Lords Sitting of 6 July 1939

Preamble
The House met at three of the clock, The LORD CHANCELLOR on the Woolsack.
The Viscount Wimborne—Sat first in Parliament after the death of his father.

SUNDERLAND CORPORATION BILL.
Read 3a, with the Amendments.
THE CHAIRMAN OF COMMITTEES (THE EARL OF ONSLOW): My Lords I beg to move that the Amendment, in page 2, line 41, after "and," insert "the deposited," be made.
Moved, That the proposed Amendment be made.—(The Earl of Onslow.)
On Question, Motion agreed to.
Bill passed, and returned to the Commons.

BUSINESS OF THE HOUSE.
THE LORD PRESIDENT OF THE COUNCIL (VISCOUNT RUNCIMAN OF DOXFORD): My Lords, I beg to move the Motion standing on the Paper in the name of my noble friend Lord Stanhope.
Moved, That Standing Order No. XXXIX be considered in order to its being dispensed with for the purpose of passing the Ministry of Supply Bill through its remaining stages.—(Viscount Runciman of Doxford.)
On Question, Motion agreed to, and ordered accordingly.

WHITEHAVEN GAS ORDER, 1939.
VISCOUNT BRIDPORT: My Lords, on behalf of my noble friend Lord Templemore, I beg to move that the Special Order, as reported from the Special Orders Committee on Thursday last, be approved, with a modification.
Moved, That the Special Order, as reported from the Special Orders Committee on Thursday last, be approved, with a modification.—(Viscount Bridport.)
On Question, Motion agreed to.

MANSFIELD GAS ORDER, 1939.
VISCOUNT BRIDPORT: My Lords, on behalf of my noble friend Lord Templemore, I beg to move that the Special Order, as reported from the Special Orders Committee on Thursday last, be approved, with modifications.
Moved, That the Special Order, as reported from the Special Orders Committee on Thursday last, be approved, with modifications.—(Viscount Bridport.)
On Question, Motion agreed to.

ST. HELENS CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL.
House in Committee (according to Order) on re-commitment of the Bill: Bill reported without amendment.
SOUTHEND-ON-SEA CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL.
House in Committee (according to Order) on re-commitment of the Bill: Bill reported without amendment.
MINISTRY OF HEALTH PROVISIONAL ORDER (YORK WATER) BILL.
Read 3a (according to Order), and passed.
MINISTRY OF HEALTH PROVISIONAL ORDER (NEWHAVEN AND SEAFORD WATER) BILL.
Read 3a (according to Order), and passed.
MINISTRY OF HEALTH PROVISIONAL ORDER (CORSHAM WATER) BILL.
Read 3a (according to Order), and passed.

PUBLIC TRUSTEE (GENERAL DEPOSIT FUND) BILL.
Order of the Day for the Second Reading read.
3.9 p.m.
THE LORD CHANCELLOR (LORD MAUGHAM): My Lords, this Bill is of an

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unusual character, and at first sight it looks rather alarming. It comes from another place, and the Examiner of Petitions for Private Bills in that place reported that the Standing Orders applicable to the Bill had been complied with. It is a hybrid Bill and was considered by a Select Committee of members of another place. The usual formalities were gone through. In fact no Petitions were presented against the Bill, the Preamble was proved, and a Report in favour of the Bill was presented. I mention that because your Lordships will see that the Bill as it comes before the House contains more than two pages of recital of circumstances which have led to the presentation of the measure. Of course that statement of facts has already been considered in evidence elsewhere and has been approved. I should add that the Third Reading, in another place, on June 13 was unopposed. If your Lordships have the print of the Bill in your hands, you will observe that the recital relates mainly to two somewhat singular facts which arise out of the administration of the Public Trustee Department under the Public Trustee Act, 1906. Your Lordships will be aware that the Public Trustee may be a trustee by himself of a number of trusts or he may be a trustee in association with others. I should like to begin by saying that this Bill relates to cases where he is the sole trustee, because thus alone was it possible for him to do the various things which are sought to be validated by this Bill.
The Public Trustee is remunerated by fees, and the fees go into the Exchequer. The costs of administering what is now a vast Department are provided out of Parliamentary funds, and Parliament makes in that way some not very large profit out of the administration of the Department. Under the Act of 1906 provision was made, not unnaturally, that separate accounts should be kept for every trust, and there are a very large number of trusts. Altogether during the years with which we are concerned there have been over 100,000 such trusts, some of them relating to small sums and some relating to much larger sums. The matters with which we are concerned here really substantially relate only to comparatively small trusts on the whole. Your Lordships will appreciate that the Public Trustee, every now and then, has
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to pay sums of interest to beneficiaries from trust funds, he has sometimes to invest such funds or to make new investments, and sometimes he has to distribute the whole, or part, of the fund, and pro tanto that trust then comes to an end. It was found as his business increased that he generally had in hand a pretty large sum consisting of a number of cash balances relating to all these trusts which, as I have already said, were very numerous.
Your Lordships will at once appreciate that if he had with complete strictness complied with his duty and kept the funds relating to every one of these trusts quite separate, when he had a small sum relating to some particular trust in hand for a few weeks or at most a few months, he could do nothing with that money at all. You cannot make money by investing a sum of, say, £100 for six weeks. It is true that he would get some small sum out of the investments if dividends were payable during that time, but on the other hand there is the cost of investment. You buy at a figure which is higher than that which you get when you sell unless there has been a fluctuation during the weeks you hold the investment, and it would not be found a remunerative transaction. The only thing that the ordinary trustee does is to put the money on deposit, and there again he has to give so many days' notice—I think fourteen—before he can get the money out again. Accordingly, in March, 1918, which is already a long time ago, the Public Trustee thought, in the interests of all these trusts, that he should form with regard to the various sums of that character—that is, nothing like the whole of the trust funds he has, but simply those funds awaiting distribution or disposal in the way I have mentioned—what I may call an omnibus trust fund. That total fund was of a substantial character, amounting to a good many thousands of pounds.
With regard to these funds—and here he did something which I must admit at once was a technical breach of trust—he invested a large part of them in investments, and as regards the balance, the smaller part, he placed it on deposit, with the result that the sums he invested, which he had invested in 5 per cent. war loan stock, gave him a return of 5 per cent., and on the sums on deposit he got

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2 per cent. Your Lordships will note that as this related to a large number of funds he kept on having to pay out of that omnibus fund, so far as it was invested or placed on deposit, the sums which had to be paid from separate trusts, and at the same time other sums were coming in in respect of other trusts, so that really the transaction rather resembled a water cistern into which water is continually coming from a number of sources and at the other end is going out as required for the purposes for which water is used. You could not say, with regard to the fund with which we are dealing, that any particular part of it belonged to any particular trust because they were all mixed up together in that way.
The result was twofold. In the first place, the Public Trustee ran the risk of the value of the securities going down, because he had to pay definite sums out to his beneficiaries and if the securities diminished in value the Treasury would have ultimately to make good the loss. The other consideration is this—and this I think justified, from the moral point of view, at any rate, what the Public Trustee did—the beneficiaries got substantially more, a great deal more, in the way of interest than they could possibly have got had he strictly complied with his duties and kept the separate trust funds entirely separate and been precluded from earning the 5 per cent. interest which, as a matter of fact, he earned on the greater part of his funds. The result was that from March 15, 1918, to a later date mentioned in the Bill, he made a sum of £28,178 15s. 4d. not in interest, but by reason of the fact that in 1932, as your Lordships will see if you turn to the top of page 2 of the Bill, there was an appreciation of his investments to that extent. That sum was treated by the Public Trustee, with the consent of the Treasury, as fees earned by the Public Trustee in respect of dealings with the fund, and, therefore, it had gone into the Treasury and went there as long ago as the year 1932. After that the Public Trustee made some other investments, and those investments were not subject to any further realisation until the year 1936, and in July, 1936—that is three years ago—he received, as you will see in the second recital on page 2, by way of appreciation on these funds, a profit or gain of £117,569.
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That having been made, the matter was brought to the attention, I think, of certain people who were investigating public accounts. They raised some objection to the propriety of the arrangement because there was no way of distributing the £117,569 between this great number of trust funds, and it was thought undesirable to continue the practice. Therefore I can tell your Lordships at once that since 1936—I may protect myself from any blame or merit by saying that it was before my time—nothing of the sort has been done. The omnibus fund has been partly deposited in banks, and partly paid into the Post Office Savings Bank, with the result that there can be neither appreciation nor depreciation, and the whole of the interest, subject to deduction for fees, has been given to the various benefactions. That being so, it was thought by the Treasury and others that it was very desirable to put this matter right, and to pay into the Treasury the remaining funds which existed, as I have told your Lordships, as the result of the appreciation of certain securities during the years in question relating to a very large number of trust funds.
I should like to add that as soon as I heard of this proposal, I investigated as far as I could the question whether it was possible for any of the beneficiaries interested in those trust funds in any practical measure, by any proceeding known at any rate to me—and it would, of course, be a proceeding in Chancery with regard to which I can claim to have some knowledge—to recover any part of the funds, and after considerable thought I came to the conclusion that it was really quite impracticable to achieve such a result. Your Lordships will observe in the first place that it would be practically impossible to find out how much of the balance due in respect of any particular fund had been applied to it in the form of any investment in the securities I have mentioned; nor could you tell exactly when it went in and when it came out. In any case, a claim in respect of any particular trust would be really of a small character and could not, I think, be sufficient to result in a sum which, having regard to the enormous cost of any such proceeding, could by any possibility result in anything being paid to the beneficiaries.

