

Amendment moved— Page 2, line S, leave out (" or ") and after (" corporations ") insert (" and public bodies ").—(Lord Wrenbury.)

VISCOUNT CECIL OF CHELWOOD

I have no objection to the Amendment, but I rather think it would interfere with the Amendments of my noble friend Lord Strachie if this Amendment were made. Therefore, I think it is right that I should call his attention to it in case he should desire to resist it.

LORD STRACHIE

I desire to safeguard my Amendments.

THE LORD CHAIRMAN

I understand the suggestion is that these words should be moved on Report. Therefore, perhaps the noble and learned Lord will put the Amendment down then.

Amendment, by leave, withdrawn.

LORD STRACHIE moved to leave out. "including municipal corporations or county councils." The noble Lord said: I move this Amendment at the request of the County Councils Association. The matter first came before the Parliamentary committee of that Association and afterwards before the executive committee of the Association and both were unanimously against the inclusion of officials of municipal corporations and county councils. I will give your Lordships the reasons why that great body, the County Councils Association, object to the inclusion of these officials. Of course, they do not object to the Bill itself. It is their view that it is not their business to interfere with any other part of the Bill, but they do desire to exclude the officials of the great municipal authorities because, in their view, the officials of the county councils and other municipal bodies are practically in the same position as civil servants.

They are people who hold office during pleasure and good behaviour, like civil servants. They also now have pensions schemes, and are pensioned in the same way as civil servants. I do not think the noble Viscount himself would suggest that the civil servants of this country should be included in this Bill, and all the arguments against their inclusion apply equally against the inclusion of local government officials, who it seems to me are in exactly the same position as civil servants. This Bill is a direct incentive to officials of local government authorities to bring in large estimates because under this Bill, if they made large estimates and the amount estimated for was not required and an apparent economy was thereby effected, they would receive a bonus upon any amount thus saved. I am told that in Yorkshire, not long ago, it was proposed to expend some £5,000 upon a road and an estimate of that amount was made by the official. When the road was made there was a saving of over £1,000 on the estimate. Under this Bill I presume that official would have got a bonus upon that saving.

You may say that it happens in private business that people who save their employer's money often get bonuses as an inducement. That may be a correct thing to do in the ease of a private business, but it seems to me that this would be an incentive to municipal officials to bring in large estimates in order to get a bonus on the amount saved. It frequently happens at the present time that the estimates of the education committee or the roads committee of a municipality or county council are largely in excess of the amount that is actually required, but that often occurs simply because of an accident. I am sure the officials do their best to keep the estimates down, but if you accept the Bill of the noble Viscount it would, I am afraid, offer an inducement to people to over-estimate and get a bonus when the estimate was found to be too large. I do not think I need say anything further in moving this Amendment. I beg to move.

Amendment moved— Page 2, lines 9 and 10, leave out (" including municipal corporations or county councils ").—(Lord Strachie.)

VISCOUNT CECIL OF CHELWOOD

Naturally I should desire to comply with any suggestion made by my noble friend, especially speaking on behalf of the important body, or at the suggestion of the important body, he mentioned, but I think he has, if he will allow me to say so, rather misunderstood the object and purport of the clause as it stands. I agree with him that it would be quite improper to have profit-sharing, or co-partnership, or anything of the kind, in dealing with ordinary Government officials, or ordinary local government officials, or county council officials, but that is not the purpose of this clause. It is a purely permissive clause. It does not impose any duty. It merely gives to these local bodies the power, if they think right, of issuing regulations providing for some such scheme with the consent of the Government Department concerned, the Ministry of Health.

The kind of case which I had in my mind was the case, which is now perhaps, I think, rather too common, of the management of a profit-making undertaking by these bodies, such as tramways, gasworks, electric light and even waterworks to some extent. In those cases the reason for giving to the employees a direct interest in their work seems to me at first sight almost as strong, if not quite as strong, as in an ordinary industrial company. Most of us have heard it said that those who work for public bodies, whether they are Government or municipal bodies, do not, perhaps, give quite the same energy to their work as those who work for private undertakings. I do not know whether that is true, but at any rate it is a common suggestion. I confess that I do not see any objection to giving to these local bodies the power of giving this extra inducement to their workmen to give really good value to the ratepayers for their rates, specially guarded, as it is, by the assent of a Government Department, and being of a purely permissive character. I do not know whether I can appease my noble friend, but I venture to hope he will not think it necessary to insist on this Amendment.

EARL BEAUCHAMP

I confess I think there is a great deal in what has been said by the noble Viscount, although it does not quite remove the apprehensions upon this Bill that I had after I heard the noble Lord's speech. I do not quite know what view His Majesty's Government would take of this particular Amendment. Perhaps the noble Viscount would allow me to make a suggestion to him. Would it be possible to consult the office Is of the municipal corporations, and the County Councils Association? If he would undertake to do that it might be possible for my noble friend to withdraw the Amendment in order that something might be agreed to on Report.

VISCOUNT CECIL OF CHELWOOD

I hasten to agree to that suggestion. I do not want: to make a controversial matter of this Bill, and I am ready to meet the noble Lord in any possible way.

LORD STRACHIE

I should be only too glad to accept the suggestion, if I could, but I cannot do so because the County Councils Association are absolutely firm on the matter.

