ELECTRICITY BILL.

HL Deb 22 July 1947 vol 151 cc42-175

2.49 p.m.

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

Moved, That the House do now resolve itself into Committee.—(The Lord Chancellor.)

On Question, Motion agreed to.

House in Committee accordingly:

[The EARL OF DROGHEDA in the Chair.]

Clause I:

Main functions of Electricity Boards.

1.—(1) There shall be established an Authority, to be known as the British Electricity Authority, and it shall be the duty of that Authority as from the vesting date to develop and maintain an efficient, co-ordinated and economical system of electricity supply, for all parts of Great Britain except the North of Scotland District …

(2) There shall be established Boards, to be known by the names mentioned in the first column of the First Schedule to this Act, for the areas which are described in general terms in the second column of that Schedule and are to be defined by orders made under this Part of this Act, and it shall be the duty of every such Board as from the vesting date to acquire from the British Electricity Authority bulk supplies of electricity and to plan and carry out an efficient and economical distribution of those supplies to persons in their area who require them.

(6) In exercising and performing flier functions the Electricity Boards shall, subject to and in accordance with any directions given by the Minister or Secretary of State under this Part of this Act—

1. (a) promote the use of all economical methods of generating, transmitting and distributing electricity;
2. (b) secure, so far as practicable, the development, extension to rural areas and cheapening of supplies of electricity;
3. (c) avoid undue preference in the provision of such supplies;
4. (d) promote the simplification and standardisation of methods of charge for such supplies;
5. (e) promote the standardisation of systems of supply and types of electrical fittings;

and shall also promote the welfare, health and safety of persons in the employment of the Boards.

VISCOUNT SWINTON had given Notice of three Amendments to this clause—namely, in subsection (1), after "There shall be established," to insert "not later than six months before the vesting date"; in subsection (2), to omit "There shall be established" and insert "(2) The British Electricity Authority shall not later than three months before the vesting date constitute"; and, in subsection (2), after "made," to insert "not later than three months before the vesting date." The noble Viscount said: I beg formally to move the first Amendment in my name and to refer to my three Amendments to this clause, because I think the noble and learned Viscount, the Lord Chancellor, has met the points on certainly two of the Amendments, and possibly also the third in an Amendment which is in his name on the paper. As your Lordships will see, the objects of the Amendments are: first of all, that the British Electricity Authority—which is, of course, the Central Board—should be appointed not less than six months before the vesting date; secondly, that the area boards should be appointed not less than three months before the vesting date; and thirdly, that the areas to be covered by these boards should be properly defined at least three months before the vesting date. At a later stage—I think on Clause 14—the noble and learned Viscount, the Lord Chancellor, has down Amendments which I think satisfactorily meet all three of my points. Perhaps it will be convenient, therefore, if I formally move, in order that the Lord Chancellor could make a statement confirming that the points are covered—in which event I shall ask leave to withdraw my Amendment.

Amendment moved— Page 1, line 8, after ("established") insert ("not later than six months before the vesting date").—(Viscount Swinton.)

THE LORD CHANCELLOR (VISCOUNT JOWITT)

The noble Viscount's Amendment has the object of securing that six months before the vesting date the Central Electricity Authority shall be established, and by that, I mean the personnel of the authority shall be established; and that three months before, the personnel of the area boards shall be made plain. In principle, I entirely agree with that. The noble Viscount's Amendment is, I am told, wrong in form, in that the Central Authority is established, apart from its personnel, by the passage of this Bill. I wanted to meet the substance of the Amendment and I have three Amendments down. If I may take the first one, I think it is convenient first of all to look at Clause 14, page 18, line 9. I there propose to insert: The vesting date shall not be less than six months after the establishment of the Central Authority and not less than three months after the establishment of all the area boards and the definition by order made under Part I of this Act of all the areas for which those boards are established. So there I give the noble Lord his three months after the establishment of the area boards and the definition of the areas and six months for the personnel of the Central Authority.

As your Lordships will remember, the personnel of the Central Authority is fully perfected only by the appointment of some of the area board Chairmen, just as the area boards in their turn are only fully perfected by the appointment of the consultative council. I have therefore put down two more Amendments. On page 6, line 17, there is an addition to subsection (2) of Clause 3 which reads as follows: Provided that, until the area boards have been established, the Central Authority shall be deemed to be properly constituted notwithstanding that the members to be appointed under paragraph (b) of this subsection have not been appointed or have not all been appointed. Then, on page 6, line 31, at the end of subsection (3), there is the other Amendment which reads: Provided that, until the consultative council has been established, an area board shall be deemed to be properly constituted notwithstanding that the board does not include the member referred to in paragraph (b) of this subsection. I think I can fairly say that I have in these Amendments met entirely the substance of what the noble Viscount had in mind.

VISCOUNT SWINTON

I am much obliged to the noble and learned Viscount for such an auspicious beginning and I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

LORD HAWKE moved, in subsection (2), after "Act," where that word occurs for the second time, to insert "after consultation with the British Electricity Authority." The noble Lord said: The Amendments of the noble and learned Viscount, the Lord Chancellor, to Clause 14, secure that the Central Authority will have six months to work before the vesting date and three months before setting up area boards and defining their areas. By this Amendment we seek to secure that during those three months the Minister shall consult with the Central Authority as to the delineating of the areas of the area boards. As I see it, there might well be three stages in this delineation. There would be first a preliminary consultation as to the adequacy of the numbers and the location; then there would be further consultations about the setting up of the boards and the more precise definition of their boundaries; and finally, which may well be later than the vesting date even, the final delineation. I hope that the noble and learned Viscount will be able to accept this Amendment, which seems definitely to be one of common sense. I beg to move.

Amendment moved— Page 2, line 13, after ("Act") insert ("after consultation with the British Electricity Authority.").—(Lord Hawke.)

VISCOUNT ELIBANK

I wish to support the noble Lord, Lord Hawke, in this Amendment. He has put the case very clearly indeed, and it requires very little elaboration from me. I should like, however, to add to what he has said, that if the British Electricity Authority are to have the responsibility on their shoulders for the general well-being of the electrical industry in the country, I think it is highly important that they should be taken into consultation from the beginning by the Minister and that the Central Electricity Authority should have a say in the definition of areas, how they are laid down, and generally in regard to those matters.

THE LORD CHANCELLOR

I have no difficulty in accepting this Amendment in principle, but I suggest to the noble Lords in whose names it stands that it would be more convenient if we had the Amendment on Clause 4, because there this precise question is dealt with. There is an Amendment down to Clause 4 in the names of Viscount Elibank arid the Earl of Rothes, and I do not think we want these words in twice. I think that that clause, if it is amended in the way suggested, will completely meet the point, and I suggest that the noble Loll; concerned should not ask to have the Amendment made here. I will accept the Amendment when we come to Clause 4.

LORD HAWKE

I thank the noble and. learned Viscount for pointing this out. think he is perfectly right and I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

2.58 p.m.

LORD RENNELL moved, in paragraph (b) of subsection (6), to leave out "so far as practicable." The noble Lord said: I drew attention on the Second Reading of this Bill to a matter relating to agriculture and the development of electricity supplies in agricultural districts. If I seemed slightly jubilant then, I am more sober now. Paragraph (b) of subsection (6) as it stands does no more than advocate the development and extension of electrical supplies to rural areas and to cheaper supplies A electricity. The insertion of the words "so far as practicable" seems undesirable, as giving everybody the greatest possible opportunity of procrastination. The use of the word "development" does not mean that extension of electricity supplies to every farmhouse has to be undertaken immediately; but this proviso seems to make the provision of these necessary supplies unduly remote. I would, therefore, like to see these words taken out.

In order to save your Lordships time, I might perhaps be permitted to add here on this Amendment what I think perhaps ought more appropriately to have been added on the Motion that the clause shall stand part, and that is to deplore the lack of any real statement of policy about the development of electricity in rural areas. I would have liked really to move the insertion of another paragraph just after paragraph (b) dealing with that very vexed question of capital charges for the extension of electric lines and supply mains in country districts, but I have not done so because I am aware that there is a very great difficulty in making a uniform charge on people in any rural district on the same basis as those living in an urban district. The question bristles with difficulties. They are difficulties which are recognized even in the most highly electrified countries in the world, like Switzerland and certain parts of North America.

It is idle to suggest that everybody should have a supply at the same rate, but I do ask the noble and learned Viscount who is going to reply to this Amendment to consider between now and the Report stage whether something could be put in, either here or in whatever appropriate place may be found, to hold out some hope of a coherent development whereby rural industries, and agriculture in particular, are not penalized by very heavy connexion charges on capital account, which in fact preclude the private person and the small farmer from receiving electricity. The matter is of some complication because I believe it should be considered in connexion with certain clauses in the 1899 Act—which will be reached in the Fourth Schedule in due course—where the original scheme which is still carried on to-day was laid down. I think it is a contention of the farming industry generally that the provisions there laid down are no longer applicable in to-day's circumstances and require very drastic revision. I do not think it is possible to have, and it is not for me to suggest, Amendments which would remove those difficulties at this stage, but it is a difficulty which I am sure His Majesty's Government will recognize and will wish to do something about if they have the development of our rural areas and agriculture in particular at heart, as their spokesmen have so frequently stated.

I therefore ask them to omit in the first place the words "so far as practicable" from paragraph (b) of subsections (6). I would also ask the noble and learned Lord to consider whether an additional paragraph could be inserted dealing with those difficulties of capital charges for connecting remote and rural districts and for dealing with a logical and coherent development as compared with the rather spotty development of electrical supplies in rural areas on account of the working of those clauses in the 1899 Act referred to in the Fourth Schedule. I beg to move.

Amendment moved— Page 3, line 16, leave out from ("secure") to ("the").—(Lord Rennell.)

THE LORD CHANCELLOR

This Amendment is to leave out the words "so far as practicable." I am quite willing to have placed upon the Electricity Board the duty of calling on "spirits from the vasty deep," but I cannot have them responsible for whether or not the spirits come. Paragraph (b) of subsection (6) reads: secure, so far as practicable, the development, extension to rural areas and cheapening of supplies of electricity. I sincerely hope that they will be able to achieve all those ends, but I cannot promise it. It is quite possible that the supplies to rural areas on the scale on which we should all like to see them would cost a great deal of money which will, I think, as some of your Lordships have already said in the course of the Second Reading debate, mean an extra charge on the urban people who will carry the rural people on their backs.

Then, with regard to cheapening of supplies of electricity, the price of electricity depends primarily upon the cost of coal. I sincerely hope that we shall be able to cheapen the cost of coal, but no human being can say more than this, that he will do the best he can to secure that end. I cannot guarantee that anybody will succeed in that, and, therefore, it seems to me essential that we should keep in the words "so far as practicable." Consider what would happen otherwise. Suppose there were some cantankerous-minded farmer living a long way from anybody else to whom no electricity was brought. He might try to mandamus the Board and say: "You have not done your duty towards me. By the Act of Parliament, without any qualification, you were to secure the extension of supplies and the cheapening of supplies, and yet you are asking me to pay a very high price or you are not going to do anything at all." We cannot put the Board in that position. We must be in a position, I quite agree, where we will do the best we can, but no Board can do more than that and, therefore, in these uncertain conditions, I cannot say more than that.

With regard to the additional paragraph which the noble Lord speaks of, I am not sure I quite understand exactly what he wants. If he wants a statement of our policy, that one of the most important things we can do when we have got the machinery of this Bill is to try to extend to the rural areas the benefit of a coherent supply, I entirely agree with that. It may cost a good deal of money but it may be one of the conditions without which we shall not get people to live in the rural areas, and it might, therefore, be absolutely essential for our continuance as a great people. Therefore, one must consider the question of cost in that relation. That assurance I can give the noble Lord, and I will gladly consider any new provision which he wants to introduce; but, as it seems to me, I am afraid that I cannot do more than repeat that for the reasons I have given it is essential that we should maintain those words "so far as practicable."

VISCOUNT SWINTON

I think the whole House will he grateful to the Lord Chancellor for that serious and very realistic speech. It comes as a most agreeable change. We have hitherto been told, not by the Lord Chancellor or by the Leader of the House, that the justification for this Bill would be cheap arid abundant electricity, that the valleys would blossom like a rose and that every farmhouse should get a nice cheap supply. All these speeches were made and of course it was all going to be so much cheaper. But now we know it is not. We know on the authority of the Lord Chancellor, perfectly rightly, that it all depends on coal, and if the price of coal continues to rise then the price of electricity, which under the free enterprise of the municipality has kept level although the price of coal has risen like that, will rise also.

The Lord Chancellor was equally realistic about the country. He said that if we all had belief in the country and it was quite right that we should give the people in the country electricity and give them it at prices which would be agreeable to the people who live in the country, there was only one way in which that could be done, and that is to charge the people in the towns mere. This is more realistic. I am not saying that that may not be a necessary course to take. I am not sure; we may have an opportunity at a later stage of discussing the very important questions of policy of whether areas should pay for themselves or one area should subsidize another. I am very glad we are entering upon these debates in this new a ad realistic spirit, but I cannot refrain from adding that if this had been the kind of speech which had been made on the General Election it is extremely doubtful whether there would have been a mandate for this Bill.

LORD RENNELL

I am very grateful to the noble and learned Viscount for what he has said, which I think will do very much to remove the disappointment which I know has been felt in the agricultural world at the insertion of these words "so far as practicable." To clear up one point which he asked me in regard to what I would like to see as an optimum, it is that there shall be no connexion charges, but not necessarily that there should be a uniform rate throughout the country for supplies. It was in that direction that I would have liked to have seen a paragraph inserted. I think that answers the question, and, with the assurance that he has given, and I hope the publicity which will attend it, I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause I shall stand part of the Bill:

THE EARL OF LYTTON

On the Motion that Clause r stand part of the Bill, I would like to put a question to the noble Viscount, the First Lord of the Admiralty, with regard to the last words in subsection (6). Your Lordships will remember that when I was speaking or the Second Reading of the Bill I mentioned the number of rights, privileges and interests enjoyed by workers under the existing conditions, and I asked the Government if they could give us an assurance that these would be continued under the new set-up. The First Lord of the Admiralty was good enough to reply to me, and I have the reference in Hansard in which he assured me that there was provision contained in the Bill for the purposes of protecting the pension rights and the promotion of the welfare, health and safety of persons in the employment of the boards. The noble Viscount perhaps had in mind Clauses 53 and 54, to which Lord Lucas had also drawn my attention earlier in the discussion. I quite admit that Clause 54, dealing with pensions, does deal with one point, and I am quite satisfied that pensions will be protected; but Clause 53 does not meet the case at all. Clause 53 is dealing with the Central Authority and what I was concerned with was provision by the area boards with regard to health and so forth.

I am not proposing any addition, but I would like once more to ask if an assurance can be given that the workers will not be worse off in the future than they have been in the past. The noble Viscount, Lord Hall, mentioned on the Second Reading the matter of co-partnership. He expressed some doubt as to whether that could be continued, because co-partnership, as he rightly pointed out, depends upon profits and, as the industry was not going to be conducted for profit, there might not be any profits out of which co-partners could be paid. That I quite understand, but I thought he also said that in that case compensation would be paid. With regard to all the other matters I am not, as I say, doing more than asking for an assurance that all the existing benefits will be continued or, where that is not possible, that some equivalent will be paid. The workers in my own company have assured me that they have in fact received such an assurance from the Minister, and I feel that, if that is so, the right place for such an assurance to be given is in Parliament. I therefore ask the noble Viscount, the First Lord of the Admiralty, whether he can give me the assurance which I asked for on the Second Reading.

VISCOUNT HALL

I have made further inquiries arising out of the speech of the noble Earl, and I find that I can repeat the assurance which I then gave him. The noble Earl did refer to Clause r, subsection (6). That does deal with electricity boards and, in the reference to boards, it means that the Central Authority and the area boards shall promote the welfare, health and safety of the persons in the employment of the boards. By this provision it is intended to place upon the boards an obligation to behave, in a real sense, as the model employer. I do not want to repeat at length what I said on the Second Reading, but I do know that the Minister is in touch with the trade union representatives representing 95 per cent. of the industrial workers. I am not including, of course, the clerical workers in that, but the guarantee which is given to the industrial workers will also cover the other workers at the same time. If the noble Earl desires to discuss this matter at any time in the future, and if there is any doubt in his mind with regard to the assurance which I am now giving for the second time, then I shall be very glad to meet him and discuss the matter further.

THE EARL OF LYTTON

I am very much obliged to the noble Viscount. I have no doubt in my mind at all, but I only wanted the assurance to be stated publicly.

Clause 1 agreed to.

Clause 2:

Additional functions of Electricity Boards.

(3) The Central Authority shall have power—

1. (a) to manufacture electrical plant and electrical fittings;
2. (b) to sell, hire or otherwise supply electrical plant and electrical fittings and to instal, repair, maintain or remove any electrical plant and electrical fittings; and
3. (c) to carry on all such other activities as it may appear to the Authority to be requisite, advantageous, or convenient for them to carry on for or in connexion with the performance of their duties under the foregoing section or with a view to making the best use of any assets vested in them by or under this Act:

Provided that this subsection shall not empower the Central Authority to manufacture electrical plant or electrical fittings for export.

(4) Any area board shall have power—

1. (a) to sell, hire or otherwise supply electrical fittings and to instal, repair, maintain or remove any electrical fittings; and
2. (b) to carry on all such other activities as it may appear to the Board to be requisite, advantageous or convenient for them to carry on for or in connection with the exercise and performance of their functions under the foregoing section or with a view to making the best use of any assets vested in them by or under this Act:

Provided that nothing in this subsection shall empower an area board to exercise or perform any of the functions referred to in paragraph (a) of the last foregoing subsection or paragraph (b) of the last foregoing subsection so far as it relates to the sale, hire or supply of electrical plant.

3.18 p.m.

VISCOUNT SWINTON moved to leave out paragraph (a) of subsection (3). The noble Viscount said: This is a very short, but very important point. If your Lordships look at page 4 of the Bill, at subsection (3), you will see: The Central Authority shall have power—

1. (a) to manufacture electrical plant and electrical fittings;
2. (b) to sell, hire …"

or otherwise dispose of such fittings, and the area hoards have a power to sell. I have nothing to say at all against the boards selling. I think they certainly ought to have that right. It is convenient and right that the distributors of electricity should be able to sell fittings to their people. Many of the companies have done it successfully. It enables them to promote standardization and so on. But that is a very different thing from manufacturing.

I cannot conceive that in any circumstances the Central Authority, which is the body which is given this power to manufacture, will really go into this business. It is not as if it was a small and simple business, it is not; it is a most complex business, requiring vast machinery, great knowledge and, indeed, vast use of patents sometimes. A great many patents are pooled, and even more often now than the use of patents there is the use of what the Americans call "the know-how." There is a tendency—certainly in America, and I am not sure whether it is spreading—not to go in so much for patents, but to go in for your knowledge of particular forms of manufacture, and a particular improvement. No business, or hardly any business, which is successful in retailing goes into manufacturing. If you take what I suppose are the two most successful retail businesses in this country—and there are others like them—take Woolworth's or Marks & Spencer, or indeed any of the great retailing firms of this country; nothing would induce there to go and put their money into manufacture. They make very good bargains with the people who manufacture goods for them. They buy on a large scale, and they make extremely advantageous contracts; but they would not be mad enough to engage in manufacturing themselves.

So far as the question of standardization is concerned, this body will have every opportunity of securing standardization because they will be the sole placer of orders in this country. Therefore, they can ensure standardization in any way they like. I hope that they will not go rather to the extreme in the matter of standardization because, sometimes, if you try to bring about the most complete and universal standardization you tend to put a stop to progress. The only other argument which can be advanced on tie Government side is that this undertaking may find itself up against a ring. I cannot imagine anyone more compete at to deal with a ring than an organization such as this which, as I say, is the only body which can place any orders. I remember Mr. Deakin once saying—I think it was at an Imperial Conference: "In the market to-day the seller is courtier and the buyer is king."

It is true, or we hope it is, that we are moving into an era of freer trade. If you are up against a ring, and are not able to break it with the very complete monopoly power that you wield—which to me is inconceivable—then surely the right way of dealing with it is not to go into manufacture, which may mean your losing a great deal of money because you will probably manufacture more dearly than the ring, but to have a proper investigation and to have the whole facts ascertained. I submit that that would be the right thing to do, and I would strongly support the Government if they took such action with a view to forcing the breaking of a ring. But the worst way of breaking a ring, if it exists, is to go into a very complicated, highly technical and scientific industry like this and to try to manufacture the goods your.. self. While, therefore, I sympathize with what is behind this, I am quite sure that the Government by this power—which I cannot believe that they will ever exercise—are acquiring means to do the right thing in the wrong way. I beg to move.

Amendment moved— Page 4, line 6, leave out paragraph (a).—(Viscount Swinton.)

LORD LLOYD

I would like to support the Amendment which has been moved with such admirable clarity by my noble friend Viscount Swinton. Under this clause it seems to me that the Government are taking a power as it were to go into State trading. One of the chief reasons which they have advanced for taking this power is that in the past many of the companies have had such a power. On that point I would just like to say that the companies have practically never used that power. The reason they have not done so is the reason that has been given by my noble friend Viscount Swinton, that except in very rare cases it was not an economic proposition for them to do so. I am sure the Government have no intention of using their power in this connexion. The Minister, in fact, has said so quite clearly in another place, and he has given the very reason to which I have just referred, saying that in his opinion it would not be economic. Furthermore, it was not within the Government's mandate to do so.

If that is the case, the Government are taking a power which they are not going to use. I suggest that it is bad legislation continually to take powers which are not to be used. That is the first thing I wish to say. The second thing I wish to say is this. I would like to reinforce what my noble friend Viscount Swinton has said about methods of breaking rings and cartels. I quite appreciate what other noble Lords have said in this connexion. The noble Lord, Lord Lucas of Chilworth, I think it was, speaking about this on Second Reading, made a particular point about a lamp ring. I do not know as much about lamps as Lord Lucas, and I daresay he may have been right. But I do not believe that this is the way to "bust" a lamp ring. The Government have started a Royal Commission to make inquiries concerning the Press. That may be a laudable object or it may not—some noble Lords think that it is not. If there is a lamp ring, what is to stop the Government launching a Royal Commission to investigate it? That is the way to deal with such a matter. It is not the right way, I suggest, to do what is proposed to be done in this clause. Therefore, I would like strongly to support the Amendment.

LORD WOLVERTON

I also would like to support the Amendment. I think it is entirely wrong that the Government should go into the business of manufacturing in this way. Lord Lucas talked about a lamp ring during the Second Reading debate, and he said that he hoped that the Government would use these powers in an offensive and not a defensive way. I have been supplied with some figures which I should like to read to your Lordships, as I think that they are quite convincing. The Electric Lamp Manufacturers' Association, which represents a number of the largest of the lamp manufacturers in Great Britain, in the year 1921 produced 20,000,000 lamps of 6o watt size, the retail price of which was 5s. 6d. each. In 1939 they produced 83,000,000 such lamps, and the price dropped to 1s. 7d. each. In 1945 they produced 109,000,000 such lamps and the price then was down to 1s. 3d. That is quite clear evidence that they have been driving down prices very rapidly, although there certainly is an organization. It should not be forgotten, however, that many organizations of this kind were set up in the difficult times between the two wars, when there was not a sellers' market but a buyers' market and it was very difficult to protect the British industry from foreign competition.

Now let us look at what the Association have been doing lately. In the first quarter of 1938 they exported 4,900,000 British lamps, and in the first quarter of 1947 they exported 9,100,000. So I do not think there is much justification for attacks on a so-called lamp ring. These people have been helping us, be it remembered, to get badly needed foreign currency. With those few words I should like to support what has already been said on this Amendment.

THE EARL OF LYTTON

Although I have complete sympathy with the objects of my noble friend, Viscount Swinton, I find it impossible to support this Amendment, and I would like to give your Lordships my reasons. I agree that clearly we do not want the Central Authority to go in for manufacturing electrical plant on a large scale. But I am very much afraid that my noble friend's Amendment might have a more restrictive effect than he quite realizes. My noble friend has pointed out that some of the existing undertakings do today enjoy the power of manufacturing, and I would like to tell your Lordships how it is used. I would also like to say that if that use were to be restricted by the passing of this Amendment, I think the efficiency of the industry in the future might be impaired. The power has been used in the past by the interests concerned for such purposes as setting up a foundry to make their own spare parts, or setting up engineering shops for the manufacture of special parts which they use in their own plants. I am sure your Lordships will all appreciate the immense difficulty that there is, in these times, in obtaining spare parts, or in obtaining delivery of many other things of that kind in the circumstances which now exist. If you are going to take away from the Central Authority, who will take over the responsibility for generating electricity, the power to make these spare parts so as to ensure immediate delivery, you will be likely to promote inefficiency, because delays are instances of inefficiency. It would be very unfortunate to take away this power.

There is another reason why it would be unfortunate, and that is one to which the Lord Chancellor has referred. One use to which this power has been put in the past, arid which it is desirable to continue, is for experimental development. It is very desirable that this generating authority should have the power to manufacture on a laboratory scale for experimental purposes in order that they may secure the best development of electrical plant. As my noble friend's Amendment would have the effect of preventing any such manufacture, I think it goes further than he would wish and I believe it would have an unfortunate effect on the efficiency of the industry in the future.

LORD LUCAS OF CHILWORTH

trust my noble and learned friend, the Lord Chancellor, will reject this Amendment, for reasons which I will give. The noble Viscount, Lord Swinton, seemed to base his argument in support of the Amendment on the fact that no retailer with any sense goes into the manufacturing side of the business and, I suppose, vice versa. I would like to tell the noble Viscount that English industrial and commercial history abounds with examples of retailers having to go into the manufacturing business to prevent themselves being held to ransom by manufacturers, and of manufacturers who have had to go into retailing for a similar reason. I hope the noble Viscount will not be offended if I point to the great and glorious example of the co-operative societies who started as retailers and had to go into the manufacturing business. There are noble Lords sitting on the other side who hale had a like experience. I can assure pair Lordships that my hope is that the Central Electricity Authority will use this power as an offensive weapon. I will repeat what I said on the Second Reading of this Bill: "There is to field of consumer goods which has been so exploited as that of electrical fittings and electrical components."

The noble Lord, Lord Lloyd, advanced a reason why all the supply companies who have had powers of manufacture have not exercised them. The noble Lord will forgive me, but he rather naively did not mention the interlocking directorates between the supply companies and the component manufacturers, which I think is an all-sufficing reason. The noble Lord, Lord Wolverton, replied to the criticism I made upon Second Reading by giving some figures, but the figure the noble Lord did not give was what the lamps cost to manufacture. It is one thing to put forward reduction in price to the public, but what we would like to know—perhaps the noble Lord can obtain the information from the source from which he obtained his figures—is the progressive reduction in cost of manufacturing these lamps over the years, and then we can see the ratio of profit that was made. I would join with the noble Earl, Lord Lytton, in saying that it is necessary for the authority to have power to experiment; but experiment means something more than technical experiment, because of the close link between experiment and the cost of manufacture. I hope the Authority will use these powers to enable them to supply the electricity consumers with all the fittings and machines, including lamps, they want at bare cost prices, if the private enterprise manufacturing industry cannot supply them.