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And, of course, your Lordships will remember that the claimant in question has received a rate of interest on his money which he could never have obtained had the money been treated separately. The average of the separate sums concerned would perhaps be between £500 and £600, held for not more than six weeks, and the amount claimable would be negligible, especially when you bear in mind that the Public Trustee would be entitled to claim the necessary expenses notionally attributable to the separation of that portion of the fund which any claimant had if he could show what that portion was. Then you have to remember that during the period in which a particular claimant would be interested it might be that the securities which were then invested for the omnibus fund would show losses, although, in fact, there have been substantial gains considered over the whole period with which I am dealing. As the average period was six weeks, it would be quite impossible, as I think, to make any claim at all. Having so satisfied myself, I am fortified in my views by the circumstance that when the matter was being considered by the Select Committee—and it was very carefully considered—no Petition was lodged by any private interests against the Bill, and no claim has ever been made by any beneficiary to be paid any amount in respect of the profits which have been made by reason of an appreciation of the fund. In those circumstances the position, I think, may be said to be this. There has been what I would describe as a technical breach of trust. It is technical because it is a breach of trust committed in the interests of beneficiaries, and it is a pure accident that there has been this profit. Had there been a loss Parliament would have had to provide for it. On the other hand, as I say, nobody has any real prospect of ever recovering any portion of the fund in question.
We propose by Clause (1) of the Bill that these dealings by the Public Trustee with the trust moneys aforesaid—the dealings being those stated in the Preamble—shall be deemed always to have been lawful, and by subsection (2) it is provided that the sum of £117,000 odd which I have mentioned, together with any interest accrued to the Public Trustee in
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respect of it, shall be paid into the Exchequer. By subsection (3) it is provided that the Public Trustee may continue to maintain the said general fund and to include therein such trust moneys as he thinks fit, being moneys awaiting investment or distribution and to deal with that fund and the interest received in the manner in which, stated shortly, he has dealt with it since the beginning of August, 1936, and not otherwise. I would remind your Lordships that the way in which he has dealt with it is by placing it on deposit in certain banks or in the Post Office Savings Bank so that the accidental windfall we are dealing with here never again will be the subject of a Bill to be brought before your Lordships.
The only other thing I have to mention is that since 1936 the Public Trustee has credited interest to the various beneficiaries after a deduction for expenses which is set out in a rather elaborate formula which you will find on page 2 in paragraph (a) and on page 3 in paragraph (b). The formula is one which is a little difficult to follow and in order that your Lordships may know exactly what is the substance of it I should perhaps tell your Lordships that the formula works in this way. It deals with the highest exact multiple of one quarter per cent. in one case and of one sixteenth per cent. in another. Suppose the fund was £100 and the total income accruing in respect of the assets in any one year represented interest at the rate of £3 18s. 2d. per cent. on the whole fund. One quarter per cent. below that rate is £3 13s. 2d. per cent. and the highest exact multiple of one quarter per cent. below £3 13s. 2d. per £100 is £3 10s. That is accordingly the rate at which interest was credited to the various trusts. A rate of £3 10s. per cent. was very much more than could be obtained on deposit.
Since 1936 there has been some slight alteration. Supposing again the fund is £100, if the total income accruing in respect of the assets of the fund in any one year since August, 1936—that is since the Public Trustee gave up investing in Government securities—represented interest at the rate of £2 3s. per £100, then interest at the rate of £2 2s. 6d. per cent. per annum (that being the highest exact multiple of one sixteenth per cent. below

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£2 3s.) would be credited to the several funds. The balance between the total interest sum and the amount credited to the various trusts, which is quite small, is not in fact sufficient to pay the Public Trustee for the cost of administering this portion of the omnibus fund. I have told your Lordships the facts of this rather singular case, and I hope I have made it clear, but I know the matter is somewhat complicated and if any of your Lordships want any further explanation I shall be very happy to supply it as far as I can. I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read 2a.—(The Lord Chancellor.)
3.35 p.m.
LORD STRABOLGI: My Lords, I do not rise to ask for any further explanations or further elucidation because I must most respectfully congratulate the noble and learned Lord on his very clear explanation of a rather complicated matter. I want, however, to make one or two observations about this Bill and the circumstances which have made its introduction necessary. I have a kind of family interest in the Public Trustee because my late father-in-law was one of those who in another place initiated the legislation which, after the most bitter opposition from the Party which the noble and learned Lord on the Woolsack adorns, passed into law. It was denounced as State Socialism of the worst order. It was said these unfortunate people would be put in charge of the Public Trustee, that their money would be frittered away by incompetent civil servants, and worse. The Public Trustee began in a very small way, as your Lordships are aware, but the work has now grown enormously and has been of the greatest benefit. One result of the manipulations of the small deposits in the hands of the Public Trustee is this very pleasant windfall for the Treasury of £117,000 odd, which windfall the Treasury does not deserve. What really has happened, if I may attempt to paraphrase the very technical and interesting account given by the Lord Chancellor, is that the Public Trustee has acted as a banker for these small trust accounts and in so doing has made a large profit.
I should have thought that it would have been in the public interest, for reasons which I will explain briefly in a moment, to have attempted to find some
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way of paying some bonus or dividend to these wards or beneficiaries, in order further to commend the whole organisation of the Public Trustee to the general public. I know there are practical difficulties, but I should not have thought they were insuperable. However, the Government have decided otherwise and there it is. But I want to take this opportunity of saying in your Lordships' House, which is the most public place in the world, that the work of the Public Trustee has been of very great benefit, and that it ought to be more widely known. I myself always recommend any relatives or friends of mine with trusts to establish to go to the Public Trustee. I have had a good deal of experience of the work of the Public Trustee, and I know that he is most helpful. The smaller the estate, the more careful he is. I would rather have such affairs in the hands of the Public Trustee than in the hands of the most capable firm of lawyers in the country, with every respect for the head of the legal profession who now sits on the Woolsack. I saw recently that the Law Society had attempted to compute the sums lost through fraudulent solicitors in the last four or five years. Speaking from memory, I think it came to over £500,000. If that money had been in the hands of the Public Trustee nothing would have been lost but the windfall under this Bill would have been greater.
I would like to express the hope that the Government themselves will take some step to make the work of the Public Trustee better known for the benefit of all concerned. As I say, although the office is staffed by civil servants their attitude to poor wards is most sympathetic and helpful. In fact the office of the Public Trustee is an excellent example of State Socialism. I am sorry its future operations are to be restricted to deposits in banks and the Post Office Savings Bank. Why should not the Public Trustee continue to invest in gilt-edged securities and so improve the assets of his wards as he did prior to 1936? I do not see why similar results should not be looked for in the future. My Party has not offered any opposition to the Bill, and I offer no opposition, but have taken this opportunity of making the remarks that I felt it my duty to make.
3.40 p.m.
LORD MANCROFT: My Lords, the noble Lord opposite has dealt closely with

