§ LORD BARNBY moved, That the Order in Council substituting a new Regulation for Regulation 54CA of the Defence (General) Regulations, 1939, which was laid before the House on the 23rd of March last, be annulled. The noble Lord said: My Lords, in asking for the support of the House for the Resolution which I now move it may be superfluous to give assurance that in so doing there is no suggestion on my part that the Minister issuing this Regulation has in any way exceeded the powers which Parliament has conferred upon him. Nor, of course, is there any thought of pressing anything which would in any way conflict with the requirements of the Government Departments concerned to achieve the fullest and the most satisfactory production for war purposes. Now it may be right to remind the House that this Order in Coun- 83 cil necessarily is described on the Paper in the way that it is and therefore it may not be within the knowledge of every member of the House as to what exactly it refers. My Motion was worded to accord with the requirements of Parliament and also because of the time within which the Resolution has to be put. It will be within the knowledge of those who have followed it that the Regulation to which my Motion refers is actually an amendment of a previous Regulation which was issued with the same purpose. That previous Regulation received much criticism and no doubt the House will agree that it was with great wisdom on the part of the Minister concerned that it was withdrawn for redrafting.
§ Incidentally, I would like to draw the attention of the noble Lord who is going to reply to this Motion to the fact that I am given to understand that no copies of the original Regulation are available at the Stationery Office and therefore no member of the House can discharge his proper Parliamentary duties in advising himself exactly as to what the amended Regulation was. But that is only a formality and I will not pursue it. I can assure the House that this Regulation to which I am now inviting your Lordships' consideration is distinctly important.
My Lords, I do not wish to interrupt the noble Lord, but I would, if I may, point out that the matter to which he has just referred is much more than a formality. It is of the utmost importance that we should be able to see these Orders in Council. A proper examination of this Regulation which is intended to amend the previous Regulation is impossible unless previous matters to which it refers are available for our consideration. I sent my clerk to the Stationery Office to get a copy of the Order in Council to which Lord Barnby has referred. He stood in a queue for an hour and was then told that it was out of print. I suggest that if these Regulations, which it is known are to be the subject of Parliamentary debate in the future, are to be properly discussed, then surely the least we can expect is that they should be circulated in the ordinary routine like other Parliamentary Papers. As I say, I differ completely from the suggestion of my noble friend Lord Barnby that this matter is merely a 84 formality. We ought to be able to see all these Papers, some of which give Ministers extraordinary and most fantastic powers. It is not by any means a formality.
§ LORD BARNBY
My Lords, I accept with pleasure my noble friend's correction, and I am sorry if I did not choose my words very happily. I am sure that what my noble friend has said will have the support of the House. We all feel that there should be a proper orientation on these matters so that members may be able to discharge their duties properly. The real point which I wish to bring out is that this Regulation represents a very novel departure in its proposals. It is thought by many that it should not be allowed to pass by within its proper period, that is to say, that it should not be allowed to run until such time as it is past challenge. It is felt that it should be challenged by Parliament to such a degree that the country shall be shown that Parliament in its vigilance is not willing to let pass by Regulations, doubtless issued with a belief in their necessity by the Ministers concerned, when they encroach on long-established precedents of the past.
And now if I may I would remind your Lordships of an Order, S.R.O. 102, issued on December 22, to which great objection was taken in another place. I think it would not be a waste of time if, for the benefit of those of your Lordships who have not read it, I should state briefly just what it proposes. It states that persons concerned in a business undertaking shall if required permit any person directed by the Board of Trade to do so to enter any premises, inspect such premises and inspect any articles therein, and furnish the means required for entry and inspection. The sum total of that, if I understand it aright, is that any Government Department can give a direction to an official, and that any person so directed can enter on premises of any business firm in the country and make inquiries for any information which may be required. Further, they can search such premises for any information which might, or which they think might, exist. Nobody is going to suppose that any Minister would issue that Order unless there was a distinct belief that it was necessary. We must remember that these Orders are issued under the Defence of the 85 Realm Regulations, which necessarily are very widely drawn and give power to every Government Department to exercise whatever authority may be necessary in order to promote production during the war. This proposal is a novel one, in that it gives to any Government Department—
§ LORD BARNBY
It places in the hands of Ministers the power to appoint to the board of any company up to three directors, provided that that company has been the recipient of substantial advances from public funds. I do not know, and I suspect that without notice my noble friend who is to reply will not be able to tell us, how many firms in this country employing, say, 250 operatives and over, have been in receipt of appreciable advances from Government funds, but I suspect that it is a very large number. I cannot help feeling that a requirement of this kind, which makes so dramatic a change in our normal procedure, might with advantage be preceded at least by a debate in Parliament. I cannot suggest that it should be preceded by legislation, but in some way or another it should have been possible for discussion in advance to take place. This is a legal matter, and I can hardly ask my noble friend who is to reply for his observations with regard to it; but I have in mind the fact that action of this kind would be more readily accepted—having regard to the fact that it establishes a principle differing from that normally followed in our industrial activities—if it were preceded by a discussion in Parliament.