THE LORD CHANCELLOR

The Government take the view that it would be a mistake to omit this power. We think that this power must obviously he retained for the experimental purposes to which the noble Earl, Lord Lytton, referred. I agree with what has been said behind me by the noble Lord, Lord Lucas: it is difficult to see where experiment ends and production begins. Having said that, I do say quite frankly that we do not anticipate we shall have to go into large-scale manufacturing so far as one can perceive, at any rate for the next few years, except as a weapon of defence. We must have this power in case we find ourselves, as we think, hardly dealt with by rings. It is all very well for the noble Viscount, Lord Swinton, to say the seller is courtier and the buyer is king. Is the buyer the king today? When I look at prices, I am bound to say the seller is the king to-day. And if conditions remain as they are, it might possibly be that these manufacturers might—I do not say they would; I am not making an attack on them at all, but economic circumstances might be such that they might—charge higher prices in the full knowledge that if they did not sell at home they could sell abroad. It is essential that these powers should be given.

Nevertheless I am enabled to give your Lordships this assurance. I am not dealing now with the small manufacturers, but so far as large-scale manufacturers are concerned, it is not intended that this power will be used except where danger of such practices as I have referred to arise. If there are no objectionable practices these powers will remain in abeyance, but if there are grounds for supposing that we are not getting things we require on reasonable terms, as cheaply as we ought to get them, then we shall hold these powers in reserve, and I think it might well be that the mere fact that we have these powers may make it unnecessary ever to use them. The analogy of the Coal Board might be prayed in aid. They were given power to manufacture goods "which can advantageously be produced … by reason of their having materials and facilities for their production."

If it be argued that this power is new and unnecessary, I would say that the Central Authority ought to possess the same powers as those of the industry into whose shoes they are stepping, and the fact that that industry did not find it necessary to use these powers must be remembered in conjunction with the fact—and I say this in no objectionable way—that the relationships between these people and the manufacturers were very close and friendly. I do not anticipate we shall have to use these powers—I devoutly hope not—but I feel quite certain that we must have them, and the fact that we have them is the very best augury that they will not have to be used.

VISCOUNT SWINTON

The noble and learned Viscount, the Lord Chancellor, has spoken very reasonably on this subject and I find myself a great deal more in agreement with him than with the noble Lord, Lord Lucas. I agree with Lord Lytton that no one would wish to take away power to manufacture bits and pieces and to do foundry work which is essential; I am concerned with large-scale manufacture. I am sure it is not worth our falling out about this. Personally I regard it as entirely academic. I am sure the power will not be used, and if the noble and learned Viscount likes to have it because somebody believes it is a stick, there it is. It is a seller's market to-day but I do not think it is going to remain a seller's market. In fact, already the reaction is beginning to set in, and that was one of the reasons why it was so important to get on early with the export drive. I do not think this power is a real stick. If we ever have to deal with a cartel we shall agree that the right stick is not bad manufacture but good publicity and, if necessary, legal action following upon that publicity. If what I have read in the Press is true and if the noble Lord, Lord Lucas, is to adorn one of these undertakings, I hope he will not again engage in offensive manufacture because then our electricity will certainly cost us more.

LORD BARNBY

I hardly feel satisfied with the reassurance which the noble and learned Viscount has given, although I appreciate the reassuring way in which he has put it. I regard this as an important matter of principle, and would like to see if some compromise might not be possible between the effective way in which the noble Viscount put the Amendment, and the assuring way in which the noble and learned Viscount, the Lord Chancellor, replied to it. I take it that this applies in the main to the generating side and not to the distribution side. It is, therefore, something which would apply to this very large group of vital manufacturers in this country who deal with the production of heavy generating electrical equipment. I put this angle to it. My mind does not go back to the Act of 1926, but the noble and learned Viscount intimated that the contemplated authority had the powers now under discussion. I have not the recollection whether they have those powers under the Act of 1926. If they have, as one who has sat on the Electricity Board since that date, and has seen the large amount of electricity equipment purchased, and seen the operation of it, I doubt very much whether there would ever be the necessity for invoking this clause in the Bill as a defensive measure.

If it does indicate insistence on the part of the Government to retain the power of manufacturing this heavy equipment. I would like to remind the Committee that it is the progress which has been made in generation in this country, through centralized purchase, and rendered possible by the wisdom of Parliament through the Act of 1926, that has put the heavy generating equipment industry of this country into the forefront of the world, and actually pre-eminent even over the United States and Germany. With due respect to the noble and learned Viscount, I think your Lordships should give consideration to this thought: that to promote legislation which gives the Government power to manufacture this most intricate equipment—I am not entering on controversial ideologies, but merely stating facts—and to tell the world in which we enjoy pre-eminence that the Government are contemplating entering into manufacture, might involve the country in great danger. The noble Earl, Lord Lytton, speaks with a wealth of knowledge and experience, and is entitled to every respect in these matters, but fully realizing the anxieties which he expressed, I suggest that the two points on which he laid emphasis are no justification for his misgivings about the Amendment we are discussing.

With regard to the point of experimentation, with due respect to the noble and learned Viscount, I suggest that the Industrial Organisation Bill which this House recently passed would provide for that, because the Government would have powers under that Act to manufacture anything of an experimental character. With due respect to the noble Earl, Lord Lytton, I suggest that the two points he made, fundamental as they are, are met. If it be true that the Government have no intention of going into the manufacture of generating equipment (certainly there will be no need for it from a defensive point of view such as has been suggested), then instead of the word "manufacture" we might insert "reconstruct." That would meet all cases which could be technically contemplated, such as the noble Earl has very properly put, and would give effective powers to the Government for anything that might be required. Then paragraph (a) would read as follows: to reconstruct electrical plant and manufacture electrical fittings.

THE EARL OF LYTTON

I would remind the noble Lord, Lord Barnby, that I am concerned not only will repairs, but with the manufacture of small parts in the foundries and workshops. I do not know whether he is suggesting words which will meet that. If so, the Amendment is a different Amendment from that which we are discussing. If the effect of the Amendment of the noble Viscount, Lord Swinton, is to prevent the Government from having any powers of manufacture, I think it would be contrary to efficiency. If there is any way in which our interests can be satisfied, I shall be only too happy to consider it.

LORD BARNBY

If the words were "to, reconstruct electrical plant and electrical fittings," it would get over any material point that has been made.

VISCOUNT RIDLEY

I hardly think that that would lead the industry to carry out the work which was necessary, apart from ordinary experimental and development work. I have sympathy with the meaning of this Amendment, but I would he very sorry to see it passed in it present form. I think in what the noble and learned Viscount, the Lord Chancellor, said, he covered the question of the manufacture of fittings, but I do not think he referred to the question of plant. If it were fully understood that the intention of the Government, in the operation of this Act, was not to seek to manufacture plant from the beginning, I think that would probably remove many difficulties. I cannot imagine that the Central Electricity Authority would contemplate doing so. If the noble and learned Viscount could say that he would include that in the same category as the fittings to which he referred, I should have thought the point would have been met.

THE LORD CHANCELLOR

I should have thought that that was an a fortiori case, though equally even in regard to plant you might try some experiment in your laboratories to see whether you had got something.

VISCOUNT SWINTON

I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

3.49 p.m.

LORD HAWKE moved, in paragraph (c) of subsection (3) to leave out "or in connexion with." The noble Lord said: This Amendment, and the next but one on the Marshalled List, are simple Amendments designed to remove what is probably a drafting error in the Bill. If your Lordships read the powers which the Bill gives to the Central Authority, I think you will agree that the words we seek to strike out are quite unnecessary. The Authority have got every conceivable power in the world without those words. I think the words have crept in during drafting somewhere in Whitehall, where it is very much easier to put everything you can possibly think of rather than to get permission from a busy superior to leave out one jot or iota. I beg to move.

Amendment moved— Page 4, line 13, leave out from ("for") to the first ("the") in line 14.—(Lord Hawke.)

LORD TWEEDSMUIR

I would just like to add a word or two to what my noble friend Lord Hawke has said. The point of this Amendment is so crystal clear that it needs no explanation. As it stands, this clause is far too loosely worded. Even if the Amendment is accepted the subsection will still be very broad in its interpretation. I think that this Amendment is in all conscience wide enough and it gives a concrete measure of coherence to the clause, because the duties which are to be defined are those laid down and listed in paragraphs (a) and (b). As at present worded it might be open to the widest interpretation, even to the extent of taking over and running a restaurant merely because it had electrical plants.

THE LORD CHANCELLOR

I do not think there is any drafting error about this. Indeed, I think it is a very good piece of drafting, because it has shortened what we had in the Transport Bill into a very much more convenient form. Might I ask your Lordships to consider such a thing as the building of houses for your workers? That is not directly for the promotion of your duties, but on the other hand, it is quite plainly in connexion with your duties, because you cannot get happy workers if you house them badly or make them come a long way to work. This paragraph is to enable housing loans to be granted so that people may get proper housing facilities. Observe how we did this in the Transport Bill. Instead of using this convenient form—I am afraid I have not the reference to the clause at the moment, but the noble Lord will, I am sure, find it—we specified in detail the various powers which it was desired that the Transport Commission should possess. There the catalogue took up nearly two pages. When we discussed that Bill your Lordships' ingenuity—which knows no bounds—suggested that in our catalogue of powers we ought to leave out two things and you asked us to put in, and we did put in, two further heads. The first was to provide houses, hostels, and other like accommodation for persons employed by the Commission, and the second was to make housing loans to persons employed by the Commission to assist them to acquire housing accommodation. I have no doubt the noble Lord has that in mind.

That was the way in which it was done in the Transport Bill, and I think the way it is done here is much better. General powers are set out and then paragraph (c) says: to carry on all such other activities as it may appear to the Authority to be requisite, advantageous, or convenient for them to carry on for or in connexion with the performance of their duties… . That is how we have done it here and that is how we have saved three pages. Although we have by this means given your Lordships no adequate scope for ingenuity, I hope the draftsmen will be awarded high marks for having adopted this much shorter form. I am quite sure that the words "in connexion with" are necessary to get the things I have in mind. I have no doubt that if your Lordships look through the catalogue in the Transport Bill you will find many other powers which might not come under the words "or convenient for," but which would come under the words "in connexion with." Therefore, I must ask your Lordships to retain these words.

LORD HAWKE

In reading this clause—and of course I am subject to correction here—I thought the words "or convenient for" would cover precisely those things which the noble and learned Viscount catalogued. He, of course, is a master of interpretation of Bills and if he assures me that in fact that is riot the case I certainly will not press this Amendment.

THE LORD CHANCELLOR

I think that is nor the case, because "convenient" comes before the preposition "for."

LORD HAWKE

In that case I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

3.56 p.m.

VISCOUNT RIDLEY moved to insert after subsection (6): (7) The Central Authority shall consult with each area board as to the operation of the generating stations within the area of that area board and where it is shown that the operation of such stations can be carried out efficiently and more economically by the area board the Central Authority shall, subject to the approval of the Minister, authorize the area board to carry out such operation on behalf of the Central Authority.

The noble Viscount said: This Amendment is a suggestion that the Central Authority should, wherever possible, delegate the operation of generation stations to the area boards in whose areas they are. First, I should say that, although on principle I would have liked to have seen it put rather more strongly than this, one must accept the fact that the geographical arrangement of the industry under the proposed fourteen area boards—or indeed any other—would not allow of such a system to be put into force completely at present. I remember that when this Bill was first introduced it did not go quite so far as it now does, and to that extent I think it is a little better since it has been discussed in another place. There was some discussion on a similar Amendment to this, and there was a certain amount of Government opinion expressed, I think, by the Parliamentary Secretary to the Ministry of Fuel, saying that of course as the Bill now stands it would be possible for the Central Authority to delegate generation. I think he also said that the Government envisaged that that would not be the ordinary arrangement but that they would in fact prefer to separate the tai o. As at present the normal arrangement is not for the Central Electricity Board to generate themselves, but for power companies to do so, so I suggest that we should follow the same principle in future. That does not, of course, write off entirely the Central Authority as the controlling and guiding interest and also as the owner and operator of the grid system.

The reasons for suggesting the complete integration of generation and distribution in the area so far as possible are in practice very strong. In parts of the country where this system operates—and here, I must confess, I am only familiar with one in detail, but there are ethers which do to some extent approximate—you fir d always that the generating station is a large centre of distribution—as it is bound to be—at present owned and operated by the same undertaking. There is a common staff engaged on the supervision and running of the station and the supervision of the distribution system, as well as a common system supply of spares which are required for both parts of the undertaking. Further, there is the simplification of such matters as accountancy arrangements for the pay of all the men working on the same station and so or. Those are minor matters, but I mention them to establish the point that at present the two are completely integrated in detail.

Now as to the commercial side of the activities, which in this connexion is important, one must remember that the sale of electricity to industry forms more than half of the supply of energy in this country and it is the sale of energy to industry which dominates the commercial considerations I have in mind. If it is possible in selling so to adjust the term; on which the current is taken that it work:; in with the remainder of the generating programme, it is clearly more efficient and economical to do so. And one must remember that if the electric supply industry in future cannot supply current to industry at the terms and on the conditions needed, there will still be a competition whereby industry can obtain power from other sources by the installation of their own plant, using process heating and so on; so that each area board must have a great deal of commercial flexibility in their operations. They must have direct access to the power stations in the area, so that they can completely co-ordinate the whole process from start to finish.

I should be interested to know why—accepting the principle of the area boards and the Central Authority—the Government have framed this Bill so as to separate the generating and the distributing side of the business. I see no advantage in it, keeping in mind, of course, the influence of the present Central Electricity Board, which may well change over and be replaced by the Central Electricity Authority; and without any further explanation as to the point of this change, bearing in mind the very considerable upset, inconvenience, increased expenditure, and difficulty in operating the business I feel that it is not justified. There are of course cases in which it cannot directly be done at the present time, and so the Amendment is framed to make it as easy as possible for the Central Electricity Authority to do this delegation. They are not to be in a rigid framework, and they are left with freedom to operate different areas in different ways. I feel convinced that that is the right way to operate the industry.

I should be sorry if the Central Authority took on to itself too much detailed control. Perhaps the Central Electricity Board may at times have wished that they had more control than they have had up to date, though I am not saying that they have shown any signs of doing so. I believe their influence has been very wisely exercised, and the sort of arrangement up to now might well be a model for the new authority to follow. At the same time I feel that the influence of the Central Electricity Board may rather be in the direction of central control. I hope very much that your Lordships will agree that we should put this Amendment in, so as to keep before the Central Authority the importance of delegating where possible, and also of making conditions suit each area, different as their requirements may be. I beg to move.

Amendment moved— Page 5, line 14, at end insert the new subsection.—(Viscount Ridley.)

THE EARL OF LYTTON

I should like to add one word in support of this Amendment. It is rather a technical matter perhaps, but your Lordships may not all realize how close is the connexion between generation and distribution of electrical current. Electricity is a commodity which it is not possible to store. Every time one of your Lordships turns on a switch you are in fact connecting up with the current which comes straight from a generating station. It may have gone through a different process in the meantime, but there is no possibility of completely divorcing distribution from generation. I rather question the wisdom, therefore, of requiring that one authority should deal exclusively with generation and another exclusively with distribution. They are very closely connected. However, the policy of the Bill is to set up the Central Authority as a generating body and the area board as distributors and I accept the Bill in its general form.

But there may be certain areas in which it is definitely more economical and more efficient that the area board should themselves generate the current which they use, and the Central Authority themselves may quite well realize that it is the case that under the Bill as it stands there is no power of delegation. All my noble friend asks for is that in those circumstances, where they exist, where all parties are agreed, the Central Board should have the power of delegating to the area boards. I think it is an eminently sensible and practical suggestion and I hope your Lordships will accept it.

VISCOUNT ELIBANK

I, too, should like to support this Amendment. I think it is a most practical suggestion, because the centralization of all generation in one body will not be for the good of the industry as a whole. The power stations, scattered as they are all over the country have for that reason been at a great advantage in the distribution as well as the generation of electricity. It should be remembered that industries are very dependent, in many parts of the country, on being able to get their power practically on the spot, and not only that, but to be able to negotiate agreements with those who understand the situation on the spot. There are, as we know, many kinds of industries in the country, and those industries have a different way of taking their supplies. Where one agreement for supply on a certain basis is apposite, in the case of another it is not so; consequently the nearer the industry is to the generator, in so far as fixing up these agreements is concerned (owing to the fact that they understand local conditions in a way that the Central Authority in London can never do), the better it will be for the industry in the future. All that my noble friend is asking is a permissive power, not a mandatory power, to enable this to be clone, to make the whole thing more flexible, not to make it rigid at the centre. I feel sure that the Central Electricity Authority, when it is established, will be very grateful for a power like this in their possession which they will be able to administer where they might think fit.

LORD WOLVERTON

I also should like to support this Amendment which is one of great importance. Subsection (6) says: Subject to the approval of the Minister, t he Central Authority may authorize any area hoard to exercise or perform on behalf of the Central Authority any of the functions of that Authority. My noble friend Viscount Ridley said that this goes a bit further and says "shall, subject to the approval of the Minister." I feel it is a great mistake. There is so much inter-connected between the distribution and the generation, sides. In many cases it makes it extremely difficult for the distribution side to carry on efficiently, because they have to keep in close liaison with the generation side. You have to try to keep an even curve all the way along, or you cannot get the supply you want. If you entirely divorce generation from distribution, I feel it will he a very great mistake, and I think the Central Authority should carry out the policy and, with the Minister's permission, wherever possible, especially in industrial areas, delegate the powers of generation to the area boards.

VISCOUNT HALL

The noble Lord who moved this Amendment and the three noble Lords who have supported it spoke with great authority as a result of many years of practical experience on the generating and in some cases, think, on the distributive side. The purpose of the Bill, of course, is to set up the two separate kinds of organization. The first is the Central Authority, for the purpose of controlling generation; secondly, there is the area board set up for the purpose of distribution. I am rather interested in the arguments which have been used with regard to the desirability of linking the one with the other. I have had some practical experience as a member of a local authority who acted as undertakers for the distribution; we purchased from a private company and experienced little difficulty either with the sale of electricity after purchase from the company generating, for the purposes either of lighting or power in the home, or indeed of bulk supply to industrialists. f am not, for a moment, suggesting that my experience is comparable with the experience of any of the noble Lords who have supported this Amendment, but we do not want to go to the practical experience of noble Lords to deal with the advantages or disadvantages.

After very close consideration of this matter the Government decided on this kind of set-up for the purpose of controlling this industry. The Government are supported in this by the fact that the. Weir Committee, who reported in 1925 and whose Report led to the setting up of the Central Electricity Board by the Act of 1926, definitely recommended that generation and main transmission should. be separated from distribution. There was an impartial inquiry and a Report by an impartial Committee. I wonder, it this Amendment were carried out literally, how far the area boards could go, for it must be remembered that the 142 selected generating stations which were controlled and are now controlled by the Central Electricity Board are all within areas which will be controlled by area boards for distribution. Does it mean that there should be a kind of inquiry as to the economic generation of electricity for each of those selected generating stations, or, indeed, for many others from whom the Central Electricity Board purchases electricity?

After all, it must be remembered that this is a great national scheme. It may be, as the noble Viscount, Lord Ridley, rightly said, that there are certain areas where you can generate electricity very much more cheaply than in other areas. Indeed I have been for a very long time. an advocate of confining the power-producing industries, so far as possible, to sites as near the pit top as possible.. Instead of conveying coal from Newcastle to London for the purposes of generating electricity in London, and then conveying electricity through the grid back from London to Newcastle in power of an entirely different form, in my view—and in the view of the Government—it is absolutely imperative that the Central Authority should be responsible for the generation of electricity. I think the area boards, if they do their job and do it well, will have as much as they can do for the purposes of looking after the distributive side and developing the distributive side into areas where the people are clamouring for a supply of electricity.

I have heard the arguments in favour of the Amendment and have taken into consideration the point of view of the Government on this matter, which has always been that the present arrangement under which the Central Electricity Board exercise a supervisory control over the operations but do not own the stations, is wrong. In particular, it leads to serious disadvantages, both from the point of view of the planning and construction of generating stations where they are most needed and in regard to distribution of staff. I am sorry that I cannot accept this Amendment, and I cannot see that a case has been made out for it. Unless you are going to start biting into the powers of the Central Authority and adding to the powers of the area boards—which, I repeat, may well have sufficient to do if they are to carry out their work and the job of distribution—it is much better that it should be carried on in the way I have indicated. Therefore, I ask the noble Viscount if he will withdraw his Amendment.

VISCOUNT RIDLEY

I am sorry that we do not seem to agree on this point. I must confess that I definitely want to bite into the powers of the Central Authority, and so, I am afraid, we are not likely to get agreement on it. I feel that I cannot press this Amendment much further, but before I withdraw it, I should like to make a comment on the noble Viscount's explanation as to why the Government had decided that they would deliberately separate generation and distribution. The noble Viscount said in his answer that they were anxious to give generation to the Central Authority for the purposes of planning and the construction of generating stations. That is what I understood his reply to mean. Of course, what I am proposing in this Amendment does not affect the planning or construction of stations, because it would still leave the Central Authority as the owner of the stations, as the people who build the new ones, as the people to decide where they will be and who will be generally responsible for the arrangements of them within the industry.

The point I am trying to make in this.; Amendment is that operation should be definitely a function of the area boards. The most successful results are achieved by having the work of distribution and generation together. The noble Viscount has referred to the practice of buying electricity from a power undertaking, and as a supply authority selling it. That is a normal occurrence. But one of the things which I understand this Bill does is to enable us to abolish that very practice. It is to take away the small undertakings and combine them into large areas, with large area boards which can cover a big area with a good deal of responsibility.

I believe that area boards would be strengthened by having the generation under their control for operational purposes, and I believe that the experience of the industry now demonstrates that the noble Viscount is not quite correct in saying that they have enough to do in looking after distribution without having to look after the generation as well. I think it is a very great pity that the Government have taken such a strong line about this, because I think it will make the efficient operation of the industry more difficult, and it will prevent the Central Authority from having the advantage of co-ordinating the industry in the way that they do now. However, I feel that there is nothing more I can do than to withdraw the Amendment, and I beg leave to do so.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

Clause 3:

Constitution of Central Authority and Area Boards.

3.—(1) The Central Authority and every area board shall be a body corporate with perpetual succession and a common seal and power to hold land without licence in mortmain.

(2) The Central Authority shall be constituted as follows:—

1. (a) the chairman and not more than six other members shall be appointed by the Minister from amongst persons appearing to 73 him to be qualified as having had experience of, and having shown capacity in, industrial, commercial or financial matters, applied science, administration, or the organisation of workers;
2. (b) four other members shall be appointed by the Minister from amongst the persons for the time being holding the office of chairman of an area board, and such appointments shall be made from the area boards in rotation; and
3. (c) there shall be one other member who shall be the person for the time being holding the office of chairman of the North of Scotland Board.

(3) Every area board shall be constituted as follows:—

1. (a) the chairman and not more than seven other members shall be appointed by the Minister from amongst persons appearing to the Minister to be qualified as having had experience of, and having shown capacity in, electricity supply, local government, industrial, commercial or financial matters, applied science, administration, or the organisation of workers; and
2. (b) there shall be one other member who shall be the person for the time being holding the office of chairman of the Consultative Council established under the following provisions of this Part of this Act for the area of the area board.

(5) The Minister shall appoint one or more of the members of the Central Authority to be deputy chairman or deputy chairmen of that Authority, and shall appoint one of the members of each of the area boards to be deputy chairman of that board.

(6) There shall he paid to the members of the Central Authority and to the members of each of the area boards such remuneration (whether by way of salaries or fees) and such allowances as may be determined by the Minister with the approval of the Treasury, and, on the retirement or death of any member in whose case it may be so determined to make such provision, such a pension to or in respect of that member as may be so determined.

Any such remuneration, allowances and pensions as aforesaid shall be paid by the Central Authority or, as the case may be, the area board concerned.

(7) The Minister may make regulations with respect to—

1. (a) the appointment of, and the tenure and vacation of office by, the members of the Central Authority and any area board;
2. (b) the quorum, proceedings, meetings and determinations of the Central Authority and any area board;
3. (c) the execution of instruments and the mode of entering into contracts by and on behalf of the Central Authority or any area board, and the proof of documents purporting to be executed, issued or signed by the Central Authority or any area board or a member or officer thereof; and 74 (d) any other matters supplementary or incidental to the matters aforesaid for which provision appears to the Minister to be necessary or expedient.

(8) Subject to the provisions of any regulations made under the last foregoing s sub-section, the Central Authority and every area board shall have power to regulate their own procedure.

4.22 p.m.

LORD LLOYD moved, in paragraph (a) of subsection (2), after "not," to insert "less than four or." The noble Lore. said: This Amendment is one which I hope will commend itself to the no )le Viscount. It is a simple Amendment and I think it puts into the Bill what the Government themselves would like to have in the Bill. It concerns the co n-position of the Central Authority. If noble Lords will look at page 6 of the Bill, they will see that the maximum possible number who can sit on the Central Authority would be twelve people, consisting of a chairman and not more than six other members appointed by the Minister, four chairmen of area boards and a chairman of the North of Scotland Board.

If noble Lords will look at paragraph (a) of subsection (2) they will see that the Minister can appoint "the chairman and not more than six other members"—which means, in other words, that he could appoint a chairman and only one other member. We feel that this Central Authority are a very important body, with a big job to do, and if noble Lords look at the Bill they will see that the qualifications required of members of this authority, the interests that they have to represent, are very extensive. There is one interest which is not in the Bill, but which I hope we are going to put in shortly; that is the interest of electricity. We feel, therefore, that it is most important that this Authority should be a Board consisting of a certain number of people. We do not wish to see this power of the Minister to appoint only—as he can dc, although I have no doubt that he would not do it—a chairman and one other.

When this matter was raised in another place the Minister resisted a similar Amendment, on the ground that h wanted to keep, very reasonably I think, a couple of vacancies up his sleeve, in case he could not get hold of the people he thought desirable at the right moment I am sure that that is a reasonable desire but this Amendment meets the Minister's wishes on that point by saying that he shall appoint a chairman and not less than four other members, and no more than six. I think this a reasonable and a simple Amendment, and, as the noble Viscount who is to reply is himself so very reasonable, I hope he will be able to accept it.

Amendment moved— Page 6, line 3, after ("not") insert ("less than four or").—(Lord Lloyd.)

VISCOUNT HALL

This Amendment is a very reasonable Amendment; we like it, and therefore we will accept it.

On Question, Amendment agreed to.

VISCOUNT HALL

The next Amendment is moved for the purpose of dealing with an Amendment which is on the Order Paper and moved by the noble Lord, Lord Teynham. We were quite prepared to accept that Amendment, but we thought it was in the wrong place, and I suggest that the Amendment should be inserted in line 6 of page 6 in the same terms as would have been moved by the noble Lord. I beg to move.