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the clauses of the Bill, and I have no doubt that he has studied all its details carefully and fully understands it. I think he was quite justified in saying that we were much obliged to the noble and learned Lord Chancellor for explaining the clauses of this Bill. The Lord Chancellor was also quite justified in describing it as a complicated Bill. I am very glad that this Bill has been introduced. The noble and learned Lord on the Woolsack has mentioned the Public Accounts Committee. I remember quite well the points which the noble and learned Lord Chancellor set forth being brought up before us. I think I was privileged to be the Chairman—if not I was certainly a member—of the Public Accounts Committee. It puzzled us how to deal with these numerous ragged, small accounts. The problem came to our notice when the Public Trustee was before us, and I formed the opinion that sooner or later we should have to have a Bill to regularise the position. This is that Bill; I am glad it has been brought in. This has been a difficult problem to handle, because breaches of trust, however slight, are always to be avoided if possible. They should never be condoned, and if a breach of trust has been made in the smallest degree it should at once be put right if possible; and this Bill puts breaches of trust right.
Here are a large number of ragged, small accounts which have quite unexpectedly, by the skilful way in which the Public Trustee officials have handled the matter, shown a good profit. It would be impossible to divide up the benefit to the individual persons who might be claimants. As for giving a dividend to the wards, it sounds all right but it is not possible. The most that one person could get on the average would be shillings and pence. I do not suppose that the majority of the possible beneficiaries could obtain the benefit of a cab fare, if these sums were divided up, as they should be, meticulously and legally. Therefore the best way out of the whole difficulty is for the Treasury to take the money which has been so unexpectedly earned. No one at all would be hurt thereby.
But this also must be remembered: that if, when these moneys were accumulated a loss had been made by the investments or by the handlings of the Public
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Trustee, the Treasury would have had to make the loss good. It was therefore only fair—I felt this at the time, though I cannot speak for my colleagues, when the matter came before the Public Accounts Committee—that the money which had been unexpectedly earned should go back to the Treasury. I felt that that was so because if there had been a loss the Treasury would have had to pay. I am therefore very glad that this Bill has been introduced.
It is not often that I agree with the views of my noble friend, Lord Strabolgi, opposite, but I think he was perfectly right in drawing attention to the benefit of the Public Trustee. In the other House, when I had the privilege of being a member, I saw the accounts of the Public Trustee year after year before the Public Accounts Committee. For many years the office made no profit; for many years it made a loss. That is right, I think; I am speaking without looking the figures up. Then it gradually made a profit. It has been gradually put into the position that it does not cost the State anything and indeed may have earned money for the State, though not much. There is no doubt, however, that it has conferred incalculable benefits on a certain class of persons. It may well be called a protector of the poor. The more we can induce the small person in a provincial town, for example, the widow or the small tradesman, who does not understand having a trust, to go to the Public Trustee, the better. In the long run it is cheaper for them, whatever small fees they have to pay—and the fees are not very great. I have great pleasure in supporting this Bill, and I am very glad it has been introduced.
VISCOUNT BERTIE OF THAME: My Lords, I speak without any documentary evidence, but I think the Post Office only accepts deposits which are less than £500; and I should like to know why the Public Trustee should be treated as a privileged depositor.
3.45 p.m.
THE LORD CHANCELLOR: My Lord, in regard to that question, I do not know the answer. I do not think there is a privilege but I think there are special circumstances in which the Post Office are willing to accept quite large sums on deposit, as for example from a Department, or an institution such as

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the Public Trustee. I do not, however, speak with real knowledge and I will find out for the benefit of the noble Lord before the matter comes before the House again. In regard to what my noble friend Lord Strabolgi said, I gladly agree with him in his encomiums on the Public Trustee and the way in which his office has been administered. If it is to be said that the Public Trustee Act was a measure of State Socialism, I would observe that if State Socialism never does anything more obnoxious to the public feeling than the Act of 1906 did, we shall all sleep quite happily in our beds in the future. In other words, I think that is a measure, however you describe it, which was greatly for the benefit of a large class of the community. But I would say that I cannot think that Lord Strabolgi's recollection of the way in which the Bill was passed into law can be quite accurate. My information is that the two persons who were really responsible for this Bill being passed, Lord Halsbury in this House, who occupied, as your Lordships know, the position of Lord Chancellor for so many years, and Sir Edward Carson in the House of Commons—
LORD MANCROFT: Was it not Colonel Howard Vincent?
THE LORD CHANCELLOR: That is the information I have received from a source which I know to be accurate. I have only to add that I also welcome the observations of Lord Mancroft. I was not aware at the moment that he was a member of the Public Accounts Committee which dealt with this matter when it came before that Committee, and this curious windfall was discovered to have caused some difficulty and the opinion was expressed that these ragged accounts, if they may be so described, should be cleared up. I am glad to find that he agrees with the view, which is that of the Government, that this Bill represents the proper way of dealing with a rather curious problem.
On Question, Bill read 2a, and committed.

HALL-MARKING OF FOREIGN PLATE BILL.
House in Committee (according to Order): Bill reported without amendment.
MARRIAGE BILL.
Read 3a (according to Order) with the Amendments, and passed, and returned to the Commons.
WHEAT (AMENDMENT) BILL.
Read 3a (according to Order) with the Amendments, and passed, and returned to the Commons.

CIVIL DEFENCE BILL.
Order of the Day for the Third Reading read.
3.51 p.m.
THE UNDER-SECRETARY OF STATE FOR WAR (THE EARL OF MUNSTER): My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a.—(The Earl of Munster.)
LORD STRABOLGI: My Lords, I have one or two questions to put to the Government on this Bill, and I understand that I am in order in doing so before the Government Amendments are moved. If that is so, I would like very briefly to put to the noble Earl, Lord Munster, the questions of which I have given him some short notice. I am glad to see that one suggestion which we have been pressing has been carried out by the Government—namely, this morning there reached me in the ordinary post Public Information Leaflet No. 1, on Civil Defence, which describes some of the contents of this Bill and tells the ordinary citizen what he should do if war comes. We have been asking for simple leaflets to be issued, and we thank the Government for that, but I am sorry that they have not carried out my suggestion that the leaflets should be illustrated. I even went so far as to suggest that a portrait of the noble Earl should appear, to give confidence to the lieges.
There are one or two things in the leaflet which are disturbing. To begin with, fire precautions. It describes the devasting effect of incendiary bombs and explains that water is the best way to put out fire started by incendiary bombs, but it goes on to state that water thrown on a bomb causes an explosion, and the burning thermite, I think it is called, is thrown in all directions. The last direction says you may be able to smother

