HL Deb 08 July 1948 vol 157 cc577-687

2.12 p.m.

House again in Committee (according to Order).

[The EARL OF DROGHEDA in the Chair.]

Clause 25:

(2) Where securities of any class were quoted in the Stock Exchange Official Daily List on all six of the following dates, that is to say, the thirteenth, fourteenth, fifteenth, sixteenth, seventeenth and twentieth days of October, nineteen hundred and forty-seven, and were also quoted in the said list or in the Stock Exchange Daily Supplementary List on any of the following dates, that is to say, the fifteenth day of February, the fifteenth day of March, the sixteenth day of April, the fifteenth day of May, the fifteenth day of June and the sixteenth day of July, nineteen hundred and forty-five, the value of securities of that class for the purposes of this section shall, subject to the provisions of this section and the next following section, be deemed to be either—

  1. (a) the average of the mean of the quotations for securities of that class appearing in the said Stock Exchange Official Daily List on the said dates in the year nineteen hundred and forty-seven, or
  2. (b) the average of the mean of the quotations for securities of that class appearing in the said Stock Exchange Official Daily List or the said Stock Exchange Daily Supplementary List on the said dates in the year nineteen hundred and forty-five on which a quotation therefore so appeared,
whichever is the higher, such addition, if any, being made to the higher average as is necessary to make it a complete multiple of one penny:

Provided that a quotation appearing in the Stock Exchange Daily Supplementary List on the said dates in the year nineteen hundred and forty-five shall be disregarded for the purposes of this section unless business is recorded in that list as having been done at any time during the period beginning with the fifteenth day of February and ending with the sixteenth day of July, nineteen hundred and forty-five.

VISCOUNT SWINTON moved to omit subsection (2) and to insert: (2) In the case of any class of securities of a company being a statutory or non-statutory undertaker or a gas holding company the value of securities of that class for the purposes of this section shall be deemed to be the amount of the reasonably maintainable annual income which could have been expected from those securities, if this Act had not been passed, multiplied by such number of years purchase as may be appropriate in order to secure the payment of fair compensation to the holders of those securities. The amount of the reasonably maintainable annual income and the number of years purchase shall be such as may be agreed between the Minister and the stockholders' representative or, in default of such agreement, as may be determined by arbitration under this Act.

The noble Viscount said: We now come to an Amendment of considerable consequence, an Amendment dealing with the whole basis of compensation. I hope that it is common ground between us all that in this matter we ought to do what is fair and just. What your Lordships have to consider here is how compensation should be assessed. It will be paid in Gas Stock of equivalent value to whatever is the assessed value. It will be paid out in as near to the equivalent value as the combined intelligence of the noble Lord, Lord Rennell, and the noble and learned Viscount, the Lord Chancellor, with the approval of the Chancellor of the Exchequer, can make it. But I want to make it plain that we are not here concerned with the issue which was before us last night, as to whether it should be paid in Gas Stock or what amount of Gas Stock should be issued. Here we are concerned only with what is the real value of the things which are to be transfered.

There are two alternatives before us. One is to take the artificial—and in this case the peculiarly artificial—alternative of Stock Exchange value, or, where Stock Exchange value does not exist, some hypothetical equivalent to what would be the Stock Exchange value if it had existed. The other alternative is to take the real value. I know I shall be told that there is the precedent of the Transport Act and the Electricity Act, and that what we ought to take is the Stock Exchange value. But precedents are valid and valuable subject to two conditions. First: Have they worked well? If they have not worked well, then we ought not to be bound by precedent but should create a new one. Secondly: Is the precedent applicable? That is to say, are we dealing with circumstances directly comparable with the circumstances to which the precedent has been applied before? Neither of those tests is valid here to establish an argument in favour of precedent.

Let us see how taking the Stock Exchange value has worked. There is no doubt at all that in the Electricity Act it has not worked well. What has happened there is that the Stock Exchange value has been taken and that has worked least favourably, or most disadvantageously, in the case of the most conservatively managed companies. Those who have managed their undertakings best have fared worst; the people who have distributed up to the hilt have come off best. I remember someone once saying of stockbrokers that they were people who knew the price of everything and the value of nothing. I would not pass quite such a severe stricture on them as that, but certainly Stock Exchange values do not at all necessarily represent the real value where a company has been conservative-minded and has not declared high dividends, or has declared in dividend only a comparatively small part of what it has earned and has ploughed back into its business and therefore made into capital a large proportion of what it carried to reserve. The tendency in the Stock Exchange is always to over-value that which declares high dividends and under-value the concern that has undisclosed reserves.

In the Companies Act we have said—I think wisely—that, subject to certain reservations made in the national interest, companies shall, broad and large, in future disclose their real reserves. What was the object of doing that? The object was that the shareholder might know the real value of his security; we did it because that value was not necessarily reflected in the quoted Stock Exchange value; there might be something behind, large reserves which were not reflected in the Stock Exchange price. That was the argument advanced by the Government in the Companies Bill, and we all thought it was very reasonable. We said, "Let us have, in future, full disclosure of reserves, so that people may know what is the real value of the asset and not be tempted to sell at the Stock Exchange value, if that is considerably below the real value of their possession."

But that very argument which the Government advanced so cogently on the Companies Act is surely a complete answer to the theory that the Stock Exchange value, and not the real value, should be taken. In this case there is not even a specious argument in favour of taking Stock Exchange value. In the case of transport and of electricity there was the specious argument that what the Government were buying were quoted shares in an undertaking, and that therefore if they gave the quoted price they were giving something which, if not altogether reasonable, was the price which would have been given if ordinary transactions had gone on. But the only justification for that argument, as your Lordships will appreciate, was that what was being bought was something for which there was a quotation. That is not the position here. In the case of electricity and transport that was true because, by and large, the great majority of the undertakings were undertakings whose shares had a Stock Exchange quotation. But here that is not in the least true. I am told that the shares of something like 2,500 of these gas undertakings are not quoted at all, and in fact the shares of only just under 100 are quoted. Obviously in a business like gas, the values must vary enormously.

In another place it was argued that it would be quite unfair to take hypothetical Stock Exchange values, and that what was fair in this case (and nobody, even on behalf of the Government, denied the obvious fairness of this) was to take the net maintainable revenue of the undertakings, varying, as it must and as it should, with the length of the franchise—as a matter of fact, I think they are all freehold—and with the successful management of the undertaking, the value of its assets and so on. As I reminded the House on Second Reading, the Financial Secretary to the Treasury who was, I think, the right person to answer, gave the most extraordinary argument in resisting. He did not say, "That is unjust"; on the contrary, he admitted that it would be a very reasonable thing to do. He said, "There is not time." Are we to put time in the scales against injustice? That would be a most immoral thing to do. As a matter of fact, even that argument is unsound upon the facts, because, as I shall show your Lordships, you have to go to arbitration if there is a dispute in these cases, and the arbitration is to ascertain what the value is or what the Stock Exchange equivalent is. Therefore, in fact, you are not going to save the few months' time which the Minister grudges to do justice to the owners of these undertakings. As a matter of fact, the time will be neither more nor less, one way or the other. As is admitted, the fair basis is the net maintainable revenue.

I appreciate that on one side, at any rate, politics enter into this business. I admit they enter into it on my side, because I oppose nationalisation. I am opposed to the principle of this Bill. However, I do not think that politics ought to enter into it when you accept the principle of nationalisation and come to do what is fair and just to the people with whom you are concerned and whose undertakings you are going to nationalise. But, even if politics have to be taken into account, and even if the Government must have something which is politically acceptable as well as morally just, I suggest to them, with confidence, that they can accept this proposal as being both politically expedient as well as just, as they admit it to be. Let me cite in favour, I will not say their "master's voice," but at any rate a most authoritative opinion which will weigh with them, and that is the opinion of the Trades Union Congress. The Trades Union Congress considered very fully what ought to be done about nationalisation and what ought to be the basis of nationalisation. They have been considering this question for a long time. They began considering it, I believe, in 1932, and they published a report on Public Control and Regulation of Industry and Trade. The first thing that that Report said (from which I do not dissent) was this. It appears to be generally agreed in the Labour Movement that fair compensation should be paid. We are all agreed upon that as a principle. Then it went on to consider how the compensation should be assessed.

They reconsidered the matter again, much more recently, in 1944. They considered the various possibilities, and, in particular, the two which are before your Lordships to-day. They considered the market value of stocks and shares and in their Report they said this: The basis — that is, the basis of the Stock Exchange valuation— has the superficial advantage of providing easily ascertained figures whether taken as the quotation on one particular day or as an average of the quotations on a number of days. It has, however, serious objections. No quotations are available for private companies, municipal undertakings… and so on. Of course, that has a tremendous bearing here, because, as I say, no quotations of any sort or kind are available for the great bulk of the undertakings. Then they went on to consider the other alternative which is the one I am putting to your Lordships to-day. It is what they call—and I think it is the best expression—"reasonably maintainable revenue." They said about that that: By this method the purchase price of the acquired undertaking is related directly to its earning powers. Then the Interim Report went on to express the view that: …in general the most satisfactory basis of valuation was reasonable net maintainable revenue. Compensation would be based on the actual earnings over a period of years adjusted in the light of existing circumstances. That is quite right, because you want to know whether the revenue is likely to be maintained—not what the concern has paid out in dividends but what in fact it has earned and what it is likely to be able to go on earning. Regard would also be paid to the probability of the continuance of those earnings. I must say that that is eminently fair and reasonable. If you are to have nationalisation at all, then I entirely agree with those who framed that Report on behalf of the trade unions that that is the right and fair way of doing it.

That is the proposal. I need not read to your Lordships the whole of the Amendment which is down upon the Marshalled List. Your Lordships have had time to study it. The value as to be: the amount of the reasonably maintainable annual income which could have been expected from those securities, if this Act had not been passed, multiplied by such number of years purchase as may be appropriate in order to secure the payment of fair compensation to the holders of those securities. Then we say—and in this, we follow the Bill—that the assessment of the fair value on the basis of net maintainable revenue shall be settled by the stockholders' representative and the Minister or, in default of such agreement, as may be determined by arbitration under this Act. Let me add this, from my experience of arbitration. It is very important to set the arbitrator a common-sense job to do. No arbitrator will have the least difficulty in finding out and assessing on the basis of facts—because every fact can be produced here—what is the net maintainable revenue and the number of years' purchase by which it ought to be multiplied. That is a fact which any practical arbitrator can decide, and in 99 cases out of a 100 the facts will not even be in dispute. It is a perfectly simple case to put to the arbitrator. But if theoretical, abstract sums of this sort are put to him which he has to do, then I do not know how an arbitrator is to do his job. The Amendment is simple; it is just; it is practical. Therefore I commend it to your Lordships and to His Majesty's Government as one which is both politically safe and financially sound. I beg to move.

Amendment moved— Page 29, line 14, leave out subsection (2) and insert the said new subsection.—(Viscount Swinton.)

LORD RENNELL

My Lords, I would like to support a great deal of what the noble Viscount has said, but I would point out that there are a variety of ways in which the valuation of assets can be made. We know from experience of nationalisation Bills that a variety of ways have been adopted for valuing assets. We have had the net maintainable revenue as a basis for the coal mines, we have had another type of valuation for Bank of England stock—namely, the existing dividend obtaining, and contributable to the holders of Bank of England stock for a very long period, inasmuch as they were given a stock which would produce them the same revenue as they had had before, without any date within which the obligation to pay that revenue was to cease. In the case of Transport Stock and Electricity Stock, a departure was made from that basis to that of the Stock Exchange quotation which, whether fair or not—and that is not relevant to this argument—was adopted. But it had this logic in it, in that the bulk of the transport securities were, in fact, quoted. It was stock that was freely traded in and might be said to have a market quotation. As your Lordships well know, a market quotation is one decided as a result of competition between many buyers and many sellers. There is no market when there is only one buyer and twenty sellers, or no seller and twenty buyers. In other words, a market is a common meeting ground where many people wish to buy and sell. That applies, or applied, in the case of transport stocks, and therefore that basis of valuation had that logic.

That train of argument applied less in the case of electricity stocks and applies perhaps scarcely at all in the case of gas stock, inasmuch as most of the stocks, in value and in number, with which this clause in the Bill is concerned are not traded in in a market at all but are a matter of negotiation on each individual account and case. When, in the case of transport stocks, the representatives of His Majesty's Government were taxed with having adopted a different principle from that adopted for the coal-mining industry, they very logically and properly said: "There are different methods of arriving at valuations, according to the commodity in which you deal. We have chosen one method for the coal mine properties, and we propose to choose another method which we think is justified for the transport stocks. They implied that on future occasions when compensation was to be paid to holders of property that was nationalised, the principle which would be adopted in the future would not necessarily be that applied in the past.

Here we have an example, in gas stocks, which the noble Viscount has shown is of a different nature and quality from either the transport or the electricity valuation schemes. My first inquiry is why it has been found necessary to adopt a form of valuation for compensation in the case of gas stocks which appears to have little justification when compared with the compensation issued to holders of transport stock. It is said that if it is logical in one case, it should be logical in the other. But I think the noble Viscount has shown that it would not be logical, and the same arguments cannot be used in this case as were used for the last two cases. So I wonder why this particular method has been adopted. Further, I wonder why it should have been found necessary to adopt a system which, frankly, is very difficult to apply. In this clause we have applied a system of valuation for compensation which makes a notional assumption that there is a market price when we know there is not; and, where the stock has not been quoted, seeks, by a very devious process which is not applicable in ordinary life, to arrive at what would have been the value of the stock if it had been quoted. To pick up what I was trying to explain last night, I would point out that you do not say, "I will assess the value of this sheep by considering it in terms of so many cows"; you take the value of a sheep when it is bought and sold in the market. You do not translate the value of a sheep through a third factor into a Stock Exchange quotation which does not exist. So I wonder why there has been adopted this particular method of valuation, which is complicated and calculated to cause difficulties and uncertainties, when an accepted method of valuation adopted in another case is available but has been turned down.

My next point on this scheme of valuation is that I am not sure how fairly it is going to operate, either in regard to the person who is being compensated or to the community as a whole which is taking over these assets. Your Lordships will know that there are in the country a large number of gas undertakings the quality of which leaves a great deal to be desired. A great number of small, country undertakings are, to your Lordships' knowledge, scarcely worth the scrap value of the material out of which they are composed. They have nothing except a franchise to do something which, in many cases, they do extremely badly. There are also, on the other hand, the most modern gas undertakings in the world. A valuation arrived at by the method suggested in this clause seems to indicate that certain undertakings which have little, if any, value (and which may, indeed, be a liability on account of the obligations that they have towards the public), will receive more than they should, while undertakings operating as going concerns with a maintainable revenue will receive less, because their stocks are not readily marketable.

For my part—and I do not know whether noble Lords on the Opposition Benches would agree with me—where an undertaking which has no tangible value, or indeed has possibly a liability which it cannot meet out of its assets, is taken over, I feel that no compensation should be paid at all. And the way of arriving at that nil result is to value those undertakings on the basis of net maintainable revenue. We do not want the community to pay more than it ought. But I feel that this method will, in fact, result in the better undertakings getting less than they ought by reason of their stocks not being readily marketable, while the worse undertakings will get more than they ought by reason of an arbitrary calculation which is to be applied to the valuation of their assets. For these reasons, and without going into details which would no doubt bore your Lordships, I feel that the basis for a valuation here should not follow the precedents which have been adopted for transport and electricity stocks. For the sake of the community, the holders and everyone else, I feel that it would be advisable that His Majesty's Government should enter into the question of valuation with an entirely open mind. They should not say that because they have done this in the past they ought to do it in this case, more especially when, in order to do it here, they have to go through an entirely arbitrary calculation to arrive at a valuation. I therefore beg to support the Amendment which has been moved by my noble friend Lord Swinton.

2.40 p.m.

VISCOUNT BUCKMASTER

I have much pleasure in supporting the Amendment which has been moved by my noble friend Lord Swinton. I have said before—and I believe it is a proposition which cannot easily be controverted—that in the case of an unwilling seller (and I stress the term "unwilling seller"), there can be only two bases on which the matter can, with justice be composed. The first is by mutual agreement, and the second is by arbitration. To my mind any other system is fundamentally unjust. I will add further—your Lordships will correct me if I am at fault—that the system which is proposed here is a new one, devised by His Majesty's Government. It has not been applied before, to my knowledge, in any major matter. If we cast our minds back to the years before the war—and I am sorry to say that mine goes back to 1911—we remember the case of the National Telephone Company. Never for one moment would it have been suggested that the stock of that concern should be taken over on a Stock Exchange price basis. It was taken over, as the noble Viscount well knows, on a basis of arbitration, because agreement could not be reached.

I venture to suggest that there are three fundamental reasons why Stock Exchange prices as a basis must be unjust. Whilst I now have no connection with the City, I have had the privilege, as your Lordships may perhaps know, of serving on the Council of the Stock Exchange, so I think that I may claim to have some slight knowledge of the matter. These prices are not fixed by the Stock Exchange at all. They are prices which express the caprices, the hopes and fears, and the idiosyncrasies of the individual investor. They do not reflect, nor do they purport to reflect, the value of the assets of the company concerned. Again, these prices, particularly under present conditions, are susceptible to extreme fluctuation for relatively minor transactions. Let us take the vast capital of a company like the Gas Light and Coke Company—I prefer to speak of one with which I have no connection, either direct or indirect. If we take the capital of a vast company like that, a company whose shares enjoy a free market, it is none the less true to say that any transactions which bore a real relation to the size of the capital of the company would have an altogether disproportionate effect on the shares in question. The third point is that by adopting Stock Exchange prices as a basis, you must perpetuate injustice, because you get anomalies.

Let us consider the case of a small imaginary company. Someone dies who owns a lot of shares in that company. The executors have got to sell them. They have to force them on the market. At the moment, the insurance companies and the investment trusts are not anxious, for technical reasons, to enter the market. Many of your Lordships must have had to act as executors, and I am sure will agree that this is true. One may often be forced to take a sacrificial price for a holding because the sale cannot be indefinitely delayed. There you get at once the case of this imaginary company of which I am speaking, whose shares are unduly depressed by the influx of the holding of a deceased's estate; and yet they are to be dealt with on the basis of Stock Exchange price valuation.

I hold strongly that Stock Exchange prices are unfair as a basis, and I would say that in this case they are particularly unfair—and for two reasons. As your Lordships know, the holder of gas securities is given in this Bill a choice of two dates; or, to put it rather more precisely, he is given certain dates and given a choice whether he will have the mean of one period or the mean of the other period. The first period is the pre-election period and the second is the period just prior to nationalisation. May I say that both these periods appear to me to be fundamentally unjust to the holder of these stocks? In regard to the first period, dividends were reduced because of the war. Share prices were in many cases reduced—particularly in the case of gas companies—through fear of enemy action. Moreover, the Report of the Heyworth Committee, while it did not recommend nationalisation, envisaged compulsory acquisition, and that tended to depress the market. Then, if we turn to your second choice of dates, we find that it is the period before nationalisation. But prices are lower than they should be; the victim is usually not in very good shape when the axe is poised above his neck! One has therefore the choice of two periods, both of which are unjust, and so there is added a further injustice to a principle which in itself is fundamentally unsound.