Amendment moved— Page 6, line 6, at end insert ("the generation and supply of electricity").—(Viscount Hall.)

LORD TEYNHAM

I am grateful to the noble Viscount for setting down his Amendment, which in fact covers my Amendment on page 6, line 7. I think the position that he has indicated is a better position than mine, and therefore I shall not move my Amendment.

VISCOUNT ELIBANK

As I was supporting Lord Teynham on the other Amendment, I wish also to express my thanks to the noble Viscount for accepting it in this place. The reason why I want to add a word to what Lord Teynham has said is that this question of representation on the Central Electricity Board by someone representing the supply and generation of electricity is a very important one. After all, the Central Electricity Board are to have control of the whole of the generation of electricity in the country. What I was going to suggest, if our Amendment had been moved, was that not only one but at least two persons understanding the generation and supply of electricity should be placed on that Board. At the present time we have a Central Electricity Board consisting, I think, of eight members—although I am open to correction—of whom all but two or three are electrical engineers. Consequently, the business of the Central Electricity Board has run extremely smoothly and extremely efficiently in a very technical industry. I hope that the noble Viscount will suggest to the Government that they put at least two representatives with electricity experience upon the Central Electricity Authority.

On Question, Amendment agreed to.

LORD RENNELL moved, in paragraph (a) of subsection (2) after "commercial" to insert "agricultural." The noble Lord said: It may be convenient to the Committee, and I have arranged with Lord Hawke, that I should discuss this Amendment with that at page 6, line 24, which also stands in his name. The Amendments are to include in the composition of the Central Electricity Authority, and in the area boards, a representative of agriculture to safeguard the agricultural industry. It is, of course, in the area boards that his presence will be most desirable, but I submit that he would also be desirable in the Central Authority, to ensure that the highest authority should have an advocate of the agricultural industry in their composition.

Amendment moved— Page 6, line 7, after ("commercial") insert ("agricultural").—(Lord Rennell.)

VISCOUNT HALL

I want the noble Viscount, Lord Elibank, to know that I will convey to the Minister his remarks about the need for additional members on the Central Board with practical knowledge of the industry. I am sure he will appreciate the difficulty, in view of the fact that in the Amendment moved by my noble friend Lord Rennell we are asked to add this other qualification. I think it can be said that the Minister has a fairly wide selection, and I have no doubt that it is his desire to see that the persons who will be appointed to the Board have the necessary qualifications to see that both the Central Authority and the area boards are well run and run by men with knowledge of all branches of the industry.

I think that a case can be made out for a representative of the agricultural in- dustry to be considered for a seat upon the area boards. I am not prepared to enter into any agreement, but perhaps the noble Lord, Lord Rennell, seeing that the proposal for an agricultural representative on the Central Authority cannot be accepted, will be satisfied with an assurance that a place for an agricultural representative might well be considered in connexion with the area boards? It will be understood that I cannot accept his Amendment, at page 6, line 7, after "commercial" to insert "agricultural," but I can accept his Amendment to insert "agricultural" after "commercial" in line 24, which will mean that an agricultural representative will be considered for a seat upon the area boards. In those circumstances I trust that the noble Lord will not press this first Amendment.

LORD RENNELL

I am much obliged to the noble Viscount. I agree with him and I meet him on that point, I think there is a better case to be made for an agricultural representative on the area boards than on the Central Authority and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD RENNELL moved, after subsection (2) to insert as a new subsection: (2) Each of the members of the Central Authority appointed under paragraph (b) of the last foregoing subsection shall hold office for a term of four years and no more. Provided that of the four members appointed upon the constitution of the area boards one shall be appointed to hold office until the first anniversary of the date of his appointment and shall then retire, one shall be appointed to hold office until the second anniversary of his appointment, and one shall be appointed to hold office until the third anniversary of his appointment.

The noble Lord said: This Amendment provides that the four members appointed upon the constitution of the area boards shall retire by rotation. The practice of members appointed in that manner retiring by rotation so as to preserve continuity has already been accepted by the Government in respect of other and similar boards, notably the Board of the Bank of England and the Public Works Loan Board. I do not think that the desirability of continuity needs much argument. If one of each of the four members retires until the rotation is complete at the end of the fourth year then each of the members will have a full four years of office and they will each retire one at a time after a full four years' service.

I beg to move.

Amendment moved—. Page 6, line 17, at end insert the said new subsection.—(Lord Rennell.)

LORD HAWKE

In addition to the point made by my noble friend, Lord Rennell, there is this to be put forward. As the Bill stands, the Minister may make regulations regarding the tenure of office of the Central Authority, and those regulations could, of course, cover the terms of office of the area board chairmen serving thereon. But if the Minister can make a regulation he can unmake a regulation, and I submit that it is very much better to have down in black and white in the Bill something which each of the chairmen of the area boards knows to be fixed and immutable. However much they may antagonize anyone or toady to anyone, they would know that it would mean no difference in their tenure of office. They are there for a fixed period of four years and then they have to clear out. In the circumstances I hope that the noble Viscount will accept the Amendment.

VISCOUNT HALL

Although in principle it is recognized that there is considerable value in avoiding the simultaneous retirement from the Central Authority of all tae four chairmen, it is considered that tae arrangements envisaged under this new subsection would not be satisfactory, since they would give a period of service of only one year to one of those chairmen, a two-year period of service for the second, and so on. These periods, it is suggested, are too short. But there is a good deal of force in what has been said, and if tie noble Lords will agree to withdraw the Amendment I will consult with them as to the framing of suitable words for insertion in the regulations, to cover the point upon which I think noble Lords feel that they ought to have some guarantee.

LORD RENNELL

I am very much obliged, but I would like to point out that in the case of two of the examples I quoted a certain proportion of the appointees will in fact serve only for one year. So the argument which is applicable in this case is applicable in the other case also. But in view of the assurance which the noble Viscount has given, I shall be very glad to withdraw the Amendment on the understanding that a similar Amendment will be inserted hereafter.

LORD HAWKE

Perhaps in discussing the matter with my noble friend, the noble Viscount will remember that even under our Amendment the last area board chairman to get on to the Central Authority will take eleven years to get there, and we do not wish to see that period made any longer.

Amendment, by leave, withdrawn.

VISCOUNT HALL moved, in subsection (2), at the end, to insert: Provided that, until the area boards have been established, the Central Authority shall be deemed to be properly constituted notwithstanding that the members to be appointed under paragraph (b) of this subsection have not been appointed or have not all been appointed. The noble Viscount said: I beg to move this Amendment which I think covers a point made by the noble Viscount, Lord Elibank, and the noble Lord, Lord Lloyd, in the Amendment which follows.

Amendment moved— Page 6, line 17, at end, insert the said proviso.—(Viscount Hall.)

LORD LLOYD

The noble Viscount suggested that this Amendment covered the point of an Amendment which is down in the name of my noble friend, Viscount Elibank, and myself. I do not think that is so. That Amendment is parallel to one which I moved recently.

VISCOUNT ELIBANK

Am I to understand that the Amendment down in the name of my noble friend, Lord Lloyd, and myself is regarded as a reasonable one? Lord Lloyd's Amendment with regard to the minimum number of members for the Central Electricity Authority was accepted as a reasonable Amendment.

VISCOUNT HALL

I am afraid that what I said just now was wrong. This Amendment does not cover the points in the Amendment to be moved by my noble friends, Viscount Elibank and Lord Lloyd.

On Question, Amendment agreed to.

VISCOUNT ELIBANK moved, in paragraph (a) of subsection (3), after "not" to insert "less than five or". The noble Viscount said: The reasons relating to this Amendment have been put very clearly by my noble friend, Lord Lloyd, speaking in regard to the appointment of a minimum number of members for the Central Electricity Authority. This Amendment is to have a minimum number of members for the area boards. I think that it is quite a reasonable suggestion, and I hope that the noble Viscount will accept it.

VISCOUNT HALL

It is accepted.

On Question, Amendment agreed to.

4.40 p.m.

VISCOUNT SWINTON moved, in paragraph (a) of subsection (3), after the second "the" to insert "Central Authority with the approval of the". The noble Viscount said: I hope the Government will be equally reasonable over this Amendment, which is one of even more importance. The object of this Amendment is to empower the Central Authority and not the Minister to appoint area boards. There is no dispute between us that the Minister will have to appoint the Central Authority. I can shorten the discussion on this because we have already discussed it at great length on the Transport Bill. On the Transport Bill your Lordships will remember this House decided that the Transport Commission shall have the appointment of the transport Executives, which are similar to the area hoards in this Bill. An even closer parallel is the parallel which emerged from the Coal Act. There the Minister himself proposed and Parliament agreed that while the Minister appointed the Coal Board, the regional boards, which are exactly similar to these regional boards for electricity, should be appointed not by the Minister but by the Coal Board. That was not an Amendment moved and accepted; it was the Minister's own idea. Therefore all the precedents are on the side of our Amendment.

I am bound to add also that the Minister himself supplied one of the strongest arguments by his extraordinary statement on the Report stage of the Bill that, when he came to make his appointments, in no circumstances would he appoint to a regional board a man who had been opposed to nationalization, when most of us thought the only possible test to apply was whether a man was the best man to do this highly responsible and technical job. The First Lord of the Admiralty did his best, and I sympathize with him, to defend the Minister when he replied in the debate on Second Reading and the argument he used was a rather curious one. I have been refreshing myself from the text of Hansard. He said that the Minister had appointed quite a good Coal Board. I never said he had not. We may have all our opinions of how good or bad the Coal Board is and how successful it is in getting coal. But what we are concerned with here was what the Minister was going to do in appointing these subsidiary boards. The First Lord said the Minister had made a very good Coal Board and were not the appointments to the district coal boards very good ones? I dare say they are; I do not say they are not. But it was not the Minister who made the appointments to the district coal boards. It was the Coal Board. Let us have the same system under this Bill.

The only argument which I think will deflect your Lordships from the decision taken on the Transport Bill and that the Government themselves took on the Coal Bill would he that there was something so different between the relationship of the Central Authority here to the regional authorities as compared with those in relationship under the Coal Act or under the Transport Bill, that we ought _to make the whole system of appointments completely different. If your Lordships will follow the terms of this Bill you will see from the whole structure of the Bill how similar are the relations and how wide are the general powers of the Central Authority. Take Clause 1. The Central Authority is to maintain an efficient, co-ordinated and economical system for electricity supply for all parts of Great Britain —and subsection (c) lays down—exactly parallel to the main Coal Board and to the Transport Commission—that the Central Authority is to co-ordinate the distribution of electricity by area boards and to exercise a general control over the policy of those boards. You cannot have a closer relationship between the broad policy and the executive action to be carried out by the boards.

Then Clause 2 says that the Central Authority are to control the functions of the area boards as regards research. When the noble Viscount, Lord Ridley, moved a previous Amendment, the importance of their powers were then used by the Government to invite Lord Ridley to withdraw the Amendment. The Central Authority can authorize any area board to exercise any of the functions of the Central Authority on their behalf. In Clause 6 the Central Authority may give directions to area boards for co-ordinating distribution and for exercising control over policy. Clause 37 gives the Central Authority power to direct area boards as regards the fixing and variation of tariffs. There is not a thing of any importance where the real policy and the control of policy is not vested in the Central Authority with these subordinate bodies as their subordinate agents. I am not arguing whether it is right or wrong, but that is the structure of the Bill. The Central Authority are to give directions about fixing of tariffs, but in order to make quite sure their orders are carried out the boards must comply with the directions given to them by the Central Authority, whether general or specific.

Again they have no independence oil finance at all. As a matter of fact, W2 have been pressing the Government to give them a little more elbow room on even the sort of day-to-day work of finance. Just observe what happens. The Central Authority may require any area board to contribute towards the satisfaction of the obligations of the Central Authority that are set out in Clause 41. I will not go through them, but they are all the obligations which the Central Authority have to meet They have no money of their own, but they make this great: issue of hundreds of millions of electricity stock. That stock is to have its interest paid upon it; we understand that: somewhere in the dim and distant future it may be redeemed, and, therefore, a redemption fund has to be created. But are these area hoards to have any say about that?

Not at all. It is to be the Central Authority who are to tell each and every area board that they shall each year contribute so much; and, indeed, unless we vary the Bill, they may tell one area board that they have to contribute three times as much in proportion to their neighbour. They can favour one, and prejudice another. So that all that obligation and that power lie with the Central Authority.

Then, the Central Authority may create their own reserve fund. Not out of their own money, but out of the money of the area boards. The Central Authority will tell the area boards how much they are all to contribute to that. They are not even to manage their own reserve funds; the Central Authority have jurisdiction over the size of the reserve funds, and over the management of the reserve funds. In Clause 44, in case any small matter had escaped the eagle eye and the vast control of the Central Authority, where any of the area boards have an excess of revenue the Central Authority are to tell the area board how it is to be dealt with. I must not call that excess of revenue "a profit." It is rather nice the way the word "profit" is most carefully avoided. Your Lordships observe the new terminology. We do not make a profit—and perhaps we shall not; after the speech of the noble and learned Viscount, I think it is probable that we shall not—but if we do make a profit, we must not call it a profit; we call it "an excess of revenue." And, as I say, that excess of revenue is not to be dealt with by the area board. The Central Authority are in each case to tell the area board how their excess of revenue—in coarer language, their profit—is to be dealt with.

That is the structure of the Bill. Your Lordships will see that as in the case of transport—I am not sure that it is not even more than in transport or in coal—every time it is the Central Authority who are to have the jurisdiction over the policy, the conduct, and the finances of these boards. Be it right, or be it wrong, that is the structure of the Bill. In those circumstances, I say it would be most improper, as well as utterly opposed to every precedent which even the Government themselves have hitherto created, that the appointment of these area boards should not be vested in the Central Authority but in the Minister. There can only be one reason for vesting this authority in the Minister, and that is to give him an excess of patronage. There are to he fourteen boards, but there is power to add to their number. To give this authority to the Minister is wrong in principle; it is wrong in administration; it is wrong by every business precedent, and it is wrong politically.

Any doubt on the matter has been removed by the statement of the Minister himself, not, I regret, in an unguarded moment—nobody pays much attention to what he says at the week-end—but made in another place, that he would not put on to any of these boards a man who had been opposed to nationalization. We should be doing less than our duty if we did not insist that the appointment of these boards should be by the Central Authority and not by the Minister. I beg to move.

Amendment moved— Page 6, line 20, after ("the") insert ("Central Authority with the approval of the").—(Viscount Swinton.)

LORD RENNELL

I do not want to recapitulate any of the catalogue of reasons given by the noble Viscount, Lord Swinton, to show what I think must be accepted on all sides of the House—namely, that the area boards are in fact subsidiaries of the Central Authority in what is one single industry. It is impossible to take the electricity industry and cut it into two pieces, and to say there are two entirely different industries, one being generation and the other distribution. That does not by any canon make sense. And if it is to be considered as one single industry, with the area boards as subsidiaries, or the distributing end of the manufacturing business, there can be no logic, either on business or other grounds, in separating the two and empowering the Minister to appoint servants (as they are) of the Central Authority. In the course of the remarks which I made in your Lordships' House at the time of the Second Reading of this Bill, I asked the noble and learned Viscount, the Lord Chancellor, if he could state what the reasons were for adopting this procedure. I was disappointed in his reply because, as the noble Viscount who has just sat down said, he adduced reasons to show why it would work, but he did not produce any reason for following this particular procedure. In default of a good reason, I find myself opposed to the provisions of the Bill, and fully in support of the Amendment proposed by the noble Viscount, Lord Swinton.

THE EARL OF LYTTON

I would like to acid a word in support of this Amendment. In doing so, I am in no way influenced by anything which the Minister may have said. I disclaim any suggestion of political jobbery on the part of the Minister. After all, we must remember that this procedure will continue, but Ministers come and go, and the Parties change. Whoever may be the Minister, and to whatever Party he may belong, let us consider this question of principle on its merits. It is from the point of view of efficiency that I support the proposal that the Central Authority should appoint the members of the area boards, rather than the Minister. The Minister, of course, appoints the Central Authority. They cannot appoint themselves, and they cannot come into existence by spontaneous generation. The Minister appoints the Central Authority. It is right and proper than he should make that appointment; there is really no alternative.

But when you come to the area boards there is an alternative. The question before us is simply whether it is better that the members of the area hoards should be selected by a Government Department—I will not say by a Minister but by a Government Department, because that is what it comes to, as a Government Department will remain after an individual Minister goes—or by the Central Authority who are responsible for the general efficiency of the industry as a whole, and who must know better than anybody else who are the available people with the necessary qualifications, experience and knowledge to constitute the membership of the boards. It is really only a question as to who would be the best judge. This is in no sense a Party issue. I would take exactly the same view whatever Party were in power at this moment, and whatever individual was Minister of Fuel and Power. The issue before us is whether it is better that the members of the area boards should be appointed by a Government Department or by the Central Authority, who are the authority responsible for the efficiency of the industry. For the reasons I have mentioned I am in favour of placing the appointment in the hands of the Central Authority.

LORD LLOYD

I would like to add just one word to what was said by the noble Viscount, Lord Swinton. I think he made it abundantly clear to your Lordships that the position of the area boards vis-à-vis the Central Authority was really that of subsidiary companies vis-à-vis holding companies. I am fortified in that view by reference to the Report stage in another place, because there I find that the Parliamentary Secretary, although dealing, I admit, with another matter, which was the possibility of outside interference in the fixing of tariffs by the Central Authority, said this: It is, in fact, in precisely the same position"— this is referring to the Central Authority— … of a holding company in relation to subsidiary companies. Surely, he is not suggesting that the terms on which a holding company may dispose of electricity to a subsidiary should be subject to outside arbitration? If that does not make my noble friend's case for him I do not know what does. For that reason, I feel I must support what he has said.

VISCOUNT RIDLEY

I would like briefly to support this Amendment. As the noble Earl, Lord Lytton, has said, it is a question of what is the most convenient way of appointing the subsidiary branches of the Central Authority. I would draw your Lordships' attention to, the arrangements made under the Coal Industry Nationalisation Act, where a different arrangement was made to what is now proposed. The regional boards or the area boards are quite definitely appointed by the National Coal Board, and it seems to me a perfectly right and proper thing that the responsibility for the whole business is on the Central Authority with a certain amount delegated to the area boards as their agents. Therefore, it seems only right that they should appoint them, give them instructions, keep in touch with them and control them.

Further, in the Transport Bill we had some discussion upon this. There is, I think, a difference, because there it was a question of different types of transport being operated by different Executives, whereas here we have the whole of one industry being divided into sections and these sections being put under one coordinating authority. It seems much clearer than it was in the Transport Bill that they should have the sore control of these matters. In an Amendment which I recently moved, I was trying to make the area boards as independent as possible of the Central Authority, and it may perhaps seem illogical to support this Amendment which puts the appointing of the members of these boards in the hands of this Authority. I think it is clearly right that they must be appointed by somebody and that they must have re- sponsibility to the Central Authority. The point to my mind is that the Central Authority should approach this business in the spirit of decentralization as much as possible, and that does not seem to defeat the very simple principle that they must appoint the people who are to be their agents.

VISCOUNT HALL

I am rather sorry that the noble Viscount who moved this Amendment reverted to a question which was mentioned on the Second Reading of this Bill. I do not propose to follow him other than to say that I am pleased that other noble Lords did not give the same reason for supporting this Amendment. I can understand why noble Lords are somewhat anxious concerning the appointment of these boards. I do not think the area boards to be set up under this Bill are in any way analogous to the regional boards set up under the Coal Act. The regional boards under the Coal Act have no separate existence at all. They are agents of the Central Coal Board for the purpose of producing coal, and the result is that they are part and parcel of the Central Coal Board in that sense.

The difference between the Coal Act and this Bill is that here the Central Authority, who are the producing authority, are an authority responsible for the production of the electricity to be sold to the area boards. It is true, as noble Lords have argued, that the Central Authority have certain powers over the area boards. I think that is all the more reason why we should have some authorities independent of the Central Authority to make up the area boards and who are not just to be servants of the Central Authority. There are two distinct functions, one being the generation of electricity; and the other distribution. It is for that reason that the Government are very anxious that the area boards (which are corporate bodies) from the angle of appointment should be quite independent of the Central Authority. Indeed, as your Lordships know, four of the chairmen of the area boards will become members of the Central Authority.

It has been argued in support of this Amendment that the Coal Act set up one board only. Well, that is so, and I have given reasons why that was necessary. In contrast, the area boards under this Bill are to be the distributors and the retailers of electrical energy, thus providing a supply in the homes, the offices, the factories and the farms of the persons within that area. It may well be that there will be a clash between the area board and the Central Authority on matters which are likely to arise in the course of their duty, and I would infinitely prefer that they should go to the person who appointed them in the event of difficulty of that kind rather than have their differences settled by the body with whom they are in dispute.

In all these circumstances, His Majesty's Government are convinced that while a certain measure of co-ordination of their activities is necessary in the higher interests of the country as a whole—this co-ordination is provided for in the Bill—these area boards should be powerful bodies untrammelled by supervision by the Central Electricity Authority as far as possible in the performance of their day-to-day functions in their area. For that reason it is proposed that members of the area boards should be appointed by the Minister. I do not want to repeat what I said on the Second Reading of this Bill. It may not have been convincing but I thought that the reasons I gave were very good reasons.

I will call to the support of the Government an independent authority in this matter, for in the Economist of June i8 there was a quite impartial article on this very important Bill, and on this particular subject this is what the Economist said: There is a real distinction between the Central Authority and the area boards, between the functions of generation and wholesale distribution on the one hand and of retail distribution on the other. All public power stations under grid are to belong to the Central Authority. The distribution systems that come into contact with the consumer and his varied requirements are to be in the hands of fourteen area boards. Moreover, it is apparently the intention, despite the enormous powers given to the Minister, to leave the area boards in comparative independence both of the Central Authority and of each other. All of them, it is true, are to be appointed by the Minister, but it is difficult to suggest any form of local appointment or election which would produce efficient boards, and appointment by the Minister is likely to give the boards more independence than they would get if they were appointed by the Central Authority, which would be the only practical alternative. That is the view of the Government. We think that it is very much better that they should have the independence that being appointed by the Minister would give them, and we think that it is in the interests of the electrical industry that that should be so.

THE MARQUESS OF SALISBURY

I wonder if I might make one more appeal to the Government. I think we all appreciate the frankness and sincerity with which the noble Viscount who has just spoken has put to the Committee the Government's case, and I believe that he himself is convinced of that case. But to many of us, the position of the Government is still a very unconvincing one. This is, of course, no new issue at all. It is an issue which has arisen in one form or another in every nationalization Bill we have had before us. I do not say that the circumstances are identical, but the position is the same. The position as we understand it is this. Whether you have an industry privately owned or publicly owned, I think it is common ground between us all that it should be managed on business principles. The existing boards of directors will be done away with and they will be replaced by Commissions or Central Authorities or whatever you like to call them. I wonder why the Government choose a different name for these bodies in each Bill. They are exactly the same thing—boards of directors representing the community, who are shareholders in the new set-up. That is how I understand the position. Surely it is right that those new nationalized boards of directors should have something of the same authority that the old ones had, something of the same powers and duties.

The noble Viscount, Lord Hall, argued this afternoon that in this particular case the situation was different from that in other Bills. He said that under the present Bill the regional boards would have a great deal more independence, that they would be really, in effect, independent bodies, and therefore it was natural that they should go direct to the Minister, who is head of the whole concern, rather than to the Central Authority. But is it really true that they are so independent? It seemed to me that there was a lack of logic in that portion of the noble Viscount's argument. If one looks at Clause 6 it really says that the Central Authority are to give directions to the area boards for co-ordinating distribution and for control over policy. For those purposes they are to be under the direction of the Central Authority. Is it sound, therefore, from the point of view either of the area board or the Central Authority that they should have direct access to some completely different person?

After all, the Central Authority are an expert body. I remember the noble Lord pointing out the other day that Lord Citrine could be regarded as an expert because he had spent a large part of his early life in the industry. He is to be the Chairman, and I suppose there are to be a number of other persons who know about the industry, and that that is why they are to be there. They are, I presume, men fitted to give advice and direction to the area boards. When you come to the Minister, he is a person who is selected for his post for quite different reasons—for his political opinions. I do not intend that as a criticism, became politics is a profession—and a more reputable profession than some people think. But it is not the same profession as that of managing the electricity industry. I cannot believe that the advice which will be given by the Minister or his very competent permanent officials, will be as good as advice given by a board composed of people who have been all their lives in the industry. However, we still feel that the area boards ought to be responsible to the Central Authority and that the Central Authority, therefore, ought b have the power of appointing the are boards who are responsible to them. T0 me it seems logical and right, and I cannot see any really strong argument against it.

There is another point to be borne in mind and that is the question of the actual position of the Central Authority themselves. I have no doubt that the Government want it to be the sort of body that all the great people in the electricity industry will want to join. But they will not join a Central Authority in which they have a purely fictitious power and when all the power over their own subordinates is vested in the Minister. That is not mere theory. It would certainly be my position if I were asked to be a member of the Central Authority. People so asked would say: "What powers are we going to have?", and if they found in fact that not only would they be overridden but very often would not even be consulted at all—the area board may go straight to the Minister who had appointed them—a great many of these important people would say, "No thank you; I think I will not." You will get a number of only second-rate people. If you are going to build up this great pyramid in stages, with the area board responsible to the Central Authority, and the Central Authority responsible to the Minister, and the Minister responsible to Parliament and the country (it is not for me to give advice to the noble Lords opposite on how a nationalized industry should be built up) that is the only basis on which I think it could work. It is for that reason, and not for any ideological bias, that we still think, in spite of speeches made to us, that we are on the right side in this Amendment, and that is why we are prepared to press it to a Division. If we come to a Division on this point, it will not be on political grounds; it will merely be because we regard it as a technical Amendment and we are trying to make a technical improvement in the scheme.

THE LORD CHANCELLOR

I know your Lordships are always willing to listen to an argument, even at the last moment. I feel so strongly that what we are here proposing is right that I want to address this argument to you, and particularly to the noble Marquess. I entirely agree with him that there is no ideological question at all between us here, and I think we can make up our minds what, in all the circumstances, is the best and most convenient arrangement; it is nothing more than that. So far as precedents go, I do not think they throw much light. Your Lordships may remember that under the Coal Industry Nationalisation Act regional bodies have no separate existence at all. If they enter into a contract, or anything of that sort, they make that contract for and on behalf of the Coal Board. That being so, it is inevitable, therefore, that the Coal Board should appoint these people who are their agents. You will remember that this same question arose under the Transport Bill, and the majority of the House thought differently from the Government; consequently the various Executives are now, by an Amendment moved in this House, to be appointed by the Commission. We shall see in the course of a day or two the view that is taken of that in another place. But I think it would be unwise at this stage to base any argument on the fact that on the Transport Bill we did something different from what we are doing now. It may be—I gather that it probably will be—that the Amendment will be debated in another place and that it will come back to us to decide what to do. I tell your Lordships now, leaving out precedents, that I think it is desirable that the appointment should be made by the Minister.