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with sand or dry earth where dealing with the danger of thermite bombs, which develop a burning temperature of 3,000 degrees Fahrenheit, I believe, and are hard to put out, and which it is stated may be dropped in very large quantities. May I ask the Government, through the noble Earl, whether they are doing anything to produce a small, cheap, portable, chemical extinguisher for these bombs? It cannot be beyond the resources of this country to produce a chemical fire extinguisher. I suggest that there should be storage of these in large quantities, and that they might be distributed when an emergency comes. Perhaps they might even encourage the householder to buy them as well. I have taken some technical advice, and I am told that you can develop chemical fire extinguishers to deal with this type of bomb. That is the first suggestion which I venture to put to the noble Earl.
The second suggestion deals with evacuation. Quoting the part of Section 5, which bears on what I venture to say to your Lordships, it describes the arrangements for evacuating children, expectant mothers, blind persons and others, from London and other great cities. Then it goes on to say:
"Those who have already made, or are making arrangements to send their children away to relations or friends must remember that while the Government evacuation scheme is in progress, ordinary railway and road services will necessarily be drastically reduced and subject to alterations at short notice."
This is a very serious matter. The London County Council Schools in London are organised for evacuation, and I understand for the most part by way of special railway trains; but there are in London a great many private schools, and although they can apply, I understand, to the London County Council for inclusion, there are many cases, where hundreds of children are concerned, where no arrangements for evacuation have been made. In certain cases, parents have been told this, and have said: "In that case we will take care of our own children and get them away in our own motor cars." Now we are told that the roads will not be available, and if that is so there are thousands of young children who will not be able to be evacuated unless this matter is dealt with.
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I have therefore a suggestion to make to the Government, and it is this. You should encourage private people to evacuate children, invalids and elderly people by private means, if they can do it. That should be, I think, the Government policy. Now, when you have some great occasion such as a royal procession or the trooping of the colour, people who are entitled to attend are given special labels to put on their motor cars, for the information of the police. I would suggest that special labels should be prepared for people engaged in privately evacuating children, invalids and elderly people, so that they may be able to pass along the roads. It is only a matter of preparation and organisation, and there will be tremendous dissatisfaction with the Government if these thousands of children and invalids, who could be taken out of danger by private means, cannot be moved because of the lack of a little preliminary organisation of this sort. I do not want to paint too gloomy a picture, but I must take the occasion to warn Lord Munster and his colleagues, that if there are found to be grave deficiencies of this kind when trouble comes, the populace may deal with them very drastically indeed. They will be held responsible, and I would not give very much for their future political careers if they fail in these grave matters. I mention those two particular matters, which I think deserve particular attention—namely, the better means of extinguishing incendiary bombs and better organisation, apart from the excellent plans of the London County Council, for evacuation.
3.59 p.m.
LORD PHILLIMORE: My Lords, it might be convenient if I rose at this moment to ask the noble Earl whether he has any further information to give us as to the point which was raised by me on the Committee stage of this Bill. During that stage, the noble Earl in charge of the Bill said:
"Certainly I am prepared to ask my right honourable friend to consider the question of compensation again…."
Furthermore, since the Committee stage was taken I find that a question was asked in another place, and that the Minister for Health replied:
"Consideration is being given to this matter in connection with the wider question of compensation for war damage, and I

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would refer my honourable friend to the statement made by the Chancellor of the Exchequer on June 20."
I need not go into all the arguments I raised in Committee, but this point is clearly one of great importance, though it may be confined in the main to those people who live in the reception areas, and it is highly desirable that they should have cause to feel that justice would be done to them in so far as damage resulted from the exercise of their hospitality towards the evacuees. If not, I cannot help feeling that a considerable amount of bad blood would be created, and the scheme would to that extent suffer. I should be glad to know whether the noble Earl can now give us any further information, and also whether he has consulted with his legal advisers as to the effect of the ordinary policy terms on this question.
4.1 p.m.
THE EARL OF MUNSTER: My Lords, I rise to reply to the questions which have been addressed to me by the noble Lord opposite and my noble friend Lord Phillimore, and I refrain from delivering at the same time a further speech, which perhaps is customary in another place on the Third Reading of a Bill. As regards the question of fire extinguishers, if my recollection serves me correctly, I recall that a similar question was raised, I think by the noble Lord, during the Second Reading debate on the Air-Raid Precautions Bill two years ago. I understand that the situation has not really altered a great deal since that time. There are private firms who are undertaking scientific research into the question whether some suitable fire extinguisher can be found for putting out a fire which might be caused by an incendiary bomb. There is, of course, a disadvantage, which I think will come to the minds of many noble Lords. The modern fire extinguisher which it is customary to find in private houses and in Government and local authority buildings is one which requires continual examination and periodical inspections to see that it has not deteriorated and that the force of the liquid inside is up to the standard required for putting out a fire. I am informed that if these fire extinguishers were stored in large numbers by the local authorities, or by the Government Departments, there would be very considerable
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expense continually recurring in seeing that the extinguishers were in a condition for immediate use.
I understand that this question has been examined with great care and I am advised that the best means of putting out a fire caused by an incendiary bomb is undoubtedly water. But the whole question is discussed in Air-Raid Precautions Handbook No. 9 dealing with incendiary bombs and fire precautions. It explains on page 17 the disadvantages of chemical extinguishers in meeting the situation caused by an incendiary bomb, and it states:
"Many chemical extinguishers are excellent for the purpose for which they have been designed, but would have certain disadvantages in meeting the situation caused by an incendiary bomb.
The average soda acid extinguisher is of the 2-gallon type, and this would in many cases be insufficient to deal both with the bomb and the resultant fire. In thick smoke it would be necessary to keep close to the ground (see Chapter IV), which would make an extinguisher difficult to handle. Moreover, it would be dangerous to use some of the extinguishers designed for special purposes. For example, carbon tetrachloride, which is used in some, might generate phosgene in contact with the burning magnesium."
That, I think, will give the public some indication that these extinguishers are not really up to standard for use with any degree of success to put out a fire which might be caused by an incendiary bomb. Nevertheless, as I have said, we are still making inquiries into this matter, and I understand that private firms are also taking the question up, but up to the present time no suitable fire extinguisher has been found for the purposes which the noble Lord mentioned.
VISCOUNT ELIBANK: May I ask my noble friend whether he is aware of a printed paper which has been issued under the aegis of the Privy Council? I have received a copy this morning, and in that paper it is stated that the worst thing to do to put out an incendiary bomb is to use water, and that you ought to use either earth or sand in order to extinguish it.
THE EARL OF MUNSTER: I thought I made it clear that these fire extinguishers are not the best means of putting out fires caused by incendiary bombs, and in fact water is the best method.
VISCOUNT ELIBANK: This paper says that water is not the best method, but the worst method, and that you ought to use sand or earth.
LORD TEYNHAM: I have this document by me and perhaps it might clear up the matter if I say that it states that if one uses a special hand pump with a nozzle, so that it produces a spray, it is then quite serviceable and quite good for putting out a fire.