I am told by those who are qualified to speak on the matter that the Minister does not obtain in this way—that is to say, by the appointment of these directors—powers greater than those which he could exercise by other means. It is easy to visualize that a Government Department which is able to control the supply of raw materials, labour, power and coal, and which is able to allocate orders, must really have all the powers necessary to exert pressure on any firm to do whatever it is desired should be done. If this novel procedure is to be followed, however, one wonders how far it may go. I suspect that it may lead 86 to definite anxiety lest it go too far. Is it suggested that it will not be possible to achieve in this way more than can be done by the powers to which I have already referred, having in mind that the power to appoint to a board three possibly unwelcome directors may produce disharmony and lead to a less efficient direction of the enterprise than if that enterprise were left in the hands of the existing board and all the other powers open to the Minister exerted?
A great deal of attention has been paid to the case of Short Brothers, which, of course, came under a different Regulation entirely—namely, that giving the power of compulsory acquisition. There are many people in industry who have some knowledge of this concern and who think that it was definitely in the national interest that the power in question should have been exercised in this particular case. I speak without inside knowledge, but if, as is suggested, certain difficulties did exist in this case, it may have been very desirable that the firm should be taken over, and it may be desirable that other firms should be taken over in similar circumstances. But in such circumstances it is worth considering whether it would not be better to graft such enterprises on to the National Ordnance Factories, so that they might be directed by the personnel which so effectively, and with such success, is managing these great national war enterprises. That is at least an alternative to what is suggested in such cases as that of Short Brothers.
I hope that I shall have the support of your Lordships in suggesting that, if directors are to be appointed, they should be neither overworked nor over-age. It is not necessary to appoint those who are already directors of twenty companies or more, and I would strongly urge my noble friend to consider whether, as has been urged in this House before in the case of appointments for executive work in Ministries, the upper age limit in the case of directors should not be sixty-five, and preferably sixty. I should also like to refer to the principle of interlocking directorates. We have seen in the past a good deal of what are called interlocking directorates, sometimes in association with the Bankers' Industrial Development Trust and the Bank of England, with money control overriding everything. In the minds of some people that may be an advantage, but others will believe that 87 that should not creep in. I hope that I have emphasized sufficiently that I do not think that either the compulsory acquisition of firms or the posting of directors is necessarily deplorable if decided on after the matter has been considered by Parliament. I will go further—and here I hope that I shall have the support of noble Lords who sit on the Labour Benches—and say that I should like to see the Government appointing directors with proper qualifications to any firms which are controlled and owned by banks. I would therefore go further than is suggested in the Order, and I hope that that may be some indication to my noble friend of my reasonableness in presenting this case.
I want to emphasize, however, that it is much better squarely to face the issue of Government ownership or private enterprise. We still take our stand on the principle of private enterprise, and I was glad to hear the Prime Minister put his views in that respect definitely on record. I would also say how much I, like many others who have read it, admired the speech made by my right honourable friend the Home Secretary last Sunday, a speech which was widely reported in the Press. The Home Secretary stated definitely that a case can be made out for private enterprise in appropriate fields, and he went on to say that there was no case whatever for private enterprise without the spur of free competition. It was a most thoughtful speech, and should give a great lead to the country. I refer to it now because I feel that this Regulation to some extent impinges upon the principle which we have hitherto adopted.
I should like to refer to the fact that we have recently read in the Press the most emphatic declaration of opinion in the United States by the National Association of Manufacturers there, and the United States Chamber of Commerce, whose membership includes a large part of American industry, reiterating their belief in private enterprise. There is a good deal of confused talk about the difference between Government enterprise, Government ownership, étatism and complete ownership and management. There are many who would have no objection to public ownership, but what they do object to is management by Parliament. Commercial management under Whitehall is 88 not believed to be a satisfactory way of running enterprise. If the beneficiary of profits be the owner, then the State must largely be the owner already. But it is well to recognize that we have already gone a long way into State trading. I would remind my noble friends of the United Kingdom Commercial Corporation. That may not be exactly germane to this question, but the State has gone further than what is suggested in this Order, and has embarked energetically on private enterprise.