What I am concerned with here, to be quite frank with you, is the criticism which was made, and most forcibly made, by some of your Lordships on the Second Reading debate, that the area boards are mere puppets of the Central Authority. I am hound to say, as I listened to some of the speeches, that they had very great force. The noble Viscount, Lord Ridley, said this: … The only way to make this plan work is to have these area boards as completely autonomous, independent units. I think that is putting it too high, but we must try to preserve some spark of autonomy. The noble Lord, Lord Barnby, said: I am convinced that the area boards should have greater authority and should have imposed upon them some measure of financial authority. Lord Hawke said: In other words, the area boards are complete puppets of the Central Authority. I think all their Lordships exaggerated slightly in those statements, but I think they all have a very great deal of truth in them.

I think they are pointing out a danger. You realize that the Central Authority, who are the suppliers of the electricity which the area boards are hound to take, have the right to fix the price which their customers, the area boards, shall pay for the electricity. That is Clause 37. It is for that reason that I think it is important, although to some extent I agree that the area boards are the puppets of the Central Authority, that we do not let this puppetry go further than is absolutely necessary. I do beg your Lordships to consider that; I really do. I do ask your Lordships to try to give the area boards some sort of little independence from these people who are performing a different function in the main—that of generation; while the area boards are dealing with distribution. Try to en- courage them to be able to speak up when they get into controversy with the Central Authority.

What is the good of adding to all these things? You are piling Pelion upon Ossa. You say that already the Central Authority have this right and that right; they can make these area boards to some extent dance to their tune. What on earth is the good of making the personnel of the area boards dependent for their existence upon the wish of the Central Authority? It is most important—and there are no politics in this; it is mere common sense as I see it—to try to get some degree of independence from the Central Authority in the area boards. I believe that you will do that better if you relieve the Central Authority from the obligation of appointing the personnel of the area boards. I believe in that way we shall do better in avoiding that to which the noble Lords, Lord Ridley, Lord Barnby, and Lord Hawke, all called attention on the last occasion with great force—namely, the risk of these area boards becoming the complete puppets of the Central Authority. I say that that is intensified if, in addition to the necessary powers which the Central Authority have under this Bill, they can appoint the personnel of the area boards.

For that reason, I beg your Lordships to consider this matter. The issue of the Economist for the 18th of January—I believe that is right—surveyed the question, went over it, and said this was the best form of appointment in order that those authorities might have some independent existence, independent of the Central Authority, and independent of each other, so that a young electrician going into the industry could see fifteen different people with whom he could deal. That is what was said in the Economist. It is because I feel that this Amendment would have the inevitable effect of making the area board still more dependent upon the Central Authority that I beg your Lordships not to force this Amendment upon us.

There is one further point I might add, for which I am much obliged to my noble friend, Lord Chorley. There is an Amendment on the Paper, almost the next one, asking that there shall be consultation. It is the Amendment to page 7, line 22, standing in the name of Viscount Elibank and the Earl of Rothes, that the Minister should do this and should only do it "after consultation with the Central Authority." In that way, we do get the Minister consulting the Central Authority, and I suggest that that is a way which perhaps would be satisfactory.

VISCOUNT SWINTON

That is only in regard to the size of the areas.

THE LORD CHANCELLOR

If there is not an Amendment to meet this point, I am perfectly prepared to accept an Amendment that, in appointing the Personnel of the area hoard, the Minister shall consult with the Central Authority. I thought there was such an Amendment down, but I cannot find it.

LORD RENNELL

I think the Amendment is the one to Clause 6, page 10, line 15, about the Minister giving directions to the area hoard "after consultation with the Central Authority."

THE MARQUESS OF SALISBURY

The Lord Chancellor has drawn attention to an Amendment which apparently deals with a rather limited point, but he has said that he might be prepared to devise an Amendment which would spread that more widely over the whole field. I think that perhaps we ought to look at this. I do not feel entirely happy about it, because I still feel that the scheme will not work—I may be entirely wrong—and that you will get the area boards constantly short-circuiting the Central. Authority. They will take orders direct from the Minister, or go direct to the Minister. They will be appointed by the Minister and he will be responsible for them. They will not tie puppets, which was the word the noble and learned Viscount used. I do not think it is quite a fair word to use. You can always say that anyone who is appointed by anyone else is a puppet. Under the noble and learned Viscount's definition they will either be puppets of the Central Authority or puppets of the Minister.

I do not believe that you will have a coherent scheme unless the area hoards receive their instructions from the Central Authority, and the Central Authority receive their instructions from the Minister. Without such a system I do not believe that the scheme will work. At the same time, if the noble and learner: Viscount thinks he can draft an Amendment before the Report stage which gives what he believes to be a greater nexus of consultation, I think the Committee would be wise to look at it. At any rate, to divide now, without even looking at the Amendment which has been proposed, would not be quite fair. Therefore, if the noble and learned Viscount is prepared to discuss an Amendment with us before the Report stage, we can still insist upon our view if we are not satisfied.

VISCOUNT SWINTON

Of course, consultation about the size of an area is something quite different. Do I understand the proposal to be that the Minister, in appointing, if he is to have the power to appoint area boards, shall do that in consultation with the Central Authority?

THE LORD CHANCELLOR

That is the point.

VISCOUNT SWINTON

It is not in the Bill now.

THE LORD CHANCELLOR

That is right.

VISCOUNT SWINTON

I want to be quite clear what the proposal is. As the Bill stands, the appointments are entirely with the Minister. As this stands, I do not think the First Lord read it quite accurately. I think I am right that the Amendment, which was put down rather carefully, aims at having the words: "the Central Authority with the approval of the Minister." That goes a very long way; it gives the Minister the chance of vetoing. The Lord Chancellor's proposal is that the Minister should not have the power of veto upon the recommendation of the Central Board, but that the Minister should appoint after consultation with them.

THE LORD CHANCELLOR

That is right. That is exactly the nature of the Amendment which I might put down. I was wrong in thinking there was one on the Paper. Such an Amendment would simply make it quite plain that before the Minister appoints an area board he has to consult with the Central Authority. I do not think it matters much whether it is done that way, or whether it is done the other way. For the reasons I have given, I prefer that, and I hope that your Lordships will look at that Amendment before you decide to press this to a Division.

VISCOUNT ELIBANK

May I say one word, as I am very interested in this particular Amendment? Looking at Clause 6 of the Bill, I feel that the area boards are placed right in the hands of the Central Authority so far as directions and policy are concerned, and I do not altogether agree with the suggestion that by being appointed by the Minister the area boards will become puppets of the Central Authority. I take a different viewpoint. It is most important, as was stated by several noble Lords in the Second Reading debate, that these boards should be as autonomous as possible; and there is a way of making them autonomous, and less amenable to Clause 6, by having them appointed by the Minister with the approval of the Central Authority. I am sorry not to go the whole way with some of my noble friends on these Benches, but, again, I would like to refer to the question of Scotland. I think it is important that the area boards in Scotland—that is for the southwest and south-east of Scotland—should be appointed by the Secretary of State, with the approval of the Central Electricity Authority, because, looking to the future, it may be easier to merge into another state in that part of the country.

VISCOUNT SWINTON

In view of the proposal made by the Lord Chancellor, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.37 p.m.

LORD RENNELL

The next Amendment is one to which the noble Viscount referred earlier on. It involves the insertion of the word "agricultural" in regard to representation on the area boards. I beg to move.

Amendment moved— Page 6, line 24, after ("commercial") insert ("agricultural.")—(Lord Rennell.)

VISCOUNT HALL

This Amendment, as I explained, is accepted.

On Question, Amendment agreed to.

THE LORD CHANCELLOR

This is one of the matters which arose out of the first Amendment on our discussion in regard to six months and three months, and I then had to provide that the area boards and the consultative councils should be properly appointed. This is really to meet that Amendment. I beg to move.

Amendment moved—

Page 6, line 31, at end insert: Provided that, until the consultative council has been established, an area board shall he deemed to be properly constituted notwithstanding that the board does not include the member referred to in paragraph (b) of this subsection."—(The Lord Chancellor.)

On Question, Amendment agreed to.

LORD HAWKE had given Notice that he would move in subsection (6), to leave out "and to the members of each of the area boards." The noble Lord said: This Amendment is tied up with the long discussion we have just had. If the noble Viscount is prepared to give me an assurance that when he is drafting something to meet that other Amendment he will consider re-drafting to the effect that the pay of area boards shall be fixed by the Minister in consultation with the Central Authority, I will not move my Amendment here.

VISCOUNT HALL

I think they do depend very largely upon the arrangement which is arrived at and which was referred to by the Lord Chancellor, and I can give that assurance.

LORD HAWKE

Then I will not move this Amendment.

LORD TEYNHAM had given Notice of three Amendments

to leave out paragraphs (b) and (d) of subsection (7) and at the end of the clause to insert: including the manner in which matters subject To the determination of the Central Authority and the area board are to be determined by or on behalf of the Central Authority and that area board respectively The noble Lord said: For the convenience of your Lordships may I suggest that this and the next two Amendments standing in my name and that of my noble friend Lord Lloyd be taken together? The whole object of these three Amendments is to hive greater freedom to the Central Authority and the area boards so that they can regulate their own proceedings without interference by the Minister.

Ministers have frequently gone out of their way to emphasize that these national corporations should be considered as business corporations and conducted as such; yet we now have a clause which would have the opposite effect. A little further on in the Bill, in Clause 5, it is laid down that the Minister may give such directions of a general character as to the exercise and performance by the Authority of their functions under this Act as appear to the Minister to be requisite in the national interest. This, presumably, is intended to indicate that matters outside the national interest would be left to the determination of the Central Authority. It is true that the proceedings of the Central Authority and the area boards are to be determined by regulations made by the Minister, but I suggest, whatever the manner in which it is done, that it is a great interference vita the organization and authority of the Central Authority and the area boards. For these reasons I beg to move.

Amendment moved— Page 7, line 8, leave out paragraph (b).—(Lord Teynham.)

LORD LLOYD

I would like to say just a word in support of this Amendment I think that the noble and learned Viscount has almost made a case for tits Amendment for us. He has told the Committee how important it is that these area boards—and this, of course, concerns the Central Authority—should have the maximum of independence. Yet, when we turn over a page of the Bill, we find that they are tied up with every kind of red tape as regards most simple matters: as, for instance, their quorum and proceedings. There is no such provision with regard to the Central Electricity Board at the present time. They are entirely free to settle their own proceedings and procedure, except that their quorum must not be less than one-third. I submit that we must assume—at any rate we must certainly hope—that these bodies, when constituted, will be constituted of men of some eminence, men with knowledge and sense of responsibility. If that is not the case, then all I can say is that it is a very poor lookout for the electricity industry. I submit that these people ought to be allowed to settle these very ordinary matters for themselves, without being treated to a lot of regulations by the Minister, just as though they were children. It seems to me that to treat them in such a way would be rather ridiculous, and I hope that the noble Viscount will be able to accept this Amendment.

VISCOUNT HALL

It is not for the purpose of extending any red tape that we ask that the Amendment should net be pressed. As I understand it, it is quite the usual practice for committees and boards to have their general procedure covered by Articles of Association, approved by some persons of authority outside themselves. All the matters referred to in paragraphs (a), (b) and (c) of this subsection deal with matters covered in the Articles of Association of a company. They are matters which are commonly covered, in the case of a company, by the Articles of Association which are approved by the members or shareholders of the company. I cannot see why any objection should be raised to any of them.

Perhaps I may give an example: the Central Authority and the area boards are to be composed of whole-time and part-time members, and it may be essential to provide under paragraph (b) that at all meetings at least one full-time member should be present to take the chair. It is also desirable that Parliament and the public should be informed as to the manner in which the business of these bodies is being conducted. The omission of paragraph (d) would render it impossible for the Minister to provide in the regulations for supplementary matters which may be necessary—such as, providing that a Board shall have power to act notwithstanding a vacancy among its members, or that all acts done at a meeting of a Board shall be valid notwithstanding that some defect in the appointment of a person purporting to be a member was subsequently discovered. I feel sure that noble Lords will recognize that these provisions are not unnecessary or excessive, and that there is ample commercial precedent for them, quite apart from the precedent of other legislation. Indeed, in the Transport Bill, these matters were laid down in the First Schedule. For these reasons I hope that the noble Lord will see fit to withdraw his Amendment.

LORD TEYNHAM

In view of what has been said by the noble Viscount, I do not propose to press this Amendment. I am certainly interested in his analogy about Articles of Association, which is, to a certain extent, quite true. There is truth too, I feel, in what he says with regard to paragraph (d), that if there were any defects in an appointment it would create difficulties. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 3, as amended, agreed to.

Clause 4:

Definition of and variation of areas.

4.—(1) The Minister shall before the vesting date by order define the areas for which area boards are established under this Act, and each area shall be so defined by reference to a map, and copies of the map of each area shall be available for inspection at such places and at such times as may be specified in a notice published by the Minister in the London Gazette and, in the case of an area in Scotland, the Edinburgh Gazette, and (in all cases) in such newspapers circulating in the area as the Minister thinks fit.

5.45 p.m.

VISCOUNT ELIBANK moved, in subsection (1), after "order," to insert: "made after consultation with the Central Authority." The noble Viscount said: After the discussion which has recently taken place I presume that the noble and learned Viscount will be prepared to accept this Amendment. It refers to the definition of areas. Three Amendments were moved by the noble Viscount, Lord Swinton, under which the vesting date would not be for six months, the area boards would not be appointed for three months, and the Central Authority would be appointed at the commencement of the six months, and there will be ample time for the Minister to define the areas in consultation with the Central Authority. I beg to move.

Amendment moved— Page 7, line 22, at end, insert the said words.—(Viscount Elibank.)

THE LORD CHANCELLOR

I can accept this Amendment.

On Question, Amendment agreed to.

Clause 4, as amended, agreed to.

Clause 5 agreed to.

Clause 6:

Powers of Central Authority and Minister in relation to Area Boards.

(2) In the exercise and performance of their functions as to training, education and research, every area board shall act in accordance with a general programme settled from time to time in consultation with the Minister.

(3) The Minister may give directions to any area board as to the use or disposal of any assets vested in the board by or under this Act which are not connected with the distribution of electricity, and the board shall give effect to any such directions.

5.50 p.m.

THE EARL OF LYTTON moved, in subsection (2), to leave out "Minister," and insert "Central Authority." The noble Earl said: I propose to leave out the last word of subsection (2) of this clause and to substitute the words "Central Authority." This subsection deals with the area boards' "exercise and performance of their functions as to training, education and research." My Amendment proposes that in exercising those functions the area boards shall act in accordance with a general programme settled from time to time in consultation with the Central Authority. It is merely a matter of administrative procedure. If your Lordships will turn back to page 9 of the Bill and look at Clause 5 (3) you will see that it there states: In the exercise and performance of their functions as to training, education and research, the Central Authority shall act in accordance with a general programme settled as aforesaid"— In other words, where the Central Authority are engaged in matters of training, education and research they shall work to a general programme which has been settled in consultation with the Minister.

Surely, when it comes to the next stage, that of carrying out that programme in detail, the Central Authority who have settled their programme with the Minister, should scale the details with the area boards. There should not be two stages with the Minister settling programmes, first with the Central Authority and subsequently with the area boards. I submit that administratively it is much better that the Central Authority, having fixed their programme in consultation with the Minister, should carry out the detail of it in consultation with the area boards and that interference by the Minister, proper at the first stage, would not be proper in the subsequent stage. I beg to move.

Amendment moved— Page to, line t4, leave out ("Minister") and insert ("Central Authority").—(The Earl of Lytton.)

VISCOUNT MAUGHAM

I wish to support this Amendment. It is true, as the noble and learned Viscount, the Lord Chancellor, said, that area boards are not agents of the Central Electricity Authority. But it is also true, as he said, that it is very desirable they should be as autonomous as possible. They have to work in intimate relationship with the Central Authority, and they can do nothing without the help of the Central Authority; and it does not seem to me right that the general programme of the area beards should have to be settled in consultation with the Minister who is not really aware of the clay to day relations between fie Central Authority and the boards. I would add that there is no Amendment to subsection (3), where the noble Earl who moved this Amendment is quite content that the Minister might give direction to any area board as to the use or disposal of assets. But this matter of the general programme ought to be settled between the Central Authority, or at any rate with a very strong reference to the Central Authority, to see that they concur with the general plan which may be laid down by the Minister. I support the Amendment. I think it is simple, and I think it will do good.

VISCOUNT RIDLEY

I do not q know why there is a separate subsection dealing with training, education and research, and I support the noble Earl la saying that such matters should be agreed, primarily, between the Central Authority and the Minister and, secondly, between them and the area boards. I would like to say something about the independence of the area boards. The noble and learned Viscount, the Lord Chancellor, I am glad to say. was emphatic about his belief in their independence and referred to what was said by myself and of to noble Lords on Second Reading. Granted that we wish to preserve the maximum degree of independence within the proper exercise of their functions, I feel that it is rather a moot point whether we shall be able to preserve it by having the area boards appointed by the Minister in consultation with the Central Authority. I take the view that if this whole business is to work, it can only work by the Central Authority appreciating the importance of putting the area boards on their feet and in a position to manage their own affairs. I have some fear that Ministers—not this particular Minister, but Ministers in general and in the future—advised by their Departments as they would be, would not be so inclined to try to keep them separate and independent, and for that reason I support this Amendment. I very much appreciate what the Chancellor said about trying to keep them separated. I am glad that he, speaking for the Government, expressed that view.

THE LORD CHANCELLOR

The significance of this is quite simple. With regard to the general programme—I stress the adjective "general"—I think the Minister ought to have the last word. You will see in Clause 5, subsections (2) and (3) particularly on page 9, line 25, that it is provided that "the Central Authority shall act in accordance with the general programme settled as afore-said"—that is, settled from time to time in consultation with the Minister. When it comes to the area boards we thought that we ought to have the same words there also, so that they would be subject to the same restrictions as the Central Authority. The reason is that there are many Departments of the Government which are dealing with these questions of research and education, and it is very desirable, as all your Lordships will agree, that we should not duplicate.

If the Minister of Education has some training scheme, or some committee is already investigating such a subject as coal conservation, or, still more obviously, something which I think is becoming possible within the next twenty years, the use of atomic energy, it would be perfectly hopeless to have the Central Authority and the area boards each conducting their particular experiments in these things, instead of all making use of the experiments the Government are conducting. Everybody will agree with that. That being so, we thought it better that the last word should be with the Minister, because he keeps in touch with his colleagues in other Departments much better, and would be able to see that there was no overlapping which would lead to waste and more expense. It is purely for that reason that we thought that, as in the case of the Central Authority so in the case of the area boards, the general programme should be settled in consultation with the Minister.

LORD HAWKE

Do I understand from the noble and learned Viscount, the Lord Chancellor, that over this particular matter the area boards will have direct access to the Minister to settle questions? Because that was not how I originally read the Bill. I read that the Central Authority would agree a general programme with the Minister—that is in Clause 5 (3)—and I imagine that a general programme must properly embrace the whole country and would include most of the activities afterwards to be delegated to the area boards. If the area boards are not going to fit into that programme, which has been settled with the Minister by the Central Authority, surely chaos will result. I cannot see that the area boards have any reason for going direct to the Minister. Surely they must go to the Central Authority, the body who have settled all their programme.

THE LORD CHANCELLOR

The noble Lord, Lord Hawke, of course will realize that in considering the programme of training, education, and research, the Minister has to co-ordinate the programmes both of the Central Authority and of the area boards. It is very possible—I say this only for illustration—that the Central Authority will confine themselves to research and education in connexion with generation, and it is quite possible that the area boards will confine themselves to distribution, but obviously there is overlapping—we cannot have a hard and fast line—and it is desirable that the Minister should be able to settle both programmes in order to avoid overlapping between the Central Authority and the area boards, and, more important, between his Department and other Departments.

VISCOUNT MAUGHAM

Would the noble and learned Viscount consider that subsection (1) is obviously overlapping subsection (2)? The Central Authority have to give to the area boards every direction necessary for the purpose of coordinating the distribution of electricity by area boards and exercising a general control over the policy of these boards, and the area boards must give effect to such directions. That seems to me to be an overlap. Subsection (2) says that a general programme has to be "settled from time to time in consultation with the Minister."

THE LORD CHANCELLOR

The general programme to be settled from time to time in consultation with the Minister is to be settled "in the exercise and performance of their functions as to training, education and research." Those particular things are to be settled by the Minister.

THE EARL of LYTTON

I read the Bill in the same way as my noble friend Lord Hawke, and that is why I moved this Amendment. I was under the impression that under Clause 5, subsections (2) and (3), the Minister, in consultation with the Central Authority, was to work out a general programme of training, education and research for the whole country, and that in Clause 6 we are merely dealing with the details of that programme which will be carried out by the area boards. Therefore, I thought it was not necessary to bring the Minister in twice—first, for the general programme and, secondly, for the carrying out of the detail. The noble and learned Viscount has pointed out that that is not the case but that there will be two different areas for this training, education and research, one in generation and the other in distribution. For that reason it is desirable that the Minister—who, I agree, must co-ordinate with other Government Departments—should have the last word, both with the Central Authority and the area boards. In view of the noble Viscount's explanation, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

VISCOUNT ELIBANK moved, in subsection (3), after "may," to insert "after consultation with the Central Authority." The noble Viscount said: This is another Amendment with regard to the Minister doing something after consultation with the Central Authority. In this case it refers to the use or disposal of any assets vested in the board by or under this Act which are not connected with the distribution of electricity. I think it is just as well that the Minister should have the same consultation in that case as in others. I beg to move.

Amendment moved— Page 10, line 15, after ("may") insert ("after consultation with the Central Authority."—(Viscount Elibank.)

THE LORD CHANCELLOR

I, too, think it is just as well, and, therefore, I have pleasure in accepting the Amendment.

On Question, Amendment agreed to.

Clause 6, as amended, agreed to.

Clause 7:

Consultative councils.

7 .—(1) A consultative council shall be established for the purposes mentioned in this section for the area of every area board.

(2) Each of the said councils shall consist of not less than twenty nor more than thirty persons to be appointed by the Minister of whom—

1. (a) not less than half shall be appointed from a panel of persons nominated from amongst members of local authorities in the area by such associations as appear to the Minister to represent those authorities; and
2. (b) the remainder shall be appointed, after consultation with such bodies as the Minister thinks lit, to represent agriculture, commerce, industry, labour and the general interests of consumers of electricity and other persons or organizations interested in the development of electricity in the area.

(4)Each of the said councils shall be charged with the duties— (a) of considering any matter affecting the distribution of electricity in the area, including the variation of tariffs and the provision of new or improved services and facilities within the area, being a matter which is the subject of a representation made to there by consumers or other persons requiring supplies of electricity in that area, or which appears to them to be a matter to which consideration ought to be given apart from any such representation, and where action appears to them to be requisite as to any such matter, of notifying their conclusions to the Area Board; and

6.4 p.m.

THE LORD CHANCELLOR moved, in subsection (2) (a), after "half" to insert "nor more than three-fifths." The noble and learned Viscount said: In another place the Opposition were anxious to get in some limitation to the number of persons to be appointed from local authority members. I have drafted this Amendment in order to go as far as I can to meet the arguments which were then advanced, and I hope it will appeal to your Lordships. I beg to move.

Amendment moved— Page 10, line 35, after ("half") insert ("nor more than three-fifths").—(The Lord Chancellor.)

On Question, Amendment agreed to.

LORD LATHAM moved, in subsection (2), after paragraph (b), to insert: In making the appointments mentioned in paragraph (a) of this subsection, the London County Council shall be regarded as an association and. The noble Lord said: This Amendment involves no question of principle, nor indeed of structure, and should not occupy your Lordships for any length of time. It is designed to preserve a locus for the London County Council as regards the setting up of the consultative councils by the Minister. It will have been observed that in Clause 7 (2) (a) the appointments are to be made from persons nominated "from amongst members of local authorities in the area by such associations as appear to the Minister to represent those authorities;". The London County Council are not members of any of the associations of local authorities. They act, and have acted for many years, in co-operation with them, and have been recognized as having a parity of status with the associations. But they are not members of any of the associations of local authorities. Accordingly, as the clause now stands, the London County Council would have no right of nomination of persons to be considered for appointment to the consultative council.

For many years the London County Council have carried responsibilities for safeguarding the consumers' interests as regards electricity supply in London. They are represented by six members on the London and Home Counties Joint Electricity Authority. I had the privilege of representing the London County Council on that authority for some six years, and I remember very well struggling with the problem of consumers' benefit, which could be very illusory at times. Nevertheless, there is cast upon the London County Council the obligation to make representations, and to protect in so far as they can the consumers' interests, both as regards charges and as regards supply. In those circumstances, I feel sure your Lordships will agree that the London County Council should have a right, similar to that intended to be given to associations of local authorities, to submit nominations to the Minister. I beg to move.

Amendment moved— Page 11, line 1, at beginning insert the said words.—(Lord Latham.)

THE LORD CHANCELLOR

There can be no doubt to any of us who have studied these matters that the London County Council have played a distinguished and prominent part in watching the consumers' interests. They have always been consulted by all sorts of Government Departments, and they certainly always will be consulted. It would be ridiculous nowadays to suggest that they should not be consulted. If the noble Lord presses me, I will accept his Amendment but, quite frankly, if he will take my advice he will not press me to do so, but will rest content with the assurance that I give him that we do intend to consult the London County Council.

The reason for that suggestion is this. The word "association" which we have used here has a somewhat long history behind it. Whether or not technically the London County Council come within these words, the fact is that under other Bills they always have been consulted, and under this Bill it is our intention that the following associations of authorities should be approached as to a panel of nominees: The County Councils Association, the London County Council, the Association of Municipal Corporations, the Metropolitan Boroughs Standing Joint Committee, the Urban District Councils Association and the Rural District Councils Association. That is the list which is normally used by the Ministry of Health for similar purposes, and your Lordships will see that the London County Council are included. There are many enactments drafted by the Ministry of Health in which the London County Council are not specifically named but, in spite of that, it is the well-established practice of that Department to consider the London County Council as an association. For instance, draft regulations to be made under subsection (1) of Section 67 of the National Health Service Act, 1946, just published, include the following: a contributory employee or local Act contributor falling within such class or description of persons as the Minister may designate, after consultation with such associations of local authorities as appear to him to be concerned … The principal association of local authorities in that case are the London County Council, although the term "association" is not expressly extended to cover the London County Council. It would be foolish (in that particular case, quite obviously foolish) not to consult the London County Council.

Why I advise the noble Lord not to press me to accept his Amendment is because I have given him a most explicit assurance that the London County Council will be consulted. If I put this in the Bill it may have the effect of some ingenious person saying: "You have specified in this Bill that the London County Council are an association, and unless you specify it in other Bills we must take it that they are not an association and you cannot consult them." This would have the opposite effect to what both the noble Lord and I desire. Therefore, on the assurances I have given him, I hope the noble Lord will not press. his Amendment, but if he wants to press it. I will accept it.

LORD LATHAM

In view of the very ample assurances given by the noble and learned Viscount, I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

6.10 p.m.