THE EARL OF MUNSTER: That is perfectly true. I was really talking about fires which resulted from the explosion of an incendiary bomb after it had set fire to a building. I thought it was common knowledge that one of the best methods of extinguishing a fire caused by an incendiary bomb was as soon as possible to throw sand or earth on the place where the bomb has exploded. That does put out incendiary bombs, and it has been proved, I think, again and again in answer to Questions asked in another place and also in this House. But when a fire caused by this intense heat has started, water is undoubtedly the best means of extinguishing it.
I pass from that to the question raised by the noble Lord opposite, dealing with the evacuation of children in private schools, and the suggestion that he made that some ticket should be pasted on to the windscreen or the lamp of a motor car is one which, of course, I will take up with the appropriate Department. My noble friend Lord Phillimore also raised the question of evacuation, and here I would appeal to him and to other noble Lords, who at an earlier stage of the discussions on this Bill have raised the whole question of evacuation of the civil population from vulnerable areas to reception areas. I know perfectly well that this scheme of evacuation is causing, perhaps wrongly, serious concern in the minds of noble Lords, and I suggest that the best method of dealing with this very large question would be for some noble Lord to put down a Question for full discussion at some date before the Adjournment. I am not in a position to-day to give the noble Lord any further reply to the question which he asked concerning compensation for damage. He quoted a reply which was given by my
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right honourable friend the Minister of Health on June 29 last, and I am not in a position to give him any further answer on that point.
As regards the question of policy holders, and whether their policies cover them in the event of a fire on their premises at a time when they are being used by people who have been evacuated from the vulnerable areas, I am not in a position to give the noble Lord information from the fire insurance companies, but on inquiring from my own agents as to whether my own fire policy covered that very point, I was informed that it undoubtedly did, and that the undertakers were prepared to cover it. I would, lastly, mention once again the question of evacuation. It has, as noble Lords know, been actively considered again and again by His Majesty's Government. I have the clearest recollection that last September the evacuation scheme which was undertaken by the London County Council worked with great success, and I have no reason to suppose that any future scheme which would be involved would not work equally satisfactorily. But I would suggest, for the convenience of noble Lords as a whole, that it might be useful if some noble Lord put down a Question so that the House could have a full statement from His Majesty's Government on this matter.
VISCOUNT MERSEY: My Lords, it does not seem to be quite clear, from the Instruction which my noble friend has just read, whether the words "road services will be reduced" imply only, as I understand, that the ordinary services, such as the Green Line 'buses, will be diminished, or whether the actual user of the roads will be in any way curtailed—that is to say, that certain roads will be closed or only certain classes of cars allowed to use them. It would be a good thing if that were made clear, although to my mind it is clear from the Instruction.
THE EARL OF MUNSTER: My Lords, I am not in a position to add anything further to this Instruction, but if it is so clear to the noble Viscount's mind it must be equally clear to every other noble Lord in the House.
On Question, Bill read 3a, with the Amendments.
Clause 8 [Powers of local authorities to construct underground car-parks suitable for use as air-raid shelters]:
4.12 p.m.
THE EARL OF MUNSTER THE EARL OF MUNSTER moved to insert at the end of subsection (1):
"Provided that in exercising their powers under this section the local authority shall, so far as is reasonably consistent with the interests of civil defence, have regard to the amenities of any protected square or land held inalienably by the National Trust."
The noble Earl said: My Lords, the Amendment which I now move is designed to meet the Amendment which was moved on the Report stage by my noble friend Lord Radnor, who was supported by the noble Marquess, Lord Salisbury. I still maintain that the Bill gave adequate safeguards, but it appears to be the wish of noble Lords that we should include this proviso which I now formally beg to move.
Amendment moved—
Page 9, line 21, at end insert the said proviso.—(The Earl of Munster.)
THE MARQUESS OF SALISBURY: My Lords, I rise only to express, on behalf of my noble friend Lord Radnor and other noble Lords, our very great feeling of obligation to the noble Earl for his concession in this respect. I am sure it is a matter of great importance, and I feel very much gratified that my noble friend has taken the view that the wishes of your Lordships ought to be fulfilled.
THE EARL OF CRAWFORD: My Lords, I am very glad that this Amendment should be made. I do, however, regret that it has been drafted to meet two illustrations which were given by noble Lords during the debate. One was Charterhouse Square, and the other was another square in London. This is now only applying to protected squares or land held inalienably by the National Trust, which is already in the Bill. I greatly regret that the protection of amenity is only to be limited to a few open spaces in London.
THE MARQUESS OF SALISBURY: The Amendment, as I understand it, does not apply only to London—it applies generally throughout the country.
THE EARL OF CRAWFORD: My Lords, I can only speak again with the permission of the House, but the noble Marquess
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below the Gangway told us that Lady Salisbury sent him to Smithfield to get a leg of mutton, and he noticed how beautiful Charterhouse Square was and came back and drew your Lordships' attention to it. Charterhouse Square, under the Bill, is protected, and so are other squares in London, but no attention is paid to the amenities of Britain except to this limited extent. I regret it, that is all.
THE MARQUESS OF ABERDEEN AND TEMAIR: My Lords, I do not see why we should not protect squares in other places—for example, in Edinburgh, where there are some beautiful squares that deserve to be protected. They are just as much entitled to be protected as are the squares in London. The noble Earl, Lord Crawford, has raised a very important point, and as this Bill, having been amended, will have to go back to another place, I should like to ask the noble Earl, Lord Munster, whether he will undertake that this point will be considered before the Bill comes back to us.
LORD TEYNHAM: My Lords, I would like to suggest that if Clauses 7 and 8 are loaded with too many safeguards it may be impossible to construct these air-raid shelters and car parks, which are undoubtedly very much needed for the defence of the civilian population. I am perfectly prepared to accept this Amendment as it stands on the Paper.
THE EARL OF MUNSTER: My Lords, by leave of the House, I should like to say that if this Amendment does not meet the wishes of the noble Lords, I am perfectly prepared to withdraw it. But I understand it meets the points that Lord Radnor raised. He has written to me informing me that it covers the points he was anxious about, and we have just heard from my noble friend Lord Salisbury that it covers the points he had in mind also.
THE LORD CHANCELLOR: My Lords, I do not quite understand why it is suggested that Scotland is not included. I may be wrong, but I rather think Scotland comes within this clause. I am sure my noble friend in charge of the Bill agrees with me that a beautiful square in Edinburgh is just as worthy of protection as one in London.
On Question, Amendment agreed to.
Clause 58 [Special provision as to supply of water for extinguishing fires]:
4.21 p.m.
THE EARL OF MUNSTER: My Lords, there is a drafting Amendment to this clause.
Amendment moved—
Page 59, line 39, leave out ("air-raids") and insert ("hostile attacks").—(The Earl of Munster.)
On Question, Amendment agreed to.
Clause 66:
Extension of borrowing powers of trustees, &c.
66.—(1) The provision of air-raid shelter shall be deemed to be an improvement authorised by the Settled Land Act, 1925, and mentioned in Part II of the Third Schedule to that Act.
(2) Any liquidator, trustee in bankruptcy or receiver shall, in addition to any other powers in that behalf, have the like powers in relation to the provision of air-raid shelter as are conferred on trustees by subsection (1) of this section.
THE EARL OF MUNSTER THE EARL OF MUNSTER moved to leave out subsection (2) and insert the following new subsections:
"(2) Any liquidator, trustee in bankruptcy, receiver, committee or other person acting in a fiduciary capacity who is, as such, the occupier of any factory premises, the owner of any mine or the owner of any commercial building or of any building or block of buildings to which Section thirty of this Act applies shall, for the purpose of providing air-raid shelter or complying with any obligation imposed on him by or under any of the provisions of this Act, have power (in addition to any other powers enabling him in that behalf)—