If I may, through the courtesy of your Lordships, I will, as shortly as possible, try to explain how this thing operates in the case of such a concern as the great company to which I have referred, the Gas Light and Coke Company. That company has paid, on an average, 5 per cent. for 100 years. My noble friend Lord Rennell will correct me if I make any mistake in what I am now saying. The company is a statutory company, and is incorporated under Royal Charter. In the ten years before the war it paid, with one exception—when it paid more—5½ per cent. I do not think the noble Lord would suggest that a share of that kind, with a record over 100 years and with such standing, should be valued on a lower basis than 4 per cent. I do not think anyone would suggest that. But, Of course, these shares are to be taken at 23s. 3d. whereas on a 4 per cent. basis they would stand at 25s. Even if we took them at 25s. on a 4 per cent. basis—which none of your Lordships has ventured to reject—we have allowed nothing at all for the possibility of increase of dividend and nothing for the assets of the company. When we consider that for ten years before the war, the company paid 5 per cent., when we think that, as it is a basic price company and not a sliding-scale company, it may reduce the price of gas by increased sales, or that it may reasonably expect a revision of its own basic price, either of which would entitle it to increase the dividend, we realise that these factors are by no means reflected in the price. Nor are the hidden assets given any value whatsoever.

The principle which my noble friend Lord Swinton has proposed is clearly fair and, to my mind, is one which cannot be resisted. If any noble Lords opposite think it unfair, I would remind them that it is not applied only to road hauliers under the Transport Act but, as stated in the White Paper relating to the Coal Act, it applied in certain cases there as well. So the Government themselves have admitted the principle to be a sound one. I have tried within a short compass to put before your Lordships the injustices of the present proposals, as I see them, and I hope that I have satisfied your Lordships that the suggestions made by the noble Viscount are eminently sound, and such as have in other cases commended themselves to His Majesty's Government. I urge your Lordships to support this Amendment.

THE LORD CHANCELLOR

I do not suppose that even if I had the gifts of Demosthenes I could convince your Lordships that the Stock Exchange method of valuation is the right one.

SEVERAL NOBLE LORDS

Hear, hear.

THE LORD CHANCELLOR

I must confess that, having had three debates on this matter, and having advanced such arguments as I could, I am wholly unconvinced that there is anything whatever unjust in having a Stock Exchange valuation. Generally, when arguments are raised from the opposite side of the House, though I do not often agree with them, I do, at least, realise that there is some substance in them. But I really am at a loss to understand why it is said that there is anything unjust in taking the Stock Exchange valuation as a method of compensating for shares. There may be other methods equally good. But, after all, what is a thing worth? It is worth what you can get for it. If you sell these shares—I am assuming, of course, that there is a real market quotation—as between a willing buyer and a willing seller, there is recorded the price which you can get. If you are unlucky enough to die and death duties have to be paid, on what basis are they paid? They are paid on the Stock Exchange valuation. Does anybody suggest that that is unfair? Does anybody come along and say that more ought to be paid, because the Stock Exchange valuation has not taken account of the value of the assets, or something of that sort? No. With the greatest respect—I do not want to argue this at length again—I see nothing in any way wrong, as a general proposition, in taking the market quotation as being a fair method of compensation.

I am not saying for a moment that a fair method of compensation may not be arrived at by taking net maintainable revenue, and multiplying it by some factor. But in one respect I must venture to differ from the noble Viscount, Lord Swinton. On all these questions of finance and Stock Exchange he knows vastly more than I do, but when it comes to arbitrations and the fixation of values at arbitrations, perhaps I know as much as he does. When he says that all the facts are ascertainable and clear, and, therefore, the matter is quite easy and everybody will agree on a figure, I tell him that he is quite wrong. Let us look at the Amendment which he has moved, in order to make my point plain. His Amendment says: the value…shall be deemed to be the amount of the reasonably maintainable annual income which could have been expected from those securities.… That consideration alone is a consideration from which two perfectly honest and competent men might derive very different conclusions. Then, when you have that figure, you must multiply by such number of years' purchase as may be appropriate in order to do what?— in order to secure the payment of fair compensation.… This sum is to arrive at what is fair compensation. If I am told that I have to multiply by such a number of years' purchase as will secure fair compensation, do I not find myself in great difficulties?

I know exactly what happens, because I have done things of this sort, I suppose I might say, hundreds of times. You will get two distinguished experts, both completely competent and completely honest, who will put forward two sets of figures, which will differ widely. You will have two, or sometimes three, arbitrators. They will apply their minds to those figures, and their conclusions will differ widely. I am not going to say that what they do is to add the three figures together and divide by three; but I have suspected that some operation rather like that is sometimes carried out in these valuation cases. All of us who have had to deal with these matters have occasionally wondered whether, in some rather disguised and polite form, something of that sort is not done. With the greatest respect to the noble Viscount, however theoretically justified his proposal may be, to say that this method is a perfectly simple thing, that all the figures and the facts are there and that a figure will be agreed, is entirely wrong. It will not. There will be widely different views as to what the figure ought to be.

As opposed to that, to take the Stock Exchange value—which is what a man would get if he were minded to sell—is, I suggest, perfectly fair. The only argument I have heard against it is this—I am not thinking only of to-day, but of the last three occasions on which this matter has been debated. It is said that the Stock Exchange value reflects unduly the payment of dividends, and has no regard for the fact that the shareholders are just as well served in the case of a company which, instead of distributing large dividends, puts money to reserve. It is further said that the people who invest money in the City of London are such simpletons that they do not know that simple fact. With the greatest respect, I would say to your Lordships—if I may borrow a phrase which is now hallowed in this House—that anybody who says that is humbugging himself. It is not the fact.

VISCOUNT SWINTON

May I ask the Lord Chancellor why it was that he insisted so firmly, when piloting the Companies Bill through this House, that we should disclose the whole of the reserves, so that people should know the real value as distinct from the Stock Exchange quotation?

THE LORD CHANCELLOR

Certainly. I think that provision is admirable. So long as people do not know the real reserves, they must make a guess at them. They may be bears, they may be bulls, they may be optimists or they may be pessimists. But why should people assume that, because in certain cases the reserves are not known, there are no reserves? I say merely that I cannot believe that any competent person, having lived in the City for more than a fortnight, would not realise that the strength of a company does not depend merely upon the dividends which it pays, but on the policy which it pursues in distributing the money, in ploughing back the profits and building up a strong reserve position. Every child knows that. Therefore, I cannot, as a matter of general principle, accept for one moment that there is anything unfair in taking the Stock Exchange valuation.

Let me come to the particular question of the gas industry. It is said that there is something peculiar relating to it. It is quite true that a large number of gas securities are not quoted on the London Stock Exchange—and the Stock Exchange Lists we are taking here are those only of the London Stock Exchange, as your Lordships know. But the stocks that are quoted cover the bulk of the industry. These are the actual figures—I am dealing in nominal values. The stocks which are quoted on the London Stock Exchange bear the nominal value of £111,000,000, as compared with unquoted stocks of £58,000,000. So that, on that basis, two-thirds of the nominal value are quoted on the London Stock Exchange. With regard to the one-third that is not quoted there are a goodly number of quotations on the provincial Stock Exchanges. I am not taking any account of them for the moment, but we believe that if you accept this Stock Exchange valuation it will not be difficult to apply a similar basis to the one-third which is not quoted on the London Stock Exchange, so that you will be able to equate one with the other. May I remind your Lordships that the Bill provides that all the liabilities of the companies, except liabilities with regard to the companies' securities, are to be taken over by the new Boards. Therefore, it is the whole of those securities which have to be compensated. The loss to each of those holders is the value of his security; and the value of that security is the true measure of compensation. The value which he would have received had he sold these securities—which is reflected in the Stock Exchange valuation—is, in our opinion, a fair valuation to give. If it were possible, by a lengthy and elaborate procedure, to arrive at a precise figure in order to make quite certain that justice was done to everybody, I certainly should not say that the mere factor of delay, trouble or difficulty was any argument against taking that course. As I have already pointed out, the method suggested by this Amendment is an exceedingly difficult and uncertain one to apply. You do not know that you do justice by this method, and by taking this Stock Exchange valuation you have the satisfaction of knowing that at any rate you are giving every man that which he would have received had he wanted to sell his stocks.

I know that I shall not convince your Lordships, and I confess that your Lordships will not convince me. This is the third time we have had this argument, and I think that I can best serve the convenience of your Lordships if I do not continue this argument ad nauseam. Realising, as I do, that this is a very important matter, a fundamental matter, and a matter which must be decided by the House on a Division, I must submit to the House that they should support the Government in this.

VISCOUNT MAUGHAM

Will your Lordships allow me a few minutes to say something upon the dexterous argument to which we have just listened? The noble and learned Viscount, with his usual skill has dealt with the arguments which have been raised and, amongst other things, has given his own view of what is the fair valuation, speaking generally, of property which is taken over by the State or is purchased, I suppose, under an agreement. His principle is that the proper value is what one can get for the property. Now I venture to say that that is absolutely unsound. For one hundred years past, this country has been dealing with property acquired on a valuation. Since the year 1845, when the Lands Clauses (Consolidation) Act was passed, there have been, I suppose, thousands of cases where the principles applicable to a valuation have been discussed, and there are many case in which the matter has gone to the courts. Without taking up much time, I do wish to state that there are two principles applicable in valuation which you will find in a book with an honoured name, Cripps on Compensation, and you will also find other works relating to that matter.

The two principles which I wish to commend to your Lordships in place of the argument that the value ought to be whatever can be obtained for the property—which means what can be obtained under what may be quite temporary values—are as follows. First, the value to be ascertained is the value to the owners, and not its value to the purchaser—in this case the State. It is the value to the owners here that we have to consider—these numerous people all over the country who have invested their money in gas undertakings. The second proposition is even more relevant as answering the tests suggested by the Lord Chancellor, The market price is not a conclusive test of real value. You will find that in Cripps on Compensation, and you will find an authority for it in the case of the South Eastern Railway v the London County Council, reported in 1915, 2 Chancery Division, at page 252. Those are the principles laid down in the Law Courts over a long series of years. They have been followed in hundreds of cases, and they are all absolutely different from the doctrine that one should apply simply the market value, if it can be ascertained.

I will add only that, in this particular case, we are not going to ascertain the market value by taking, in a small number of cases, what happens to be the quoted figure in the Stock Exchange List, the Official Daily List, or the Daily Supplementary List. Those Lists do not disclose what people have given for property, and for how much people have sold their shares. Often they' are purely nominal quotations, which have no connection whatever with real transactions. I have not been engaged in many Stock Exchange transactions but I know well that you cannot meet any broker on the Stock Exchange who will not tell you that those quotations are nominal—not all of them, of course, but a large number. That is an absolutely fatal comment on the view of the Lord Chancellor, that what should be paid as compensation is what can be obtained for the property. There are, in a small number of cases, some real valuations, but it is clear that under Clause 25 you will not get real transactions in a

Resolved in the negative, and Amendment agreed to accordingly.

VISCOUNT SWINTON moved to omit subsections (3), (4) and (5). The noble Viscount said: This Amendment is consequential. I beg to move.

Amendment moved— Page 30, line I, leave out from the beginning to the end of line 41.—(Viscount Swinton.)

THE LORD CHANCELLOR

I shall not trouble the House to divide on this Amendment. The noble Viscount will indicate, and I will check so far as I can those of his Amendments which he thinks are consequential. It is not to be thought, of course, that because I do not oppose the Amendments now, I am not opposed to them in principle; but it would be inconvenient to have a series of Divisions.

vast number of cases. I cannot help saying that, whatever criticisms may be made on this particular Amendment, it represents something perfectly fair between the parties, and that is not the case under the Bill as it stands.

On Question, Whether the words proposed to be left out shall stand part of the clause?

Their Lordships divided: Contents, 20; Not-Contents, 48.

CONTENTS
Jowitt, V. (L. Chancellor.) Ammon, L. [Teller.] Lucas of Chilworth, L.
Addison, V. (L. Privy Seal.) Amwell, L. Marley, L.
Chorley, L. Milverton, L.
Huntingdon, E. Crook, L. Pakenham, L.
Henderson, L. Pethick-Lawrence, L.
Hall, V. Holden, L. Rochester, L.
St. Davids, V. Kershaw, L. Strabolgi, L.
Walkden, L.[Teller.]
NOT-CONTENTS
Cholmondeley, M. Ridley, V. Hampton, L.
Salisbury, M. Swinton, V. Hawke, L.
Townshend, M. Howard of Glossop, L.
Amulree, L. Hylton, L.
Albemarle, E. Balfour of Inchrye, L. Llewellin, L.
Dundonald, E. Belstead, L. Lloyd, L.
Fortescue, E. [Teller.] Braye, L. Mancroft, L.
Graham, E. (D. Montrose) Carrington, L. [Teller.] Monkswell, L.
Lindsay, E. Cherwell, L. Moyne, L.
Lucan, E. Clanwilliam, L. (E. Clanwilliam.) Queenborough, L.
Manvers, E. Rankeillour, L.
Perth, E. Clydesmuir, L. Rennell, L.
Selkirk, E. De L'Isle and Dudley, L. Rochdale, L.
Denham, L. Schuster, L.
Buckmaster, V. Dorchester, L. Templemore, L.
Hailsham, V. Fairlie, L. (E. Glasgow.) Teynham, L.
Maugham, V. Forteviot, L. Tweedsmuir, L.
Wolverton, L.
VISCOUNT SWINTON

I am much obliged to the noble and learned Viscount. I have gone carefully into the matter and I think I can indicate to your Lordships exactly which Amendments are consequential. They can be checked between now and the Report stage.

On Question, Amendment agreed to.

VISCOUNT SWINTON

I beg to move this consequential Amendment.

Amendment moved— Page 30, line 42, leave out ("subsections (2), (3) and (5)") and insert ("subsection (2)").—(Viscount Swinton.)

On Question, Amendment agreed to.

VISCOUNT SWINTON

I beg to move this Amendment which is also consequential.

Amendment moved— Page 31, leave out lines 3 and 4.—(Viscount Swinton.)

On Question, Amendment agreed to.

LORD CHORLEY moved, in subsection (7), to leave out "of any class" The noble Lord said: This is a drafting Amendment. The words proposed to be left out are quite unnecessary. I beg to move.

Amendment moved— Page 31, line 5, leave out ("of any class").—(Lord Chorley.)

On Question, Amendment agreed to.

VISCOUNT SWINTON had given Notice to move, in subsection (7), to leave out "either of" and insert "two." The noble Viscount said: With your Lordships' permission I should like to move this Amendment in a more convenient form—namely, to leave out "either of the two last preceding subsections" and insert "the last preceding subsection." I beg to move.

Amendment moved— Page 31, line 5, leave out ("either of the two last preceding subsections") and insert ("the last preceding subsection").—(Viscount Swinton.)

On Question, Amendment agreed to.

VISCOUNT SWINTON

I beg to move this consequential Amendment.

Amendment moved— Page 31, line 6, leave out ("subsections") and insert ("subsection").—(Viscount Swinton.)

On Question, Amendment agreed to.

3.20 p.m.

LORD CHORLEY moved, after subsection (7) to insert: (8) If all the securities of any issue were originally disposed of to a person who did not become the registered holder of those securities, the price of issue of each of those securities shall for the purposes of this section be deemed to be either—

  1. (a) the price paid for that security by the first registered holder thereof; or
  2. (b) the price received by the company for the security plus an amount equal to two and a half per cent. of that price;
whichever is the lower

The noble Lord said: This Amendment has been put down in order to implement an assurance which was given in another place by the Solicitor-General. The clause deals with cases where there have been new issues, and it is concerned with the price. In the case of new issues it is, of course, not uncommon for the shares not to be sold directly to the public; they are placed with a firm of stockbrokers or an issuing house who sell them to the public and make a profit. Obviously, it would be unfair if the original price of issue were based on the price which was paid by the stockbroker. Therefore it is necessary to have this Amendment, which provides that the price of issue is the price paid for that security by the first registered holder, or the price received by the company for the security plus an amount equal to 2½ per cent. of that price, whichever is the lower. Inquiries which have been made show that the sum of 2½ per cent. is a fair remuneration to the stockbroker. Therefore, that alternative has been put in. On that basis, I am sure that your Lordships will think that this carries out the assurance which was given, and will accept it. I 'beg to move.

Amendment moved— Page 31, line 15, at end insert the said subsection.—(Lord Chorley.)

VISCOUNT SWINTON

I am much obliged. It is a little hard to follow, but I understand that it carries out in the most convenient form what was undertaken.

On Question, Amendment agreed to.

VISCOUNT SWINTON

I have one alteration to make in the next Amendment on the List. The word "two" ought to be "three" Therefore, I beg to move, to leave out "six" and insert "three"

Amendment moved— Page 31, line 16, leave out ("six") and insert ("three").—(Viscount Swinton.)

On Question, Amendment agreed to.

VISCOUNT SWINTON

This Amendment is consequential. I beg to move.

Amendment moved— Page 31, line 22, leave out from the beginning to the end of line 46.—(Viscount Swinton.)

On Question, Amendment agreed to.

VISCOUNT SWINTON

This Amendment is also consequential. I beg to move.

Amendment moved— Page 32, line 1, leave out from the beginning to the end of line 26.—(Viscount Swinton.)

On Question, Amendment agreed to.

Clause 25, as amended, agreed to.

Clause 26 [Increase of value of securities of companies suffering loss of revenue from war causes]:

VISCOUNT SWINTON moved to leave out Clause 26 and insert the following new clause:

As to loss of income from war causes.

"In agreeing or determining under the last preceding section of this Act the amount of the reasonably maintainable annual income which could have been expected from any class of securities an allowance shall be made to offset any loss or diminution of income arising from any war damage (within the meaning of section two of the War Damage Act, 1943) suffered by the undertaker or any subsidiary of the gas holding company concerned or by reason of any transfer of population, industry, trade or business from any part of the area supplied by the undertaker or any subsidiary of the gas holding company concerned caused by circumstances arising out of the war."

The noble Viscount said: Your Lordships will see that Clause 26 is intended to give a measure of compensation or allowance in increased value to those undertakings which suffered by reason of the Second World War. Obviously, that is a just and proper principle and ought to be applied, whether we take the Stock Exchange value or whether we take the value which the House has adopted. It is a perfectly right and proper principle and ought in either case to be brought into consideration in the assessment of value. I think this clause is rightly drafted, and I have taken the principle which the Government put forward in their Clause 26. But, of course, with the simpler method of valuation that the House has now adopted, that enables us to make it a much simpler clause. I think that it correctly translates the Government's Clause 26 into what ought now to apply. I ought in fairness to say, however, that there is one small alteration in the clause as I am moving it. Five lines from the end of my Amendment, your Lordships will see these words: the gas holding company concerned or by reason of any transfer of population, industry, trade or business from any part of the area supplied. The Government's clause, I think, merely mentions the transfer of population. I understand that there is really nothing between us on this question. Obviously we want the compensation to be paid if there has been a loss of business either because an industry has been transferred or because the population has been transferred. It was assumed that "population" covered also the transfer of industry. It has been suggested to me that, that being the common intention, it is proper to put in the words: "population, industry, trade or business" Therefore, I am moving it in that form. I thought I would draw your Lordships' attention to that point. Otherwise, I think that this clause is, as nearly as may be, the equivalent of the old one. I beg to move.