LORD BANBURY OF SOUTHAM

I hope the noble and learned Viscount will accept the Amendment. It is true that the clause is permissive, but consider what would happen in a county council, or municipal authority, if this permissive clause was left in as it stands, and there was a majority in the council which refused to put it into operation. There would be an agitation at once by the officials and employees that it should be put into operation. At the present time everyone in this country is suffering from the grievous burden of rates, and if there is to be any saving it should go to the ratepayers and not to officials or employees, who are at the moment extremely well paid.

What is the position, and what must be the position, of a county council or municipality? It is impossible for the members of either body to exorcise control over estimates and expenditure in the same way as is done by a body of directors who are responsible to their shareholders. The preparation of estimates—it is not merely a question of spending money, of building new gas works, or tramways, or electricity works; it is the preparation of estimates for the year—must to a large extent be in the hands of the officials of a county council or municipality. I do not object to that, it is a necessity. The officials are well paid and it is their duty to do this without any further bribe, for that is practically what this proposal is. And think what the temptation will be in these circumstances, human nature being what it is. The noble and learned Viscount has an exalted idea of human nature. I have not. I believe human nature to be intrinsically bad.

My belief is that what would happen is this—I do not say it would in every case, but it would in many cases—that the people who are employed to make and prepare estimates would say: "Look here, wages and materials are high, do not put the estimate too low. Let us have some credit for making an estimate more or less near the mark." And they would take care to see that the estimate was above the mark. Then, if a saving was made, instead of going to the already overburdened ratepayer, it would go to the officers and employees of the county council or municipality. There in nothing in this clause that I can see to prevent that happening, particularly if an agitation is got up, for popularly elected bodies are not likely to stand out very strongly against an agitation by the majority of the people who elect them. Therefore, the chances are that in many cases any saving which ought to go to the ratepayers would go to the employees of the municipality or county council.

The noble and learned Viscount says that there is the safeguard that this cannot be done without the authority of the Minister of Labour. I place no reliance whatever on the Minister of Labour in the present Government. I believe the Minister of Labour in the present Government would be only too delighted to go down into his own constituency and say: "See what I have got for you; see what you have got by returning a Socialist Minister." And I do not believe that the noble and learned Lord, the Lord President of the Council, would resign in consequence. I hope the noble Lord will go to a Division, if necessary.

VISCOUNT CECIL OF CHELWOOD

I do not desire to turn this Bill into a controversial matter, and as there appears to be a strong feeling that this provision ought not to be included I shall not resist the Amendment. I only desire to say in reference to what Lord Banbury of Southam has said, that, in this particular instance, it is not that I have a higher opinion of human nature than he, although I should be very sorry if I constantly held such a low opinion of human nature as he does. I think it is sometimes a good thing to give to those who are working a direct inducement to do their best in their work, and that that is a greater advantage than the possible disadvantage which might arise from manipulating estimates in the way he thinks would be probable. I do not desire to introduce an element of controversy, however, and I shall not resist the Amendment.

On Question, Amendment agreed to.

LORD WRENBURY

The next three Amendments are consequential.

Amendments moved—

Page 2, line 9, Leave out ("or") and insert (" and ")

Page 2,lines 10 and 11, leave out (" be deemed to ")

Page 2,line 11, leave out ("application to") and insert ("order of").—(Lord Wrenbury.)

On Question, Amendments agreed to.

LORD STBACHIE moved, after "company" ["company, corporation or public body"] to insert "or" and to leave out "or public body." The noble Lord said: This is consequential.

Amendment moved— Page 2, line 14, after (" company ") insert (" or ") and leave out (" or public body ").—(Lord Strachie.)

On Question, Amendment agreed to.

LORD WRENBURY moved to leave out "on" ["bonus on the amount"] and insert "calculated with reference to". The noble and learned Lord said: The purpose of this Amendment is this. The clause says that the bonus shall be calculated on the amount by which the actual expenditure in the department or branch of service in which such servant or employee is employed is less than the estimated expenditure. It is obvious that this is very difficult to ascertain. If you are going to give a five per cent, bonus on the difference it would be difficult to say what it was, and I doubt whether it would be workable. The words I suggest are "calculated with reference to ", which are much more elastic. You could have regard to the actual expenditure and to the estimated expenditure and then give a bonus "calculated with reference to" the saving, without ascertaining the exact monetary amount on which you are going to give so much per cent. The only object is to make the thing more elastic.

Amendment moved— Page 2, line 17, leave out (" on ") and insert ("calculated with reference to").—(Lord Wrenbury.)

VISCOUNT CECIL OF CHELWOOD

I agree.

On Question, Amendment agreed to.

LORD STRACHIE moved to omit all words after "branch," where that word secondly occurs. The noble Lord said: This is also consequential.

Amendment moved— Page 2, line 21, leave out from ("branch") to the end of line 25.—(Lord Strachie.)

On Question, Amendment, agreed to.

LORD STRACHIE moved, at the end of the clause, to insert the following new subsection:— (2) This section shall not apply to county borough or district councils or any other local authorities.

The noble Lord said: This is consequential on what your Lordships have already decided.

Amendment moved— Page 2, line 25, at end insert the said new subsection.—(Lord Strachie.)

On Question, Amendment agreed to.

Clause 2, as amended, agreed to.

Remaining clause agreed to.