(a) to utilize any moneys in his hands in his capacity as liquidator, trustee, receiver, committee or otherwise as aforesaid;

(b) to raise money by the sale or mortgage of any property vested in him or under his control in that capacity,

and any money reasonably expended by him for the said purpose shall be treated as part of his expenses incurred in that capacity and shall be allowed in account accordingly.
(3) Where the owner of any commercial building or any such building or block of buildings as aforesaid is a mortgagee, he shall be entitled to add to his security any money reasonably expended by him for the purpose of providing air-raid shelter in connection with the building or block or of complying with any obligation imposed on him by or under this Act as owner of the building or block."
The noble Earl said: My Lords, you will recall that during the Report stage I moved a new clause which now is Clause 66, and at the same time I informed the House that I should be adding to subsection (2) something which would not in
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any way alter the meaning of the original five lines which appear in the Bill at the present time. The House will recall that I gave an explanation of this clause on the Report stage, and therefore it is not necessary for me to weary your Lordships with a long explanation of these new subsections. I beg to move.
Amendment moved—
Page 64, line 30, leave out subsection (2) and insert the said new subsections.—(The Earl of Munster.)
On Question, Amendment agreed to.
Clause 81 [Exemption of certain works from building by-laws, etc.]:
THE EARL OF MUNSTER: My Lords, the next Amendment in my name is drafting. I beg to move.
Amendment moved—
Page 73, line 41, after ("by") insert ("or under").—(The Earl of Munster.)
On Question, Amendment agreed to.
Clause 90:
Other provisions as to interpretation.
90.—(1) In this Act, except where the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to say:—
"Owner," in relation to factory premises or a commercial building, means—
Provided that, where any estate or interest in any factory premises or commercial building is the subject of a mortgage and the mortgagee is in possession, that estate or interest shall be deemed for the purposes of this definition to be vested in the mortgagee.
THE EARL OF MUNSTER THE EARL OF MUNSTER moved to leave out the proviso at the end of the definition of "owner" and insert:
"Provided that, where the estate or interest of any person who, under the preceding provisions of this definition would be the owner of any commercial building, is the subject of a mortgage, and either the mortgagee is in possession or the rents and profits are being received by a receiver appointed by or on the application of the mortgagee, that estate or interest shall be deemed for the puposes of this definition to be vested in the mortgagee."
The noble Earl said: My Lords, I think this Amendment is one which makes the words more simple than they read as they now appear in the Bill.
Amendment moved—
Page 82, leave out lines 18 to 22, and insert the said new proviso.—(The Earl of Munster.)
On Question, Amendment agreed to.
Clause 91 [Application to Scotland]:
THE EARL OF MUNSTER THE EARL OF MUNSTER moved, after subsection (23), to insert the following new subsection:
"(24) In Section sixty-six for subsection (3) there shall be substituted the following subsection:—
(3) Where a heritable creditor in possession is for the purposes of this Act the owner of any commercial building or any such building or block of buildings as aforesaid, it shall be competent for the local authority to make, on his application, a charging order in his favour charging and burdening the building or block of buildings with an annuity to repay to him any money reasonably expended by him for the purpose of providing air-raid shelter in connection with the building or block or complying with any obligation imposed on him by or under this Act as owner of the building or block in like manner as they may make a charging order in favour of an owner under Section twenty-one of the Housing (Scotland) Act, 1925, and the provisions of Sections twenty-one and twenty-two of that Act shall apply accordingly subject to the following and any other necessary modifications:—
An annuity constituted a charge by a charging order made under this subsection shall rank pari passu with the heritable security in virtue of which the heritable creditor is in possession of the building or block."
The noble Earl said: My Lords, this subsection is inserted to provide the application to Scotland of subsection (3) of Clause 66 which your Lordships decided to amend during the previous stage of our discussions. I beg to move.
Amendment moved—
Page 93, line 42, at end insert the said new subsection.—(The Earl of Munster.)
On Question, Amendment agreed to.
4.23 p.m.
THE EARL OF MUNSTER: My Lords, I beg to move that this Bill do pass.
Moved, That the Bill do pass.—(The Earl of Munster.)
LORD STRABOLGI: My Lords, I apologise for addressing you again on this matter, but it is an important subject. I want to return to the charge about the meaning of the Government's language in the leaflet with regard to road services. The noble Viscount, Lord Mersey, reads the passage which is meant for millions of the inhabitants of these islands in one way, and I read it in a different way. There may be considerable stoppages on the roads by Government authority. What we want to know is what is going to happen about these roads. I think
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it is important that people should know, because trouble may come suddenly, and it is in the interests of the defence of London and other large cities that children and invalids should be evacuated from them. How are these people to be moved if the roads are to be closed? I think the public have a right to know. I should be obliged if the noble Earl would give some explanation, or, if he is not in a position to do so now, perhaps he would take an opportunity of doing so. If necessary I could put down a question at some future time, and he could reply. I think we ought to have a little more information on this quite important matter.
THE EARL OF MUNSTER: My Lords, I fear I am not in a position to reply to the question which the noble Lord has raised. The matter is one which I should imagine concerns the Ministry of Transport. Nevertheless the whole subject is one which comes under the general term evacuation, and I did suggest in the course of replying to the remarks that were made on Third Reading of this Bill that the whole matter of evacuation should come up for discussion in your Lordships' House upon a Motion raised by some noble Lord. Perhaps the noble Lord opposite would himself see his way to put down a question so that the whole matter can be discussed. The question of motor transport on the roads in time of evacuation is one to which the Government naturally have given serious consideration, and I think it would serve the purpose of your Lordships if the whole matter was discussed at some early date.
On Question, Bill passed, and returned to the Commons.

MINISTRY OF SUPPLY BILL.
Amendments reported (according to Order).
Clause 2:
General powers of Minister.
2.—(1) Subject to the provisions of this subsection, the Minister shall have power—
Provided that the powers of the Minister under this subsection shall not be exercised in relation to the supply to any other Government Department of any articles required by that Department for the purpose of the discharge of its functions, unless the powers of that Department in relation to the supply of

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those articles are for the time being transferred to or made exercisable by the Minister under the next following section of this Act.
4.26 p.m.
THE MINISTER FOR THE CO-ORDINATION OF DEFENCE (LORD CHATFIELD)THE MINISTER FOR THE CO-ORDINATION OF DEFENCE (LORD CHATFIELD) moved to add to subsection (1):
"and, without prejudice to any powers transferred or made exercisable as aforesaid, the powers of the Minister under this subsection of manufacturing or otherwise producing articles shall not be exercised after the expiration of a period of three years beginning with the date of the passing of this Act, except in respect of such classes of articles as His Majesty may specify by Order in Council made not earlier than the commencement of the last six months of that period."
The noble Lord said: My Lords, this Amendment standing in my name is in fact very similar to the Amendment moved by the noble Lord, Lord Gain-ford, whom we all regret is not present here to-day to hear what further action is being taken upon the matter that he raised. Lord Gainford's Amendment has also been put down again by him for this stage of the Bill, and is supported by the noble Viscount, Lord Samuel. The Amendment that I am now moving provides that the Minister's power of "manufacturing or otherwise producing" shall lapse after three years, with two exceptions. These exceptions are as follows. In the first place, at the end of the three years from the date of the passing of this Bill, powers of manufacturing, etc. possessed by other Government Departments will have then been transferred to the Minister under Clause 3—that is to say, powers such as the War Office have to manufacture guns at Woolwich Arsenal. These powers will not lapse at the end of the three years, but will be unlimited in duration. That is the effect of the words at the beginning of the Amendment "without prejudice to any powers transferred." Since the powers already exist, there is no reason why they should lapse, and indeed the noble Lord's own Amendment expressly saves them from lapsing.
Secondly, at any time after the middle of the third year, an Order in Council may be made continuing the Minister's power of manufacturing any articles specified in the Order, but under Clause 6 this Order is subject to Parliamentary approval. Either House can refuse to
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affirm it, but, if it is approved by both Houses, the Minister will have powers of manufacturing the limited classes of articles specified in the Order. The Amendment expressly provides that the Order shall not be made until towards the end of the three years, in order to ensure that Parliament will have another opportunity of reviewing the matter in the light of the situation at that time. I have endeavoured in consultation with my right honourable friend the Minister of Supply Designate to meet the feeling of your Lordships on this matter as expressed on the Committee stage. In view of this explanation I trust that the Amendment may be regarded as substantially meeting the points raised in Committee on Lord Gainford's Amendment, and will be accepted by your Lordships. I beg to move.
Amendment moved—
Page 3, line 4, at end insert the said words.—(Lord Chatfield.)
VISCOUNT SAMUEL: My Lords, you will be aware that Lord Gainford's absence to-day is due to the fact that he was seized with a sudden indisposition on Tuesday in the precincts of this House, but your Lordships will be glad to learn that it is not a serious matter, and that he is now well on the way to recovery.
NOBLE LORDS: Hear, hear.
VISCOUNT SAMUEL: He has requested me to speak on his behalf on this occasion. The Amendment moved by the noble Lord does meet the points which were raised on Lord Gainford's Amendment whilst at the same time avoiding certain possible objections to the Amendment in the form in which it originally stood that were pointed out by the representative of the Government on that occasion. I understand that the Federation of British Industries, at whose instance this matter was originally raised, are advised that the Amendment, as now proposed, sufficiently meets the point which they had in view. In those circumstances, unless any noble Lord who previously took an interest in the matter thinks otherwise, I should propose not to move the Amendment which stands in my name as well as that of my noble friend Lord Gainford.
LORD STRABOLGI: My Lords, on behalf of my noble friends I wish to express the gratification we feel at hearing the good news about the health of the noble