Amendment moved—

Leave out Clause 26 and insert the said new clause.—(Viscount Swinton.)
THE LORD CHANCELLOR

That is quite right. We will accept it. It seems to follow. I do not think that there is any point about the words "population, industry, trade or business."

On Question, Amendment agreed to.

Clauses 27 to 29 agreed to.

Clause 30:

Compensation to composite companies.

(6) Regulations may provide for conferring a right on the holder of any debentures, debenture stock or preference stock of a composite company, or on the company, by notice given within the prescribed period to the other party, to require the transfer to the holder of such amount of the British. Gas Stock issued to the company under this section as is attributable to the value of the said securities held by him, and for the cancellation of those securities to a proportionate extent and may also provide for the protection of mortgagees and encumbrance in cases where the debt secured by the mortgage or encumbrance does not vest in an Area Board or is apportioned as between an Area Board and the undertaker, and the debt or, as the case may be, the part thereof not apportioned to the Area Board was, immediately before the vesting date, secured on property which vests in the Board.

LORD HAMPTON moved, after subsection (4) to insert as a new subsection: (5) Notwithstanding the provisions of any enactment a composite company shall have power to hold any British Gas Stock issued to them under the provisions of this section, and, at their discretion, to sell the same or any part thereof, and reinvest some or all of the proceeds of any such sale.

The noble Lord said: Since this Amendment was put down, I see that the point has been covered by an Amendment put down to page 38, line 44, by the noble and learned Viscount. I do not think I need say any more about it. I beg to move.

Amendment moved— Page 38, line 9, at end insert the said subsection.—(Lord Hampton.)

LORD CHORLEY

This matter is covered by an Amendment to page 38, line 44, put down in the name of my noble and learned friend. While we accept the principle of the noble Lord's Amendment, we would prefer him to withdraw it and accept the Government's Amendment.

LORD HAMPTON

I agree. I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

LORD CHORLEY

The three following Amendments go together, and with your Lordships' permission, I will speak to them together. The composite companies will receive British Gas Stock in compensation for the transfer of their gas undertakings. Under the Bill as it is now drafted, a debenture holder or a preference stockholder may require the company to exchange for British Gas Stock such part of his holding as was attributable to the gas undertaking. The company are given a similar option. There have, however, been discussions with the representatives of the composite companies, and, as a result of those discussions it seems that it is preferable to limit this arrangement to debentures and to leave the problem of the reductions of share capital, which would have been involved with the proposal as it is at the present time, to be dealt with by the courts in the normal manner. Secondly, if debenture holders are willing to exchange the whole of their holdings for British Gas Stock we are quite content that they should do so, and that would be a sensible and useful arrangement. It does, however, involve an alteration in the proposals in the Bill, and the Amendment has been tabled in order to help that to be brought about. I beg to move.

Amendment moved— Page 38, line 31, after ("debentures") insert ("or").—(Lord Chorley.)

On Question, Amendment agreed to.

LORD CHORLEY

I beg to move the next Amendment.

Amendment moved— Page 38, line 31, leave out ("for preference stock").—(Lord Chorley.)

On Question, Amendment agreed to.

LORD CHORLEY moved, in subsection (6), to omit "and may also provide" and to insert: (b) for enabling a composite company, notwithstanding anything in any enactment, by agreement with the holder of any debentures or debenture stock of the company, to redeem them by means of the transfer to the holder of such amount of British Gas Stock issued to the company under this section as may be agreed with the holder; and (C) The noble Lord said: I beg to move this Amendment.

Amendment moved— Page 38, line 37, leave out ("and may also provide") and insert the said new paragraph.—(Lord Chorley.)

On Question, Amendment agreed to.

LORD CHORLEY

This is a drafting Amendment. I beg to move.

Amendment moved— Page 38, line 41, leave out ("undertaker") and insert ("company").—(Lord Chorley.)

On Question, Amendment agreed to.

LORD CHORLEY moved to add to the clause: (7) A composite company, notwithstanding any limitation imposed by any enactment on their powers of investment, may hold any British Gas Stock issued to them under this section, and, for the purposes of any enactment limiting the amount of investments that may be held by the company, any such stock shall be disregarded, and the company may sell any such stock and apply the proceeds of sale for any purpose for which they are authorised to apply capital moneys. The noble Lord said: My Lords, this is the Amendment which was referred to a moment ago by the noble Lord, Lord Hampton, and it has been put down to, meet the point in respect of which an assurance was given by the Minister on the recommitment stage in another place. There, an Opposition Amendment had been tabled, much in the same terms as that standing in the name of the noble Lord, Lord Hampton, and designed to, enable a composite company to hold compensation stock and, at their discretion, to sell all or part and to reinvest some or all of the proceeds of such sale. It was doubtful whether that could be permitted to a statutory company. The Minister agreed that it would be useful if they had power to do that, but said it was necessary that there should be consultations with the Ministry of Health, who are obviously interested in this type of point. However, I am glad to inform your Lordships that an agreement has been reached. The Amendment which is now tabled is rather wider than the one previously suggested, and will enable the proceeds to be used for any purpose for which the companies in question are authorised to use their capital monies. I beg to move.

Amendment moved— Page 38, line 44, at end, insert the said subsection.—(Lord Chorley.)

LORD HAMPTON

I am grateful to His Majesty's Government for meeting this point.

On Question, Amendment agreed to.

Clause 30, as amended, agreed to.

Clauses 31 and 32 agreed to.

Clause 33:

Control of dividends, interest and other payments.

33.—(1) Where any company, being an undertaker to whom this Part of this Act applies but not an ancillary gas undertaker, have paid pursuant to a resolution passed after the twenty-third day of January, nineteen hundred and forty-eight, 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 company 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 appropriate Board an amount equal to the total amount of the excess:

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

(c) in the case of any other class of securities, payments of dividend at a rate not exceeding four per cent. per annum or the rate, calculated as a rate per annum, paid on that class of securities in respect of the last complete financial year in respect of which a final dividend was paid before the said twenty-third day of January, nineteen hundred and forty-eight, whichever is the higher;

Provided that:

  1. (i) where any local enactment applicable to any such company restricts the dividends 604 payable by the company in respect of the last complete financial year before the said day or any subsequent period to amounts less than the payments permitted under paragraph (c) hereof, those amounts shall be deemed to be the payments of dividend permitted under this section in respect of that year or period;
  2. (ii) the payments permitted under this section shall only be made out of the net revenue of the company for the period in respect of which the payment is made, or out of any funds applicable in accordance with the normal practice 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 out of those funds, not be permitted under this section;

3.35 p.m.

VISCOUNT BUCKMASTER moved, in subsection (1), after the first "not" to insert "a statutory undertaker or." The noble Viscount said: This is a short and simple Amendment which seeks to remove an injustice, and, I trust that as such it may appeal to your Lordships. The Bill provides a new control on non-statutory companies, and on statutory companies there will now, of course, be a double control—namely, the control imposed by the Bill and the control imposed by their own statutory restrictions. The result of this will be that the controls will operate downwards, but never upwards. That appears to me to be an injustice and, without elaborating the point in any way—although I will do so if the noble and learned Viscount wishes—I hope this Amendment will appeal to him. I beg to move.

Amendment moved— Page 39, line 38, after ("not") insert ("a statutory undertaker or").—(Viscount Back-master.)

THE LORD CHANCELLOR

Statutory control of dividends at the present time is, I think, of three kinds. There is, first, the standard price system, under which a standard dividend, with a rate varying between 3½ and 10 per cent., is laid down in relation to a standard price. If I understand it aright, the dividends may rise above the standard if the selling price falls below the standard price. About 180 undertakers are concerned in this system. Then there is a basic price system, under which a basic price and a basic dividend are laid down in the Statute. The basic dividend may always be paid, if earned, irrespective of the actual basic price level. If the price level is below the basic price, a part of the difference between the actual revenue from the sale of gas and the theoretical revenue at the basic price may be used—so far as the actual net profits allow—to increase the basic dividend. Normally, a sum equal to the extra dividend must be devoted to the employees (usually as a co-partnership bonus). Here there are about fifty large undertakings concerned.

There is also the maximum price system, under which a maximum price and a maximum dividend are prescribed. The maximum dividend (often 10 per cent.), may be paid whenever it is earned, and there are about 150 undertakings concerned in that. I can see a possible hardship in subjecting those companies which are always subject to one statutory control to a further statutory control and therefore I will suggest this compromise to the noble Viscount and see whether he is prepared to accept it. I think I can meet him with regard to the standard price system and the basic price system. I will go into it between now and Report stage, and I anticipate that I shall be able to do that. I do not think I can meet him on the maximum price system, however. If the noble Viscount accepts that offer, perhaps he will be willing to withdraw his Amendment now, and allow me to see whether, between now and Report stage, I can find some form of words on the lines I have suggested which will meet the substance of the difficulty that he has outlined.

VISCOUNT BUCKMASTER

I appreciate the manner in which the noble and learned Viscount has met me in this matter. I accept that a case can be made out for excluding the maximum dividend companies, and I gladly accept the proposal he has made. Therefore I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

3 39 p.m.

LORD LLOYD moved, in subsection (1), after the first "resolution" to insert "of the directors of the company" The noble Lord said: On behalf of my noble friend and myself I beg to move this Amendment. In case the noble and learned Viscount should make me regret that I had moved it in its present form, I would like to say straight away that I do not attach any great sanctity to the words I have used; indeed I think they may probably be wrong. I am not at all sure that it is the right Amendment, but I wanted to raise the matter because I believe that as this clause stands now there is a possibility of injustice being done to directors. If your Lordships will look at the clause as it stands at present, you will see that it says: "if pursuant to a resolution passed after the 23rd day of January, 1948, a dividend is declared in excess of the rate permitted, the directors may be liable to certain penalties." The first point I would like to make is, that there is a certain ambiguity about the word "resolution." It might be a resolution of the directors or it might be a resolution of the shareholders in general meeting. The Bill does not say. But there is, I suggest, by inference, a possibility that it means a resolution passed by the shareholder

If your Lordships will look at line 9, on page 40, you will see that where directors are concerned in a recommendation they are specifically mentioned. Therefore, in the case of this resolution the inference, may well be that it is a resolution of the shareholders. This point was raised in another place during the Committee stage and it was pointed out that it was possible that this referred to a resolution of the shareholders; that the directors, in perfectly good faith, might have recommended a dividend exceeding the rates permitted just before the operative date and that the general melting and the publication of the Bill might come so closely together that the dividend could be passed in perfect good faith by both directors and shareholders, without them having any knowledge that they had committed an offence. There was an actual example, I believe, of a company which sent out a recommendation to the shareholders on January 15. The Bill was published on Friday, January 23, and the dividend was declared at the general meeting of the company on Wednesday, January 28. I am sure your Lordships will appreciate that the Bill could not possibly have reached any of the directors—as it came out over the week-end—before Monday, and it is more than possible that it would not reach them in time for the general meeting. In that case, obviously, the shareholders and directors might well, in perfectly good faith, have passed a dividend in excess of that permitted.

An attempt was made by the Government to meet this point on the Report stage in another place. That attempt—which I welcome—is represented on page 40 at line 36 and the following lines of the paragraph. It is there provided that if the directors consulted the Minister and obtained his consent, then the clause would not apply to them. Clearly, that does not cover the sort of case to which I am referring. While I do not say that there are likely to be many cases of that kind, I feel that there may possibly be cases of genuine injustice being done to some directors by this retrospective legislation. Therefore, while, as I have said, I do not set great store by the actual wording of the Amendment, and I am quite prepared to accept some alternative wording, I hope that the noble and learned Viscount, the Lord Chancellor, will be able to give us some assurance upon this kind of case. I am sure that he would no more wish to see any injustice done than would any of us. I beg to move.

Amendment moved— Page 39, line 39, after ("resolution") insert ("of the directors of the company").—(Lord Lloyd.)

LORD AMMON

I think that this would be a suitable moment at which to adjourn until 5.30 p.m.

[The Sitting was suspended at a quarter before four o'clock and resumed at half-past five.]

THE LORD CHANCELLOR

I have now had an opportunity of thinking out a suitable answer to the noble Lord. I was asked, first of all, what is meant by a "resolution" It means an effective resolution which declares a dividend. As the noble Lord knows, in the normal course of events an interim dividend is declared by a resolution of the directors. A final dividend is declared on the recommendation of the directors by a general meeting of the company. That is the normal course, and that, of course, is provided by Table A. The resolution herein referred to is an effective resolution. I would say at once that the Amendment the noble Lord has moved would be no good at all, and would defeat his own purpose. He wants to make the clause refer only to a resolution of the directors. The final dividend, of course, is declared by a resolution of the company. As the noble Lord himself said, he did not guarantee that his Amendment is perfect for what he has in mind. It was to deal with this very matter that we put in the proviso. It is quite true that the proviso makes the payment subject to the approval of the Minister. I think from the noble Lord's point of view that that is desirable, because if we have in the Bill the words "subject to the approval of the Minister," we can obviously allow greater latitude. If, on the other hand, there is no provision for ministerial approval, we have to tie the matter up very strictly with regard to dates and times. We all want to deal with the case where the dividend was in train before the directors knew what the Bill was going to contain. Yet the proposition is obviously a different one when they did know and, notwithstanding that knowledge, acted. The proviso refers to a payment being a payment made in pursuance of a recommendation of the directors of the company made on or before the said twenty-third day of January. The instance which the noble Lord gave, if I followed his dates aright, was that the recommendation of the directors was made on January 15——

LORD LLOYD

It was posted to the shareholders on January 15.

THE LORD CHANCELLOR

That was the date of the recommendation of the directors to the shareholders. The date of the Bill was January 23, and the general meeting was on January 28. Therefore, the proviso is apt to cover that case. It comes within the proviso, because the recommendation of the directors communicated to the shareholders was made before January 23. I can conceive of cases where you might want a wider proviso. Take the imaginary case of a company at Stornoway. The directors' recommendation, let us say, was made on January 24, before they had heard about this clause of the Bill. The general meeting then and there approves of the recommendation of January 24. That would not be within the proviso. If there is any case of that sort, I will gladly consider putting in appropriate words to deal with it. But this matter was all threshed out on the Committee stage and the Report stage in another place. We have put in a proviso which is appropriate to cover every case of which we have heard. If there is any other case not covered by the proviso of which the noble Lord knows—the one which he cited is covered by the proviso—and he will give me the details of that case, I will gladly consider amending the terms of the proviso to meet it. But at the present moment, so far as we know and believe, the proviso is appropriate to deal with every case. We have not come across any case where the recommendation of the directors on which the company approved a dividend was made after January 23. As I say, if there is such a case, I will look into it. The Minister invited all such cases to be sent to him, if there were any, and we have heard of none. I am certain that if there had been one we should have heard of it by now. If you wanted to deal with it in the way the noble Lord suggests, you would have to consider the extension of the terms of the proviso, and I should not consider the extension of the terms of the proviso unless I was satisfied that there was a case which was not protected by the proviso at the present time and which ought to be protected.

LORD LLOYD

I am grateful to the noble and learned Viscount for what he has said. I think it almost entirely meets my point. However, there is just one thing which he said on which I am not quite sure that I agree with him. It is that the case I cited is covered by the proviso. Technically, you might say it was, but it is a very close thing. May I remind the noble and learned Viscount again that the Bill happened to be published on a Friday, which was January23, and this meeting was on the following Wednesday. It is just conceivable in a case like that, I submit, that the Bill may not have been in the hands of the directors in time; and certainly there would have been very little time to consider the matter. I do not want to split hairs, after the noble and learned Viscount's assurance, but I think that that is a close case. If there is any trouble over that case—particulars of which I shall be glad to give to the noble and learned Viscount afterwards—I hope he will give special consideration to it.

THE LORD CHANCELLOR

May I interrupt the noble Lord? If he looks at page 40, line 8, he will see the words: being a payment made in pursuance of a recommendation of the directors of the company made before January 23. The recommendation of the directors in this case was made on January 15. Therefore his case, beyond any argument, comes into the proviso.

LORD LLOYD

I am grateful to the noble and learned Viscount and, with that assurance, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD ROCHDALE moved, in subsection (2), to leave out sub-paragraph (1). The noble Lord said: This Amendment is similar to one moved by my noble friend Lord Buckmaster on page 39, line, 38, on which the Lord Chancellor gave some assurance that he would look into the matter with a view to reaching a compromise. This Amendment deals with exactly the same problem, but seeks to deal with it in a somewhat different way, by relieving the statutory companies referred to of their limitations as regards dividends under their own existing local enactments. I rather think, therefore, that this is consequential to my noble friend's Amendment, and I hope that me noble and learned Viscount may be prepared to accept it. I beg to move.

Amendment moved— Page 40, line 27, leave out sub-paragraph (1)—(Lord Rochdale.)

THE LORD CHANCELLOR

I am not prepared to accept the Amendment, but it obviously comes within the topic which I have undertaken to consider. The consideration which I give to Lord Buckmaster's Amendment will also apply to this.

LORD ROCHDALE

I am grateful to the noble and learned Viscount, and beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 33 agreed to.

Clause 34:

Final payment of dividends and interest.

(3) The stockholders' representative shall apply the sums paid to him under the preceding provisions of this section (so far as they will go) for the following purposes and in the following order of priority:

(a) in making insert payments on any debentures or debenture stock of the undertaker, which have accrued up to the vesting date and have not been paid, at the rates permitted under the last preceding section;

(11) In this section the expression "final financial period" means such part of the financial year of the undertaker during which the vesting date occurs as precedes that date:

Provided that, where any undertaker has not made the payments of interest or dividends permitted under section thirty-two of this Act in respect of the last complete financial year or years ending after the first day of January, nineteen hundred and forty-eight, and before the vesting date, the said expression means that year or those years together with such part of the financial year during which the vesting date occurs as precedes the vesting date.

THE LORD CHANCELLOR moved, in subsection (1), to leave out "Minister" (where that word first occurs) and insert "President of the Institute of Chartered Accountants in England and Wales" The noble and learned Viscount said: Clause 34 as drafted provides that the auditor for the purpose of ascertaining the revenue for the final period shall be appointed by the Minister, after consultation with the appropriate Board and the stockholders' representative. The representative bodies of the accountancy profession—for whom, if I may say so, I have a most profound regard—have suggested that the precedent of the Transport Act, Section 20, should be followed, and that the auditor should be appointed by the President of the Institute of Chartered Accountants. That is the purpose of this Amendment, and I feel sure that it will commend itself to all noble Lords. I beg to move.