I think it will be agreed that there is no room for complacency in a matter like this. I understand that my noble friend Lord Portal is going to reply for the Government. His past record stands as a proof of the benefits of private enterprise, and the same observation I think applies to my right honourable friend the Minister of Production, whose personality and record also leave us under no doubts in that respect. I have no desire to divide the House. It may well be that few speakers will follow me in this debate because possibly many noble Lords who saw the Order Paper did not ascertain what was meant by the terminology which necessarily had to be employed in putting down this Motion. But I hope my noble friend in replying will feel that I have put forward with moderation the grounds on which I hold that Parliament should go on record as not having let this Regulation pass without examination. I hope that he will be able to assure us that at least where a decision is taken under this Regulation, there will be an appropriate hearing before an independent tribunal, or at least a tribunal in which any firm which might be affected would have confidence, and I think he could easily think what tribunal would be appropriate. I hope also that the company concerned would have the opportunity to state its case. Those are moderate safeguards, and it is to be hoped that my noble friend can give that assurance. I conclude with a reference to the wisdom of Shakespeare, who said:… O! It is excellentTo have a giant's strength; but it is tyrannousTo use it like a giant.I beg to move.
§ Moved, That the Order in Council substituting a new Regulation for Regulation 54CA of the Defence (General) Regulations, 1939, which was laid before the House on the 23rd of March last, be annulled.—(Lord Barnby.)89
§ THE MINISTER OF WORKS (LORD PORTAL)
My Lords, my noble friend Lord Barnby is moving the annulment of the Order in Council substituting a new Regulation for Regulation 54CA. It is only right and proper that noble Lords in this House should examine new Regulations. I hope to be able to prove that His Majesty's Government also make a close study before they change any Regulations. The best way to demonstrate this is to compare the original Regulation 54CA with the new Regulation, and see where they differ, and why the new Regulation is considered necessary. On that I would like to say to the two noble Lords who have spoken already that the question of the old Regulation not being forthcoming is one which we must consider. You can regard public funds amounting to about £280,000,000 as having been, or proposed to be expended by way of advances or grants of a capital nature, or in providing capital assets for the use of companies engaged in the munition and allied industries. In the main the expenditure would be in connexion with "capital assistance schemes" for buildings, plant and machinery. This figure naturally does not represent more than a very small part of Government capital expenditure on agency factories, shadow factories and ordnance factories. But we must all agree that £280,000,000 is an enormous sum and warrants special safeguard.
§ LORD BARNBY
Would it be possible to give any indication of the approximate number of firms which have been the recipients of these advances?
§ LORD PORTAL
I could not give the exact figures to-day, but I will let the noble Lord have them. I must also point out that companies which have "capital assistance schemes" or loans have in most casts directly or indirectly the Government as their sole customer. The Government have not endeavoured to obtain a detailed State control over our munition industries. We have State control over ordnance factories in the same way as Woolwich Arsenal was controlled in pre-war days, but agency and shadow factories are operated by industrial companies as managing agents on behalf of His Majesty's Government. One knows of industries that have got into the political field and I for one, with some of my 90 friends, consider that these industries have not benefited from such intervention. But I assure my noble friend Lord Barnby that on this Regulation there is no reversal of this policy.
This Regulation is one of very limited application. The Government already have the powers under Defence Regulation 78 (1) to put in an authorized controller; (2) if satisfied that to secure effective control it is necessary, (a) to remove any persons having any function of management, and (b) to acquire the shares of the company. In this Regulation the Government ask for representation where it has made a substantial contribution. I understand that one of the questions which people are discussing is what this word "substantial" means and how it will be read. It is obvious that it may be read in two ways; one where the Government, shall we say for example, contributes 80 per cent. of the capital or, secondly, where it puts up, say, £1,000,000 out of a capital of £4,000,000. Both these would be substantial contributions and the banks would have treated them as substantial contributions before the war. I wish to assure my noble friend that the Treasury will be taken into consultation on this particular question and will give their advice as to whether the contribution can be said to be substantial in the circumstances. That is a very important point.
In this Regulation it states:If a competent authority is satisfied, with respect to any war production undertaking carried on by a company, that for the purpose of improving the efficiency of the war production of the undertaking it is expedient to associate one or more persons …That point of "improving the efficiency of the war production" is one on which we are all agreed. The competent authority has to keep that end in view whatever he wishes to do under this Regulation. Your Lordships will agree, I think, that no Minister of the Crown would ignore these words or would ask for representation unless he was really satisfied that efficiency would be improved as a result. The duty of the responsible Ministers is to get production and to promote efficiency. The appointments of these directors which are made outside the articles of association are only for one year, and at the end of that year the competent authority has to review the appointments. That is very important.
91 My noble friend knows as well as I do the cases which occurred before the war. Directors were not put in for one year in those cases—they were put in for very much longer. It would be open to any company to whose board directors have been appointed to make representations if they wanted to, if they considered these Government appointments unsuitable. The Government appointments of directors which, as in the previous Regulation, can only be up to three directors, would in no case constitute a majority of the board. In the case of the previous Regulation, if directors could not be appointed by agreement, then the alternative was to appoint an authorized controller first. With the present Regulation, a competent authority would have power to appoint directors if the company objected to them, but it would not be necessary to appoint an authorized controller first. I ask my noble friend and other members of your Lordships' House who have experience in industry whether they would prefer to have an authorized controller, or up to three directors appointed to a business. The answer, I am sure, would be unanimous: they would prefer directors.