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Lord, Lord Gainford. We are bound to resist this Amendment, for the reasons given by my noble friend Lord Snell on the previous stage of the Bill. We think it is highly desirable, if the Government should be successful in manufacturing, that that should be continued, because it will prevent profiteering by private individuals. We tremble to think of Orders in Council, at the mercy of your Lordships' House, to prevent this desirable practice. I do not know the views of the noble and gallant Lord, Lord Chatfield, on this subject, except, of course, that as a member of the Government he is bound to support this Amendment. What would he say if it was proposed to stop the construction of warships in the Royal dockyards which have been of immense benefit to the State? I think he would resist it at once. We may find, as a result of future experiments, that we shall be able to manufacture articles advantageously in Government factories, but that at the end of three years that will have to be dropped. My Party are bound to resist the Amendment, and we shall do our utmost in another place to defeat it.
THE EARL OF CRAWFORD: My Lords, it is very optimistic to think that the Government can manufacture more cheaply than private people.
LORD STRABOLGI: They do in the Royal dockyards.
THE EARL OF CRAWFORD: That certainly does not apply in other interests like railways, in regard to which the Government have from time to time exercised their ingenuity at the serious expense of the taxpayer. The first two lines of the Amendment as explained by the noble and gallant Lord on the Front Bench meet the very point which the noble Lord opposite has just raised. I would like to ask—perhaps the noble and learned Lord the Lord Chancellor can tell me—why the words "as aforesaid" are put in. It seems to me they refer to the present clause, and not to an Act of Parliament 100 years old or a custom 500 years old which authorises the Army to make its own munitions. After the first two lines the subsection is limited for three years subject to certain conditions.
The powers limited are those of "manufacturing or otherwise producing articles," but the subsection deals with
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other processes than manufacturing or otherwise producing. The subsection authorises the Government to store, to transport, to exchange, sell or dispose of articles, to buy articles with a view to exchange for other articles, and
"to do all such things (including the erection of buildings and the execution of works) as appear to the Minister necessary…"
The time limit is only in phrase limited to manufacturing or otherwise producing articles. Are the other powers conferred to be continued, and not to be subject to the three years limitation? I should have thought that the whole of the subsection should be limited to three years, with the safeguard which is referred to in the last words of the Amendment that by Order in Council the powers of the subsection might be prolonged six months at a time. Otherwise it seems to me there is a very serious ambiguity. I quite understand that after you have stopped manufacturing goods you must continue to store and transport goods for the purpose of liquidation, but why should not liquidation take place within the ensuing six months, or if it is not completed then within other periods which His Majesty by Order in Council may determine? There is an ambiguity which I would very much like to be cleared up, especially in so far as paragraph (c) is concerned—namely, the erection of buildings which ex hypothesi must be a new act and not the continuance of an old act.
THE LORD CHANCELLOR: My Lords, the words "without prejudice to any powers transferred or made exercisable as aforesaid" mean that the only thing to be limited as a result of the introduction of the Amendment are the powers to manufacture or otherwise produce articles. Accordingly there will be still power for the Minister on whom powers are conferred to buy or otherwise acquire articles and
"to do such things (including the erection of buildings and the execution of works) as appear to the Minister necessary or expedient"—
THE EARL OF CRAWFORD: "For the"—
THE LORD CHANCELLOR: "for the exercise of the foregoing powers." That is, powers of manufacturing or otherwise producing shall not be exercised beyond the period of three years except by

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Order in Council. It is quite clear. I do not understand that criticism on the last occasion went beyond the powers of manufacturing or otherwise producing articles. Those are the matters dealt with by the Amendment which the noble and gallant Lord in charge of the Bill has moved.
VISCOUNT MERSEY: May I ask, would the Minister have power to sell otherwise than for disposing of the surplus at the end of the period?
THE LORD CHANCELLOR: He would not sell unless he knew he did not want them. In other words the Amendment does not affect the right to sell articles but only the right to manufacture or produce the articles.
On Question, Amendment agreed to.
4.39 p.m.
Then, Standing Order No. XXXIX having been dispensed with:
LORD CHATFIELD: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a.—(Lord Chatfield.)
LORD STRABOLGI: My Lords, I want to say a few words only with reference to what fell from the noble Earl, Lord Crawford. He will remember very well, as a former First Commissioner of Works, that just after the War the Office of Works built excellent houses, cheaply and well, when there was a tremendous shortage of houses. There was the usual cry of Socialism and this admirable service was dropped. Lord Melchett, who was one of the greatest individualists that our generation of politicians has produced—the first Lord Melchett himself—as a fierce anti-Socialist always said what an admirable Department it was and what a great pity it was that it had to be dropped. That is what I am afraid of, and that is why we object to this Amendment.
4.40 p.m.
LORD CHATFIELD: My Lords, on the occasion of the Second Reading your Lordships' House was very pressed for time, and a great many questions were asked by noble Lords who contributed to the debate which I did not have an opportunity at the time to answer. Also on the Committee stage several points were raised into which I promised to inquire
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further and to give a reply at a later stage. I should like to detain your Lordships rather unusually long on the Third Reading by answering certain of those points, and at the same time dealing with certain other matters of importance which have been raised.
In the first place I owe an explanation to the noble Viscount, Lord Bertie, in that when the noble Viscount at the Committee stage moved an Amendment, I said that the Law Officers had been consulted about the Amendment which he had proposed. That was an Amendment to Clause 4 (2) to insert the words "or wilfully fail to disclose any material fact." I was in fact mistaken in thinking that the Law Officers had been consulted, and in the circumstances I of course took steps to consult them subsequently to ascertain their opinion. I think I should give the House their opinion, which is as follows:
"'Untrue representations' covers a case where the falsity arises from a wilful concealment coupled with the circumstances and any statements in fact made. The form of words proposed by the noble Viscount in Committee might cover a wider range, but the case of wilful non-disclosure is covered to the extent set out above, and this is the extent to which we think it right to go in the clause."
In order to make the position clear, the foregoing statement expands what I said, but the Law Officers agree that my earlier statement in reply to the noble Viscount was accurate.
The noble Lord, Lord Addison, in his speech on the Second Reading, also raised the question that he thought that the functions of the Minister of Supply should be extended to cover a very wide volume of materials, such as ferrous and non-ferrous metals, and other supplies which are required by all producing Departments and by all the major industries. He added that common user should be extended to such things as scientific instruments. Power is being taken by Clause 2 of the Bill to accumulate stocks of material as necessary both for the purpose of manufacturing supplies for the Services and for the maintenance of civil industry in emergency. There is no doubt that immediate consideration will be given to the question of accumulating supplies, both of ferrous and non-ferrous metals and of other materials that may be needed. Already there have been purchases of reserves on a substantial scale, and control in these matters will be at

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once concentrated in the Ministry of Supply. As regards common user articles, it is the intention immediately on the formation of the Ministry to survey the whole field of common user articles in detail, and full consideration will be given to the question of transferring to the Ministry the supply duties concerning other common user articles.
The noble Lord, Lord Mancroft, in Committee asked from what body or bodies arbitrators are to be chosen. I informed my noble friend that I would confirm at a later stage the correctness of the reply which I then gave him as to the composition of the panel. It is the intention that the panel of arbitrators, as I then said, should be drawn from a very wide field, and that it should include representatives of industry and other persons who would be appropriate. The suggestion that was originally made by some members of the other House was that the panel should be drawn from nominees of the President of the Law Society, the President of the Institute of Civil Engineers and the President of the Institute of Chartered Accountants, and it was because that field was not considered sufficiently wide that an undertaking was given that the Minister would select arbitrators from the widest possible field, including lawyers, civil engineers, surveyors, accountants, representatives of other professional bodies, and, above all, representatives of industry. That, I think the noble Lord will remember, bears out what I said more briefly on the previous occasion.
LORD MANCROFT: I am much obliged to the noble and gallant Lord.
LORD CHATFIELD: The noble Lord, Lord Strabolgi, asked why both the Chairman and the Deputy Chairman are to be lawyers. I think he thought that if he or I were Minister of Supply we should probably designate admirals rather than lawyers for that duty! I might explain that this question arose really, as I think I said at the time, from an idea in another place that the Chairman might be nominated or selected by the panel, and this suggestion was discussed to some considerable extent. Considerable pressure was applied from some quarters for the Chairman to be nominated by the Minister, and pressure was applied by the representatives of the industry for an independent choice.
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A compromise was made on the appointment by the Minister of a Chairman and Deputy Chairman who should be competent to form a completely unbiased judgment as to the suitability of arbitrators selected from the panel. It was felt that this object would be best achieved by the Minister appointing as Chairman and Deputy Chairman,
"persons of legal and impartial experience, able to prevent the miscarriage of justice by seeing that the right member is selected to do the right thing."
I am there quoting from the OFFICIAL REPORT of another place. The noble Lord, Lord Askwith, asked that the members of the panel should not be appointed for more than a certain number of years, and I promised sympathetically to consider with my right honourable friend the Minister of Supply Designate whether that could be arranged. It has been arranged, and my right honourable friend and I are prepared to agree that members of the panel should be appointed for a limited period, for a certain number of years; and steps will be taken administratively to effect this.
There is one other point of some importance about which I feel I ought to detain your Lordships for a short time. That is the important problem of finance; the compensation and the grants, and how they are going to be applied. It was originally in Clause 12 of the Bill, which is now of course Clause 13. The noble Lord, Lord Barnby, drew attention to what he considered an ambiguity regarding the recovery of expenditure over and above the amount of the 27½ per cent.; that is to say, as regards the contribution of the Contracts Departments towards the remaining 72½ per cent. In the first place the noble Lord mentioned the percentage, believed to be 50 per cent. of recovery, and that rather confused me, because I did not know that there was anything about 50 per cent. in the Bill at all, and I asked if I might answer him at a later stage. Actually, of course, there is no mention of 50 per cent.; he was quoting a figure mentioned in reference to another Bill. The Explanatory Memorandum to this Bill actually makes no remark at all about this matter.
As regards the contributions which are to be made towards the balance of expenditure incurred in order to ensure the due functioning of the essential plant under this Bill, I might perhaps put two