Amendment moved— Page 43, line 30, leave out ("Minister") and insert ("President of the Institute of Chartered Accountants in England and Wales").—(The Lord Chancellor.)

On Question, Amendment agreed to.

LORD HAWKE moved, in subsection (3), after paragraph (a) to insert: (b) in paying such sums, if any, as may be authorised by the Minister to be paid to any person as compensation for loss of office or employment or in recognition of past services rendered to the undertaker. The noble Lord said: Clause 59 of this Bill provides that the Minister shall by regulations require the early Area Boards to pay compensation to officers who suffer loss of employment and so on. We are proposing an Amendment here which takes the initiative from the Minister and puts it in the hands of the stockholders' representative. He is to make suggestions to the Minister as to the compensation that should be paid, and the Minister says "Yes" or "No"

The reasons for this are that we feel that the very essence of compensation for past services is a swift recognition of those services; if things are left for any length of time, rewards tend to go sour and stale. We are giving the Minister the services of the stockholders' representative in putting before him at a comparatively early date a list of the persons who should be compensated. I submit that that is a far better procedure, and will save the Minister a great deal of botheration, as compared with the method used in the Bill which, as your Lordships who have had anything to do with similar problems will be aware, will result in interminable "tribal warfare" in Whitehall before some standard scale is evolved. This will take a considerable time and I may remind your Lordships that, meanwhile, some of the men will have lost their jobs and will be without any means of livelihood. It is a method of achieving justice as simply and as quickly as possible. The only argument which I feel the Government can advance is that it may not achieve exact equality. I submit, however, that no scale can ever achieve final equality between men, because men are not equal. In fact, equality is the enemy of egality. I do not know whether Karl Marx wrote that: he may well have done so. I beg to move.

Amendment moved— Page 44, line 12, at end insert the said paragraph.—(Lord Hawke.)

THE LORD CHANCELLOR

Clause 34, subsection (3), lays down the manner in which the stockholders' representative is to dispose of the sums he receives from the appropriate Area Boards; that is to say, the net revenue of the undertaker, for the final financial period, less the gross amounts (if any) already paid out by the undertaker by way of debenture interest or interim dividends in respect of that period. The order which is prescribed is as follows: (a) outstanding debenture interests; (b) other interest payments and dividends due up to the vesting date according to the rights of security holders and statutory limitations; and, (c) repayment of the balance (if any) to the appropriate Area Board. This Amendment seeks to interpose between (a) and (b) compensation for loss of office or gratuities to directors or employees authorised by the Minister.

Similar Amendments were moved in another place, but it was then proposed that payment could be authorised by a general meeting of the company, or by a meeting of the holders of securities of the company, as well as by the Minister. It was claimed that that was on the lines of the provisions of the Transport Act. We did not accept that contention then, even in that form, because we maintained that the position in gas is radically different from that in transport, because in transport any sums so voted by the shareholders would automatically reduce the sums available for dividend, whereas in gas they could be paid out of funds which were surplus to dividend requirements and which were properly, therefore, assets of the Area Boards. It is true that this Amendment meets this objection by limiting payment to sums authorised by the Minister, but it is still not acceptable to the Minister—for this reason. Compensation for loss of office and recognition of past services are adequately covered by the provision in Clauses 57 (Pension Rights) and 59 (Compensation to Officers). Clause 59 says: The Minister shall by regulations require every Area Board and the Gas Council to pay, in such cases and to such extent as may be specified in the regulations, compensation to officers of any undertaker.… But it does not extend to payment to directors as such. Of course, if a director is an officer of the company, then he receives his compensation as an officer.

LORD HAWKE

May I interrupt? Where does the question of "directors" come in? It is not mentioned in my Amendment. I did not mention the word "directors."

THE LORD CHANCELLOR

That is the whole operation—"any person." All persons are covered by Clauses 57 and 59.

LORD HAWKE

I do not think the noble and learned Viscount heard me correctly. If I had expressed myself currently, he would have heard me say that it is a substitute for Clause 59, as providing a quicker and simpler procedure. I never mentioned "directors" and I do not know how that crept in.

THE LORD CHANCELLOR

It creeps in this way. A director, whatever his other failings may be, is a "person." The Amendment which the noble Lord is moving authorises payment of compensation to "any person" whereas Clause 59 authorises payment of compensation to "any officer" I therefore thought that that was the real point of the Amendment, to extend the payment of compensation to directors who were not officers. If it is that, I am certainly not prepared to accept it, because I think we ought to confine compensation to officers of the company, and pension rights to those who have served the company. If there are exceptional cases which are not covered by Clauses 57 and 59, it is open to the companies, under he Bill as now drafted, to approach the Minister for approval to make appropriate payments. And the Minister can approve payment under Clause 36 (1), proviso (iv), or under agreements under Clause 22, subsection (7). We are not prepared to delete Clause 59; we think Clause 59 is a matter of great importance, and we prefer the code which we have in Clauses 57 and 59, which amply safeguard the rights of officers and employees.

VISCOUNT SWINTON

I respectfully agree with the Lord Chancellor about this, that this is not the appropriate way of doing what my noble friend is seeking to do. I am not it all interested in getting payment for a director who is not an executive officer. But I want to be clear about this. It is important that in the right place we should be able to discuss and safeguard the position of what the Lord Chancellor has called customary obligations and what I call customary practices. What I had in mind is that wanted to be sure that a man in the employment of a company, who would have received payment if he had stayed on with the company, should be covered by Clause 57 or Clause 59—whichever is the appropriate clause—not as a matter of grace, but as a matter of right. Providing I am satisfied that that is covered by Clause 57 or Clause 59, I do not think there is anything between us.

THE LORD CHANCELLOR

That is quite right. Whether we call them customary obligations or customary practices I do not think makes any difference. I quite agree with the noble Viscount that the matter should be discussed, to safeguard it. I want to safeguard it as much as he does.

LORD HAWKE

The noble Viscount, Lord Swinton, has dealt with the question of the persons to be covered. Could the noble and learned Viscount give me some assurance on the question of speed? That is a very important element and, as I understand, in the existing nationalised industries there is considerable disgruntlement over the delay in producing these regulations. Perhaps when we come to the clause involving regulations the Lord Chancellor will be able to give us some assurance on that point.

THE LORD CHANCELLOR

I think we are accepting some Amendment on that point, but I entirely agree with the desirability for speed in this matter. Of course, the regulation has to be laid—the noble Lord knows that, and probably desires it—but I entirely agree that we should do this thing speedily. "He gives twice who gives quickly."

LORD HAWKE

My point has been met, and I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

LORD CHORLEY

The next three Amendments, which really go together, are drafting Amendments in order to make quite clear the meaning of the expression "complete financial year." I beg to move.

Amendment moved— Page 47, line 9, leave out from ("year") to ("before") in line II.—(Lord Chorley.)

On Question, Amendment agreed to.

Amendment moved— Page 47, line 11, after ("date") insert ("or has not made those payments in respect of either that year or the immediately preceding financial year, being a year ending after the first day of January, nineteen hundred and forty-eight").—(Lord Chorley.)

On Question, Amendment agreed to.

Amendment moved— Page 47, line 12, after ("or") insert ("as the case may be").—(Lord Chorley.)

On Question, Amendment agreed to.

Clause 34, as amended, agreed to.

Clause 35 agreed to.

Clause 36 [Reopening of transactions resulting in dissipation of assets]:

LORD WOLVERTON

This Amendment is a drafting Amendment. We think there is a mistake in the wording, and that where it says "where the arbitration tribunal is satisfied" the last two words ought to read "are satisfied." I beg to move.

Amendment moved— Page 49, line 20, leave out ("is") and insert ("are").—(Lord Wolverton.)

LORD CHORLEY

It is true that practically throughout the Bill the phrase "arbitration tribunal" is treated as a plural noun. Therefore, I think the noble Lord is quite right and I accept his Amendment.

On Question, Amendment agreed to.

LORD WOLVERTON

This Amendment is to make the clause consistent with the Amendment just accepted, and to make it clear that the onus of proof has to be proved to the satisfaction of the tribunal. We think these words ought to come out and the words on the Order Paper inserted. I beg to move.

Amendment moved— Page 49, line 22, leave out from ("is") to ("that") in line 23 and insert ("also satisfied").—(Lord Wolverton.)

LORD CHORLEY

My noble and learned friend thinks that these two Amendments may in fact disturb the harmony——

VISCOUNT SWINTON

Of the proceedings?

LORD CHORLEY

No. The noble Viscount will agree that nothing could disturb the harmony of the proceedings—the harmony of the drafting. It may mean that we may have to look at this matter again. If your Lordships will allow me to accept it on that principle, I shall be very glad to do so.

THE LORD CHANCELLOR

May I point out to the noble Lord that what we have now done is this? By accepting this most unhappy first Amendment, if I may call it so, we have made the clause read: Where the arbitration tribunal are satisfied that the transaction in respect of which an application is made is a transaction to which this section applies— and then unless it is also satisfied. I do not know quite what to do about it, because we have not been consistent. I think this is what we used to call, if I remember, the nomen collectivum, which can be either plural or singular. If we are to put the "is's" and the "are's" right all through this Bill, we shall have hundreds of Amendments, which does not make for speed. I think it is very difficult to say, "Where the arbitration tribunal are satisfied," and then "unless it is satisfied." We had better accept it in this form for now, and see whether we can induce the noble Lord to withdraw his first Amendment at a later stage.

VISCOUNT SWINTON

I do not trust the Government about much, but I do trust them over drafting, because they have very competent assistants. I think we should shorten business and produce a less bad Bill if we let them correct the drafting, on the clear understanding that they will not correct anything else.

On Question, Amendment agreed to.

Clause 36, as amended, agreed to.

Clause 37 agreed to.

Clause 38:

Provisions as to foreign investments.

(2) Every such company shall, within such period as may be prescribed, supply to the Minister and the appropriate Board particulars in the prescribed form of all foreign investments of the company, and shall dispose of those investments in such manner and within such period as may be prescribed.

5.58 p.m.

LORD HAWKE moved, in subsection (2), after "investments" to insert "or such of them as may be prescribed." The noble Lord said: This is a small and technical Amendment, and for the life of me I do not know whether it is strictly necessary. Clause 38 (2) requires every company to dispose of its foreign investments within such a period as the Minister may prescribe. Clause 38 (5) describes foreign investments as "any assets," and I understand that that description covers patents. There is a possibility that foreign law may not recognise this vesting, and that a transfer in this country to a nominee may be necessary before the vesting. On the other hand, there are certain countries where, apparently, such an act of despoliation as this vesting will be recognised and the transfer will not be necessary. Certain people are disquieted that there seems to be no provision in Clause 38 (2) to let out for transfer such assets on the instructions of the Minister. I beg to move.

Amendment moved— Page 50, line 38, at end insert ("or such of them as may be prescribed").—(Lord Hawke.).

LORD CHORLEY

I am advised that the noble Lord's doubts as to whether it was in fact necessary or useful to move this Amendment are more than justified, and that the Amendment is, in fact, quire unnecessary. Therefore I hope he will withdraw it.

LORD HAWKE

With that assurance I readily beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

LORD BALFOUR OF INCHRYE moved, after Clause 38, to insert the following new clause:

National Associations.

".—(1) All property rights liabilities and obligations which immediately before the vesting date were property rights liabilities and obligations of any National Association shall on the vesting date (notwithstanding any other provision of this Act) vest by virtue of this Act and without further assurance in the Gas Council.

(2) The following provisions of this Act, that is to say, section seventeen (except subsections (1) and (9) thereof) section fifty-seven and section fifty-nine shall with any necessary modifications apply to each National Association and officers of and persons who have been in the employment of that National Association as if that Association were an undertaker to whom Part II of this Act applies and any such officer who suffers loss of employment or loss or diminution of emoluments or pension rights in consequence of the passing of this Act shall be deemed to be an officer who suffers loss of employment or loss or diminution of emoluments or pension rights in consequence of the vesting.

(3) In this Act the expression "National Association" means the British Gas Council, the Federation of Gas Employers, the National Federation of Coke Associations, every constituent Association of the last-named Federation and the Association of Gas Corporations."

The noble Lord said: The purpose of this new clause is to provide that employees of national associations serving the gas industry shall receive compensation for loss of employment or loss or diminution of emoluments or pension rights to the same extent as the employees of gas undertakings which are being acquired under this Bill. The employees of these associations really serve the gas industry in exactly the same way as if they were in the employment of gas undertakings. Indeed, many of these employees come from or are seconded from the gas undertakings for duty with the associations. As noble Lords know, these gas associations integrate the activities of all gas undertakings in matters where any co-ordinated or co-operative action is desirable to maintain the supply of gas to the community.

This Amendment provides that the assets and the liabilities of the gas associations shall be taken over by the Gas Council to be set up under the Bill. In another place a somewhat similar Amendment was moved. It did not find favour because it did not contain what I hope will now be an acceptable provision, that the assets of the associations should be taken over by the Gas Council. The Parliamentary Secretary to the Ministry of Fuel and Power said that the Minister would see whether he could not meet the situation in some way or other. He said: We are most anxious that the people who have served the industry so well should not be left out on a limb and so not have the advantages which their contributions to the industry generally so richly deserve. Therefore it is quite clear that the Government are sympathetic to protection being afforded to these men. If they found it difficult in another place to provide that protection, we hope that an Amendment in this form for taking over the assets of these associations will remove that difficulty. I sincerely hope that the Government will feel able, if not to accept this Amendment in its exact words, at any rate to accept it in principle. I beg to move.

Amendment moved— After Clause 38 insert the said new clause.—(Lord Balfour of Inchrye.)

THE LORD CHANCELLOR

I think the noble Lord has a point here and I believe I can meet him. I will accept this Amendment in principle but I must consider the drafting, which is not quite right. In particular, we shall have to have some provision equivalent to a disclaimer of contracts applying here as in the other cases. If the noble Lord will withdraw his Amendment, I will put down a suitable clause on the Report stage.

LORD BALFOUR OF INCHRYE

I am grateful to the noble and learned Viscount. I am sure that the action of the Government will bring a feeling of relief and satisfaction to many of these employees. On the assurance which the noble and learned Viscount has given, I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 39 agreed to.

6.7 p.m.

THE LORD CHANCELLOR moved, after Clause 39 to insert the following new clause:

Modification of enactments in relation to undertakers pending transfer.

"(1) Section 150 of the Companies Act, 1948 (which requires that, in the case of a company having subsidiaries at the end of its financial year, group accounts within the meaning of that section shall be laid before the company) shall not apply in the case of a company which is a gas holding company, a statutory undertaker or a non-statutory undertaker; and the group accounts of a holding company, not being an undertaker to whom Part II of this Act applies, need not deal with a subsidiary which is a gas holding company, a statutory undertaker or a non-statutory undertaker.

(2) The Minister may by order provide for the modification of any local enactment which—

  1. (a) requires the number of directors of any company, being an undertaker to whom Part II of this Act applies, to be not less than a specified number;
  2. (b) specifies the number of directors of any such company required to constitute a quorum; or
  3. (c) requires a director of any such company to hold securities of the company."

The noble and learned Viscount said: We have recently passed a Companies Act containing new and rather drastic provisions and requirements with regard, among other things, to the form of accounts. The accounts of gas companies have, I understand, always been rather peculiar—at any rate sui generis—and it seems a pity that in order simply to deal with the last period they should have to go through all the trouble and formality of recasting their previous practice. Therefore the object of this clause is to exempt them from the requirements of Section 150 of the Companies Act. There is another section of that Act—Section 149—which deals with the form of accounts. Section 149, however, has its own escape clause. That is to say, the President of the Board of Trade may: …on the application or with the consent of a company's directors, modify in relation to that company any requirements of this Act as to the matters to be stated in a company's balance sheet or profit and loss account… Companies having subsidiaries are similarly required to see that the balance sheet and profit and loss account give a free and fair picture of the companies concerned. Therefore we need not put it in Section 149, which has its own escape clause; but we do want to put it in Section 150. Section 150 requires that any company having subsidiaries should prepare group accounts, and so on; and, as I have said, we think that that would be too severe an obligation to place on these companies at this time. I beg to move.

Amendment moved— After Clause 39, insert the said new clause.—(The Lord Chancellor.)

VISCOUNT SWINTON

This is certainly a very sensible provision. I wonder, however, whether it would not be better to put in Section 149, which puts an obligation upon companies; then, if they want to keep out, they would have to make application to the Board of Trade. Surely, what we want here is that the gas companies will sing their "swan song" in the way they have been accustomed to singing their song in the past. I should have thought the simple thing was to say that neither of these clauses was to apply to them; then the existing law which governs them will enable them to produce their accounts in the form in which they have always produced them. Otherwise, it is possible that all of them—perhaps 2,500—will be writing to the Board of Trade for a permit to escape from Section 149, which they could get automatically. If the Lord Chancellor will look at this between now and Report stage he may be able to make it a little simpler.

THE LORD CHANCELLOR

I will certainly look at it.

LORD RENNELL

In the case of a company that is continuing, I suppose the provisions of the Companies Act will be applicable to their case.

THE LORD CHANCELLOR

I will look at that also.

On Question, Amendment agreed to.

Clause 40:

Revenues of Area Boards and Gas Council to be sufficient to meet outgoings.

40.—(1) It shall be the duty of each Area Board so to exercise and perform their functions under this Act as to secure that the revenues of the Board are not less than sufficient to meet their outgoings properly chargeable to revenue account, taking one year with another.

LORD TEYNHAM moved to add to subsection (1) and if and so long as they exercise their powers to manufacture plant, gas fittings or coke fittings, they shall so exercise those powers as to secure that the, revenues arising from such exercise are not less than sufficient to meet their outgoings in respect thereof properly chargeable to revenue account, taking one year with another. The noble Lord said: If your Lordships will turn to Clause 1, subsection (2) (d) you will see that it says that the Area Board can supply gas fittings and coke fittings; and paragraph (e) says that they may do so after consultation with the Gas Council. They may also manufacture gas plants. The object of this Amendment is to ensure that in cases where Area Boards do exercise these powers they shall do so only on a financially economic basis, so that the revenue obtained covers expenditure.

I think it will be clear to your Lordships that, if the business of manufacturing these fittings and plant and so on by an Area Board is run at a loss, this loss would have to be subsidised from a sale of gas. I think that this would impose a further burden upon the gas consumers. I suggest that the Bill should be so drafted, wherever possible, as to ensure that the obligation of Area Boards to provide a cheap and plentiful supply of gas is made of first importance. This Amendment will prevent Area Boards from subsidising their manufacture of fittings and thereby perhaps wasting money which might be applied to the provision of gas. I beg to move.

Amendment moved— Page 52, line 45, at end insert the said words.—(Lord Teynham.)

THE LORD CHANCELLOR

I think that this Amendment is right. If the Area Boards are going in for manufacture, they ought not to subsidise it out of the price of gas. I will accept this Amendment.

LORD TEYNHAM

I am grateful to the noble and learned Viscount for accepting it.

On Question, Amendment agreed to.

Clause 40, as amended, agreed to.