LORD TEYNHAM moved, in subsection (4), to add to paragraph (a), "and to the consumers or other persons by whom representations have been made as aforesaid." The noble Lord said: For the convenience of your Lordships, may I suggest that I deal with this Amendment and the next—to add a paragraph to subsection (7)—together? These are two very simple Amendments, which I think are really self-explanatory. Their object is to ensure that the consumer who has made a complaint or representation to the consultative council shall be informed what action has been taken on the matter. The two Amendments really provide that the consumer must be informed by the consultative council if they are taking action, and also if the Central Authority themselves are taking action in the matter. We think it only right that a consumer should be kept informed as to what is being done, because otherwise he may feel that his complaint has been pigeon-holed, when in fact something really is being done. We do feel that if these two Amendments are not accepted, the consumer would be dissatisfied, and that dissatisfaction would no doubt breed a large number of dissatisfied consumers. We think that these Amendments are very necessary to the Bill. I beg to move.

Amendment moved— Page 11, line 29, after ("board") insert ("and to the consumers or other persons by whom representations have been made as aforesaid").—(Lord Teynham.)

THE LORD CHANCELLOR

If the consultative committee is doing its job I have no doubt that in nine cases out of ten it will keep the consumer informed. The consumer will naturally follow up his complaint, and the council will want to justify themselves by telling the consumer what they are doing about it. It certainly would be our desire to get the consultative council to work in that way. On the other hand, I do not think it is desirable to impose this as a statutory obligator. I think that is asking too much of these people, and I think it would very likely defeat its own object. I suspect that there will be some cases in which the consultative councils will deal with a complaint and will pass it on to the area board. They will get an answer from the area board which shows that the consultative council have gone off the deep end, and gone off backwards as it were, not really quite understanding what the problem was. I do not think it is desirable that they should have to pass on that sort of correspondence to the consumer. Therefore, I suggest that: we should not impose this statutory obligation upon them, out leave it to them as a matter of good sense to justify their existence to their various constituents by assuming they will answer letters. If you impose a statutory obligation I am not quite sure where we shall get, and I think that in the circumstance; the best course to take is to leave the matter where it is.

LORD WOLVERTON

The only trouble is that it is rather a lengthy process. The consultative council have to go to the area boards and the area boards to the Central Authority, who in the last resort take it to the Minister. It might take some time. and that is why we do feel rather anxious that consumers should be informed as to what course of action has been taken and what progress is being made.

LORD TEYNHAM

In view of the assurance given by the noble and leaned. Viscount that the consultative committees will in fact inform the consumers that a. complaint is being examined, I do not propose to press my Amendment.

Amendment, by leave, withdrawn.

Clause 7, as amended, agreed to.

Clauses 8 to 12 agreed to.

Clause 13:

Bodies to Whom Part of Act applies.

13.—(1) This Part of this Act applies to—

1. (a) the bodies specified in the Second Schedule to this Act thereafter in this Act referred to as "authorised undertakers")

being the bodies who fall within the class in the next following subsection;

(2) The class of bodies referred to in paragraph (a) of the last foregoing subsection are—

1. (i) bodies who supply electricity, under the authority of any enactment, in any area of supply in Great Britain; and
2. (ii) bodies who supply electricity, under the authority of an enactment, to the bodies mentioned in paragraph (i) hereof or to the Central Electricity Board:

Provided that the said class does not include—

6.15 p.m.

LORD MORRISON moved in the proviso in subsection (2), to insert: "(a) the North of Scotland Board." The noble Lord said: On behalf of my noble and learned friend, the Lord Chancellor, I beg to move this Amendment. Although the North of Scotland Hydro Electric Board falls within the definition of authorized undertaker given in Clause 13, it does not appear in the list of undertakers in the Second Schedule to the Bill. The reason for this is that the Board itself becomes an Electricity Board under Clause I, and the acquisition provisions of Part II of the Bill are inappropriate to it. The Amendment covers its exclusion from the Schedule by excluding it from the class of bodies who are authorized undertakers for the purposes of the Bill. I beg to move.

Amendment moved— Page 17, line 1, at end insert ("(a) the North of Scotland Board").—(Lord Morrison.)

On Question, Amendment agreed to.

LORD MORRISON moved to add to the clause: (6) Where an agreement under Section eighteen of the Act of 1943 for the transfer to the North of Scotland Board of the whole or any part of the undertaking of any undertakers comes into force between the passing of this Act and the vesting date, and the undertakers thereupon cease to fall within the class described in subsection (2) of this section, this Part of this Act shall not apply to them. The noble Lord said: The Second Schedule to the Bill specifies the authorized undertakers to whom Part II of the Act will apply, and includes Fort William, Lerwick and Wick Corporations. Under Clause 14 these undertakings will, on the vesting date, vest in the North of Scotland Board. The Board has, however, reached agreement with the undertakers for the transfer of their undertakings to the Board by agreement under Section 18 of the Hydro-Electric Development (Scotland) Act, 1943, but the formal documents have not yet been signed and the agreements are not effective until this has been done. It is probable that before the vesting date the formal agreements for the transfer of the undertaking to the North of Scotland Board will have been effected. In such circumstances the undertakers will no longer be bodies who supply electricity in any area of supply, and it would no longer be inappropriate for Part II of the Act to apply to them. The Amendment provides accordingly. If in any case the agreement is not concluded by the vesting date, the undertaking will automatically vest in the North of Scotland Board under the Act. I beg to move.

Amendment moved— Page 17, line 44, at end insert the said subsection.—(Lord Morrison.)

VISCOUNT ELIBANK

The object of this is that they are taken right out of the Bill? They are taken over by negotiation with the North of Scotland Board and taken right out of the Bill?

LORD MORRISON

That is so.

On Question, Amendment agreed to.

Clause 13, as amended, agreed to.

Clause 14:

Vesting of assets of electricity undertakings.

14.—(1) Subject to the provisions of this Part of this Act all property, rights, liabilities and obligations which, immediately before such date as may be appointed by order of the Minister (in this Act referred to as "the vesting date") were property, rights, liabilities and obligations of a body to whom this Part of this Act applies, shall on the vesting date vest by virtue of this Act and without further assurance in such Electricity Board or Boards as may be specified in the following provisions of this section or determined thereunder. (11) Subject to the next following section, every body to whom this Part of this Act applies shall be dissolved on the vesting date.

6.18 p.m.

VISCOUNT SWINTON moved, in subsection (1), after "date," where that word first occurs, to insert "not being a date earlier than the first day of April in any calendar year." The noble Viscount said: The object of this Amendment is to ensure that the vesting date shall not come before April 1 in any calendar year. I think everybody will agree that this is a provision convenient to everybody concerned, the Government, the local authorities and the companies. It is a convenient date for the Government because consequent upon the Amendments to which we have already agreed there are to be six months at least to enable the Central Authority to get into their stride, and then three months after that the area boards come into being. It is obviously convenient from the point of view of local authorities, because I understand that all their financial years close at the end of March. It is also obviously convenient from the point of view of the companies, because your Lordships will have observed that under the Bill the companies are empowered, and indeed directed, to declare a dividend for their last financial year. A great many of the companies end their financial year on December 31. It takes a certain amount of time to get in all the accounts, certainly two or three months, and it is not any easier now—in fact it is more difficult with the shortage of staff and so on—than it was. Therefore, if April I—or if that were not considered a good date, some other date in April—were taken, everybody's interests would be served, and everybody could be as happy as they could reasonably expect to be under the new dispensation. I beg to move.

Amendment moved— Page 18, line 3, after ("date") insert the said words.—(Viscount Swinton.)

THE LORD CHANCELLOR

I think I can go some way to meet the noble Viscount here. I may be able to go further on Report stage, but I can go as far as this now. If your Lordships will look at the Supplementary List, you will see that the next Amendment is one which I have put down. It says: The vesting date shall not be less than six months after the establishment of the Central Authority and not less than three months after the establishment of all the area boards … and I think I might add: and shall not be earlier in any particular year than April f of that year. I am not in a position to say I can do that at the present moment, but I will consult with the Minister and find out whether I am in a position to do so. I can say now that I will suggest that it should not be earlier than April I, 1948.

Perhaps it would be better not to put the words in now, because I will see between now and the Report stage whether I can get any additional words for the noble Viscount. But if he would be happier if he had those words in now, I am willing to put them in.

VISCOUNT SWINTON

I am very much obliged to the noble and learned Viscount. I am sure he will not withdraw his offer. For all practical purposes perhaps these words are good enough, because I imagine the thing will vest some time next year; but it is conceivable that if it is desired to go on with this interregnum for a considerable time, the argument would apply will equal force. Supposing it were decided that we were not to vest in 1948 but it 1949, all the arguments apply just as much, irrespective of what particular year it falls in. I think it would be more convenient to pass the Lord Chancellor's Amendment when we come to it and let him put down the best he can lo for me when it comes to Report staff re. I am very grateful to the noble and learned Viscount, and I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

THE LORD CHANCELLOR

This is the Amendment to which I referred just now. I beg to move.

Amendment moved—

Page 18, line 9, at end insert: ("The vesting date shall not be less than six months after the establishment of tie Central Authority and not less than three months after the establishment of all the area boards and the definition by order made under Part I of this Act of all the areas for which those Boards are established.").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

The next is a drafting Amendment. I beg to move.

Amendment moved— Page 18, line 35, after ("all") insert ("rights, liabilities and obligations under")—(The Lord Chancellor.)

On Question, Amendment agreed to.

6.25 p.m.

VISCOUNT SWINTON moved to leave out subsection (11). The noble Lord said: I must ask your Lordships to bear with me while I deploy a rather complicated series of proposals. I am sure it will be convenient to deal with the whole business now, because I have to get rid of subsection (11) having regard to the long clause standing in the names of Lord Rennell, the Earl of Lytton and myself, which follows immediately after, and a great many other Amendments, all of which are consequential upon that. Therefore, with your Lordships' permission, I will explain just what it is we want to do. We want to make provision for the continuation of two types of company. As your Lordships will have appreciated, setting aside what are called composite companies—that is, companies which are electrical companies and which also have gas or water in addition—all the companies which have 75 per cent. or more of their stock or loans in the generating or distributing industry are taken over completely under this Bill.

The date is also important, because the test date is not the date of the passing of the Act, but January I, 1946, and circumstances may have changed meantime in relation to those companies' investments. Clause 13 (1), however, provides that if, on January 1, 1946, 75 per cent. of their stock or loans are invested in generating or distributing electricity in the United Kingdom, then their businesses are taken over; they have no option to carry on. Composite companies are exempted, but if any other company, not what is technically called a composite company here, comes within the 75 per cent. category, then all the assets of that company, although they have nothing whatever to do with the purpose of this Bill, which deals with the generation and distribution of electricity in the United Kingdom, must be taken over. That is obviously wrong from the point of view of the Government and the electricity Authority and the boards, and it is obviously equally unfair to the company, which may have assets abroad. I imagine that nothing could be more inconvenient to the Central Authority or the area boards than to be landed with a number of investments which consist of electrical undertakings—or it may not be an electrical undertaking at all; it might be anything; it might be a tramway or a bus company; it might, for all I know, be a trading business or an hotel or something abroad. Obviously, nothing could be more embarrassing, and what they would have to do would be to get rid of it as soon as they could.

If the company which owns this asset abroad would like to go on owning it and running it as part of its undertaking, it would be common sense as well as fair that the company should be enabled to do that. It is not only assets outside this country; there may be other assets inside Great Britain which have nothing whatever to do with the generation or distribution of electricity, or anything that is ancillary. Anything which is reasonably associated with this electrical business and ought to go with it, obviously goes over; but in a number of cases there are undertakings wholly alien which again must be embarrassing to the Authority or the board. They would certainly want to get rid of these undertakings.

Therefore, what we say is this: if there is a holding company which owns assets, which I may conveniently call extraneous assets, though I include assets which are either outside this country or inside it but which are not concerned with the purposes of the Bill—the generation and distribution of electricity—then we say that that company should be allowed to remain in being, it should part with all that it should part with to the Central Authority or the appropriate board, but it shall be allowed to retain these extraneous assets. There is the main big Amendment which follows and then there are a number of consequential Amendments. It may be that with thought even this could be simplified. There may be a simpler way of doing this, but the broad principle that we ought to find a way of doing it I do not think anybody would gainsay. A company of that kind would, of course, carry on with its undertaking as long as it wished to do so; its life would be continued.

There is also another type of company which we have to consider. I am not sure about this because I am not sure that, if the stockholder's representative is a director and the appropriate director of the company, this is so important, but I will certainly put it. A company whose assets are all taken over and which consists entirely of quoted securities is a simple proposition because all that is wanted is a mathematical sum. That obviously can be done by a liquidator and then the process of paying out on the bank plan goes on. There are a number of companies—about 140 of them—where you cannot proceed by a simple mathematical sum because some part or all of their assets are unquoted assets. Therefore, the Bill provides that the purchase price shall be settled by agreement or, in default of agreement, shall be assessed by arbitration, the arbitrator being given a rather odd direction. I do not know that I altogether envy him because, if I may paraphrase it in this way, he has to try to get as near as possible to what would have been quoted if there had been a quotation. It is odd, if one gets away from the ordinary test of compensation and of what a thing is worth, how difficult it is to try to substitute something else. That is the job which the arbitrator has to do. Someone has got to negotiate the agreement on behalf of this company; it has to go to arbitration if there is no agreement. My friends and I have thought that the right way to do that was to leave the board, who are after all representing the interests of the shareholders, to do that. Then, as soon as the agreement is made or the arbitrator has given his award and it is known how much money has to be paid out, the thing becomes merely a matter of liquidation and the company can go into liquidation.

I apologize for having dealt with this point at some length but I hope that I have made it plain; I think it is convenient that I should have deployed the whole position, both as regards the companies that want to have a continuing life because they have valuable assets with which they want to carry on and also, of secondary importance, those who have a temporary life because they have to get an agreement or go to arbitration about their assets. I cannot deal with either of those unless I get rid of this subsection, and therefore I beg to delete it.

Amendment moved— Page 22, line 19, leave out subsection (11). (Viscount Swinton.)

LORD RENNELL

With your Lordships' permission, I would like to take the Amendment which stands in my name, to insert a new clause after Clause 14, at the same time as the Amendment moved by Viscount Swinton. If I deal with the first of the two main points made by Viscount Swinton, it is not to say that I do not agree with him over the second one about the directors of the company being the right persons to negotiate; but it is on the first point that I want mainly to draw your Lordships' attention to the difficulties that arise, and have arisen for the Government, in the policy that they have adopted. What I have to say about my Amendment for inserting a new clause after Clause 14 and the deletion of subsection (11) is really not unconnected with what is going to come up later on Clause 20 with regard to the compensation to companies, because it seems to me that all the difficulties that arise about continuing companies of the sort described by Viscount Swinton arise out of the same, as I think, mistaken policy conducted in drafting this Bill in these proposals.

The properties that are in question and that are to be taken over are to be taker. over by compensating shareholders, broadly speaking, with electricity stock. Now the companies to which Viscount Swinton has referred which own properties that are not necessary to the electricity scheme as a whole—namely, electrical properties abroad and properties which are not electrical in this country—could continue to remain in possession of them if those properties which the Bill seeks to take over were paid for, not by compensating the shareholders with electricity stock but by giving the companies themselves value for the properties taken over.

Let us take the case of the company of the type referred to by Viscount Swinton having, say, 75 per cent. of its assets the sort of assets which the Bill seeks to take over and 25 per cent. of them assess that either are not in this country (the tramway undertakings and the bus companies abroad which Viscount Swinton referred to) or assets in this country wide a are not electrical assets. All those asset, whether those that are taken over or those that are not taken over, are not the property of the shareholders; they are the property of the company. If the compensation envisaged in the Bill, instead of being payable to the shareholders and, therefore, logically requiring the dissolution of the company as is stipulated in subsection (11), were not payable to the shareholders but were payable to the companies, the companies having assets which are not taken over would automatically continue to be in existence and that would, therefore, obviate having to insert after Clause 14 the clause which I propose should come after Clause 14, which admittedly is a piece of patchwork. It would also obviate all she difficulties which arise in the Bill, and which will arise even more when we come to discuss Clause 20, of appointing a stockholders' representative to represent the stockholders in the place of the directors who are normally the stockholders' representatives.

In other words, the whole structure of the Bill could be simplified, and it is my submission that it should so be simplified, to alter the basis of compensation which has every form of historical precedent to support it—namely, to pay the compensation to the owners of the property and not to a third party. I know that this raises a very big issue and is obviously one that probably should not be settled by the discussion of particular Amendments even on the scale of inserting new clauses. I am also quite well aware that the Bill needs recasting not only as regards the general tenour of Clause 17 but also, much more so, as regards the general tenour of Clause 20. But I cannot help feeling that it would not only be more satisfactory from our point of view—which is obvious, because that is why I am speaking from this side on the subject—but it would also probably be much more satisfactory from the point of view of the Government, to follow the precedent which has been laid down for many generations in this country, that where the sovereign authority of the State decides to do something, the people who should be compensated for what is being done should be the owners of the property.

The noble and learned Viscount will correct me if I am wrong, but I believe that has been departed from in only one Bill hitherto—namely, the Transport Bill, or Act as it will shortly become, I have no doubt, where the railways are taken over by compensating the stockholders directly. I suppose it is on that analogy that this procedure has been followed in taking over electricity undertakings. I believe that a much better case could be made following that line on the Transport Bill than could ever be made, with all the skill and persuasiveness of the noble and learned Viscount, in the case of electricity undertakings. Your Lordships will, perhaps, forgive me if I have apparently wandered rather far from the point, which is the Amendment to delete subsection (11), but it was with the purpose of pointing out that the alternative to following us through the many difficult Amendments which are consequent upon the thesis put forward by the noble Viscount, Lord Swinton, is that of paying people for the properties they own instead of paying third parties.

In the reply which the noble and learned Viscount will give, I feel that it is our right and privilege to be told why the precedent (subject to the exception of the Transport Bill) is to be created here of not paying compensation to the people who are entitled to have it, and what are the strong arguments in favour of this unprecedented course which have led them into these complications, when an easier course might have been followed. 1 think that is all I need say on this matter, because it will come up again on Clause 20. I shall be very glad if the noble and learned Viscount can persuade me that the Government are in the right. I do not see offhand what the grounds are, except the one ground which I hope we shall never hear—namely, that this is a cheaper way of taking people's property away from them.

THE EARL OF LYTTON

The actual Amendment before us is to leave out subsection (11), but we are in this difficulty, that the purpose that my noble friend Lord Swinton, has in leaving out this subsection is in order to make room for a new clause, and a number of subsequent consequential Amendments in the Bill, and it is impossible to tackle this first Amendment without reference to some of the later ones, which will be consequential. But, without entering into discussion on the elaborate and complicated machinery which is involved in some of the later Amendments, or to the very important but controversial subject raised by my noble friend Lord Rennell on the principle of compensation as applied under Clause 20, may I just call your Lordships' attention to the reason for the new clause which it is proposed to insert after Clause 14, if we leave out subsection (11)?

Your Lordships will see that it has a marginal note: "Electricity holding companies having external assets." The purpose of this clause is to deal with holding companies which possess external assets which are in no way connected with the generation or distribution of electricity, whether those extraneous assets are in this country or outside this country. When this matter was being discussed in another place, the spokesman of the Government stated on several occasions that it was not the desire or the intention of the Government to take over anything that was entirely dissociated from the generation or distribution of electricity, but up to this moment they have not produced any Amendment which will give effect to that intention, and my noble friends are proposing these Amendments with the object of giving effect to the policy which the Government has declared it wishes to follow. May I give your Lordships an example of a holding company, one of the subsidiaries of which owns property such as flats, and that sort of thing—nothing whatever to do with the generation or distribution of electricity? Under this Bill as it stands, that company will be taken over including those assets, and then the Central Authority will be required to consult with the Minister as to how they should dispose of that property, which they do not want, and which they have no reason to lake over, and which they have no intention of retaining. What we ask your Lordships to say is that, in the case of such a company, those assets should not, in fact, be taken over, and that the company possessing them should have the right, after two months, after giving notice to the Minister of its intention, to take out of the operation of this Bill those extraneous assets, and, if that is so, there are a number of Amendments which will come on later to say how these matters shall be dealt with.

Without entering into that machinery, I do want to impress upon your Lordships the main point, which is that we should provide for electricity holding companies having assets that are wholly disconnected with electricity, either generation or distribution. The rest is a matter of machinery and other detail. The Government have shown a very reasonable attitude so far in our proceedings as regards some of the points, and I think they will also admit that noble Lords on this side of the House have been reasonable in accepting their arguments when they have put up some good case. I would, therefore, plead most strongly to the noble and learned Viscount, the Lord Chancellor, that he should either accept this Amendment as it stands, or give us an assurance that, before we part with this Bill, there will be an Amend- ment from the Government side to give effect to the pledges which were given in another place, but which have never yet been met. Until we can get that, I hope my noble friends, Lord Swinton and Lord Rennell, will press this Amendment.

THE LORD CHANCELLOR

I gladly join in helping any discussion on this difficult problem, and follow the excellent ample which has been set. This is a very difficult clause, and it is very difficult to isolate this proposal to leave out a relevant subsection from the Amendment to Clause 20. I agree that it is difficult to separate it from the whole basis of compensation If, as a rather experienced advocate myself, I may be allowed to pay a tribute to your Lordships, I would say that you have succeeded in a very few minutes in putting the salient points of this extremely complex facade to all these matters. I shall try to follow suit. I should like, first of all, to say a word or two about compensation under Clause 20. So far as I know, with the exception of the Transport Bill, this. is the first time that this has been done. I have not made any researches, but I do not recall another case. On the other hand, when we come to Clause 20, as I am afraid your Lordships have rather anticipated, I shall remain adamant about adhering to the scheme proposed, not because we want to get property, paying less money for it, but because I believe it is quite impossible to assess what the fair price is. I believe that what is proposed is as good a way as any; indeed, I think you will probably get nearer to the assessment of a fair price by this method than by any other.

Why do we want to take over holding companies? Your Lordships, of course, appreciate that if a holding company own as less than 75 per cent. of electricity under-takings and so on, it escapes altogether. It is only if it holds 75 per cent. or more that we take it over. Now why do we want to take over holding companies? For one very simple reason. You find that the structure that has grown up is this. You have a large number of authorized undertakers, and this very convenient device of a holding company is frequently employed to do all sorts of things. It is employed, for example, to service the undertakers, and to male arrangements for repairs; the staff of the holding company superintend the under- takers. If we are going to take over undertakings without taking over holding companies, we shall find ourselves landed with a whole lot of undertakings without the expert staff and skilled management necessary to run them. Therefore we say that we must take over the holding companies—assuming that they are within the description of holding more than 75 per cent.—we must take them over lock, stock and barrel. We must take over everything that they have. We must transfer to ourselves contracts of servants and other people who are with them so that we may employ their skilled staff in managing what is going to become our business.

In addition, as I have mentioned before, if you are going to accept the Stock Exchange basis—that is why I referred to Clause 20—you can only do it if you take over holding companies, because to a great extent subsidiaries are not quoted on the Stock Exchange, whereas a holding company normally is. If you are going to apply that basis—and that is a matter which we shall have to discuss when we come to Clause 20—you must take over the holding company.

Now I come to this difficulty. It is the fact that the holding company may hold up to 25 per cent. of what have conveniently been called extraneous assets. It has been said in another place, and I say it again now, that the Minister has no desire whatever to take over these extraneous assets. I am assuming that they really are extraneous, and not ancillary or anything of that sort—a block of flats, or—to quote the example given by Lord Rennell—foreign investments. We do not want them at all. But why is there nothing in the Bill at present? For this reason. If a holding company wants to get rid of those extraneous assets to some third party, it can get rid of them until the vesting date. The only prohibition on the operations of the holding company is that they must not dissipate their assets. They must not throw them away, or make improper bargains. So long as they receive a fair price for their extraneous assets, the holding company are entitled to get rid of them. We do not want them, and we have no objection whatever to the use of a device like this, for instance. In parenthesis I should say that you must be careful not to make a holding subsidiary for the holding company, otherwise you are done for. But there would be no objection to a company being formed consisting of shareholders or, if you like, directors of the holding company, who will declare themselves trustees for the existing shareholders. Any competent solicitor could give you half a dozen other devices in a few minutes. By all means sell these extraneous assets to some such company as that.

What will the holding company then have? They will have—I am assuming that this has been an honest bargain—instead of these extraneous assets, the money which has been paid for those assets. The only criticism that could possibly be levelled against the holding company for doing that, would be if someone were to come along and say: "I am going to make a complaint to the Tribunal; you did not get enough for the assets." If you are frightened of a complaint of that sort being made—and may I say that I can well understand people being nervous, and I myself, if concerned with a matter of this sort, would want to be sure that no one was going to have a shot at me, however remote the chance was of being hit—go to the Minister. He is willing to approve these transactions. He has no desire to make money out of this scheme at all. So long as the transaction by the holding company in disposing of their extraneous assets is fair and above board, and the assets are disposed of at their fair value, so that in place of these assets there stands in the books of the holding company the real value of the assets in the form of cash or stocks, or whatever it may be, the Minister will make no complaint.

As I say, if the holding company want to be reassured they can go to the Minister and say what they propose to do; and if the Minister is satisfied that there is no hanky-panky going on, that a fair price is being obtained and so on, he will have no objection to approving. It is not the case, as noble Lords will see, of any Amendment being required. Indeed, there can be no Amendment. The holding company are masters of the situation down to the vesting date, but when the vesting date comes, they are dead. So they can only act before the vesting date. Before that, they are the masters of their own assets. The only thing they have to fear is that in the future someone may say: "You have been dissipating your assets," and, as I have said, they can guard against that by getting the approval of the Minister.

VISCOUNT ELIBANK

May I be allowed to interrupt the noble and learned Viscount in order to ask this question? Would the Minister give absolution to the directors, because it is the directors who will be responsible and very much responsible under the Bill, if they do not act correctly? Would the Minister give them absolution and make their position absolutely secure?

THE LORD CHANCELLOR

I speak subject to my recollection being at fault, but: I think Clause 26 is the clause dealing with this. I must confess that I am getting rather confused between all these various Bills but I believe that to be true. I think it is there that you will find this dealt with. I think you will find it stated there that directors are completely indemnified so long as they get the approval of the Minister. That clearly should be so, because as the noble Viscount, Lord Elibank, says, they are the people who are liable if assets are dissipated and it is they who want the approval of the Minister. I think you may take it that so long as they get the approval of the Minister they have nothing to fear. That is the suggestion that I make to your Lordships. We must adhere to the Stock Exchange values, we must adhere to the proposal to take over holding companies lock, stock and barrel for the reasons that I have given. And we must adhere to the rule that the holding companies come to an end on the vesting date. But we do not want the extraneous assets. We are perfectly prepared that holding companies should between now and the vesting date distribute their extraneous assets, and if the directors are hesitant or frightened about it, let them by all means go to the Minister. The Minister wants to make no money out of this. He wants to see that a fair price is being received, and that, your Lordships will agree, is fair. He wants to see holding companies obtain a fair price.