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points. First, there is the grant to be paid under the Bill equivalent to the standard rate of Income Tax on reasonable capital expenditure incurred by the contractor in complying with the Minister's requirements. This is an amount equal to the standard rate of Income Tax, and amounts to 27½ per cent of the capital expenditure incurred. It should be noted that no grant is paid on non-capital expenditure because non-capital expenditure is permissible as a deduction for Income Tax purposes and for Armaments Profits Duty, and, therefore, receives consideration under normal Income Tax law, and will receive consideration under the law relating to Armaments Profits Duty.
Secondly, as regards the balance of 72½ per cent. it has been decided that, for a period of two years, Contracts Departments in making contracts may include in prices additional contributions towards all the expenditure incurred by contractors in complying with the Minister's directions. In so far as the grants are grants towards capital expenditure they will be taken in diminution of capital expenditure, and will not be brought into revenue account at all. Hence, as regards this particular expenditure, no question of Income Tax or Armaments Profits Tax arises. In so far as the payments made by Government Departments are grants to non-capital expenditure they are in repayment of expenses incurred by firms, and to the extent, therefore, that non-capital expenditure made by firms is recouped by these grants, the ordinary revenues of a firm will be left unimpaired by the Minister's requirements, and will be liable to taxation in ordinary course as concerns the part of revenue which becomes profit.
It is, nevertheless, true to say that none of the payments made by the Government in respect of expenditure to secure the due functioning of essential plant will be liable, under this Bill, either to Income Tax or to Armaments Profits Duty. I might give one example of the manner in which this tax will work out. There are two things which have to be decided. First, the liability to tax which is based on the total receipts by a firm under armament contracts exceeding, your Lordships will remember, £200,000. That has no relation whatever to profit but is merely a
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determining factor as to liability, and I think it will be possible to earmark the contracts in respect of expenditure to secure the due functioning of plant in such a way that they shall not come into the calculation of the minimum amount of receipts which brings a firm within the range of the Armaments Profits Duty. As regards profits which ultimately govern the amount of tax which is leviable, that is entirely a different matter and depends on the balance of revenues after payment of the necessary expenses of the firm. What the Government in effect do in contrbiuting towards such expenditure met from revenue is to swell both revenue and expenditure, leaving the net sum unchanged. That, my Lords, I think explains the somewhat complicated problems which are raised by the financial clauses and which I thought it was perhaps as well to have on some record in answer to the noble Lord who raised this matter.
VISCOUNT BERTIE OF THAME: My Lords, I am very much obliged to my noble and gallant friend for having considered the question I raised in Committee and for having read out the Law Officers' finding, which of course I unreservedly accept.
On Question, Bill read 3a, with the Amendments, and passed, and returned to the Commons.

STANDING ORDERS COMMITTEE.
4.54 p.m.
THE EARL OF LUCAN: My Lords, on behalf of the Lord Chairman I beg to move the Motion standing in his name.
Moved, That the Viscount Hailsham be named of the Committee in the place of the Earl of Airlie (resigned).—(The Earl of Lucan.)
On Question, Motion agreed to.

MINQUIERS REEF.
LORD PORTSEA LORD PORTSEA had given Notice that he would ask if His Majesty's Government could give any information as to the position as regards the Minquiers Reef (in Jersey waters), and as to the building of a house thereon by a French subject; and move for Papers. The noble Lord said: My Lords, in view of information which has been sent me, and also a request, I shall, with your Lordships' permission, postpone this Question to another day, no date mentioned.

NEWFOUNDLAND AND THE CHANNEL ISLANDS: NAVAL RECRUITING.
4.56 p.m.
LORD PORTSEA LORD PORTSEA asked His Majesty's Government what facilities there may be for recruiting men and boys of the Norman Islands and of Newfoundland for His Majesty's Navy and if such facilities are to be extended. The noble Lord said: My Lords, this double Question relates to two parts of the Empire which are far distant from each other. The ocean divides them, a waste of seas, but at the same time they are very closely connected, for the connection between these isles and Newfoundland has been going on since the days of Sir Walter Raleigh. In those days, and even in my youth, the passage from Newfoundland if it did not last more than fifty days was considered to be a very quick passage. Now, as your Lordships are aware, it takes half that number of hours. Newfoundland is passing through a very distressful period, and it is, as you are aware, the oldest Colony belonging to this country. The men there earn their livelihood from their earliest days in deep sea fishing, and I am credibly informed that during the War they made some of the finest seamen who came to the assistance of the Mother Country. I am informed that it is not easy for boys and men to join the Navy, although they wish to do so and, as they are all sailors, such a proceeding would relieve the distress in that country.
A good deal of what I have said applies also to the Norman Islands. The men there are, of course, better known to your Lordships than those of Newfoundland. You have in your Lordships' House distinguished sailors, and you all know of Carteret, Saumarez, Dumarez, Tupper and O. de B. Brock, who have led fleets of this country. Both officers and men are recruited in comparatively large numbers from the islands, and almost invariably they have distinguished themselves. At this moment, however, having visited the islands recently, I can find no recruiting facilities for men, and particularly for boys, and I should wish to be told that the path for boys and men to join the Navy is to be made speedier and easier.
4.59 p.m.
LORD CHATFIELD: My Lords, I have been asked to answer this Question raised by Lord Portsea, and I was, I confess, in a little difficulty to know which were the Norman Islands he referred to, because actually there are three or four Norman Islands in the world, one actually just North of Newfoundland.
LORD PORTSEA: One is old and the other is new.
LORD CHATFIELD: I was not sure whether the old or the new was being referred to. I quite understand now that the islands he referred to are the islands which are more commonly called by us the Channel Islands. As regards the Channel Islands, I am informed that the situation is this: There are actually no recruiting offices for the Royal Navy in the Channel Islands, but a recruiting officer from Southampton spends a few days there once a quarter, and due publicity is given to his visit. A special recruiting campaign has been organised in connection with the visit of His Majesty's ship "Jersey" to St. Helier this week, and these facilities are considered adequate to meet the case. But of course there is no obstacle to men from the Channel, or Norman, Islands making their own way to this country for the purpose of joining the Navy.
Newfoundland, however, is somewhat different, though there also there is no recruiting office for the Royal Navy; but arrangements are made for prospective recruits to be examined and entered when one of His Majesty's ships visits St. John's, which occurs at not unduly long intervals. The possibility, however, of extending the facilities of recruitment in Newfoundland is being examined. I should like to agree most heartily with the noble Lord as regards the great efficiency as seamen of those men from Newfoundland, which, as he says, was so thoroughly well proved in the last War. There is, of course, in this case also, no objection to men finding their own way, but I admit it is difficult for them to do that. The whole matter is under consideration, and I hope that it may be possible to provide greater facilities for men from Newfoundland to join the Navy if and when they wish to do so.
House adjourned at two minutes past five o'clock.