Clauses 41 to 44 agreed to.

Clause 45:

Central guarantee fund.

(4) All moneys in the central guarantee fund which are not for the time being required to be applied for the purposes of the fund shall be invested in such, securities of the Government of the United Kingdom or such securities guaranteed by the Treasury as may be determined by the Gas Council with the approval of the Minister and the Treasury.

LORD HAWKE moved, in subsection (4) to omit all words after and including "such securities" and to insert "Trustee Securities." The noble Lord said: I beg to move the Amendment standing in the name of my noble friend Lord Bridgeman and myself. This is a very simple Amendment, and I hope the Government will see fit to accept it. As the Bill stands, the central guarantee fund has to be invested in such securities of the Government of the United Kingdom or such securities guaranteed by the Treasury as may be determined by the Gas Council with the approval of the Minister and the Treasury. We seek merely to substitute for this the bald statement that it should be put into trustee securities. The Government, rightly, are proceeding on the principle of decentralisation and autonomy in these matters. I think that this authority ought to be allowed to have control of its own financial affairs. If by wise investment it can make a little money, let it do so. If, on the other hand, through bad management it succeeds in losing money, let it do so, and get rid of the management. Above all, let it be as free as possible from the Minister and the Treasury. I beg to move.

Amendment moved— Page 57, line 46, leave out from ("in") to the end of the subsection, and insert ("Trustee Securities").—(Lord Hawke.)

THE LORD CHANCELLOR

I am sorry that I cannot meet the noble Lord in this matter. Of course, we are dealing here with the central guarantee fund which is to be established by the Gas Council and which is to be supported and maintained by the Area Boards and by such profits as the Gas Council may make—if any—out of their manufacturing activities, if they do manufacture. The money is to be there to serve as a first line of defence in support of the guarantee which the Treasury are giving, so that, if the Treasury do have to pay up under their guarantee, there shall be a fund available to which they can look for reimbursement. That being so, it seems to us that it is only reasonable to limit the field of investment to Government securities and Government-guaranteed securities. That is exactly what we had in Section 24 (4) of the Coal Act of 1938. It was not the wicked machinations of a Socialist Government in those days. That strictly limited the investment of the Coal Commission Reserve Fund to Government securities and Government-guaranteed securities. We feel that as the guarantee fund is to provide backing for payment of interest on stock guaranteed by the Treasury, it is essential to have the field of investment limited as it is in the Bill. I am sorry that we cannot accept this Amendment.

VISCOUNT SWINTON

I do not feel at all happy about that answer. It is not as if the Area Boards or the Gas Council are being encouraged to invest in gambling ventures at all. The proposition is that this trust fund must be invested in trustee securities. What the noble and learned Viscount the Lord Chancellor has said is: "Because the Treasury are guaranteeing it, therefore it must be invested in Government securities." I cannot see that that fund will necessarily be safer if it is invested in Government securities than if it is invested in other trustee securities. I do not think that it would have been a profoundly wise investment, either in the interests of the benficiaries under the fund or the Treasury who may be called to guarantee it, for a trust fund to have been invested in "Daltons." It certainly would have been very much reduced in value. It would have been much wiser to say: "Let this trust fund be treated like other trust funds, like the other reserve funds of these undertakings." It is right that it should be limited to trustee securities—but within limits. As I understand it, the Gas Council have the management of this fund. It is not the Treasury who are to manage it. Is that not right?

THE LORD CHANCELLOR

That is right.

VISCOUNT SWINTON

It seems to me that it is an elementary function of the management to handle this reserve fund—because this is a reserve fund for a special purpose. I cannot see why providing that the investment is in approved trustee securities, they should in this case be limited to Government stocks. I believe that there is an erroneous principle here. I am rather anxious about this being cited as a precedent. Perhaps it was done in 1938, and we may have been responsible for it. But that is not a reason for doing it for all time. After all, there are many other things which were done in 1938 which the Government do not necessarily follow. We did not get a great deal of help from them over some of the things which were done or undone. However, on this rather limited clause, I am not going to debate that that precedent is one which we ought necessarily to follow.

This is a question of principle, and I think three points are involved. It is the function of management of the Boards and the Gas Council to manage their own funds. I do not think that we ought to go into this question of whether the Treasury, directly or through the hands of the Minister, or through their created Boards, can lay their hands on the money and say "All the money so affected has

Resolved in the negative, and Amendment agreed to accordingly.

LORD HAWKE moved, in subsection (6) to leave out "at least." The noble Lord said: This is very simple Amend- got to go into Government funds in order to bolster up Government funds." There ought to be a discretion. I do not think the clause as drafted is reasonable, because this system may be followed with much wider funds. I do not think that it is reasonable vis-à-vis other borrowers on trustee securities. All those Corporations are having their undertakings taken away from them. Many of the Corporations are sound financially, and I do not see why the stocks of a good Corporation should not be invested in the way now proposed. It may be a wise move to invest this fund or part of it in securities which have an early, or relatively early or varying date of maturity, but why should it be limited to Government funds? I think there is a good deal in this, and that the right thing, the normal thing, ought to be done—namely, that a trust fund should be invested in trustee securities, and that those who have the management of the fund should have a discretion as to what trustee security they invest in.

On Question, Whether the words proposed to be omitted shall stand part of the clause?

Their Lordships divided: Contents, 14; Not-Contents, 40.

CONTENTS
Jowitt, V. (L. Chancellor.) Ammon, L. [Teller.] Henderson, L.
Amwell, L. Holden, L.
Huntingdon, E. Chorley, L. Kershaw, L.
Crook, L. Lucas of Chilworth, L.
Hall, V. Darwen, L. Marley, L.
Walkden, L. [Teller.]
NOT-CONTENTS
Cholmondeley, M. Aberconway, L. Llewellin, L.
Salisbury, M. Altrincham, L. Lloyd, L.
Balfour of Inchrye, L. Montagu of Beaulieu, L.
Fortescue, E. [Teller] Belstead, L. Moyne, L.
Lindsay, E. Carrington, L. [Teller.] Newall, L.
Onslow, E. Clanwilliam, L. (E. Clanwilliam.) O'Hagan, L.
Selkirk, E. Oxenfoord, L.(E. Stair.)
Clydesmuir, L. Rochdale, L
Buckmaster, V. Courtauld-Thomson, L. Shute, L.(V. Barrington.)
Cecil of Chelwood, V. Denham, L. Strathcona and Mount Royal, L.
FitzAlan of Derwent, V. Fairlie, L. (E. Glasgow.)
Monsell, V. Hacking, L. Templemore, L.
Ridley, V. Hampton, L. Teynham, L.
Swinton, V. Hawke, L. Wardington, L.
Hylton, L. Wolverton, L.

ment. The Bill provides that if an Area Board fail to meet the interest charges on their share of Gas Stock, the Minister puts the brokers in; and he can put them in for a period at least until the Area Board is fulfilling its obligations again. We are seeking to exclude the words "at least," so that as soon as the Area Board have become solvent and can meet their proper obligations the Minister's control should be lifted. I beg to move.

Amendment moved— Page 58, line 18, leave out ("at least").—(Lord Hawke.)

THE LORD CHANCELLOR

I am afraid that I cannot accept this Amendment; I think it would be a bad one. The clause as drafted provides not a maximum period but a minimum period. I might point out to your Lordships that if an Area Board were to default on their capital obligations it would be a very serious thing. In all probability they would have had to resort to all sorts of expedients, some wise and some foolish, before actually admitting a default. I am all in favour of removing the control as soon as possible, but it does not necessarily follow that the moment to remove the control is the moment when a Board have put themselves right again. They may require some little control for a time after that, in order to make sure that they keep to the straight and narrow path to which, on this hypothesis, they would have just got back. You may want to see that thereafter they are advancing in the right direction. I do not say that you will, but you may want to do so. This Amendment proceeds to fix the maximum period of control. Directly the auditor said things were all right again, all controls would have to be removed. I do not think that would be wise. A Board that have fallen into this grave position would probably have something badly the matter with them. I am not prepared to say that the moment an auditor gives his certificate all leading strings should go. It should be left to the discretion of the Gas Council to decide whether or not the time has come when they can remove all control. It is undoubtedly desirable to remove control as soon as it is reasonably safe to do so.

VISCOUNT SWINTON

I think there is reason in what the noble and learned Viscount the Lord Chancellor has said, but I should draw rather a different conclusion as to what should be done when one of these bodies had fallen into grievous sin. My idea would be to remove the management and put in a better one, giving them directions as to how they should conduct their business. I see a certain difficulty about that, however, because I suppose persons are to be appointed to these bodies for a term of years. It may be said that, with this kind of Government control, unless people are given an appointment for a term of years they are given no security and that if a man may be removed at the will of the Minister you will not get good people to act on these Boards. That is one of the dangers of going in for this kind of business. The ordinary principle in private enterprise, which is so much looked down upon in some quarters, is that the directors of a concern have to be elected by the shareholders. Some of them, it is true, are elected for a term of years, but always some directors come up for re-election every year. If a receiver has been appointed to take over a business, the directors who are responsible for so conducting their affairs that that receiver has been put in are apt not to be re-elected. I confess that I find myself in a dilemma here. I am inclined to agree with the Lord Chancellor, but I do not think that he has produced the right remedy. I think he would agree that you do not want to put in the Treasury as receivers; what is really wanted, if the management proves incompetent, is to get competent management. What I would like to know is, how is that going to be done in a case like this?

I would venture to make a suggestion. I do not know whether what I am going to suggest can be done under this clause, but I suggest that it is worth considering in this connection before the Report stage. When the affairs of a Board have got into the state described, the position is that the business has gone bankrupt. As I have said, I would agree, in the first instance, that you must appoint members of the Boards for a term of years—whatever term is regarded as necessary. But if they prove grossly incompetent, and get their business into this kind of mess, I think there ought to be power for the Minister, or whoever is responsible for making these appointments, to step in and get rid of all or any of the Board, and appoint a new lot. I do not believe that such a power would deter good men from taking appointments on these bodies. What would deter good men would be the prospect of a Minister coming into office who did not like the look of them, who regarded them as vermin, and said, "Out you go." That is a possibility against which business men want to be safeguarded. They do not mind the word "vermin" being used as a term of abuse—in fact, coming from certain quarters they probably regard it as a compliment. But if that abuse can be translated into action, and people can be removed because a Minister does not like the colour of their politics, or the colour of their complexions, then you will not get good men. They must have security of tenure. But it could be laid down that the Minister Should be able to say to them: "If you conduct the business so badly that it goes bankrupt, I am going to get rid of you and put in someone else who will run it properly." I think we ought to consider whether the Minister should have that power to act in that way if a business goes bankrupt.

THE LORD CHANCELLOR

I have always understood that the trouble with vermin is that if you say to them "Out you go," they do not go.

The question of the tenure of office of directors will be dealt with by regulations made under the Bill. I quite see that there is force in what the noble Viscount has said. On the one hand, it must be made clear that we do not so frame our regulations as to make any director think he may be dismissed at the mere arbitrary whim of the Minister. If directors were led to think that, you would never get good people to join at all. On the other hand, it should be possible so to frame regulations as to have a different standard altogether, if directors should fall down in this way. A falling down of this kind would be a very bad one, and I think that, if it did happen, it would probably be a matter to be dealt with by regulation made under the Bill.

LORD RENNELL

I think a distinction should be made here. I agree that the terms of the appointment and termination of office of directors on a Board should be laid down in the regulations. They are the appropriate place in which to define how the appointments are made, and how the terms of office come to an end. But the removal of directors is not a subject which, in my submission, ought to be dealt with in regulations. I feel strongly, as Lord Swinton has said, that where a Board have been so derelict in their duties as to allow their enterprise to fall into bankruptcy, the Minister should have the statutory power to get rid of them and to appoint a new Board. As I have said, I quite agree that regulations should be drawn setting out the normal conditions for appointment and termination of office, but the removal of directors for the reasons mentioned is not a normal matter.

LORD HAWKE

Our discussion has certainly ranged over a far more important subject than the one which I raised. I realise that my Amendment is probably not appropriate, and I beg leave to withdraw it.

Amendment, by leave, withdrawn.

Clause 45, as amended, agreed to.

Clause 46:

Reserve funds of Area Boards and Gas Council.

(2) The Area Board or the Gas Council, as the case may be, shall contribute to the said fund to such extent as they may determine, and the management of the said fund and the application of the moneys comprised therein shall be such as they may determine: Provided that—

LORD HAWKE moved, in subsection (2), at the beginning of the proviso to insert: (a) the amount which, may be transferred to the reserve fund of any Area Board, or of the Gas Council, as the case may be, shall not in any financial year exceed one per centum of the revenue of that Board, or the Gas Council, during the previous financial year, and the amount of any such reserve fund shall not at any time exceed five per centum of the amount of British Gas Stock for which the responsibility is for the time being allocated to that Board or the Gas Council.

The noble Lord said: The gas industry is somewhat peculiar in that it is largely based on structures devised by our grandfathers who were very solicitous of the interests of the consumer. The result is that in its framework protection for the consumer bulks extremely large. In the matter of reserve funds, as a general rule the statutory undertakings had limitations placed on what they could put to those funds, because it was known that such funds came out of the price of gas. Now in the Bill as it is drafted at present there is no limit, so far as I can see, to the amount which the Area Boards can screw out of the public on gas, coke or anything else, and put to their reserve funds. That may be a sound business principle, but when one comes to examine who has control over the reserve funds certain objections tend to arise. It is the Minister who really controls the reserve funds, because he can tell the Area Boards precisely what they can put to reserve, and how they are to spend the money.

We live in an age of a planned economy. I think on both sides of the House we are committed to some form of a planned economy, greater or smaller. In that planned economy the Budget is the main instrument. I submit that if it is desirable to budget for deficits or surpluses, as it may well be, the proper way to do it is openly and squarely in the Budget, disclosing to the world what you are doing. These nationalisation Bills, with their various reserve funds, and so on, give the Chancellor of the Exchequer a magnificent opportunity for manipulating what is, in effect, his central Budget, by instructions to his agencies in these areas. Our Amendment seeks to guard against such an eventuality in the case of the gas industry by laying down a limit to the amount which can be taken out of the consumers' pockets for gas and put into the area reserve funds on instructions from the Minister. I beg to move.

Amendment moved— Page 58, line 32, at end, insert the said paragraph.—(Lord Hawke.)

THE LORD CHANCELLOR

I must say I am entirely opposed to this Amendment. I think it is essential that these Area Boards should have the sense of responsibility that comes from being able to manage their own affairs. I want them to be independent; I want them to be able to stand on their own feet. I welcome the fact that they will decide what reserve funds they may put by. I am not myself frightened that they will put by too much in that way. I am much more frightened that they will put by too little for reserve, because I think public pressure will be brought to bear upon them, through the consumers' council, and all that sort of thing, and they may not pursue a wise or what is called a conservative policy in this regard, which would be a pity. On the other hand, the risk is there, I agree, that they might build up colossal funds and continue to charge the consumers high prices for their gas.

For this very reason it was felt that the Minister should have a power to intervene. In Clause 46 (2) (b), the Minister is given power in regard to this matter to give a direction, even though it is a specific and not a general direction, in order to guard against these people treating their consumers unfairly and disregarding the wishes of their consumers' council. But, subject to that qualification upon their powers, I am entirely opposed to subjecting these Area Boards to this rigidity. The 1 per cent., the 5 per cent., and all the rest of it, are, after all, purely arbitrary figures. I am sure the noble Lord will agree with that. I think this is departing from the principle of the Bill, to which I attach great importance—namely, the making of these Boards really autonomous units. Therefore I am opposed in principle to this Amendment.

VISCOUNT SWINTON

I am afraid that for once I find myself more in agreement with the Lord Chancellor than with my noble friend. Perhaps, therefore, I am wrong. The Boards could not, as I understand it, pile up undisclosed reserves. Under some clause in the Bill (which is a good clause in the form in which we settled it) accounts have to be kept in accordance with the best commercial standards. That means, by implication, that all the provisions we have put into the company law will apply. As I understand it, that means that the reserves will have to be completely disclosed and the public will know exactly what the reserves are. In view of that, and the fact that there will be pressure for gas to be supplied as cheaply as possible, I think we ought to let these bodies have that discretion. We have been pressing a great deal in other clauses for their discretion and their independence in management. Although consistency is not the test of all English policies, yet sometimes one should be consistent.

LORD HAWKE

Nobody wishes more than I do to see the Area Boards autonomous and independent. In fact, His Majesty's Government have adopted the principle of an Amendment which I moved to the Electricity Bill on this very subject, on which I received great support from my noble friend Lord Ridley, but, I think, from no one else. My chief quarrel here is that the Boards are not autonomous. It is the Minister who runs the reserve funds. I maintain that the Minister can, if he wishes to do so, on instructions from his colleague the Chancellor of the Exchequer, pile up a very considerable Budget surplus. However, the opinion of the Committee is against me, and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

VISCOUNT SWINTON

The next Amendment in the names of my noble friends Lord Hawke and Lord Bridgeman is consequential on a principle which we have already adopted. I beg to move.

Amendment moved—

Page 58, line 48, at end insert— (3) All moneys in the general reserve fund of each Area Board and the Gas Council which are not for the time required to be applied for the purposes of the fund shall be invested in Trustee Securities."—(Viscount Swinton.)

THE LORD CHANCELLOR

I do not treat this at all as a consequential Amendment. It seems to me to deal with a very different matter. The fund with which we were dealing before is the contingency fund under the control of the Gas Council, which is met by contributions from the Area Boards; it has to be built up to the tune of £5,000,000, and is available to meet the Treasury if the Treasury are called upon under the guarantee. That is the previous fund with which we dealt. This is a wholly different fund. This is the ordinary general reserve fund of each Area Board. The Amendment as drawn would be absolutely unworkable. The Area Board want to keep some liquid cash with their bankers. They could not do that. This, again, departs entirely from the principle of giving the Area Boards autonomy in their own concerns. They have complete discretion to do what they like with their general reserve fund. We really cannot accept this Amendment. This is quite a different fund from the last one, and it is quite a different principle. Do give the Area Boards discretion to do what they like in regard to this reserve fund. Whether you do that or not, at any rate, do not do anything so foolish as to prevent them from keeping even sixpence at the bank. This Amendment is absolutely impossible.

VISCOUNT SWINTON

I am convinced by the Lord Chancellor on that last point. I will indicate where I had some anxiety about this matter—anxiety which I think the noble and learned Viscount has now allayed by what he has said. Your Lordships will see that as regards this reserve fund the Minister can give complete directions if he wishes. The Bill says that the power to give direction shall extend to any matter relating to the establishment of a reserve fund…the management thereof, the carrying of sums to the credit thereof, or the application thereof, notwithstanding the directions may be of a specific character. Frankly under that provision the Minister would have power to say to every one of these Boards, "You shall invest the whole of your reserve fund (less, of course, the money that you wish to keep liquid in the bank) in Government securities." It was for that reason that I said the Amendment was in a sense consequential. The Lord Chancellor has said it is the intention that these Boards shall be perfectly free to invest their funds as they please, and from that I take it that there will be no specific direction to them as to how they shall invest their reserve funds.