In so far as foreign assets are concerned, we would be very willing to have nothing to do with them. If the holding companies can devise a scheme by which they can pass them to some other com- pany, there is no reason why that should not be done and I suggest to your Lordships that that is the right way of doing it. Therefore I cannot accept this Amendment. I hope your Lordships will agree, because this Amendment will not be acceptable in another place, and it might be better to agree with your adversary quickly when there is some hope of agreement with him, so that we can have something of practical utility here. I do the best I can. I suggest that the Amendment should not be pressed and. that your Lordships should try to work things out on the line I have indicated by the distribution of extraneous assets to some third person so that they might be dealt with hereafter.

VISCOUNT SWINTON

Would it be more convenient if we went on with this now and adjourned later?

THE LORD CHANCELLOR

I think we should adjourn now.

[The sitting was suspended at three minutes past seven o'clock and resumed at half past eight.]

THE LORD CHANCELLOR

If your Lordships are now fortified and refreshed you will be able to withstand a few further words on this topic. I am sorry the noble Viscount, Lord Elibank, is flat here, because I want particularly to answer a question which he addressed to me. He pointed out that the people who are liable to be "shot at" if anybody claims that there has been a dissipation of the assets, are the directors. That is true. That matter really arises under Clause 26, to which I referred, and Clause 29, to which I did not but should have referred. If your Lordships will look at Clause 26, it seems to me that the relevant position is at the top of page 40, where it says: Where, at any time after the tenth day of January, nineteen hundred and forty-seven, any such body as aforesaid"— that includes the whole of the companies to be taken over— have, without the approval of the Minister"— done various things. The third thing is: distributed assets other than money to their members;". It is true that those words are defined in subsection (6), but the offence, if offence there be, is committed because those things have been done without the approval of the Minister.

That refers only to a distribution to members. The corresponding case, where you distribute to somebody outside—if you like, a company formed for the purpose—is dealt with in Clause 29. If your Lordships will look at the bottom of page 47, you will see the proviso, which says: Provided that this section shall not apply:"— and now I read sub-paragraph (iii)— to any payment or other transaction … which has been approved in writing by the Minister, either generally or specially, and whether before or after the date of the payment or other transaction. So that in either case, whether you are transferring assets to your members, or whether you are transferring assets to outsiders, the offence is that of disposing. For instance—I read from paragraph (b) on page 47— sold or disposed of any of its property or rights without consideration or for an inadequate consideration;". If you get the approval of the Minister in writing, then no one can be heard to question the transaction.

I know of one case—I am not certain of my facts, and I am afraid I am a mere theorist on this; therefore I will not give the name of the company, but it is a very well-known company—where I understand the position is this. It is mainly concerned in such things as manufacture, finance, and so on. It does not itself own shares in other undertakings, but it has a wholly-owned subsidiary which does own a good many undertakers—or some undertakers, at any rate—and, in addition, owns some outside assets, particularly, in this case, foreign assets. It is a holding company which the parent company owns. Under this Bill the holding company will be taken over, but the parent company will not. That is a very easy case to deal with, because if the holding company, which possesses foreign assets, agrees with the parent company (which I understand in this case wants those foreign assets) to transfer them to the parent company in return for a fair consideration, then the assets of the holding company which will be taken over will be, not the foreign investments but, in their place, what is, ex hypothesi, a fair sum. That can be done in that way.

In other cases, where you have not that set-up, it may be necessary to constitute a company for the purpose. I am not going to advise as to how that can be done, but I am perfectly certain it does not defeat the wit of man. There are many eminent solicitors who understand this thing—some of whom may have heard our debates to-day—who can tell you far better than I can how this can be done. I quite understand that they want a statement from me, and they will get it. The Minister will not be concerned to look upon this course with disapproval at all. So long as the holding company gets a fair price for that of which it disposes, that is all he wants. He does not want extraneous assets. He wants to guard against dissipation, and all your Lordships will agree with that. That is as far as I can go, and I hope that the assurance I have been able to give—which I have given, I need hardly say, with the authority of the Minister and his advisers—goes some way to satisfy your Lordships that we do not want to be unreasonable about this matter and we do not want to take over extraneous assets, but we only want to see that extraneous assets belonging to companies which we are taking over are not parted with unless fair consideration is given for them.

VISCOUNT SWINTON

We are all deeply indebted to the noble and learned Viscount for the interesting and clear exposition which he has made of a complicated situation and, if I may respectfully say so, of the rather difficult situation in which he finds himself. Let us see our measure of agreement here. The Lord Chancellor says that it would be quite wrong for the Government to take over what I have conveniently and compendiously called extraneous assets—assets outside this country and assets inside this country which are not concerned with the generation and distribution of electricity. The noble and learned Viscount says further that the Minister does not wish that an excessive price should be paid for those assets. In fact—correct me if I am wrong—he wants to try and deal as fairly as he can with these holding companies. But I am bound to say that the proposition so far put to us does not do very much to help them. Let us observe what it is he has told us. After all, these companies only want to continue to exist, owning and managing under- takings which they have bought because they thought it a wise investment on behalf of their shareholders. Those undertakings they are running very competently and some of them may be bringing in hard currency. All they ask, oddly enough, is to be left alone with those assets which nobody except themselves wants.

The noble and learned Viscount said, "I will give you a very good tip. We should agree with our adversary." I always agree with my adversary if it is a deal, but frankly I do not give something for nothing. We even got fourpence for ninepence in the old days—or was it ninepence for fourpence? The position is now reversed. just observe—and I am sure the Lord Chancellor will agree with this—what this sporting offer is which he has made. It is this. You can go and establish a new company—it is rather a labour to do this—and get your shareholders to subscribe to it; and then, with the Minister's approval, you can sell it at a fair market price—observe the expression, because that is what it is—as between a willing buyer and a willing seller; you can sell to the new corporation which you have created, and upon which you have paid extra stamp duty, at a fair market price, what already belongs to you. It is "curiouser and curiouser."

I do not want to look a gift horse unduly closely in the mouth, but that extraordinary transaction is well within the powers of any company to-day without any facilities in this Bill. Why have we to do this? Because the Lord Chancellor says the Government, the authority, must take over all the holding companies and all that is theirs—including all things they do not want—because they need their expert service. Your Lordships will remember the episode of Uriah. It was not a very agreeable one. David coveted Uriah's wife and the only way he could get Uriah's wife was to liquidate—I understand that is the right expression, legally> and otherwise—Uriah. So, as here, Uriah was liquidated, and the lady was transferred to the "central authority." It was not an agreeable transaction, not a transaction which has been held up to us, whether it be in a public school or in a Socialist Sunday school, as one to be emulated, provided at any rate that it can be avoided without undue inconvenience!

I think I can say to the noble and learned Viscount, the Lord Chancellor—and I am sure the Lord Chancellor is the last person to emulate David in this capacity—that I can save him from this. I would make him this proposition. He can get the equivalent of the wife, these expert persons engaged in the conduct of the undertakings. Under the Bill as it stands, he can get at a fair price the assets he wants to acquire. I am not going into Clause 20 for this purpose because I know he wants the Stock Exchange values. We shall have to debate Clause 20 presently, and adverse view s will be expressed upon it. But even the hardiest advocate of compensating shareholders in Stock Exchange values would, I think, hardly stand for this anomaly, that you should take over the whole of the undertaking, the whole of the assets of a holding company, at one comprehensive Stock Exchange value, and then compel that company, in order to retain what it desires not to part with and what the Lord Chancellor does not desire to acquire, to buy back at an excessive price.

I say "at an excessive price" because quite obviously the price at which they would have to buy back would be higher than that to which the Lord Chancellor was referring. Let me make that plain It is certainly true. He buys what is elegantly called "the whole caboodle" at the Stock Exchange value, and that contains a very large number of unquoted assets. This method is selected because it is easy, of course; also it avoids valuing those unquoted assets, the value of which in the aggregate, even on the form of valuation which we are directed to take under the Bill, may be considerably more than what is to be given for the total holding company on this Stock Exchange quotation. But observe this, further. The holding company has then to buy back its extraneous assets. At what price does it buy them back? A fair price. What do you mean by a fair price? The Lord Chancellor has told us there must not be a dissipation of assets. It is to be what a willing buyer would give to a willing seller; it is to be the same value that the Minister would give if he put up the assets to auction.

If the whole transaction were open and above board, and you had bought the whole of my undertaking at its fair value as between a willing buyer and a willing seller, and I had a right of pre-emption to buy parts of it back, of course I would buy my part back-but on the same terms as those on which I had parted with the whole. It would, however, have been grossly unfair to take my whole at the artificially deflated price and then force me to buy back what I ought never to have been made to part with, I will not say at an unfair price but at a higher price—namely that as between a willing buyer and a willing seller.

There is a very simple way out of this. We all want these companies to go on; we all want them to continue to hold their extraneous assets; we all want them to part with the whole of their internal electrical assets and also to part with the services of all these gentlemen who are concerned to-clay with running these subsidiary electricity companies. That is our common intention and surely we can do that without putting these wretched holding companies into liquidation and going through this curious procedure of getting a solicitor to form some new company to which the shareholders come along and subscribe. Why cannot you leave a poor tenant in possession? After all, you do not turn people out of their houses to-day; they are allowed security of tenure. Surely the poor holding company, which has done a very good job, as the Lord Chancellor has said, can be allowed to continue to have security of tenure.

What is a holding company exactly? It is a shareholder. It is a shareholder which has two things: it has a number of subsidiary electricity companies—75 per cent. or more—it also has a number of other assets, exactly as any one of us who is a shareholder in an electrical undertaking and a shareholder in something else. You take over from us our shares in electricity, you do not take over the other share investments we possess, and you pay us for our shares in electricity in accordance with the Bill. If it is quoted you pay us the quoted value of our security; if it is unquoted you pay us the value which we agree, or which is settled by arbitration, as nearly as possible on the lines as if it were quoted on the Stock Exchange.

Treat the holding company as what it is—namely, an investor, who holds certain things you wish to take over and certain things you do not wish to take over. Take over from this holding company investor all the electricity undertakings, and value them exactly as you lay down in the Bill that they should be valued. If they are shares in companies which are quoted on the Stock Exchange, take the Stock Exchange value. If they are companies whose shares are not quoted on the Stock Exchange, take the agreed value or the arbitration value, as is laid down in the Bill. When you come to pay, I do not even ask you to pay in cash. Pay to this investor, the holding company, as you would pay to any other investor in the land; pay him out the value of his investment, as laid down in your own Bill without a single amendment, and pay him in the way you lay down in your Bill—namely in Electricity Stock of the equivalent value at the date of issue. Then you have got all you want. You have taken over the whole of the assets which ought to be transferred to you, you have taken them over in exactly the manner and at exactly the valuation which, in your own Bill, you lay down as the right and the fair way to do, and you leave him in possession of the assets you do not want to take over.

I am advised—and I have managed to have five minutes' consultation on the only point I wanted to clear up—that so far as the transfer of this expert staff is concerned (which I quite understand you want and which we feel, subject always, of course, to people's rights, should go over to you), you will take them over and will have assigned to you the benefits of all those agreements. I am advised that it is already provided, under a clause of the Bill, that when you take over these undertakings you will take over the benefits of the contracts of service, whether they are with individual companies or with a comprehensive entity. At any rate, that could easily be the subject of arrangement. That broadly is the proposition I put to your Lordships. I should like to make quite sure that it is watertight. I think I have carried the Committee with me that it is eminently fair; I think I have carried the Committee with me that it is eminently reasonable. The great thing to do, after all, is to transfer to the Government what the Government ought to have, and to leave outside, for somebody else's possession, what they ought not to have, and what they do not want. I am advised that, with the skilful draftsmen that are available, this thing can be done in a simple clause, with two or three extra Amendments, with much less complexity than by the Amendments I have previously put on the Order Paper and deployed to the Committee. On those lines I think we could deal fairly, to the common advantage of all.

It is not fair to ask the Lord Chancellor for a final answer to that now, but I am sure he will give it that usual consideration which I have found he always gives to any considered proposition with which he is met, particularly as I am sure he must feel in his heart that equity moves with good sense and convenience in this matter. I do not wish to withdraw my Amendment immediately, and I would therefore propose, if my noble friends agree, that when we have discussed this a little further—I do not know whether my suggestion will find general favour, but I think it will—I will then withdraw the Amendment, if there is a clear understanding that we try to come to an accommodation on these lines. But, of course, if we should not reach such an understanding I would reserve my full right to put an Amendment down on these lines on the Report stage. We shall then have had our full debate and tested one another's minds in this matter, and I am sure we ought to he able to arrive at a rapid conclusion and an agreed, just and final conclusion.

LORD RENNELL

There are two points arising out of the speech of my noble friend, Viscount Swinton, which I think it only right that I should add. I believe that the noble and learned Viscount, the Lord Chancellor, would agree that a great deal of what he said was not likely to carry conviction so far is I am concerned. To say that a holding company with a 25 per cent. residual interest of extraneous assets can sell them and—to put a gloze on what the Lord Chancellor said—had better sell them while the going was good, through one or other device, is certainly not an argument, I am sure, that he would consider a fair or reasonable one to put forward. Anyone who sells under duress, who sells because he has to sell, before the vesting date, is not likely, in any circumstances, to get a fair price. I do not think the Lord Chancellor would suggest that or would put forward that argument.

The second point which I think has possibly also escaped attention—though not perhaps of the noble and learned Viscount, the Lord Chancellor, because he must be well aware of it—is this. A holding company which sells certain assets, which it is required to sell under duress, at any price it can get, will (or its shareholders will) receive in compensation Stock Exchange values for it; securities. If it sells those assets, even under duress, to a willing buyer, the Chancellor of the Exchequer will take 9s. in the £ out of what profit has been made in the difference between book value, and sale value. Can either of those two plans be considered as fair treatment for the shareholders or anyone else? Bear in mind that the price at which these extraneous assets are sold during the interval prior to the vesting date can have no possible effect on the Stock Exchange value of the security on the dates referred to in the Bill. To have put forward that plea, as the Lord Chancellor did, a justification of this method of the holding company disposing of its extraneous assets, is surely an action which on second thoughts he would not wish to press.

If some other compromise can be found on the lines which the noble Viscount, Lord Swinton, has suggested, I shall welcome it, but I could not accept any of the arguments put forward by the Lord Chancellor for proceeding along the lines of the Bill. Least of all could I accept the two justifications which I understood him to make for proceeding on those lines. One was that in abolishing the holding companies the Government wished to buy staff. My Lords, the Government can buy generating plant and buy a share, but I have yet to learn that this or any other Government can buy staff in that way. The second justification was that there was no other method of valuing the assets of holding companies. That is surely art exaggeration. The underlying assets of holding companies can be and have been valued, not only in this country but in America, on countless occasions. The real assets underlying in the form of plant have been valued, and the value of a running concern can be assessed. Indeed, it has been assessed, or an attempt has; been made to assess it, in the Coal Act as the maintainable revenue of a coal mine.

The underlying assets of a holding company cannot be valued in accordance with the value of holding company shares in Stock Exchange prices. That is manifestly not in accordance with practice or experience.

9.1 p.m.

THE EARL OF SELBORNE

I rise not only to support what my noble friends have said but to protest against the transparent inequity of the plan explained to your Lordships by the noble and learned Viscount, the Lord Chancellor, just before the adjournment. In the first place, it is clearly very arbitrary to take these figures of 75 per cent. and 25 per cent. If the difference of treatment is as big as it is in this Bill, then it must be very inequitable to those companies who are just on one side or the other of the border line. And that to my mind is in itself an important consideration and an important criticism of the Government's plan.

In the second place, just consider how the plan that the noble and learned Viscount explained to us would work. He boldly faced the dilemma in which the directors would be placed, as to whether or not they are getting a fair price for the extraneous assets which they wished to dispose of, and which indeed he invited them to dispose of. If they sell to an outside body, as the noble Lord, Lord Rennell, has pointed out, they are not likely to get a fair price. With the Sword of Damocles hanging over their heads, and everybody knowing that they have to settle before the vesting date, they would not be likely to get a fair price. But the Lord Chancellor practically invited them to engage a clever City solicitor who would show them the way by which a new company could be formed, consisting of their own shareholders, or some other such device. I assume that that is the plan which most holding companies would prefer in such circumstances. They are faced with the dilemma which the noble and learned Viscount also faced—they have to charge their own shareholders a price which the Minister will regard as fair when he comes to take over the holding company and the Lord Chancellor's solution was to invite directors to submit that price to the Minister himself.

I ask your Lordships to visualize what would happen. There must be a number of companies in such a position. Every one has its own extraneous assets with their own complications. There are difficulties in each case about the valuing of the assets, and the companies would be queueing up in front of the Minister who has to give them a decision. We all know what it is when we have to write to a Government Department or approach it on a difficult matter. We do not expect an answer in a short time. All that time the company would be kept on tenterhooks waiting for a decision, and I venture to suggest that the directors would not get a decision until the eleventh hour. That obviously would put them in a very awkward position.

Consider another aspect. Let us say that the price agreed by the Ministry was £100,000. The shareholders would be invited to find £100,000 of new money to buy their own property in a new company; they would pay that £100,000 over to the holding company, and ultimately, when the settlement came, they would be given 100,000 of Government securities in exchange—Government securities which might well be unsaleable at that moment! That, to my mind, is a most inequitable way of treating shareholders whereas the plan proposed by my noble friend Viscount Swinton is not only clearly equitable but also clearly feasible, where you buy one asset and do not buy the other. That, one would imagine, was common sense. I hope very much that the Government will reconsider their plan, because it is not only extremely elaborate but it seems to me that it is bound to act with the greatest inequity in cases where it is applied.

THE EARL OF LYTTON

I do not know whether the Committee are clear as to where we stand on this matter. I do not feel quite clear in my own mind, and I would like, if possible, to try and clear the position. My noble friend Viscount Swinton said that he was reluctant to look a gift horse in the mouth. So am I. But I am not sure whether it was a gift horse which the noble and learned Viscount, the Lord Chancellor, offered to us. I may be mistaken, but I want to clear the matter up. I am a holding company with extraneous assets. The Lord Chancellor tells me that he does not want those assets. So I say to him: "May I keep them?" Then I understand him to say: "No, but you may sell them." But, having sold them, the money I receive for them will then pass under this Bill to the new authority. In other words, I may sell my assets; but I must not keep the money I get for them.

THE LORD CHANCELLOR

The noble Earl will forgive me. You cannot keep both the assets and the money.

THE EARL OF LYTTON

No. I do not want to. I ask to keep my assets. The Lord Chancellor says: "No, but you may sell them, and having sold them you must give me the money which you receive for them." I say: "Thank you for nothing." It is useless to labour the fact that the Minister is sure to give his consent. He will certainly give his consent. All the Lord Chancellor is offering to me is that I may save the Minister the trouble of taking the assets over and selling them himself by selling them in advance. If that is what is proposed, I do not feel that he has really made a very great concession to us. I may be wrong——

THE LORD CHANCELLOR

It is possible.

THE EARL OF LYTTON

—and the noble and learned Viscount will correct me if I am. However, that is what I understood him to say. Now the noble Viscount comes along with another proposal, and before I can say whether that is acceptable to me I would like to clear my mind about it. The noble Viscount said that we are all agreed that the holding company should go on in respect of their extraneous non-electrical assets. If that is so, I am satisfied. But I thought that was not the view of the Government, and that they were not anxious that they should go on. They say: "On the contrary, we are going to take over the holding company lock, stock and barrel, with all its assets, whether they are electrical Or not."

VISCOUNT SWINTON

They would like them to go on if they could see a way free to do it.

THE EARL OF LYTTON

I hope that is so. I hope they would like them to go on, and I hope the noble and learned Viscount will offer them a way by which it can be done. In that event, I shall be glad to support his alternative procedure. I have supported the Amendment of my noble friend Lord Rennell in the belief that it would have the effect which I desire—namely, that the holding companies should continue to hold assets which tie Government do not want. If the Government are willing to accept that Amendment—and my noble friend Viscount Swinton has an alternative way of doing it—I shall be very glad. But I would ask my noble friend to be sure that he is right in thinking that the Government want the same thing as we want, and that we shall get it by his alternative form of words. It is, of course, a little difficult to take in, without a draft Amendment before one, exactly what is proposed, but if the noble and learned Viscount understands what it is that the holding companies desire—and I believe he wants to achieve the same end—if he will put on the Paper an Amendment which will carry out that purpose then we shall be only too glad to accept it.

THE LORD CHANCELLOR

May I just answer the last observations? If tie noble Earl reads to-morrow what he has just said, I think he will see that he has not really appreciated the position as I see it at all. We are looking at the thing from completely different points of view. You may or may not think that the Stock Exchange method is a fair one—for the moment I am assuming it is. On that hypothesis, the Stock Exchange value which you would give is the value of tie assets of the holding company, the assets of the holding company of both electricity and extraneous assets. Therefore, tie shareholders are paid for the value of the extraneous assets by getting the Stock Exchange value. They are assets which tend to swell the total value of the company.

Now that that is plain, my proposition is this. I am not concerned with whether or not they sell these assets, but if anybody does want to sell these assets I am ready to facilitate that in any way I can. If they do not want to sell them there is no question of sale under duress. If tiny want to sell them, they are perfectly free without going within a hundred miles of the Minister. But if they do they run the risk of somebody saying hereafter, "You sold at an under-value." Therefore, to try and meet that point I say that if you want to go to the Minister, the Minister is perfectly prepared to approve the transaction if he thinks it is a fair transaction; and that relieves you of your worries. Do not trouble to go to him unless you want to; but do realize that if you do not somebody may say it is not enough. I think that is perfectly fair.

I have made it plain that from the Government's point of view they must take over the holding company altogether. You cannot take over a bit of the holding company, even although it is a large bit, because you cannot apply the Stock Exchange value at all; and neither can you bring about an assignment by operation of law which results from the taking over the whole of the holding company, all its contracts and everything else. That is the point I put, and I do venture to think, with the very greatest respect, that the noble Earl—for whose judgment I have the most profound regard—will see that by the remarks he made just now he has rather made light of the considerations which I have advanced. He will see also that I am not trying to do anything in the way he suggested, and it is not right to say that the Minister would automatically give his consent. By no means would he automatically give his consent, because obviously if these foreign assets were being sold for an old song, then the Minister would have to pay the Stock Exchange value for those assets. The Minister would want to see that the price which was being obtained was a fair price.

I would add this. I myself think that one of the methods he would adopt in seeing whether it was a fair price would be this. It might he, of course, shares in some foreign company which are quoted, and you would know what the value of those assets were. More probably they would not be quoted, in which case I should imagine that he would look at the revenue of the holding company and see, for example, that one-tenth of its revenue came from foreign investments. Then he would say: "What price am I to give for the holding company? £x therefore it is fair to give one-tenth of £x for the foreign investments." But to ensure that there can be no misunderstanding about where I stand I would only Say that I am anxious to do what I can. I need hardly say that any Amendments which are put down I will always consider, but I must not in any sense be taken as committed, and I must not be thought to have gone further than in fact I have gone in my explanation of the Government's point of view.

LORD RENNELL

I should like to clarify one point. Let us take the example of a holding company that has a Stock Exchange quotation of the value of its shares at (say) 25 per cent. of its assets; and extraneous assets to that value are then sold. Let us assume that the 25 per cent. is sold for cash at any time between to-day and the vesting day. The holding company receives the cash for those investments. How much more British Electricity Stock will shareholders get by reason of those assets having been sold between now and vesting day, as compared with what the shareholders would have received in British Electricity Stock had this portion of extraneous assets not been sold?

THE LORD CHANCELLOR

Of course, they get nothing. The assumption is that they have been sold for a fair value. If they have been sold for a fair value the assets of the holding company now, instead of being British Electricity Stock and foreign investment, are British Electricity stock and cash representing this portion of the investment sold; and if the cash fairly represents the foreign investment it should make no difference to the shareholders. You cannot say there is a Stock Exchange valuation attributable to that 25 per cent. There is not. The only Stock Exchange valuation is attributable to the whole thing. You cannot allocate a particular part of a Stock Exchange valuation—say £x—to particular assets, and so long as they are sold at a fair valuation, whether they fetch £2x or £½x does not matter.

THE EARL OF SELBORNE

Would it be fair if they were sold at the valuation at which they stand in the books of the company?

THE LORD CHANCELLOR

Not necessarily.

VISCOUNT SWINTON

The interchange which has just taken place has made it abundantly plain that whether it be fair to take Stock Exchange value or not, one thing is grossly unfair; and that is that the Minister should pay Stock Exchange values when it suits his purpose, but that the wretched holding company which wishes to hang on to its shares, and has to buy them, should not be allowed to buy a quota on the Stock Exchange value but should have to buy for what is called "a fair price as between a willing buyer and a willing seller." I am not going into that point again but it does show, at any rate that the proposal I have put to the Committee saves the Minister from putting himself in the grossly unjust position that he exacts the highest possible price for something he does not want by forcibly taking it from an unwilling seller and then merely remunerating that gentleman.

I shall leave it at that. All that I have said may be studied, and I know the Lord Chancellor will study it because he did not follow it altogether, but he will when he reads it in Hansard to-morrow. I have not departed in a single sentence from the measure of assessment and value laid down in the Bill. You will buy what you require to buy at what you yourself, in the Bill, have said is a fair price to pay, whether it be a quoted or whether it be an unquoted asset. I think that is a much better form of transaction than the very complicated one which we, whilst we proceed by trial and error, have put on the paper. I propose to do this: I propose to withdraw the formal Amendment to delete subsection (11) which we are now discussing. I would then suggest to my noble friends who have been associated with me in this matter that we should take out, as we proceed through the Order Paper, all those innumerable Amendments which fall consequent upon this, but that we reserve our full right to put down and certainly to propose on Report an Amendment on the lines which I indicated in my opening speech. With those words, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 14., as amended, agreed to.

Clause 15 [Provisions as to undertakings of local authorities]:

LORD CHORLEY

This is substantially a drafting Amendment. I beg to move.

Amendment moved— Page 24, line 7, after ("undertakers") insert ("or whether any property is or was (for the purposes of the last foregoing subsection) held or used partly in the said capacity and partly in other capacities").—(Lord Chorley.)

On Question, Amendment agreed to.

LORD CHORLEY

This again is purely a drafting Amendment. I beg to move.

Amendment moved— Page 25, line 21, leave out ("which") and insert ("whom").—(Lord Chorley.)

On Question, Amendment agreed to.

Clause 15, as amended, agreed to.

Clause 16:

Right of pre-emption for local authorities in respect of land vested in an Electricity Board.

16.—(1) Where any land of a local authority vests by virtue of this Act in an Electricity Board, the local authority shall, for a period of ten years from the date of the vesting of the land, have the right of pre-emption conferred by the subsequent provisions of this section.

9.24 p.m.