The Government may be said to have powers already to take over companies—that is, to requisition their works—if they think that, by so doing, they would further the efficiency of the war effort. That question is, I believe, going to be debated in your Lordships' House shortly. The Government also have power to appoint an authorized controller, and this new Regulation which we are discussing gives them the power, if they consider that the company concerned does not require either of the more drastic measures, to appoint directors. I consider that this is far the least drastic of these measures. That is what I am trying to impress on your Lordships House to-day. It must also be remembered that directors appointed in this way do not come up for re-election after a period of years, as occurs in ordinary business methods, and I for my part consider it would be easier to have directors appointed in this way rather than by agreement, when one would be sceptical and loath to get rid of them when they came up for re-election. That does not occur in this case. The sole responsibility for the appointments is put on the Government.
92 Another safeguard will be that before the application of this Regulation the case will be considered by a Committee of the Ministry of Production known as the Munitions Management and Labour Efficiency Committee, which sits under the Chairmanship of Sir Charles Craven. This Committee will consider any representations from companies who may be affected, though they will act in a purely advisory capacity. That is a question on which my noble friend asked for information. The directors, if appointed under this Regulation, will be helpful to the Ministers concerned and also to the company. As your Lordships know, to-day many of the difficulties you have in a company arise out of a hold-up in the supply of some component parts required by the company, and these directors should be of great assistance in smoothing out such difficulties, so helping the war effort. Such men will be extremely useful if they know the Minister and are acquainted with all the other sides of the problem.
Let me remind your Lordships of what was the practice in pre-war days when capital assistance from the State, the banks, or other sources was given to companies. In pre-war days the State invested money in one of our large oil companies, and nominated directors to safeguard its interests. Some of these directors are still, I believe, on the board of this company in which the State has an interest. You had banks and other bodies who put up money for companies and also put in directors to safeguard their interests. This was looked upon as an ordinary practice before the war. I myself—the Minister of Food was associated with me in some of these matters—was Chairman of the Treasury Fund, S.A.R.A., and also on the Nuffield Trust for the Special Areas, and when we considered it advisable we put in directors. I was functioning under the Treasury, and so was my noble friend the Minister of Food. I know four or five cases in which, in conjunction with the Nuffield Trust, we put in directors. Surely with the safeguards and assurances which I have given in regard to the new Regulation, when a case is made out by the competent authority, we should have the powers to appoint up to three directors where the taxpayers of this country have a substantial interest and where we consider it necessary to further the war effort. Surely after the war, when certain industries or 93 companies may have to be put on their legs again, either by the help of the banks or by the same methods as were employed in the Special Areas, the same practice will be employed as in pre-war days. This Regulation will only be in being for the period of the emergency, and I hope my noble friend, after hearing the views I have expressed and the assurances I have given him, will withdraw his Motion
§ LORD BARNBY
My Lords, I am sure the House will have obtained much comfort and satisfaction from the assurance my noble friend has given with regard to the intentions underlying this Regulation. It is a mater of gratification—which we had a right to expect from the noble Lord—that there should have been so clear a reiteration that this is no infringement of the principles of private ownership and private activities, and that there is no underlying intention on the part of the Government to use the Regulation for any political purpose which would permit the injection of Government activity into private business. That is all to the good. I would like to pay tribute to the pains my noble friend has taken to indicate that this is only a measure for the period of the emergency. He emphasized that it would he to any firm a welcome alternative to the appointment of a controller. I can well believe that he would get general support for that view, but I still do not feel quite reassured with my noble friend's explanations and his reasoning. The injection of unwelcome directors to a board might possibly produce disharmony and slow down production more than would be the 94 case if the works were taken over altogether, if that appeared to be the only means of bringing about what was required.
My noble friend was good enough to give an assurance in regard to one of the safeguards which I hoped he would see his way to give. It was that the case would be referred to an independent Committee, and he instanced the Committee which is known as Sir Charles Craven's Committee. I am sure that will in itself be a sufficient reassurance, but unless I misunderstood him my noble friend did not give the assurance that every firm corning under this Order would have ample opportunity to state their case. I cannot think that it was the intention not to assume that that should be done. If I can take my noble friend's gesture for concurrence I shall be reassured with those two safeguards.
§ LORD PORTAL
If I might interrupt my noble friend I cannot give him any further assurance than I have already given.
§ LORD BARNBY
I am quite satisfied to leave it at that. My noble friend will understand the substance of my intention. With this reassurance and the safeguard he has been good enough to give, I beg leave to withdraw my Motion.
§ Motion, by leave, withdrawn.