THE LORD CHANCELLOR

The noble Viscount will observe subsection (3) at the top of page 59, which has regard to provision for replacements for other purposes. That makes them free from the Minister's control.

LORD RENNELL

There is one point which is not quite clear to me. I think it is perfectly right that this Amendment has nothing whatever to do with the previous one which was not pressed. What we are talking about here is a reserve fund in the area and the purposes for which the fund may be used, which are defined in the first part of Clause 46. In fact, the Area Board can do what they like within the limits of subsection (1) which deals with the use of some of their funds to manufacture plant, gas fittings or coke fittings; and the other matters are laid down in subsection (2). The object of making this reserve fund, as I see it, is to have a fund of money out of which to make payments in certain eventualities. If complete discretion were given to the Area Boards to invest the monies they have, not only in the manufacture of plant, gas fittings or coke fittings, but, for instance (as does happen), in more gas works or mains, that would not provide a liquid fund. What I think is intended here is that, broadly speaking, each fund should be maintained in negotiable securities or cash but should not be used otherwise than as laid down in subsection (1); it should not be used in such a form as would not make funds available in cash for the purposes for which the fund was created. In other words, there should be a fund of money in securities and not a reserve invested in the Board's own business.

THE LORD CHANCELLOR

I should have thought that that is a matter for business-men who understand the industry, and I do not. Of course, there must be considerable liquid reserves, but I suppose you should be able to build up your reserves and use a substantial part of those reserves by ploughing them back into the business, building new gas works or retorts or whatever has to be built. It obviously is a matter of sense that you would wish to build up considerable liquid resources. But your Lordships will see the words "appropriate replacements or other purposes" on page 59. That provision obviously contemplates liquid reserves because you cannot deal with replacements unless you have liquid reserves.

LORD RENNELL

I thought it only proper for the Board not to use this reserve fund by ploughing it back into the business. The whole object of a reserve fund is to keep it in liquid form.

LORD HAWKE

I think the main object of the Amendment is to secure that the Area Boards are not ordered by the Minister under Clause 56 (b) to put their funds into some specific Government stock. If the noble Lord would be prepared to accept some Amendment like "shall be held in Trustee Securities and cash," I think that would be sufficient.

THE LORD CHANCELLOR

No, certainly not. We are going to have good business men to manage this fund, not lawyers, and they know far more about it than I do.

LORD HAWKE

I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 46 agreed to.

6.57 p.m.

LORD TEYNHAM moved, after Clause 46, to insert the following new clause: Any surplus income of an Area Board after meeting outgoings properly chargeable to revenue account, taking one year with another, and after maintaining a general reserve in accordance with the provisions of this Act shall be applied in reduction of the price of gas charged to consumers within the area of such Area Board.

The noble Lord said: I venture to draw your attenton to the great importance of setting out in this Bill the obligation of Area Boards to produce a cheap and plentiful supply of gas. This Amendment is very simple, and has been put down to ensure that the surplus income of an Area Board, after meeting proper outgoings, will be applied to reduce the price of gas. It is not intended that a small surplus should be applied to this end, but it would obviously be improper for an Area Board to build up a large surplus without reducing the price of gas. For this reason I am not entirely satisfied with the wording of the Amendment and propose, if His Majesty's Government agree to the principle of the Amendment, formally to move the Amendment so that, if the principle is agreed, the Amendment can be withdrawn and redrafted at a later stage. I beg to move.

Amendment moved— After Clause 46 insert the said new clause.—(Lord Teynham.)

LORD CHORLEY

I am afraid that we cannot agree to this in principle. The argument against it is exactly the same as that which my noble and learned friend has just been putting before your Lordships in respect of the last Amendment. In other words, this unduly fetters the discretion of the Area Boards. The Area Boards have to conduct their business like business men; no business men should be tied down in the way that this Amendment would tie them down and, as I understand it, is aimed to tie them down. I am rather surprised to see the name of the noble Viscount associated with this particular Amendment because he is on our side, so to speak, in respect of the cardinal principle of preserving the autonomy of Area Boards. If the Amendment were accepted, the Area Boards would be obliged to apply any surplus remaining after satisfying previous deficiencies to price reduction. I am sure that your Lordships will agree that the proper business policy requires the matter to be looked at over a period of time. It might well be that after a period of lean years the Area Board would, properly and sensibly, come to the conclusion that one "fat" year did not in fact justify an immediate reduction. It would lead them into difficulties which, I am sure your Lordships would agree, a competent board of business men would not expect to have placed upon them by any Amendment of this kind.

VISCOUNT SWINTON

I think there are two principles here. The first principle, which the Government have already accepted, and which has been put in as one of the duties of the Area Board—I think the Lord Chancellor is to recast it, and put it into more satisfactory form—was a positive direction upon the Area Board that they had to sell gas as cheaply as they could. That is good. That which comes at the beginning is the overriding direction, the binding provision. I am bound to say that if they created either an excessive reserve—they have to have a prudent reserve—or they have an enormous carry-forward, which is unnecessary, then I think they would be guilty of a breach of the main directive to them. I admit that I do not think I have drafted this clause very happily, because, taken literally, it would mean that if an Area Board ended up with a balance of £500, they would have to apply that to reducing the cost of gas. I do not know quite how they would do it. They may end up with a balance of £50,000 or a balance of £5. Obviously, if they end up with £they will carry it forward, but if they end up with £50,000 they ought to apply that to reducing the price of gas. The Government having agreed at the beginning that these Boards have to sell gas as cheaply as they can, I am inclined to agree that this is unnecessary.

LORD CHORLEY

I am obliged to the noble Viscount. I might add that if the Area Board did pursue the absurd policy which this Amendment envisages, then when they presented their accounts to Parliament a considerable amount of criticism would soon be brought to bear upon them, which I think it most unlikely they would be able to withstand.

LORD TEYNHAM

I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 47 agreed to.

Clause 48:

Sums which are to be chargeable to revenue account.

48. Each Area Board and the Gas Council shall charge to revenue account in every year all charges which are proper to be mace to revenue account, including, in particular, proper allocations to the central guarantee fund and to any reserve fund kept by the Board or Council under section forty-six of this Act, proper provision for the redemption of capital and proper provision for depreciation of assets or for renewal of assets, and all payments (including the payments which al.?, by the relevant provisions of this Act, or by any other relevant enactment, to be deemed to be capital payments) which fall to be mace in that year to any local authority under Part II of this Act in respect of any loan or advance of that local authority, and references in this Act to outgoings properly chargeable to revenue account shall be construed accordingly.

Loran LLOYD moved to omit "including, in particular, proper allocations to the central guarantee fund and to any reserve fund kept by the Board or Council under section forty-six of this Act" and to insert: as respects each of the main activities of the Board or of the Council including. The noble Lord said: This is quite a simple Amendment, but it is not unimportant. One of the things which I am sure noble Lords on all sides of the House would desire is that, once these industries are nationalised, the public as a whole should be able to see every year exactly how their nationalised industry is doing, and that the accounts and records available should be perfectly clear. All this Amendment seeks to put into the Bill is that, when we are dealing—as we are in this clause—with revenue, the way the revenue is charged to the various activities of the Board should be clearly shown in the accounts. That is the object of this Amendment, and it seems to me a worthy one. I hope the noble Lord will be ready to accept it. I beg to move.

Amendment moved— Page 59, line 22, leave out from ("account") to ("proper") in line 25, and insert ("as respects each of the main activities of the Board or of the Council including").—(Lord Lloyd.)

LORD CHORLEY

I think this Amendment is unnecessary. It does not add anything to what is there already. In the circumstances, I hope the noble Lord will not press the Amendment.

LORD HAWKE

Would the noble Lord say exactly where it is there already? I hoped that at long last the well-known stone-wailer was going to open his shoulders and let us have one.

VISCOUNT SWINTON

May I suggest to the noble Lord that if he would look a little further ahead—perhaps he has not got so far in his homework—he will see in Clause 49 the provision that the accounts are to be kept in the best commercial manner, and the form of the statement shall be such as to secure the approval of the Treasury.

LORD CHORLEY

Yes, that is it.

LORD LLOYD

I am grateful to the noble Viscount for having read his homework better than I have. I had not got so far last night. In the circumstances, I beg leave to withdraw my Amendment.

Amendment, by leave withdrawn.

LORD LLOYD

This Amendment is a drafting Amendment. If your Lordships will look at Clause 46 (1) you will see that the Gas Council or the Area Board can establish only one general reserve fund. Therefore, it obviously does not make any sense to say that they should charge things to "any reserve fund." I beg to move.

Amendment moved— Page 59, line 23, leave out ("any") and insert ("the").—(Lord Lloyd.)

LORD CHORLEY

This Amendment is misconceived, if the noble Lord will allow me to say so. It is in fact correct to use the phrase, "any reserve fund," because it is referring not only to the Board but also to the Council. The Council will not have a fund unless they actually embark upon the process of manufacture or something of that kind. In the circumstances, I think the noble Lord will see that the word "any" is the right word.

LORD LLOYD

Perhaps the noble Lord has read it rather better than I. As I read the Bill it says: …all charges which are proper to be made to revenue account, including, in particular, proper allocations to the central guarantee fund… which I understood was the fund for the Gas Council— and to any reserve fund… When I look at Clause 46 I see: …the Gas Council shall establish and maintain a general reserve fund for the purposes of the Area Board or the Gas Council as the case may be. I do not quite follow the noble Lord.

LORD CHORLEY

"As the case may be." They might not have to. Therefore, the noble Lord will see that the word "any" is correct.

LORD LLOYD

It is a small drafting point which, if the noble Lord feels strongly about it, I do not think we should pursue. I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

7.8 p.m.

LORD TEYNHAM moved, after "assets" (where that word first occurs) to insert: in accordance with a uniform scale prescribed by the Minister after consultation with the Gas Council. The noble Lord said: The object of this Amendment is to ensure that the Area Boards should make use of a uniform scale of depreciation. Otherwise, of course, it might be possible for Area Boards to adjust their depreciation and perhaps balance their budgets. We, on this side, are in favour of having Area Boards as little controlled as possible, but we think that the Bill should be drafted to prevent any misuse of depreciation. I beg to move.

Amendment moved— Page 59, line 26, after ("assets") insert ("in accordance with a uniform scale prescribed by the Minister after consultation with the Gas Council").—(Lord Teynham.)

LORD CHORLEY

The only point here is whether there should be a uniform scale prescribed by the Minister. I think it is agreed by everybody that there should be uniformity in this matter. Indeed, when this particular point was brought up in another place, the Minister agreed that uniformity was desirable, and that the only question was whether the method should be prescribed or whether it would not be better to leave it to the Gas Council. The Minister gave a promise that he would discuss it with the Chairman designate of the Council. As your Lordships are aware, Mr. Sylvester, who for many years was associated with the Gas Light and Coke Company, has been designated. He is, I believe, an accountant by profession. He has been consulted about this matter, and he of course agrees that a reasonable degree of uniformity is very necessary and proper in respect of this particular matter. On the other hand, in the existing gas industry there are considerable divergencies, and it would obviously entail a lengthy and technical inquiry in order to establish a uniform system. Mr. Sylvester's view is that the matter would be much better left to the Council to deal with. I hope that the noble Lord will think that that is a sensible view, and not press his Amendment.

LORD TEYNHAM

In view of the noble Lord's explanation and assurance, I beg leave withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 48 agreed to.

Clauses 49 and 50 agreed to

Clause 51:

Provisions as to supply of gas by persons other than Area Boards.

(5) Any question arising under this section as to whether, or as to the extent to which, it is reasonably practicable and economical for an Area Board to buy a supply of gas, or as to the terms and conditions on which the supply is to be given, shall be referred for inquiry and report to a person appointed by the Minister after consultation with the Lord Chancellor or, in the case of the Scottish Gas Board, after consultation with the Secretary of State, and shall be determined by the Minister after considering the report of the said person.

7.12 p.m.

LORD CHORLEY moved, after subsection (4) to insert: (5) Where any requirement is made under subsection (2) or subsection (3) of this section, any pipes or other plant or gas fittings which the person who is to sell gas to the Area Board uses or holds for the purpose of the supply of gas manufactured by him and which will, in consequence of the said requirement, no longer be required by him, but not including any pipes, plant or fittings which it is not reasonably practicable and economical for the Area Board to take over, shall, if either the Area Board or the said person so requires, be transferred to the Area Board. The noble Lord said: There are two Amendments to this clause which go together. Subsections (2) and (3) of Clause 51 deal with the disposal of gas manufactured at works—for example, iron and steel works which are not nationalised under the Bill—which is surplus to the needs of that works. Under subsection (2) the owners of the works can require the Area Board to take their surplus gas if it is reasonably practical and economical for the Area Board to do so; and under subsection (3) the Area Board can require the surplus gas to be supplied to them.

The new subsection proposed in the first Amendment deals with the disposal of the pipes and fittings which have been previously used for the supply of the surplus gas—for example, in the case of a railway gas works, for supplying gas to railwaymen's cottages, and things of that sort. The Amendment enables either the previous supplier of the surplus gas or the Area Board to require the handing over of those pipes, other than those which it is not reasonably practicable and economical for them to take over. In the event of a dispute on a point of that sort, or about the price at which they should be taken over, the matter is, by the second of these two Amendments, to be decided by an independent referee under subsection (5).

The Amendment also fills in a small gap in the Bill. It is reasonable that an Area Board should be able to require an outside supplier of gas to hand over his distribution system at a fair price in a case where that outside supplier requires the Area Board to buy his surplus gas under subsection (2). Conversely, it is reasonable that if the Area Board requisition surplus gas under subsection (3), the previous supplier should not be left unreasonably with the old distribution system on his hands. The "plant" referred to might include, for example, gasholders or pressure governors which are associated with distribution systems. "Gas fittings" refers to cookers and things of that kind hired by the previous supplier of gas to con Burners who are now to be supplied by the Area Board. An Amendment to deal with this point was suggested by the Transport Commission, who own several railway gas works. I think your Lordships will agree that it is a sensible thing to repair this small gap. I beg to move.

Amendment moved— Page 62, line 39, at end, insert the said new subsection.—(Lord Chorley.)

LORD TEYNHAM

I find a little difficulty in following what these two Amendments do. They seem to some extent to meet a point raised by the Opposition in another place. Where surplus gas is taken compulsorily by the Area Board from independent coke ovens or steel works, the suppliers, we feel, should not have their capital tied up in the necessary trunk mains. I think that the object of the Amendments is desirable but that the drafting might be slightly different, otherwise, certain unintended effects may result. When gas is manufactured by A, who uses the trunk main owned by B to supply the Board, the Amendment would enable the property of B to be transferred to the Board if the Board or A so requires. The second Amendment, of course, provides for inquiry into any question arising; but since B is not brought into the picture at all, he might not have the chance to raise the question.

VISCOUNT RIDLEY

I think there may be some difficulties about this question, not so much perhaps in the Amendment itself, but in the remainder of the clause. I think it is a far more complicated matter than would appear at first sight. At the end of this clause there is what seems to be the only definition in the Bill of what we are dealing with: This section shall not affect the supply of gas by any person otherwise than through pipes. There is no definition of "gas" in the Bill—and I should not like to suggest what it should be if there were. I imagine that subsection (1) of Clause 51 is the subsection in the Bill which in fact keeps the industry nationalised when it has once been nationalised. As to the possible results following on the definition to which I have referred—the supply of gas through pipes—that means that any gas which is supplied or even transported through pipes on the way to being supplied, becomes forbidden so far as supply to anybody but the Area Board is concerned. It might well apply to certain products of the petroleum industry which are handled in a gaseous form and taken from one works to another nearby for further processing.

In those circumstances, it is possible—and I believe there are such cases in existence—that it is not a question of selling for the use of a subsidiary or holding company such as is referred to in subsection (6), paragraph (a). Clause 51 is dealing with a whole range of products, not only of the gas industry itself but of such things as small gas works owned by the Transport Commission; and it is quite possible that there may be great difficulty for steel works under this clause, if gas is supplied from coke ovens or blast furnaces for the use of subsidiaries; but it is perfectly possible that the gas might be used by a neighbour who is not a subsidiary. It seems to me that under Clause 51 of this Bill the possibility of such a supply is prohibited. Subsection (1) of Clause 51 says: No person shall, after the vesting date, commence to supply gas… So far, I think that is quite clear; any of the sale or purchase of gas between producer and user which is now going on is to be allowed to continue. Then it says in subsection (3)—and this seems to me to be contradictory; I would like to know whether I am right: The Area Board…may require that person to sell to the Board all or part of the gas manufactured by him which he does not require for his own use.… That is not said to refer to a person who, after the vesting date, wants to start supplying gas off his premises. So, although permission is given in subsection (1) to an existing seller of gas to go on doing it, it appears to me to be taken away by subsection (3). Possibly I have misunderstood it; I hope I have. I do not think that that can be intended.

Following on that, there arises the importance of the Amendment which is being moved. One must agree that on a transfer of gas supplies the gas equipment, fittings and so on should follow. Those who have had to put in the plant for their use are no longer allowed to use it and would naturally wish to transfer it. But there is a difficulty, I think, because subsection (5) of this same clause says: Any question arising under this section as to whether, or as to the extent to which, it is reasonably practicable and economical for an Area Board to buy a supply of gas…"— and also, under the Amendment proposed by the noble and learned Viscount the Lord Chancellor, any question …as to the extent to which, pipes, plant or gas fittings are be transferred to an Area Board… is to be dealt with by the Minister. Any such question, says subsection (5): shall be referred for inquiry…after consultation…and shall be determined by the Minister after considering the report of the said person. That is a familiar sequence of events which, in this particular connection, is unfortunate. The Minister gives the authority to the Area Board to acquire both the right to supply gas and also the apparatus for so doing, and, on appeal to the independent arbitrator, the Minister is in a position to override any decision that he has made. I do not want to oppose this Amendment, because I see the sense, force and usefulness of it, but I want to raise the question as to the apparent inconsistency between subsections (1) and (3) of Clause 51. It seems to me that they are contradictory. I did not want to put an Amendment down, because it seemed easier to raise the question on this Amendment.

LORD CHORLEY

I think that the noble Lord, Lord Teynham, and the noble Viscount, Lord Ridley, are dealing with rather different points. Lord Teynham, raised the question as to whether the wording of the proposed Amendment covers sufficiently accurately the matter at which it is aimed. I will gladly have that matter looked at. If the point which he has made is one of substance, we will have it put right at Report stage. With regard to the point made by the noble Viscount, I think he welcomed the Amendment and I am obliged to him for his support. He raised two points of substance, one of which was in respect of the definition of "gas," and whether the supply of gas which was not coal gas by one works to a neighbouring works would be hit.