LORD HAWKE had given notice to move in subsection (1) after "authority" where that word first occurs, to insert "or of a composite company or of a company to which section of this Act applies." The noble Lord said: With your Lordships' permission, I will speak to all the Amendments to this clause which stand in my name, they all being consequential on the first. As the Bill stands, if any land belonging to a local authority passes to the Electricity Board as a consequence of this Bill, and the Electricity Board does not require it, the local authority has an option for ten years on the first refusal to buy that piece of land. In my Amendment, I seek to extend that option to composite companies and also such holding companies as may be allowed to continue in existence as a result of the Amendments which we have put down to the Bill. In another place, an Amendment was moved on Report to deal with this question of composite companies, and the Solicitor-General gave an assurance that he would accept the principle, but in practice I cannot find that he has implemented that promise in any way. It seems perfectly fair that if the company has parted with the land to somebody who does no: want it——

LORD CHORLEY

If it would assist my noble friend, I would point out that it is in fact implemented in the Amendment to Clause 17.

LORD HAWKE

I apologize to the Committee for wasting their time. I should have noticed that, and I will not move my Amendment.

Clause 16 agreed to.

Clause 17:

Composite companies.

(4) Subsections (2) and (4) of section fifteen of this Act shall apply to a composite company in like manner as they apply to a local authority, subject to the modification that for references to the Minister of Health there shall be substituted references to the Minister.

(5) Regulations may make provision—

1. (a) for the apportionment of, and the making of financial adjustments with respect to, any liabilities incurred by a composite company partly in their capacity as authorised undertakers and partly in other capacities, and for any necessary variation of mortgages and incumbrances relating to such liabilities; and
2. (b) for the apportionment of cash and investments held by a composite company partly in their capacity aforesaid and partly in other capacities.

LORD CHORLEY moved at the end of subsection (4) to insert "and the last foregoing section shall also apply to a composite company in like manner as it applies to a local authority." The noble Lord said: This is the Amendment to which I referred a moment ago and, as I pointed out to the noble Lord, Lord Hawke, it implements the promise that was given in another place. But, of course, it only goes so far as the composite companies. The noble Lord's Amendment covered not only composite companies, but also any holding company that would be left as a result of the negotiations and discussions which will proceed. To that extent it meets the noble Lord's object, and I am sure he and the Committee will be willing to receive it. I beg to move.

Amendment moved— Page 27, line 13, at end insert the said words.—(Lord Chorley.)

LORD HAWKE

I take it that the noble Lord will insert suitable words to include any holding company that is allowed to continue as the result of any change of mind the Lord Chancellor may have?

LORD CHORLEY

Yes. In so far as a holding company exists, obviously it would be right and proper that the same rights of pre-emption should be extended to it as are extended to the composite companies.

On Question, Amendment agreed to.

LORD CHORLEY moved after subsection (4) to insert: (5) No part of the cash and investments of a composite company shall vest in an Electricity Board under Section fourteen of this Act, and the last two foregoing subsections shall accordingly not apply thereto, but regulations shall, subject to the provisions of this Part of this Act with respect to the final payment of dividends and interest, provide for the apportionment, as between the Board and the company, of the whole of the cash and investments of the company, together with any income accruing thereon pending such apportionment, in such shares as may be agreed between them or, in default of such agreement, determined in accordance with the regulations. Any references in the following provisions of this Act to property which vests by virtue of this Act shall include a reference to property apportioned to an Electricity Board under this subsection.

The noble Lord said: There are other Amendments consequent upon this Amendment, and also Amendments to Clause 27 which are dependent upon it. It is rather complicated, and I hope to take it as shortly as possible. The clause to which it is an Amendment provides machinery for the vesting of cash and investments of a composite company, and also for the provision of funds for paying dividends after the vesting date—what is referred to as the final dividend. The arrangements contained in the clause as it stands have been found to be not altogether satisfactory, and the new subsection has been tabled in order to provide an improvement.

The scheme under this proposal will deal with the position, so to speak, in four stages. First of all, no part of the cash and investments is to vest automatically, but all is to be apportioned, subject to the provision for final dividends, between the board and the company in accordance with the regulations. Secondly, the net revenue of the company for the final financial period is to be ascertained and certified by an auditor appointed by the Minister. It is in that regard that an Amendment to Clause 27, at page 25, lines 13 to 16, will be moved. Thirdly, the amount required for final dividends is to be ascertained and certified by that auditor (that is where the second Amendment to Clause 27 will come in). Finally, only to the extent that the net revenue exceeds the amount of the third item—that is the amount required for the final dividends—will it come within the apportionment to which I referred at the beginning. So the net effect will be to allow the company for the time being to keep all cash and investments at the vesting date, to deduct from them the final dividends and then to apportion the remainder. I beg to move.

Amendment moved— Page 27, line 13, at end insert the said subsection.—(Lord Chorley.)

VISCOUNT ELIBANK

I would like to ask the noble Lord this question, which I think is a very important question. How are these assets to be apportioned? To what regulations does the noble Lord refer? If they are not regulations that have been made, how are they to be made, and upon what lines? I think we ought to be told how the apportionment is to be made and what is to be the basis of the apportionment. The noble Lord has not told us that.

LORD CHORLEY

That will be provided for in the regulations which will be issued by the Minister. Obviously, the object will be to achieve an equitable method of apportionment of this type of assets between the two interests involved. If the noble Viscount expects me to give him a draft of the Amendments, I am afraid that I am not in a position to do that. I do not suppose that the Amendments have actually got to the stage of being drafted yet.

THE LORD CHANCELLOR

May I see if I can help here? Any items which are earmarked, either for the electricity undertaking or for the non-electricity undertaking, will go accordingly. If they are not earmarked and you do not know which pertains to which, they will go, I should say, on the basis of a comparison of the value of the electricity undertaking and the extraneous undertakings. They will be allocated in that proportion.

VISCOUNT ELIBANK

I understand that there is still a difficulty. We might have composite companies in which the electricity and gas interests are operated together to a large extent, or the organization which controls them may be one and the same. It is not always easy to see how you are to decide how much you will apportion to one or the other.

THE LORD CHANCELLOR

It is not easy but I think that that is the way we should try to do it.

On Question, Amendment agreed to.

LORD CHORLEY

This is preparatory to the next Amendment. I beg to move.

Amendment moved— Page 27, leave out lines 21 to 24.—(Lord Chorley.)

On Question, Amendment agreed to.

LORD CHORLEY moved, at the end of the clause to insert: (8) References in the following provisions of this Act, except Section twenty-six thereof, to bodies to whom this Part of this Act applies (not being references which expressly exclude composite companies) shall be construed, in relation to a composite company, as referring to that company in their capacity as authorised undertakers. The noble Lord said: This is a complementary Amendment designed to bring the composite company into relation with the local authority. It does not apply to Clause 26 because securities being common to all the authorities of a composite company the control of dividends can only be exercised in respect of the company as a whole. I beg to move.

Amendment moved— Page 27, line 41, at end insert the said sub-section.—(Lord Chorley.)

On Question, Amendment agreed to.

Clause 17, as amended, agreed to.

Clauses 18 and 19 agreed to.

Clause 20:

Compensation to holders of securities of bodies other than local authorities.

(7) For the purposes of this section, the value of any securities of any such body, not being securities to which subsection (2), (3), (4)or (5) of this section applies, shall he such value as may be agreed between the Minister and the said stockholders' representative or, in default of such agreement, as may be determined by arbitration under this Act, and the arbitration tribunal, in determining the value of those securities shall have regard, as far as may be, to the value of securities to which subsection (2) of this section applies (as determined under that subsection), being securities which, as respects all matters affecting their value, are most nearly comparable to the first named securities, and if, in relation to any class of securities to which this subsection applies, such a fresh issue or conversion of securities as is mentioned in subsection (3) or subsection (4) of this section his occurred, the arbitration tribunal shall also have regard, as far as may be, to the manner in which the value of securities is. to be determined in case s to which the said subsection (3) or subsection (4) applies.

The LORD CHANCELLOR

This Amendment is one of the least controversial in this Bill. I beg to move.

Amendment moved— Page 30, line 19, leave out ("which") and insert ("whom").—(The Lord Chancellor.)

On Question, Amendment agreed to.

On Question, Whether Clause 20 as amended shall stand part of the Bill?

VISCOUNT ELIBANK

Before the clause passes, I would like to ask the noble and learned Viscount whether he would explain subsection (7), which refers to the valuation to be applied to securities which are taken over independently from the holding companies who do not surrender the whole of their rights. It says that these shall be most nearly comparable to securities which are quoted: Suppose that it is not possible to decide what the comparable value should be; on what basis are these securities to be taken over: It is true that an arbitration is provided in the event of the company not being satisfied, but that is not how these securities are to be taken over. It is left absolutely in the air, and it is of considerable concern to holding companies who will not come within the 75 per cent. quotation and will dispose of electricity subsidiaries upon the basis of this particular subsection.

THE LORD CHANCELLOR

The noble Viscount has raised a very difficult question. It is easy enough to answer him, but it is difficult for the Arbitration Tribunal to find the answer. The answer to him is that it is for the Arbitration Tribunal to settle. The Tribunal would have the advantage of hearing the arguments by learned counsel on both sides, which would probably occupy several ways, and the Tribunal would deliberate at great length and come to a result which may or may not afford satisfaction for both parties. They will then have to do the best they can. I cannot say more than that.

VISCOUNT ELIBANK

Who will pay the costs—the companies?

THE LORD CHANCELLOR

I presume each side will pay their own.

VISCOUNT ELIBANK

Might I suggest that the McGowan Report made certain suggestions on which this sort of company should be taken over and would ask, in the light of the alarming prospect the noble and learned Viscount has held forth as to arbitration, and to the enormous fees which will be paid by the companies to learned counsel, whether he will look into this question a little more closely and give us something on Report stage.

THE LORD CHANCELLOR

The stockholders' representatives can argue their case, but if argued by counsel the costs are paid by the Central Authority.

VISCOUNT ELIBANK

I do not think that answers the point I have put forward.

THE LORD CHANCELLOR

I think it does.

On Question, Clause 20, as amended, agreed to.

LORD RENNELL moved, after Clause 20 to insert the following new clause:

Adjustment of compensation to holders of securities of bodies other than local authorities.

".—(1) If it shall be proved to the arbitration tribunal by the Minister or by any body to which this Part of this Act applies being a body in respect of whose securities compensation is payable under the provisions of the last foregoing section that the aggregate of the values of such securities ascertained in accordance with the provisions of the last foregoing section (which values as so ascertained are in this section referred to as 'Stock Exchange Values') is less or greater than the amount which the property, rights, liabilities and obligations of that body might have been expected to realise if this Act had not been passed and if they had been sold as a going concern on the vesting date in the open market by a willing seller to a willing buyer, the difference (in this section referred to as 'difference in value') shall be deducted from or added to the Stock Exchange Values of the securities of that body in the manner mentioned in subsection (3) of this section and the values of those securities shall be treated as less than the Stock Exchange Values by the amount of the difference in value or the difference in value shall be treated as part of the values of those securities, as the case may be, in determining the compensation to be paid to the holders of such securities.

(2) If the Minister or any body shall desire to offer proof of the matters set forth in the last foregoing subsection and shall, not less than twenty-eight days before the vesting date, serve on the body or on the Minister, as the case may be, a notice of such his or their desire, the question whether there is any, and if so what, difference in value shall be determined by arbitration under this Act, and where such a notice is so served the provisions of subsection (11) of section fourteen of this Act shall not apply to such a body.

in any arbitration held under the provisions of this subsection the arbitration tribunal shall determine all questions in dispute between the parties in relation to the value of any of the securities of the body in question.

(3) Any difference in value determined under the provisions of the last foregoing subsection shall be deducted from or added to the Stock Exchange Values of the securities of the body concerned or of any class or classes of those securities in such manner as shall be settled by a scheme assented to by such majorities of the members of each of the classes as are prescribed by subsection (2) of section one hundred and fifty-three of the Companies Act, 1929, or, in default of such assent, approved by a tribunal to be established by regulations and in such settlement due regard shall he had on the one hand to what the relative expectations of income yield front the several classes of securities would have been if this Act had not been passed and on the other hand to the rights of priority conferred on such classes respectively by the statutory provisions and other documents relating thereto:

Provided that where the beneficial interest in any securities of the body concerned was held immediately before the vesting date by another body to whom this Part of this Act applies (hereinafter referred to as 'the holding company') and for that reason no compensation is payable in respect of those securities, any deduction made from the Stock Exchange Values of those securities shall be deemed not to form part of the property and rights of the holding company at the vesting date and the said property and rights shall be deemed to be diminished thereby and any addition made to the Stock Exchange Values of those securities shall be deemed to form part of the property and rights of the holding company at the vesting date in addition to any other property and rights belonging to them." The noble Lord said: This new clause refers to the question of compensation, which has already been touched upon in Clause 14 and in other places, but in another context. In moving this additional clause we are facing the direct issue of compensation without any extraneous matters which were the subject of the debate on Clause 14. The noble and learned Viscount, the Lord Chancellor, stated in his replies on Clause 14, as I am sure is correct, that with the exception of the compensation clauses in the Transport Bill so far as railway stockholders were concerned, this is the first time in our history in which His Majesty's Government propose to compensate, not the proprietors of a property, but somebody else, for the confiscation of that property. We certainly live in strange times, and no doubt from time to time new precedents have been created. Put may I remind your Lordships that in the taking over of no other property hitherto has this procedure been followed.

In order to carry this through, the principle of a Stock Exchange valuation has been adopted. The noble and learned Viscount says that is because no other valuation is possible. I find it difficult to believe that the Lord Chancellor will continue to sustain the argument that no method of valuing public utility undertakings other than by their Stock Exchange values is possible. He has only to look at what has been constant practice in the United States of America, both before and after the New Deal, in dealing with holding companies and public utility undertakings, and he will see that the practice of valuing public utility under-takings on other than a Stock Exchange valuation has been adopted there, as it has been frequently adopted in this country in the course of the last two generations. I need only refer the noble and learned Viscount to the valuations made of certain properties belonging to what has now become the Port of London Authority, the National Telephone Company and the London Passenger Transport Board, where the properties were valued, so far as I know, as running concerns. If they were valued as running concerns, and the earning capacity was assessed, can there be any justification for saying that that cannot be done in the case of electricity companies? If there is justification for saying that, hope the noble and learned Viscount will enlighten us upon it.

My second point is that the basis which has been taken as the valuation is the Stock Exchange values. I think there are two reasons for that, if I may take them out of the mouth of the spokesman of His Majesty's Government—though perhaps he would not put them in quite the way I shall. The first of the two reasons is that it is the easiest and idlest method of doing it. It certainly takes less time, and is far less trouble, if it can be justified. I shall hope to show that it cannot be justified. The second reason is that by taking the Stock Exchange values of these properties, they will be confiscated at a cheaper and lower rate, for the very simple reason that by and. large Stock Exchange values are based on the ordinary capacity of the securities involved; and the ordinary capacity of the securities involved, especially of the equity securities, is the function of what is distributed and not what is earned. It may be the function of both, but it is more usually the function of what it is distributed.

In your Lordships' House I need hardly take the very simple example of a company which earns 10 per cent., and pays 5 per cent. The valuation of its shares on the Stock Exchange will, by and large, be based on the 5 per cent, distribution and not on the 10 per cent. earnings. The balance of those 10 per cent. earnings which will have been ploughed back, and are likely to go on being ploughed back if the company is left alone, will inure to the shareholders hereafter. This future benefit is neglected in a Stock Exchange valuation or is at any rate to a large extent neglected. I do not want to exaggerate that point. If the noble and learned Viscount will consider the yields on current securities of all sorts, including electricity securities before the critical dates, he will find that by and large the values are based on dividend yields and not on earnings. There are a few exceptions, but they are very few. In other words, the valuation which has been proposed is one based on a distribution of only a small or conservative part of the earnings of the company, and not on the whole earning capacity.

The Amendment which is before your Lordships is to provide the alternative of taking Stock Exchange valuations or a valuation based upon arbitration on the claim of either party and not of one party only—the Minister can claim, and the company can claim. That seems to me a fair and equitable basis. I do not feel that it is one which is likely to be accepted by the Government, but I would like them to feel that if they persist in insisting on a Stock Exchange valuation they will, so far as I am concerned—and I believe I have the support of a number of noble Lords on this side of the House—be doing something which we believe to be unjust, which cannot be defended except for the reasons I have adduced, and which cannot be justified on the grounds of public necessity because there is no other alternative method. I beg to move.

Amendment moved— After Clause 20 insert the said new clause.—(Lord Rennell.)

THE EARL OF LYTTON

Before the noble and learned Viscount replies I would like to add a word in support of my noble friend Lord Rennell. I will not take the argument which he has already developed. As he has pointed out, the Bill, proceeding on the basis of compensation on Stock Exchange values, is making a departure from precedent in all our previous legislation. In fact, the word "compensation" in this Bill is a misnomer. What the Government are doing is acquiring property and paying for shares. As the noble Lord, Lord Rennell, has pointed out, it is not buying shares but buying property, and the argument throughout the Government speeches that Stock Exchange value represents the full market value of the undertaking is a complete illusion. However, as the Lord Chancellor has already told us that he cannot depart from that basis I want to confine myself to pointing out to him that even on that basis there may be injustices which I am sure he would not wish to inflict, owing to the date chosen for a particular valuation. There are companies which had large additional business during the war and whose capacity was consequently increased, and the market value of those companies' shares may have been in no way diminished. On the other hand there were other companies who during the war suffered very considerable damage, who have at times suffered a loss of revenue, had to raid their sinking funds, had to reduce their dividends, and were only able to make good in the last year of the war, and who are now going to be paid out on the Stock Exchange value at a time when their war losses were still affecting their prices. That, I maintain, is an injustice, and I am sure the Government do not wish to do an injustice if it can be avoided.

But I quite understand that you cannot legislate for particular hard cases which may arise, and so I want to suggest to the Government that they should at any rate be willing, even if they will not depart from the Stock Exchange value, to agree to a company having the right to lay its case before an arbitrator if it can prove that the date selected for the valuation on which compensation is to be paid will work hardly against it; and in the same way that it should be open to the Minister to represent that Stock Exchange value may represent more than the fair market value of the undertaking and go to an arbitrator on the same point. There are such cases. Whilst I accept the arguments of the noble Lord, Lord Rennell, and support the Amendment he has put down, I would ask the noble and learned Viscount, the Lord Chancellor, to consider the matter I have mentioned and see how far he can meet us on such a point.

THE LORD CHANCELLOR

This Bill, unlike the Town and Country Planning Bill, was not subject to any kind of guillotine in another place. It was very fully considered, and therefore we find ourselves inevitably in the position that all the big matters raised here were discussed in the other place. We cannot help it. All these battle-grounds are well marked with previous victims, and battles have been won and lost on this particular matter. These points were discussed at great length in the other place, as your Lordships well know. Therefore you will not be surprised to hear that I have nothing to give at all on this matter. It seems to us that this system is fair, and I am surprised at this challenge. In the Town and Country Planning Bill I was asked, in considering development values, to consider the case of people who had paid Death Duties, and whether it was not right and fair and appropriate to take the Death Duties as the development value. What happens here? If any of these shareholders dies, possessing these shares, on what would he pay Death Duty? On the Stock Exchange value. Are your Lordships really saying that all estates that have been wound up, say in the last twenty years, must be reopened and the unfortunate people have to pay more?

THE MARQUESS OF SALISBURY

The argument there surely was that the Government were being even more unfair and were not paying Stock Exchange value. They took a global figure of £300,000,000 and divided that sum as best they could. The position in the Town and Country Planning Bill was even worse than this, but that does not make this fair.

THE LORD CHANCELLOR

I agree. But the goal held out to me, the star which I had to follow, was the figure taken for Death Duties. At what price did these shareholders buy their shares?

Unless they were original shareholders, they bought them at Stock Exchange values. If any of the shareholders had wanted to sell his shares, he would have got Stock Exchange value. What on earth is the injustice of giving him Stock Exchange value? Lord Rennell knows more about these things than I do; 1 ant a child in these matters, but I had the great advantage of learning something about them for very many years from eminent people such as Lord Plender and Sir William McLintock and others, used to preach to me when I was almost a boy that it was just as much to the interest of shareholders to put money to reserve as to distribute it. Am I to be told that eminent people in the City of London do not know that?

It is not as if these shares had been dealt with by people who know nothing about these matters, such as country parsons. These shares are held by very experienced people in the City of London—people who know how to read a balance sheet, who understand the elementary Let that money put on one side and ploughed back into the company is just as valuable to the shareholders as money distributed in dividends. Am I really to be told by the noble Lord that those who invest in these shares are such simpletons that they regard it only as a very substantial fall in the amount of dividend that is paid, and have no regard whatever to the amount that is going back into the company?

THE EARL OF SELBORNE

The only objection I have is that the shareholder who is allowed to continue in the enjoyment of his share is in a different position from the shareholder who is having his property removed from him. The two circumstances are not comparable, as the noble and learned Viscount knows.

THE LORD CHANCELLOR

Investment trusts and insurance companies hold these shares. Am I really to be told—a statement which I cannot follow although I am ignorant about this—that these eminent people from the City of London, who understand all about trading and finance, are such simpletons that all they look at is the amount of dividend paid, and have not the slightest regard to the elementary fact of what a company puts back into its own business' I do not believe it. I see no injustice, whatever in giving these people that which they would have got had they required to sell these shares or that on which they would have had to pay duty when the day comes when they will have to depart this wicked world. It is on that that they will pay Death Duties. Is it so unfair that the test which you take as being a fair test for Death Duties should be taken as the value of these shares? It is the value which we pay. It may be that in some cases we pay too much; it may be that in some cases we pay too little, but what is the alternative?

I never said that it is impossible to attempt to value a public utility on the basis of net maintainable revenue. I have attempted to do it myself many times. But in this particular case, the problem is so exceedingly difficult that it is not like a simple elementary sum in mathematics. It I ask two mathematicians to do the same sum, they may, if they are good enough, certainly arrive at the same answer. In this case, no two people would arrive at the same answer if they tried to do it on the basis of net maintainable revenue. I venture to say that, if you had three people, all eminent and all highly qualified, trying to arrive at a valuation on that basis, their valuations would be radically different. Probably what they would do would be to add the three figures together, divide by three and arrive at the average.

Why is it so very very difficult in this case? It is very very difficult in this case because of the franchise, and it is very difficult in this case too because I think it is legitimate to consider the recommendations of the McGowan Report. In the case of power companies that Committee recommended that there should be an effective sliding scale. If we had not introduced this legislation, and if we simply had legislation on the lines of the McGowan Report, is it not quite certain that no one would have claimed compensation on the basis of this stipulation for an existing sliding scale?

There are those difficulties, and I do maintain that it is impossible to arrive with any scientific precision at what the figure ought to be on the basis of net maintainable revenue. That being so, we adopted the Stock Exchange value. I believe the Stock Exchange value to be fair and reasonable. It may err one way or the other, but I do not think it is any more likely to err one way or the other than is the other figure. It is certainly simpler and much easier to arrive at, but it is not merely because we are lazy that we are desirous of accepting it. If we were satisfied that there was some alternative method which would enable us to arrive with precise accuracy by scientific means at a figure we would gladly adopt that other method, even though it might be more costly, and more laborious. It is because we believe in this particular case, having regard to the franchise difficulties and the like, that you cannot possibly arrive at any precise figure, that we claim we are doing no injustice by taking the Stock Exchange figure.

With regard to what the noble Earl, Lord Lytton, said, although I do not know anything about the market in regard to these shares, and I do not know the particular significance of the date we have taken, I do know that we have endeavoured to select alternative dates, the one, I think, before and the other after nationalization was announced. We endeavoured to select those two alternative dates so that the holders might get whichever of the two was the better for them, and we believe that in this way we are acting fairly and, in the circumstances, in the only practical way. Therefore, although I am only repeating what was said at much greater length in two days of debate in another place, I regret I have to stand quite firm.

VISCOUNT SWINTON

I would add only one or two words, because I said something on this subject on the Second Reading. I am sure that the Lord Chancellor did not mean to suggest this, but it would be a pity if, because a matter has been debated in another place, it were considered not right for it to be discussed again, especially when it is a matter of this importance. I know the Lord Chancellor did not mean to give his words that particular meaning. After all, as Lord Cecil said very well on another occasion, Parliament, by its very name, is a place where people talk and where the country can have the benefit of what is said and be instructed—not that we lecture the country, but we inform the country, so that the country can make up its mind. In recent months certainly, and I think all through this session, the country in the debates which have taken place in this House, has had a great deal about which to make up its mind and on which to form fair judgments, and nobody has borne greater testimony to that fact than the Ministers themselves.

The Death Duty argument I have never found in the least convincing, because death comes to all of us, and we all have to pay Death Duties. Therefore it is said the Stock Exchange value is the right thing. But what happens when you pay Death Duties? Unless you are one of those very few millionaires now who happen to keep a few millions in cash or in the bank—I do not suppose you keep Treasury Bills any more—with which you can pay your Death Duties, you spend a large part of your estate in paying them. How do you pay? You sell your investments, and you can only sell your investments on the Stock Exchange. Obviously therefore, the Stock Exchange value is the only practical value to take for Death Duties. It does sometimes, as a matter of fact, work one way and sometimes the other. I have known it to work extremely hard against some estates, and I have known it work the other way in regard to others. I have known it work very hard where somebody has died when values were high, and they could not get probate; and before the executors have received probate a fluctuation has come in the shares, and half as many shares again have had to be realized in order to pay the duties. It is an entirely irrelevant argument.

Nor is it relevant to say that the Stock Exchange value must be a fair sum to give, because if I want to sell my shares the only place where I can sell them is on the Stock Exchange. I agree that that is so. No one complains about it. If we want to sell our shares we have to get a price on the Stock Exchange. But the whole gravamen of the charge here is not that you are taking something from people who want to sell their shares, but that you are taking property from people who do not want to part with it. I am not going to follow the noble and learned Viscount the Lord Chancellor into the question of what constitutes the Stock Exchange value of a share, but it is not as simple as he says. The price is not made by Messrs. Morgan Grenfell and Company and a few trust companies. The price varies ac- cording to the number of people who buy and sell the shares. If you go and look at the registers of these companies you will find that though there are a certain number of quite large holdings, the great bulk of the shares are held by very sir all people. Actually what constitutes Stock Exchange value is whether people are in the market to buy and sell shares. No one is better informed on this than the Chancellor of the Exchequer. If anyone will consult him and ask him what makes the price of Consols or Treasury 2½ per cents. to-day he will learn that it is whether people want to buy them. If he wants to put up the price he has to go into the market and buy rather a lot.

The real question is, what is a fair price to give to a person who does rot want to sell. There are many people who have bought—in many cases the buyers have been investment trusts—and have made a wise investment in these interest. I agree that they are probably the wisest investors. People who want security will acquire debenture or preference stocks in these companies. As I say, the investors in many cases are individuals, but there are also charities who get back their Income Tax. The debate, we have had upon this subject has been a very interesting one. The debate we had on the matter of the holding companies has at least shown that this method does work extraordinarily unevenly. I could give the noble and learned Viscount the Lord Chancellor an example of which I happen to have knowledge. A subsidiary company, one of these holding companies, holds investments of a very high value—property investments which have been wisely made. If they got the real value for them, as if they buy them back is between a willing buyer and a willing seller, that would add probably ten shilings or twelve shillings to the value of these shares.