The question of the definition of "gas" is certainly a difficult one. It is one which, I confess, has been looked at and we have not so far succeeded in dealing with it effectively. I can assure the noble Viscount that we will look at it between now and Report stage in the light of his observations, to see whether we can do something to deal with the point which he raised on that particular matter. With regard to the apparent discrepancy between subsection (1) and subsection (3), I do not think that there is such a discrepancy. Subsection (1) deals with the point in the absence of a direction by an Area Board. Subsection (3) is concerned with the position when the Area Board does in fact give a direction in respect of the use of the gas, or part of the gas, manufactured by an independent manufacturer who is continuing to make it. There again, I shall be glad to have these two subsections looked at. If the point which the noble Viscount has made is a good one, I will get in touch with him, and we can discuss the matter later.

VISCOUNT RIDLEY

What I am concerned about is this. I understood that it meant that any concern which is now selling surplus gas for industrial purposes is expected to be able to continue to do so. I understand that subsection (1) means that. I am afraid that subsection (3) gives the Area Board the complete power to require that such as undertaking should sell to the Board all the surplus gas not wanted for their own purposes. It seems to me that the two subsections must be contradictory.

LORD CHORLEY

Not necessarily. For instance, in the event of a war emergency, or something of that kind, it might be necessary that there should be such a direction in respect of the use of the gas. It is surely a question of what the best use might be.

VISCOUNT SWINTON

Of course, in war all sorts of things have to happen, and everybody has to submit to whatever directions are necessary. What the noble Viscount and I wart to be clear about is this. What is the intention of this in peace? I quite understand that anybody who is manufacturing gas to-day for his own use will be able to go on manufacturing it, and use all he requires for his own purposes. He will also be selling to somebody that not the position?—gas which he does not require. It is one thing to say that he shall be able to go on doing that and carry on those domestic arrangements for the sale which he has already made, and that he will not be interfered with by the Area Board except in some important cases of emergency. If it is the intention that the status quo should be maintained, as regards both what he produces for his own use and what he sells, then I do not think that subsection (3) is happily phrased to express that, It says: The Area Board…may require that person to sell to the Board all or part of the gas manufactured by him which he does not require for his own use, and the said person shall comply with that requirement. There is nothing there about a national emergency or Defence requirements.

LORD CHORLEY

I gave that merely as an example of the sort of case.

VISCOUNT SWINTON

That is not giving the Committee the information we want. What we want to know is this. Is it the policy that the status quo shall be maintained, and that if "A" is manufacturing gas for his own purposes and for sale to somebody else, in the absence of something quite abnormal he will be able to go on doing that? As I understand it, that is what subsection (1) intends. Then subsection (3) comes in and says that, if the Area Board want to take any part of or all of the gas which he does not require for his own purposes, they can so require. It is no good the noble Lord saying that that is to meet a national emergency. If what is intended is that the Board should be able to do that if they find it convenient and suitable to them, that is one thing. I am not saying whether that is right or wrong; it may be right. But if it means that, then let the Committee be told quite frankly that the Board are going to have that right, and can put it into operation at any moment. Then the man knows that, except for his own purposes, he will be put out of business in that respect. But if, on the other hand, what is intended is that that power shall be exercised only in some exceptional circumstances of overriding national importance, then the clause ought to be re-cast and it ought to be so stated. What its purpose is ought to be put clearly. If the clause is to have the wider interpretation, then I think the Minister must justify it. Perhaps after dinner the noble Lord will tell us what it means, and, if it has the wider significance, why he thinks it necessary that it should have that significance.

VISCOUNT RIDLEY

I am most concerned about this matter, because of the importance of arriving at a definition of the word "gas." I am not asking the noble Lord to arrive at that definition; I am not going to try to do it myself. The definition that has been used, for practical purposes, is "that which is supplied through pipes." That means that every sort of gas, whether coal gas or any other, which goes through a pipe and is sold, becomes subject to this clause. That is a matter of great importance in relation to a whole range of products which are used throughout industry. It might be said that oxygen which one buys in cylinders would be subject to this clause, because it is put through a pipe in order to get it into the cylinder. That is rather splitting hairs; nevertheless I think it should be made perfectly clear that subsection (3) operates only in the case of an emergency, and I would prefer it left out if it means that., After all, in a war Ministers have power to requisition this, that and the other, and anything of that sort can be arranged for. I think we want to be perfectly clear throughout the whole range of these industrial products as to exactly how things stand in this regard. We want to be careful that the Bill is very precise in stating that it is not possible to interfere with those very necessary things which have nothing to do with coal gas as we know it

VISCOUNT SWINTON

May I make a suggestion to the Leader of the House? We have got into a muddle over this matter. It may be that Lord Ridley and I are not very clever at understanding what is in the Bill. But obviously here is an important matter. It will not be at all satisfactory, if the noble Viscount will allow me to say so, for him to say, "Let us have a look at this and, if there is any trouble about it, we can put down something on Report." What we want to know is the meaning of what is written here, and what is the intention of the Government. It is only when we know that that we shall be able to decide whether we want to pursue the matter on Report. I venture to suggest that the noble Lord who is in charge of this particular clause should give us that explanation when we reassemble, and then we shall see how far we must pursue it.

[The Sitting was suspended at twenty-six minutes before eight o'clock, and resumed at nine o'clock.]

LORD CHORLEY

Before we adjourned I was asked a number of questions by the noble Viscount, Lord Swinton, and by the noble Viscount, Lord Ridley. The first point which I would like to make in answer to the noble Viscount, Lord Ridley—on the question of what sort of gases the Bill applies to—is that in our view it is sufficiently clear from the general tenor of the Bill that it applies to coal gas and not to the various types of industrial gases which the noble Viscount had in mind. As I had already said to him, I am ready to have that looked at again, and if any words can be provided to make that clear, by definition or otherwise, we shall be glad to insert them. The second point is that it should be sufficiently clear from the clause that persons who make gas for their own use are not to be regarded as gas suppliers for the purpose of this particular clause. Subsection (6) makes it clear that that applies not only to companies which manufacture gas for their own purposes, but also to holding companies of such companies, or to subsidiaries of holding companies. In other words, we want it to be perfectly clear that people making gas for the purpose of the industry in which they are occupied are not to be subjected to the requirements of this clause.

Then we come to subsection (3) on which a question was raised. I think the point there is that where a manufacturer of gas is already supplying a third party then, prima facie, he is entitled to go on supplying such a third party. But there is power in subsection (3) for the Area Board to stop him, by requiring him to put his surplus gas at the disposal of the Area Board. I have been trying to make that clear. I took as an example—and it was purely chosen as an example—the sort of case where gas might be needed in the national interest, perhaps for war purposes or something of that kind. I think the noble Viscount, Lord Swinton, was perfectly correct when he pointed out that the subsection is not limited to a case of that kind. That is so. It might be used for the purpose of rationalising the gas supply in a particular district: for example, where a grid had been introduced it might clearly be to the advantage of the neighbourhood to take the gas and bring it into the grid system, thereby making it available as part of the rationalised supply system for a whole neighbourhood. The noble Viscount, Lord Swinton, asked me almost for a declaration of policy as to how far this subsection will be used. I am not in a position to give him any declaration of policy of that kind. Obviously there are a number of cases where it might reasonably be used. I am not provided with the necessary material, nor am I authorised to make a declaration of policy. Obviously it is the sort of thing which might be the subject matter of a general direction by the Minister under the powers which he has of giving general directions. Beyond that, I am afraid I am unable to go.

LORD TEYNHAM

I am sure my noble friend Lord Swinton would be grateful for the explanation given by the noble Lord, especially in relation to the fact that subsection (3) is not limited necessarily to what might happen in relation to war.

VISCOUNT RIDLEY

What the noble Lord, Lord Chorley, has said is very helpful. I also have the difficulty of defining the commodity about which we are talking. I appreciate that what it is intended to be is coal gas. I refer to that point only as illustrating the danger that might arise through the difficulty of drafting. It might at some date mean that this Act will be used for purposes for which it is not now intended. It seems to me, on thinking it over, that what would prevent that would be some modification of subsection (3). I think I understand what the noble Lord has in mind about the position of the person who is now making and selling his surplus gas, and I do not quarrel with the intention in that regard. But I do not feel at all happy about subsection (3). It seems to me that if it is necessary, as it may be, for overriding powers to be taken in a state of war or emergency, it would be better to take them under war-time Legislation or under Defence Regulations. I do not feel altogether happy about taking them under this subjection. I appreciate that the intention of the Minister, and probably the policy of the Area Boards, would not be in the direction of doing things which would interfere with the industrial arrangements which are for the good of the country, but I would have felt happier if that power had not been so specific. I appreciate that what we are now discussing is not actually covered by the Amendment before us, but it does derive from it. I would like, if I may, to endeavour to suggest an Amendment on the Report stage which will bring subsection (3) more into line with what some of us have in mind. Apart from that modification, I would support the Amendment as it has been moved.

On Question, Amendment agreed to.

LORD CHORLEY moved, in subsection (5), after "given" to insert: or as to whether, or as to the extent to which, pipes, plant or gas fittings are to be transferred to an Area Board, or as to the terms and conditions on which they a re to be transferred. The noble Lord said: This Amendment goes with the earlier one which I moved before the adjournment. The explanation which I then gave covers this Amendment. I beg to move.

Amendment moved— Page 62, line 43, after ("given") insert the said words.—(Lord Chorley.)

On Question, Amendment agreed to.

Clause 51, as amended, agreed to.

Clause 52:

Methods of charge and tariffs.

(5) A tariff fixed by an Area Board under the last preceding subsection may include a standing charge in addition to the charge for the actual gas supplied and may also include a rent or other charge in respect of any gas meter or gas fittings provided by the Board on the premises of the consumer.

9.10 p.m.

LORD LLOYD moved, in subsection (4) (b), to leave out "special" and insert "written." The noble Lord said: The object of this Amendment is to bring the provision as regards agreements for the supply of gas in line with similar provisions in the Electricity Act. If noble Lords will look at this paragraph they will see that nothing in this subsection shall affect any special agreement for the supply of gas in force immediately before the vesting date. I do not think any of us knows what any of these special agreements may be but, quite frankly, what we wish to do is to provide in this Bill exactly the same as was provided in the Electricity Act; that is to say, that the Area Boards may not alter any existing written agreement and that consumers who have already made written agreements shall be protected in this way. In another place, when this matter was discussed, the Parliamentary Secretary stated that this Bill was on all fours with the Electricity Act. I do not think that is so. We think it would be better if, instead of the words "special agreement" the words "written agreement" were substituted. That would cover all the existing agreements which do not appear under this term "special." I beg to move.

Amendment moved— Page 64, line 26, leave out ("special") and insert ("written").—(Lord Lloyd.)

LORD CHORLEY

I am afraid that we cannot accept this Amendment. It is true that the provision is similar to the corresponding provision in the Electricity Act—Section 37, subsection (3)—but it is not on all fours with it, because the two situations are not identical. Clause 52, subsection (4), allows the Area Board complete discretion to vary tariffs, which they obviously must have; but by proviso (b) it safeguards a person who is getting the supply of gas under a special agreement. The noble Lord's Amendment seeks to substitute for the term "special agreement" the term "written agreement"; but the two are not the same thing. To substitute "written" agreement for "special" agreement would, in effect, deprive the Area Board of the power to vary the tariffs which it is the main object of the clause to confer upon them. In the first place, it would obviously cause doubt as to how far the power goes; and, secondly, it would exclude a whole lot of people who have special agreements, because those special agreements may not be in writing. The ordinary practice of the gas companies is to supply gas under written agreements. It might well be argued, therefore, that if the noble Lord's Amendment were accepted there would be no power to vary the terms on which the gas is supplied under those agreements. What the clause is aiming at is the supply of gas to, industrial consumers under special agreement as to quantities, price and that sort of thing. Those agreements may not be in writing, but they are valuable agreements, entered into with the intention that possibly they should continue for a substantial period of time. There is another type, the domestic two-part tariff, which is also a special agreement. It is this type which it is desired to preserve. I think, in the circumstances, the noble Lord would agree that his Amendment is one that ought not to be pressed and I hope that he will withdraw it.

LORD LLOYD

I cannot pretend, even after the noble Lord's explanation, that I understand exactly what a special agreement is, and I should be grateful if he could enlighten us on that point.

LORD CHORLEY

A special agreement is one which is not an ordinary agreement. The agreement under which the noble Lord secures his gas is an ordinary agreement, but if he were a large industrial consumer—as he may be—he might very well have with the gas producers a special agreement, lasting possibly over a number of years, for the supply of large quantities of gas at a special tariff.

LORD RENNELL

Is it open to the Area Boards to make a special agreement with anybody they choose, or is there a limitation upon the type of person with whom a special agreement can be made?

LORD CHORLEY

The object of this clause is the preservation of existing agreements.

LORD RENNELL

That is not quite an answer to the question I asked. The noble Lord sad that the Area Boards must have the faculty of entering into special agreements. Is it open to Area Boards to make a special agreement with any person, or are there restrictions? The words "special agreement" have no definition in the Bill, so far as I know.

VISCOUNT RIDLEY

In the next subsection it says that special agreements can be made only where the tariffs are not appropriate. It is difficult to understand, because there are tariffs which are appropriate to a wide range of industrial users of gas, but even those in the ordinary course of business of the gas company are, in fact, varied from one to the other. It depends upon the rate of use, the hours of use, the extension of the works, and so on. I do not think you can say that any industrial use is "special."

LORD LLOYD

May I put another point before the noble Lord' replies? He said that the conditions are quite different from those dealt with in the Electricity Act. I say again that I think he ought to get together with the Parliamentary Secretary in another place to see that the conditions are exactly the same. That is my first point. The second point I have to make is that I should have thought that in this Bill we have conceded more to His Majesty's Government than they themselves demanded in the Electricity Act. May I read the relevant subsection: nothing in this subsection shall affect any written agreement"— note, "any written agreement"— in force immediately before the vesting date. I do not pretend to understand what a special agreement is, except that it is not ordinary. I would like to ask the noble Lord for his definition of an ordinary agreement, and then perhaps we can get the matter clear.

VISCOUNT SIMON

In view of the fact that there is no definition anywhere, will not the Government consider whether this phrase—which may be quite right—cought not to be in some way defined? Looking at it, I should have thought it almost impossible for a court to determine what is a special agreement. I think I see the noble Lord's general point, but is it right to put in a provision of this sort which really has no particular meaning? The word "special" is used in all sorts of ways—"special train," "special pleading," and all kinds of things. Ought there not to be a definition?

LORD CHORLEY

I am obliged to the noble and learned Viscount. I will certainly Look at the matter between now and Report stage.

On Question, Amendment negatived.

VISCOUNT BUCKMASTER moved, in subsection (5), after "charge" (where that word last occurs) to insert: Which may be a charge calculated according to the number of therms supplied in the form of gas. The noble Viscount said: I trust that this Amendment will cause the noble Lord less embarrassment than did the preceding one. If the noble Lord would look at Clause 52 for a moment he will see that the Area Board in charges may include a rent or other charge in respect of a gas meter or other fittings provided by the Board. The purpose of this Amendment is to ensure that the "other charge" may be one based on the thermal consumption of gas. Orders or the statutory companies normally provide, in the case of prepayment meters, that this should be so, and the prepayment meter—by which I mean a slot meter—is adjusted to cover this increased charge. This is a great convenience to the user of the meter and also saves a considerable amount of work for the companies. If this Amendment were accepted, not only would the consumer be helped but the companies would be relieved of a good deal of work, and an old-established practice would be maintained. I beg to move.

Amendment moved— Page 64, line 32, after ("charge") insert the said words.—(Viscount Buckmaster.)

LORD CHORLEY

I am sorry that the noble Lord thought that I was embarrassed by the last Amendment. In fact, I enjoyed the little badinage by the noble Lord, Lord Lloyd. This Amendment is quite unnecessary. The powers conferred on the Area Boards are perfectly general in their terms and, I am advised, clearly cover the substance of the Amendment. Indeed, when there is a discretion of this kind, I think it is a general principle of draftsmanship that it is unwise to throw doubts on the generality by the insertion of special words. I therefore hope the noble Viscount will not insist on the Amendment.

VISCOUNT SWINTON

I am a little puzzled about this. What I think is absolutely essential is that everybody should pay for gas by the therm. Gas is not defined in this Bill; I daresay you could not define it. But formerly people were able to sell gas on any or no calorific value. Later, an admirable reform was introduced—I am not sure that I did not introduce it!—under which there was established the thermal unit, and everybody had to charge, if I may so put it, for the whisky in the water and not for the water: and the whisky had to be maintained (which was rather unusual) at a proper strength. It is very important that that should be preserved.

As I understand it, Clause 52 seems to me the important clause in this matter. Subsection (1) says: Subject to the following provisions of this section, every Area Board shall charge for the gas supplied by them according to the number of therms supplied, such number to be calculated in the prescribed manner on the basis of the declared calorific value of the gas. If that is right, then what people buy, whether they put a penny or a shilling in the slot, or pay a quarterly bill, is gas of a thermal calorific value. So long as that is absolutely established, and nothing else can be done, this does not seem to me to matter very much. As I understand it, this deals not with how much you pay for the gas but what you pay for the meter, or for the meter plus the gas.

VISCOUNT BUCKMASTER

The meter and the fittings.

VISCOUNT SWINTON

Then, provided the man is paying for the gas, what I should have thought was the right thing to do is to make him pay a reasonable charge for his meter.

THE LORD CHANCELLOR

That is right.

VISCOUNT SWINTON

The idea of the meter charge is that he pays and gradually buys it. I do not see why he should pay a higher meter rent because he puts more pennies into the slot and buys more gas. If that is really the proposition, then we must do two things. First, we must see that everybody gets gas of the right calorific value and pays for it as such—which I gather we do under the main direction of Clause 52. The second point is that we must see that everybody pays an equitable meter rent. If the Bill does that, it is all right; but if it does something else, I suggest that it is not right.

THE LORD CHANCELLOR

I agree with everything that the noble Viscount has said. In the first place, I object to the Amendment because the words are wholly unnecessary. The introduction of the words is a mere signpost; and I think it is an undesirable signpost, because it points in the wrong direction. So far as charging for gas is concerned, as the noble Viscount has pointed out, it should be based on a thermal unit. So far as charging for the meter is concerned, it is grossly unfair to charge two people different prices in accordance with the amount of gas that they use. On that basis, the meter is a signpost pointing in the wrong direction. It is unfair to base the charge for the meter on the amount of gas that is used. For the gas itself, apart from the meter, obviously a thermal unit charge is right.

VISCOUNT RIDLEY

Could I see how the meter comes into this business? It is the usual practice, in the case of the slot meter, that there is a charge for the use of the meter. It is more logical and a little fairer than the noble and learned Viscount the Lord Chancellor is suggesting, because the more gas that goes through the meter, the more it costs to maintain. It is not inequitable in that respect. It is also a great convenience to the customer that, instead of having to save up for quarterly bills, he pays as he goes. It is a very extensive practice. I think it is universally recognised to be a reasonable way of dealing with the matter. On the other hand, surely, as I suggested, there is nothing in the Bill to stop the Area Boards using this method of charging for meters, so that possibly this Amendment is not necessary. It would be a great inconvenience not only to the Area Boards but also, I suggest, to the consumers if it were not in fact possible for the Area Boards to charge in this way.