The Lord Chancellor has told us how he learned in the old days from the great accountants. I have worked with them too. I put this to him. He has been, as I have been—he at the Bar and I in business—concerned in the buying of businesses and in making amalgamations. Has he ever had, in all his experience with the great accountants he has quoted, an amalgamation of two businesses where Stock Exchange valuations were taken? I dare wager, never. In every case two valuers have come in and have not found it difficult to come to an agreement. Like the noble and learned Viscount, I have been involved in plenty of these amalgamations. I tell him that no one in his senses would go into an amalgamation on a Stock Exchange valuation. The only way one goes into an amalgamation is on a genuine valuation of the real position, made with all the facts disclosed by the auditors and to the auditors.

The provision under the Bill is a compulsory amalgamation. I tell you beyond doubt that there is one thing you are going to do by it and it is well we should emphasize it. Do not think that this is going to affect only the shareholders in these particular undertakings. It is going to have an effect all through the country. I am not talking about political effect. This Bill will not do us any harm politically, but economically it is going to penalize the most conservative, the people who have ploughed back profits, year after year, into the business. The people who look as though they are paying 7 or 8 per cent. on their issued capital have ploughed back into the business sometimes twice the issued capital or as much again, and the real rate is not 7 or 8 per cent., but much nearer 3 or 4 per cent. That is what has built the strength of British industry. That is what the Chancellor of the Exchequer is urging everybody to do. By this method of valuation you are deliberately saying to the people who have been conservative, wise and prudent in their finance, "What fools you have been! If you had declared the highest dividend you could all along the line, your shares would stand higher and you would get a better price." You are discouraging thrift, sound, wise and prudent finance, and you are rendering a grave disservice to the industrial strength of this country.

THE EARL OF SELBORNE

May I add one word to what my noble friend has said, because it is so very true and these facts ought to be borne in mind. I am not going to mention any names, but I am willing to give the noble and learned Viscount names and all the facts and figures privately, if he so desires. A company which I happen to know about whose shares were quoted on the Stock Exchange, for a certain purpose had a valuation made by an eminent firm of chartered accountants to see what the valuation of the shares really was. It was no less than double the value quoted on the Stock Exchange, where the shares were quoted at a very considerable premium. I just give that instance. Other noble Lords who have experience in these matters could no doubt quote many other cases. It is a commonplace. The Stock Exchange valuation is no criterion of the real valuation of a company. Profits are ploughed back into a company for the purpose of continuing the business, of weathering unforeseen storms and for providing a sound foundation. They are ploughed back by people who do not intend to sell, and nine times out of ten the value of the money ploughed back is not appreciated on the Stock Exchange, is not known on the Stock Exchange, and is not reflected in Stock Exchange prices. Therefore the whole basis of the Stock Exchange valuation may be fair in the sense that what the Government gain on the swings they may lose on the roundabouts. But it may be grossly unfair to private individuals who are forced to part unwillingly with their property.

It seems to me that in adopting this method the Government are doing two things, both of which will be very prejudicial to the economic health of this country. In the first place, they are committing an injustice to individuals which they really cannot sustain and defend in argument. It is all very well for the noble and learned Viscount, the Lord Chancellor, to say, with an air of great assurance, "That seems to me to be perfectly fair." I could not help wondering to myself whether he would really think it fair if he were in the position of one of these shareholders. But the Government are doing another thing—they are encouraging companies not to plough back their profits into the business, but in future to distribute up to the hilt and to do everything they can to keep up the value of their shares on the Stock Exchange.

I know of a case (again I can give the facts to the noble and learned Viscount. if he desires to have them) where this is being done deliberately at the present time. The Chairman of a company has said to me: "We have never distributed up to the hilt before, but we are going to do it now, because if ever our industry is nationalized we want to secure the best price we can for our shareholders." That has only to go on for so long to get the whole of British industry in a very precarious plight. The strength of British industry has largely been built up by the conservative and self-denying policy of those who have had charge of it. The Government, by this rough and ready and, as I maintain, inequitable method of valuation, are undermining that great tradition of British finance.

LORD RENNELL

I intend to withdraw this Amendment, by leave of your Lordships, but before doing so I want to say three things. The noble and learned Viscount says that he considers his basis of valuation to be fair. I am afraid I do not. In the second place, I know he does not say that this is the only basis on which a valuation of the assets of these companies can be made; there is another, but it will be laborious. The third thing I have to say is that I do not propose to traverse, as I think I could, the noble and learned Viscount's remarks about the merits or otherwise of Stock Exchange valuations. Quite frankly, and with all respect, I do not consider that they are germane to this argument, because what the Government are buying is not the stock of the companies but the assets. If they were buying the stock of the companies there might be something to be said for taking Stock Exchange values. They are buying properties under compulsion, on a basis which has no regard for the value of the properties. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 21:

Appointment of stockholders' representative.

21.—(1) In the case of any body to which this Part of this Act applies, being a body in respect of whose securities compensation is payable under the last foregoing section, there shall be appointed, before such date not later than the vesting date as may be prescribed, an individual, in this Act referred to as the "stockholders' representative", to represent the interests of all holders of securities of that body in connection with the determination of the amount of compensation payable in respect of those securities, any payment made after the vesting date of interest or dividend in respect of those securities, and any other matters arising under this Part of this Act affecting the interests of the holders of those securities, and it shall be the duty of the stockholders' representative, in carrying out his functions under this Part of this Act, to represent the interests of the holders of those securities.

10.19 p.m.

THE LORD CHANCELLOR

This next Amendment comes again as a little comic relief. I beg to move to leave out "which" and insert "whom."

Amendment moved—. Page 33, line i8, leave out ("which") and insert ("whom").—(The Lord Chancellor.)

On Question, Amendment agreed to.

VISCOUNT SWINTON had given Notice that he would move, in subsection (1), leave out "last foregoing section" and insert "provisions of section twenty of this Act and to whom subsection (11) of section fourteen of this Act applies." The noble Viscount said: With regard to this Amendment I would like to be sure that I carry my noble friends with me. The original Amendments we had were for two purposes. First of all, they were To deal with the holding company. That matter we have agreed we will deal with on Report by the new clause. The second purpose was to preserve in being a company and its board of directors where that company had to state what it was to receive in stock, either by agreement or by arbitration. The stockholder clause has now been so amended that the share holders of the company appoint the stockholder's representative. They can appoint, and presumably normally would appoint, the most suitable director to carry on the negotiations for them; and it is only if the shareholders fail to appoint that the Minister appoints somebody. I under-stand that that stockholder receives his remuneration from the Central Electricity Board and has all his proper charges paid. For my own part, I am inclined to think that the negotiations are sufficiently well drafted in the interests of the company, and my own inclination is not to pursue that particular hare further. As there seems to be general agreement in the Committee on that point I will not move my Amendment.

Clause 21, as amended, agreed to.

Clause 22 [Compensation to local authorities]:

THE LORD CHANCELLOR

This is a drafting Amendment. I beg to move.

Amendment moved— Page 34, line 46, leave out ("next following section") and insert ("two next following sections").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 22, as amended, agreed to.

Clause 23:

Further compensation to local authorities in respect of severance.

23. There shall be paid by the Central Authority to local authorities, by way of compensation in respect of the severance of their electricity undertakings from their other activities, the sum of five million pounds, and the said sum shall be divided among such of the said local authorities as satisfy the prescribed conditions, and the amounts to be paid to the individual authorities shall be determined in such manner and in accordance with such principles as may be prescribed.

10.24 p.m.

LORD RENNELL moved to leave out all words after "activities" and to insert: such respective sums as may be agreed or in default of agreement settled by arbitration under this Act as fair compensation for the net losses likely to be suffered by these local authorities respectively by way of overhead expenses or establishment charges in consequence of the passing of this Act. The noble Lord said: We now come to an entirely different section of those Amendments which deal with the rights of, and injustices suffered by, companies. We now come to the second category, where I believe a further injustice has been committed in the present wording of the Bill. I refer to the compensation payable to local authorities in respect of severance, and I would like to develop that thesis a little.

When local authorities' electrical undertakings are taken over those local authorities may suffer certain damage on account of severance. As a matter of fact they suffer other damages which are not referred to in this clause, but to which I feel it is perhaps appropriate to refer at this point. Apart from the basis on which their undertakings are to be taken over—which is not under discussion—the only compensation for damages or injuries which they may suffer is that in this clause, assessed at an arbitrary figure for the whole country of £5,000,000. May I take first the assessment of £5,000,000? Fixing a round figure, irrespective of the actual damage suffered, seems to be rather a curious procedure. It rather seems to me similar to that figure of £300,000,000 which appeared in the last Bill—of which the noble and learned Viscount had charge—as being the best shot, if one may say so, that could be made. No real assessment had been made, however, to ascertain whether the £300,000,000 was right or wrong, too big or too small.

So far as I know, the figure of £5,000,000 which is provided for in this Bill to compensate local authorities has been arrived at in rather the same way. Admittedly, between the time the Bill was drafted and this date it would have been impossible to arrive at an actual figure for investigating the claim of each individual local authority whose electrical undertaking has been taken over. But that is no reason for not making those investigations hereafter and allowing these claims, if necessary, to go to arbitration. That is the object of the Amendment I have put down. Perhaps one of the criticisms that will be advanced against the Amendment is that it is, on the whole, rather too narrow, and should include compensation not only for severance but also compensation in respect of overhead expenses or establishment charges, quite apart from compensation in respect of other fixed contributions from rates or the repayment of contributions from rates in the past.

Both in the compensation clause in respect of companies and in these compensation clauses to local authorities it seems to me, as a supporter of the Bill and of all the principles underlying it (wherein I probably differ from other noble Lords below the gangway) a pity to mar a sound approach and a right development at this stage by allowing injustices of this sort to be perpetuated in a Bill—especially if they could be avoided by taking more time, or if another course could be adopted. But it might take a very long time. In the matter of compensation of local authorities, I agree that arbitration on their claims would take time; and so would the assessment of their claims. Even so, does it not seem a pity to mar the Bill and leave a bad feeling at the back not only of shareholders' minds, but at the back of the minds of the local authorities themselves and of the ratepayers, that they have, on account of hurry and urgency which is alleged, but which I cannot see, to be made to suffer some injustice which could have been avoided?

It is to mitigate that, so far as possible, that I have put down this Amendment, and I would ask the noble and learned Viscount, the Lord Chancellor, to consider it. It does riot specify a fixed maximum amount within which all compensation to local authorities has to be set, but would allow these claims to be deter- mined by arbitration hereafter. In certain cases the cost of arbitration for local authorities might be heavy, but I am led to understand that by and large they would prefer to suffer those costs on the chance of getting more to finding themselves fitted in to a Procrustean bed of £5,000,000, whatever their claim is. That is the basis of this Amendment, the basis on which I ask the Lord Chancellor to consider it: of not trying to hurry, but of taking time to see that justice is done to the many local authorities who to-day feel aggrieved. I beg to move.

Amendment moved— Page 36, line 16, leave out from ("activities") to the end of clause and insert. the said new words.—(Lord Rennell.)

LORD ADDINGTON

May I say a word or two before the noble and learned Viscount replies? This does concern local authorities and I would like generally to support the principles laid down by my noble friend who has moved this Amendment. It seems to me far better to get some figure that has some basis upon the actual losses concerned, rather than take the arbitary figure of £5,000,000. So far as that figure is concerned, on which there has been some discussion both here and in another place, I would wish to point out that the associations concerned, certainly the Association of Municipal Corporations, have supplied no figure to the Government and given no information on which the figure of £5,000,000 could have been calculated. They have in no case acquiesced or agreed to the sum, and although they have requested an opportunity of discussing the matter with the Minister that request has so far not been acceded to.

The only way in which any views have been expressed was by two officers at a meeting called for another purpose. Such discussions by officers are not binding on the local authorities, and it is only when agreements are made by the councils themselves that they can have any such effect. The noble and learned Viscount referred to the discussion in another place. So far as I understand there has been no real discussion on the adequacy of the £5,000,000, nor has there been any real explanation of the principles on which that particular figure was arrived at. I happened to be talking on the way up here to-day with a councillor of one of the corporations whose electricity supplies are likely to be taken over. He expressed the opinion that in that particular borough the result of this Bill would be an increase in the rates to meet the losses that have been incurred owing to severance. I think again that it is unfair that the ratepayers should have to bear these losses because they have not been adequately compensated with regard to severance.

I have one observation to make about the wording of this Amendment, and I believe that in order to cover all the losses that might be involved the words should read: by way of overhead expenses and establishment charges"— instead of "or," as in the Amendment— and such other expenses as may be shown to have arisen by reason of the severance. I believe that those words would cover fully all the circumstances which should be taken into account, and that might also arise on the next Amendment in the name of Lord Wolverton regarding con-panics. I think, as is suggested, that it might be settled by agreement as well as by arbitration. If it can be settled by agreement, it will avoid a good many the difficulties concerned with the cost of arbitration. I think there are probably sufficient data on which an agreement might be reached and there are sufficient facts, particularly when taking particular instances on which a fair and a proper estimate of the losses incurred could be ascertained. I therefore hope very much that the noble and learned. Viscount will be able to accept this Amendment.

THE LORD CHANCELLOR

I am sorry that I can do absolutely nothing here at all. I thought this was not an ungenerous figure, and I am bound to say that it surprises me to hear that the local authorities object to the rough and ready way in which it was arrived at. What they object to is the fact that they do not consider it enough. No doubt if we had put a little extra to it, they would not have troubled about it being rough and ready; not a bit of it. They would have liked it very much if they could have had a bit more. We really think that we have treated them handsomely. It is true that they have had no discussions with the Minister himself, but they did have the very fullest discussions with the officials of the Ministry. On those discussions the Minister took the matter up and had guidance from his colleagues as to what figure he might offer; and this figure of £5,000,000 was the figure which we accepted.

The claim has been put forward to the officials on three grounds: First of all the loss of the right to use the profits of the electricity undertaking in relief of rates; secondly, the loss of benefit in respect of Income Tax set-off (I confess I do not think very much of those two claims); and, thirdly, the loss of contributions made by the electricity undertaking towards central establishment charges and other overhead expenses. The third is the real objection. The total amount actually contributed by electricity undertakings towards the central establishment charges and other overhead expenses of local authorities cannot be ascertained precisely, but it is accepted by the Minister, and by the Associations representing the authorities, that it falls within the range of £500,000 to £1,000,000 per annum. The amount of the contribution is not, of course, necessarily an accurate measure of the loss. Some of the liabilities which the contributions are intended to meet may be automatically liquidated by transfer to the electricity boards on vesting dates; others will be liquidated over varying periods of years.

Under those circumstances I quite agree that you cannot estimate the total loss with any accuracy; but it is clearly likely to be considerably less than £1,000,000 in the first year—as I say, it ranges from L500,000 to £1,000,000—and to diminish rapidly thereafter. Consequently, our figure of £5,000,000, which would allow of loss at the maximum rate of contribution for a period of five years, is likely in our view to be a generous one and sufficiently liberal to provide a margin to cover smaller items which the local authorities may also regard as losses consequent upon severance. Although I think the claims are bad, I may say that the first two types of claim no doubt influenced us to some extent in putting our figure as high as five times the £1,000,000, which is the agreed maximum of the contribution. We may be criticized as having gone a little too high there, but I do not think we can he criticized for having gone too low, and, as a broad and general principle in these Bills, I am inclined to think that where you have a transfer of an undertaking from one public authority to another public authority, it is really not a case which calls for compensation. But, for the reasons I have given, we did decide to give something, and we have given this figure of £5,000,000. I do claim that it is not an ungenerous figure and consequently I cannot go beyond this figure; nor can I accept this arbitration which I think would be complicated and very difficult. It would also be questionable whether any such arbitration would result in advantage to the local authority.

LORD RENNELL

I am very much obliged to the Lord Chancellor for his sympathetic handling of this Amendment. Of the three points which he made, I entirely agree that the Income Tax point is not one which can really be justified. He will probably agree that there is more, as he said, in the claim for compensation in respect of the contributions of the undertaking to rates. I accept, of course, what he says: that that fact had its influence in fixing this figure at £5,000,000, and that the total claims are unlikely to exceed that figure. My information from certain sources (which is nothing like so complete as that of the noble and learned Viscount) is that the figure might be exceeded if the first of those claims, the contribution to rates, were taken into account. But, whether the figure is right or generous or not generous, I am not entirely persuaded by the argument that arbitration, or arbitration in default of agreement as suggested by my noble friend Lord Addington, is not the proper course, and would not leave a greater sense of justice having been done than the fixing of an arbitrary figure, which it is difficult to justify, to each individual authority. However, in view of remarks which the noble and learned Viscount, the Lord Chancellor, has made I do not feel inclined to press this Amendment. I therefore beg leave to withdraw it.

Amendment, by leave, withdrawn.

Clause 23 agreed to.

Clause 24 agreed to.

Clause 25:

Compensation to composite companies.

25.—(1) Every composite company shall be entitled to be paid by the Central Authority, by way of compensation for the vesting in that Authority or in any other Electricity Board of property and rights of the company, and in lieu of any other compensation in respect of that vesting, an amount calculated as follows:— (c) the amount of the compensation shall be an amount bearing to the aggregate value of the said securities the same proportion as the said average net revenue of the electricity undertaking bears to the said average net revenue of the company's undertaking as a whole.

10.41 p.m.

LORD WOLVERTON moved, in subsection (1), at the end to insert: (d) there shall be added to the amount calculated in accordance with paragraph (c) of this subsection such, if any, additional amount by way of compensation for the severance of the electricity undertaking of the company, as may be agreed between the Central Authority and the company or (in default of agreement) as may be determined by arbitration under this Act as being fair compensation for the anticipated net loss resulting to the company by way of overhead expenses or establishment charges in consequence of such severance.

The noble Lord said: This Amendment is one which I think is justified, because under Clause 23 local authorities are to be given some £5,000,000—though we still do not know how it is to be divided up—in respect of severance. In Clause 25 there is no such provision for composite companies. As your Lordships know, they appear on Page 1oo of the Bill. They are not very big concerns but I do submit that what is fair in one case should be fair in the other. They are mostly gas and electricity concerns, although there are one or more which deal with gas, water and electricity. We on this side of the House feel that they should be treated in the same way. The Amendment seeks to arrange it so that if agreement cannot be reached they should go to arbitration under Clause 31 which sets up the abitration tribunals. There is a precedent for asking for this. Under the Electric Lighting Act, 1888, companies are taken over compulsorily by local authorities and there is a provision in that Act in respect of severance. I beg to move.

Amendment moved— Page 37, line 22, at end insert the said paragraph.—(Lord Wolverton.)

THE LORD CHANCELLOR

I must tell the Committee quite frankly that I have no authority to agree to this Amendment, and therefore I am not going to do so. Equally, while hoping that these words will not be used in evidence against me hereafter, I rather wish that I had authority to agree to this Amendment or something like it. If the noble Lord will agree to withdraw it now, I will see if I can get authority to help him on this matter on the Report stage. If I may say so with respect, I think that in the noble Lord's own interest, it would be better that he should take the course I suggest. He will then at any rate have had my advocacy behind the scenes. I do not know—perhaps he does not either—how far this is a practical issue, and what there really is in this matter. As I have said, I will look into it. I cannot agree to arbitration. I have just denied arbitration to the local authorities, and if I were to concede arbitration to these people, I should get into even worse trouble than that into which I have already got. I can tell the noble Lord that this will require a little ingenuity, but I will do my best to get the necessary authority to help him between now and the Report stage if he will agree to withdraw the Amendment.

LORD WOLVERTON

I am very grateful to the noble and learned Viscount for what he has said, and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 25 agreed to.

Clause 26:

Control of dividends, interest and other payments.

26.—(1) Where any body to whom this Part of this Act applies, being a company, have paid after the tenth day of January, nineteen hundred and forty-seven, interest or a dividend on any of their securities in respect of the last complete financial year before the said day or any subsequent period, being payments which, regard being had to any interest or interim dividend paid before the said day in respect of that year or period, are in excess of the payments of interest or dividend permitted under this section, all persons who were directors of the body at the time when the resolution of the directors was passed authorising or recommending the payments shall, subject to the provisions of this section, be liable to pay to the Central Authority an amount equal to the total amount of the excess.

(2) The payments of interest or dividend permitted under this section are as follows:—

Provided that: (i) such payments shall only be made out of the net revenue of the body for the period in respect of which the payment is made, or, with the approval of the Minister, out of a iv reserves applicable for the purpose of maintaining interest payments and equalising rates of dividend, and any payment shall, so far as it is made otherwise than out of that revenue, or, with the approval of the Minister, out of those reserves, not be permitted under this section; and

(7) Any claim under this section by the Central Authority against the directors of any such body as aforesaid shall be determined by arbitration under this Act, and, if the arbitration tribunal decides the claim in favour of the Central Authority, it shall make such orders against the said directors as will secure the payment to the Central Authority of the total amount for which the directors are liable on the claim, but the tribunal may exempt any director from liability, on the ground that he was not responsible for the acts giving rise to the claim, and may order different amounts to be paid by different directors, having regard to the extent to which they were respectively responsible for those acts.

10.45 p.m.

VISCOUNT SWINTON moved, in subsection (1) after the first "paid" to insert "pursuant to a resolution passed." The noble Viscount said: I think the noble and learned Viscount, the Lord Chancellor, will agree that it is right that the test date should be the date when the resolution is passed. The test date ought to be the date when the resolution was passed and not when payment was made. Is that right?

Amendment moved Page 38, line 29, after ("paid") insert ("pursuant to a resolution passed").—(Viscount Swinton.)

THE LORD CHANCELLOR

I am prepared to accept this Amendment at once.

On Question, Amendment agreed to.

LORD HAWKE moved, in proviso (i) of subsection (2), to leave out all words after the first "or" and insert: out of any undistributed profits properly applicable for the purpose of maintaining interest payments or equalising rates of dividend. The noble Lord said: In this Amendment we seek to provide that where a company is allowed under this Bill to pay certain interests or dividends and finds that the period in question is almost certain to be the last year before sequestration, the company may, out of proper funds, make up the amount to the maximum it is allowed to distribute under the Bill. The Government may possibly claim that the point has already been covered by the small Amendment which the noble and learned Viscount is making to this clause. It may meet one point. Possibly our wording was not quite correct technically, but our Amendment takes out "the approval of the Minister." It seems to me quite unnecessary to drag the Minister into a matter of this sort.

It is laid down, and perfectly well known, what maximum the company is allowed to pay and it will be perfectly well known to the directors of a company and their accountant advisers what funds are available from which it is right and proper to pay dividends. It is further provided in the Bill that if the directors of a company pay dividends out of funds which are not properly available for those payments, the Minister can immediately pounce on them. Therefore why is it necessary to bring in the Minister. It seems to me somebody's safeguard in the back of their minds that the Minister and the Ministry must have a finger in every pie. It is merely piling unnecessary work on the Minister. I hope the noble and learned Viscount will agree with that, and on that basis accept the Amendment. I beg to move.

Amendment moved— Page 39, line 15, leave out from ("or") to ("and") in line 21 and insert the said new words.—(Lord Hawke.)

THE LORD CHANCELLOR

I thought I had met the noble Lord very fully by putting in the word "funds" which is a rather wide word, instead of the narrower word "reserves" but I agree with what he has said, that by my Amendment I have left in words "with the approval of the Minister." I will see what I can do to help him on that. I have not the authority at the present moment. I think I shall have to accept his "properly applicable." So long as they are taken out of funds "properly applicable," there is a case for considering whether the approval of the Minister is necessary. It was not until to-day that I was aware of this difficulty and I have not had time to get instructions. I will take up the matter to see if I can move a further Amendment on Report stage, the effect of which will be to leave out "with the approval of the Minister" and put in the words "properly applicable" or something on these lines.

VISCOUNT SWINTON

May I suggest the words, "in accordance with normal practice"?

THE LORD CHANCELLOR

I think that that would not be at all bad—"applicable in normal cases," or something like that. I will look into it. I have not any instructions, but I am willing to do what I can to help. If the noble Lord will withdraw his Amendment, and allow me to have mine, I will see if I can go one better on the Report stage.

LORD HAWKE

I certainly agree with "funds," and in view of the assurances which I have been given, I am only too glad to withdraw the Amendment.

Amendment, by leave, withdrawn.

THE LORD CHANCELLOR

I beg to move the next Amendment, to which I have referred.

Amendment moved— Page 39, line i6, leave out ("reserves") and insert ("funds").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

I beg to move the next Amendment.

Amendment moved— Page 39, line 21, leave out ("reserves") and insert ("funds").—(The Lord Chancellor.)

On Question, Amendment agreed to.

LORD TEYNHAM moved, in subsection (7), after "shall be" to insert: made before the expiration of a period of twelve months beginning with the vesting date, and if so made, shall be. The noble Lord said: The object of this Amendment is to secure that there should be a time limit on claims which may be made by the Central Authority against directors in respect of contravention of subsection (7) of this clause. I venture to point out that there is already a time limit which I think is twelve months, in Clause 29 (2). I can see no reason why there should not be a similar time limit in this case. I beg to move.

Amendment moved— Page 41, line 9, at end insert the said words,—(Lord Teynham.)

THE LORD CHANCELLOR

I think this is reasonable, and that I ought to accept the Amendment.

LORD TEYNHAM

I am grateful for the acceptance of the Amendment.

On Question, Amendment agreed to.

VISCOUNT SWINTON referring to an Amendment of which Viscount Maugham had given Notice, in subsection (7), to leave out all words after "orders" and insert "as it shall think just, having regard to all the circumstances," said: There is nobody else here to take the place of the noble and learned Viscount, Lord Maugham, in whose name this Amendment stands. If the Lord Chancellor is going to accept this Amendment, I will gladly move it but if it is one of those difficult legal points which require a brace of Lord Chancellors to determine, I hesitate to do so. Does the noble and learned Viscount think that we might take it at half past two to-morrow?

THE LORD CHANCELLOR

Your Lordships will see that I have the next Amendment down to Clause 26. It is not on the Marshalled List, but on the Supplementary List. I asked the draftsman to put into appropriate language the substance of the Amendment of the noble and learned Viscount, Lord Maugham. I feel quite sure that I have met the noble and learned Viscount by my new Amendment.

LORD HAWKE

I had some words with the noble and learned Viscount. Lord Maugham, on the subject, and he thought he had been met by the Lord Chancellor.

VISCOUNT SWINTON

Then I will not move the Amendment.

THE LORD CHANCELLOR

This is the Amendment I have just mentioned. It puts into appropriate language the substance of the Amendment of the noble and learned Viscount, Lord Maugham. I beg to move.

Amendment moved—. Page 41, line 12, leave out from ("against") to the end of the subsection and insert ("all or any of the said directors in respect of their liability on the claim as it thinks just, having regard to all the circumstances").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

the next Amendment is a drafting Amendment. I beg to move.

Amendment moved— Page 41, line 44, after ("(1)") inset ("(3)").—(The Lord Chancellor.)

On Question, Amendment agreed to.