VISCOUNT BUCKMASTER

I am obliged to the noble and learned Viscount for what he has said. In regard to his interpretation of the clause, I will accept his wide legal knowledge that the words "or other charge" leave it open to the Area Board to make a charge in the manner which I propose. I do not at all accept his suggestion of unfairness. I have no intention of proposing anything unfair. I venture to suggest, with great respect to the noble and learned Viscount, that, when this Bill becomes an Act, the Area Boards will charge in this very way, which is the only way in which they can charge. On that understanding, I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 52 agreed to.

Clauses 53 and 54 agreed to.

Clause 55 [Application of gas supply code and enactments to Area Boards]:

9.30 p.m.

LORD CHORLEY moved to add to the proviso to subsection (2): "and is not rendered redundant by the provisions of this Act." The noble Lord said: In this clause the problem of local enactments governing statutory undertakers is dealt with, and those obligations which are enacted on the undertakers are now transferred to the appropriate Area Boards. Under the proviso the local enactments which are inconsistent with, or rendered redundant by, the Act cease to have effect. But the proviso does not affect any local enactments which contain some special provision for the protection of individuals or of certain classes of individual. The words of the Amendment are inserted for the purpose of making it quite clear that the exception does not keep in force any local enactments which, though they do in fact contain protective provisions of this kind, are in fact rendered redundant by the provisions of the Act itself. I beg to move.

Amendment moved— Page 68, line 39, at end insert the said words.—(Lord Chorley.)

On Question, Amendment agreed to.

Clause 55, as amended, agreed to.

Clause 56:

Machinery for settling terms and conditions of employment of staff, etc.

56.—(1) Except so far as they are satisfied that adequate machinery exists for achieving the purposes of this section—

(a) it shall be the duty of the Gas Council to seek consultation with any organisation appearing to them to be appropriate with a view to the conclusion between the Gas Council and that organisation of such agreements as appear -to the parties to be desirable with respect to the establishment and maintenance of machinery for the settlement by negotiation of terms and conditions of employment of persons employed by Area Boards and the Gas Council, with provision for reference to arbitration in default of such settlement in such cases as may be determined by or under the agreements; and

LORD BALFOUR OF INCHRYE moved, in subsection (1) (a), to omit "any" and insert: all organisations representing persons employed in the industry which before the vesting date were recognised in the gas industry for national negotiations me, with any other. The noble Lord said: The Bill provides that the Gas Council should consult with any organisations appearing to them to be appropriate with regard to the establishment of machinery for settling; the terms and conditions of employment. The Amendment seeks to ensure that ail the bodies which at present are recognised for national negotiation should be consulted by the Gas Council for the purposes of this clause. The Amendment also leaves the Gas Council free to consult any other bodies they may wish. I do not think any further explanation is needed from me, and I beg to move.

Amendment moved— Page 69, line 30, leave out ("any") and insert the said new words.—(Lord Balfour of Inchrye.)

THE FIRST LORD OF THE ADMIRALTY (VISCOUNT HALL)

During the course of the proceedings on this Bill in your Lordships' House, tribute has been paid to the relationship between the employers and the organisations representing the persons employed in this industry, and I am sure your Lordships desire that that relationship should be continued as between the representatives of the trade unions and the Gas Council. This Amendment, moved as it is, will make it obligatory upon the Gas Council to consult all organisations representing employees in national negotiations before the vesting date, as well as any other organisation appearing to them to be appropriate, for the purposes of the establishment and maintenance of machinery for the settlement by negotiation of terms and conditions of employment. This limits the discretion of the Gas Council, by requiring them to seek consultation with the existing organisations recognised in the gas industry for national negotiation. No doubt the Gas Council will do that. At the same time I would like to point out, as one who has had some experience in negotiating, not only as a leader of a trade union but also as representing a large Government Department, that there is a great deal of sensitiveness between the various trade unions as to who should really be consulted in relation to wages and wage conditions. Now in the gas industry some of the organisations representing employees in national negotiations are not concerned with the terms and conditions of employment. That being so, there is no point in requiring the Council to consult with such organisations as, say, the Institution of Gas Engineers. This professional body does not normally negotiate terms and conditions of service, though it may be concerned with national negotiations concerning technical matters in the industry and technical training of the employees.

In the interests of the relationship between one side and the other, I think it would be very much better to leave this matter as it is in the Bill, in view of the fact that not only have the trade unions themselves been consulted but that this clause was framed as the result of consultations with the Ministry of Labour who are themselves, of course, responsible for the good relations between both sides of the industry. There does not appear to be much in this, but I think that there is sufficient in it to bring about some suspicion among trade unions which, after all, will represent, 95, 96 or even 97 per cent. of those employed in the industry. For those reasons, I beg noble Lords opposite not to press this Amendment.

VISCOUNT SWINTON

May I say just a word or two upon this, because I agree so much with the spirit of what the noble Viscount has just said? We were closely in agreement in that fruitful discussion which we had yesterday on labour relations. I agree with the noble Viscount, looking at this Amendment again, that it is not exactly designed to fulfill the purpose which it has in view. I agree that technical organisations, which are naturally consulted, are not necessarily the proper people to bring into wage negotiations. I also conceive that it would be a pity to put into the Bill—a Bill which after all, deals with the general structure of wage investigations and labour negotiations which are to go on through the lifetime of this industry—words which would stereotype this matter completely, as this would do. But that is not the intention, I think. What was at the back of the minds of those who framed this Amendment—and what I believe is very present to the mind of the noble Viscount the First Lord of the Admiralty—was this. Here we have an industry in which, as everyone agrees, relations between the parties concerned have been extraordinarily good. We want to make quite sure that those relations should continue to be good. They have depended, both at the national level and the local level, on the extraordinarily successful personal contact. This applies, for instance, to the trade unions, notably the great union over which the late Lord Dukeston presided. I only wish that he could have been with us now. He would have contributed a great deal to our discussions in this House on matters like these. He would have been as valuable to the House as he was in his own movement.

As I was saying, it was anxiety to preserve that good relationship, while letting it develop in the future, that was at the back of the minds of those who framed the Amendment. If, as I understand, from the noble Viscount, the intention of the clause is to promote that, while as a matter of course continuity will be given to the system of organisation which exists at present, and which will be developed as the needs of the industry require, then I think the clause is adequate as it stands.

VISCOUNT HALL

It is mainly a question of having confidence in the Gas Council. I have no doubt that, sensible men as they are, they will want to have continuity in the relationship between themselves and the representatives of their workpeople. That is why I stress the point that it would be difficult if there appeared to be any change in that relationship. I have no doubt that they will continue, as did their predecessors, in the very human relationship which has always existed in this industry.

LORD BALFOUR OF INCHRYE

I cannot disagree with one word that has fallen from the noble Viscount. The last thing that I wished to do in moving this Amendment was to impair those good relations, which are an example in industrial co-operation. Indeed, my purpose was to ensure their continuance. The noble Lord has explained how he thinks the continuance of those good relations will be effected, and has pointed out how my Amendment might endanger them. Therefore, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

9.42 p.m.

VISCOUNT CECIL OF CHELWOOD moved, in subsection (1) (b), after "Council" where that word first occurs, to insert "subject to the provisions of section fifty-eight of this Act." The noble Viscount said: I apologise to the Committee for having put down this Amendment. It was put down only through excessive caution. I am anxious that nothing should be done that could possibly interfere with the operation of Clause 58. If there is any possibility of that, I would suggest to the noble and learned Viscount that lie might think it worth while to put in some such words as I propose. I move the Amendment only in that sense.

Amendment moved— Page 69, line 42, after ("Council") insert the said words.—(Viscount Cecil of Chelwood.)

THE LORD CHANCELLOR

I oppose this Amendment only because, as I see it, there is no provision in Clause 58 which in any way conflicts with this provision in Clause 56. If, however, after we have discussed Clause 58, there should come into it any provision which does conflict, I shall be happy to reconsider this mater on the Report stage.

VISCOUNT CECIL OF CHELWOOD

In the circumstances, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 56 agreed to.

Clause 57:

Provisions as to pension rights.

(5) Subject to any regulations made under this section the provisions of this Act under which liabilities and obligations of an undertaker to whom Part II of this Act applies are vested in an Area Board or the Gas Council shall apply in relation to customary obligations of the undertaker in respect of pensions, notwithstanding that the undertaker was under no legal obligation in respect of those pensions, and if any question arises as to the existence or extent of any such customary obligation the question shall, in default; of agreement, be referred to a referee or board of referees appointed by the Minister of Labour and National Service, after consultation with the Lord Chancellor, or where the proceedings are to ho held in Scotland, after consultation with the Secretary of Stale, and the decision of that referee or board shall be final and the Area Board or the Gas Council shall give effect to that decision.

(8) Regulations made for the purposes of this sect on may be made so as to have affect from a date prior to the making thereof, so, however, that so much of any regulations as provides that any provision thereof is to have effect from a date prim to the making thereof shall not place any person other than an Area Board or the Gas Council in a worse position than he would have been if the regulations had been made to have effect only as from the date of the making thereof.

LORD BALFOUR or INCHRYE moved, in subsection (2), after "scheme" (where that word last occurs) to insert "whether such rights have actually accrued or not and," The noble Lord said: The purpose of this Amendment is to ensure that employees shall be entitled to receive benefits when pension schemes are reorganised, notwithstanding that their right to a pension might not technically have accrued by reason of their not having reached the pensionable age. I beg to move.

Amendment moved— Page 71, line 14, after ("scheme") insert the said words.—(Lord Balfour of Inchrye.)

THE LORD CHANCELLOR

This Amendment, if I understand it aright, would make the subsection read: …to secure that persons having pension rights under the scheme whether such rights have actually accrued or not… My answer to the Amendment is this The noble Lord will find at the bottom of page 85 these words: 'pension rights' includes, in relation to any person, all forms of right to or eligibility for the present or future payment of: a pension to or in respect of that person, and any expectation of the accruer of a pension to or in respect of that person under any customary practice… That being so, "pension rights" by its very definition (and "pension rights" appears in line 14) means that it includes rights which lie in expectation. We do not want the words twice over.

LORD BALFOUR OF INCHRYE

I thank the noble and learned Viscount for the explanation, and beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD BALFOUR OF INCHRYE moved, in subsection (5), to delete "Subject to any regulations made under this section." The noble Lord said: This Amendment is, I think, of somewhat greater importance than the last one. Its purpose is to remove the power which the Minister will have, under the Bill as now drafted, to negative the passing to the new Boards of the customary pension obligations of the existing companies. The Bill says, in subsection (5), that customary pension obligations of existing undertakers are to vest in the Area Boards, in the same way as legal obligations. Then we come to what we consider is the bad point of subsection (5)—that the whole of it is made subject to any regulations made. Therefore, the provision that the pension obligations should vest in the Area Boards could, as I read it, be negatived at any time the Minister might think fit. The purpose of this Amendment is to remove that power of the Minister to nullify the subsection. The matter was touched on in another place when the Solicitor-General said that if a person with a customary right is taken over, he will look to the Board to implement that customary right. The statement of the Solicitor-General in another place ignored that power which is now given to the Minister to negative by regulation. The Amendment which I move would make statutory the undertaking, or the submission, which the Solicitor-General gave in another place. I therefore beg to move.

Amendment moved— Page 72, line 6, leave out from the beginning to end of line.—(Lord Balfour of Inchrye.)

THE LORD CHANCELLOR

I have great sympathy with the noble Lord's desire, but I suggest that if he left out these words he would defeat that desire. Let us see what this clause does. This whole clause makes it plain that persons having pension rights are not to be placed in a worse position by reason of amendment, repeal, revocation, transfer, extinguishment or winding-up. That is the foundation of this subsection. You may often get pension rights which are conditional, for instance, upon the man continuing to serve a particular firm. The analogous case in wills is to a servant "if in my employment at the time of my death." This unfortunate man might at the critical time be serving in an Area Board. The last thing the noble Lord wants to do is to say that, by reason of the fact that he is no longer serving John Jones Limited, he should be deprived of his customary rights; that is the sort of thing the Minister must have power to deal with by regulation. He must be able to say, "I eliminate that fact from my consideration, and I shall not make that in any sense a barrier to him." If we do not have those words there may be that difficulty. I think the noble Lord will find that these words, so far from being in any way hostile to his desire, are designed for the very purpose of giving effect to his desire.

LORD BALFOUR OF INCHRYE

I thank the noble and learned Viscount for his clear statement. I see that my Amendment as drafted might have the opposite effect, but, nevertheless, the power still exists that the Minister might by regulation negative the transfer of perfectly ordinary and straightforward pension rights. If we could have an assurance—if not now, at a later stage—that the Minister had nothing of that kind in mind, it would give greater confidence to those people who are being transferred.

THE LORD CHANCELLOR

I will give that assurance now. The intention of this power is to preserve the right of the Minister to remove the sort of artificial barriers which otherwise might stand in the way.

LORD BALFOUR OF INCHRYE

I thank the noble and learned Viscount for his assurance and beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

9.50 p.m.

VISCOUNT SWINTON moved, in subsection (5), to omit "obligations" (where that word occurs a second time) and insert "practices" The noble Viscount said: This is, I hope, merely a matter of language, because from what has been said in this House and from the discussions which I have had with the Lord Chancellor, I think that he and I are in complete agreement as to what is intended. What I am anxious about is that not only shall these Area Boards or the Gas Council—I think it will generally be the Area Boards—take over the legal obligations of the gas companies to their employees, but shall also take over the customary practices. It is the usual thing for companies, as a regularly established practice which they have followed over years, to reward a person who has given thirty or forty years' service by some bonus gift or allowance. I agree that that varies from company to company, exactly as the legal obligations vary from company to company.

I am quite sure that we should all agree that ii would be very wrong for the State, which has always regarded itself, and has been directed by Parliamentary Resolution to regard itself, as a model employer, to take over an enterprise and give less good terms than the employer under private or regulated enterprise had been giving before. All I want to do is to make perfectly sure that where there is in one of these undertakings which is taken over a regular practice and custom by which certain payments in the way of gratuity, or whatever it may be, are made, that obligation will be fully honoured by the Boards who succeed the companies. I gather from the assent the Lord Chancellor has indicated that that is what we all want to do and, therefore, I am glad to think that it becomes a matter only of what is the right language to use.

I have suggested that we should not use the word "obligations" but should use the word "practices," because to me, as a layman—I dare say I am wrong—"obligations" suggests a binding obligation, a legal obligation upon which an action could be brought, whereas "practices" is what I may call the custom of the trade—something which has regularly been done. I have had this point looked up for me, and I believe that both words have been used in the past. I must admit that in the Railway Act, 1921, when the railways were amalgamated, the word "obligations" was used, although I understand that it was construed as covering practices. On the other hand, the London Passenger Transport Act—for which the Lord President of the Council was responsible in the first instance, and I, curiously enough, was responsible for tarrying to fraction under the succeeding Government—the word "practices" was used. As that is the later Act, I would have thought that "practices" was the right word. On ' the assumption—indeed on the assertion—that we both mean the same thing, I will gladly submit to the Lord Chancellor's judgment of what is the right word to give legal effect to what I hope and believe is our common intention. I beg to move.

Amendment moved— Page 72, line to, leave out ("obligations") and insert ("practices").—(Viscount Swinton.)

THE LORD CHANCELLOR

I agree with every word the noble Viscount has said as to our intention in this clause. It adds nothing to the paint to say whether the man has any legal obligation which he can enforce in a court of law—that has nothing to do with it at all. If a company has habitually, after, say, a man has served them for forty year; or reached the age of sixty-five, given some gift of cash to that officer on retirement, that is what I call a customary obligation or a customary practice. The fact that the man has no legal right to sue for it in a court of law adds nothing to the point at all. It is plainly right that the Minister should address himself to this question. It is not a question of whether there is an obligation to do it. The question is, What have the company done? If the Minister finds that that is what the company have done, then that is what he has got to do. That is the intention.

As to the use of the words, the phrase "customary obligation" has been used in all these nationalisation Acts. If we departed from the words "customary obligation" we might give a nasty backhander to the electricity officers; it might be said that some wider principle was being accepted here than was accepted with electricity. So I suggest that we should continue to use the phrase "customary obligation." With regard to the construction of that phrase I hope that if there has been any controversy in the past my words will carry to those who will have to deal with this matter in the future. My understanding is quite plain that the noble Viscount is fully right in the observations he has made.

VISCOUNT SWINTON

I am very grateful to the noble and learned Viscount. I am sure we are absolutely at one in our intention, and I gladly accept the noble and learned Viscount's advice as to the best words to give effect to the matter. I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

LORD BALFOUR OF INCHRYE moved to insert at the beginning of subsection (8) "The original." The noble Lord said: This Amendment and the next go together. They are designed to ensure that the regulations which the Minister will issue concerning pension rights under Clause 57 shall be made within twelve months of the vesting date. I do not think there can be any argument as to the desirability from all points of view, and particularly from the point of view of those who wish to know where they stand tinder the new conditions, that the regulations should be made in the shortest possible time. Therefore we have suggested a maximum period of twelve months. The position is complicated by the fact that under subsection (3) of this clause it may be necessary to bring in amending regulations. Therefore our first Amendment says that the time limit shall apply to the original regulations. I sincerely hope that, having regard to the need for employees to know where they stand, the Government will look sympathetically at this Amendment. I beg to move.

Amendment moved— Page 72, line 34, after ("(8)") insert ("The original").—(Lord Balfour of Inchrye.)

VISCOUNT HALL

It was always the intention of the Minister to make the original pension regulations as soon as possible and the period suggested is reasonable. Therefore I will accept this Amendment.

On Question, Amendment agreed to.

LORD BALFOUR OF INCHRYE

This Amendment is consequential. I beg to move.

Amendment moved— Page 72, line 34, after ("section") insert ("shall be made within twelve months after the vesting date and the original regulations and any amending regulations.")—(Lord Balfour of Inchrye.)

VISCOUNT HALL

I am glad to accept this Amendment.

On Question, Amendment agreed to.

Clause 57, as amended, agreed to.

Clause 58:

Co-partnership schemes.

58.—(1) Where any scheme in force immediately before the vesting date provides for enabling persons employed by any undertaker to whom Part II of this Act applies, other than an undertaker to whom section eighteen of this Act applies, or any class of persons so employed, to participate in the profits of the undertaking, provision shall be made by regulations for continuing the scheme for such period after the vesting date as may be specified in the regulations, with such adaptations and modifications as appear to the Minister to be necessary or expedient.

9.59 p.m.

VISCOUNT CECIL OF CHELWOOD moved, in subsection (1), after "profits" to insert "or management." The noble Viscount said: I believe I am right in saying that this clause was inserted in the other place after the Bill had been introduced. The object of the clause is to give power by regulation to extend what is called in the side note "Co-partnership schemes." It differs from Clause 56, which merely gives power to the Gas Council, on one side, and the Area Boards, on the other, to make fresh agreements on, at any rate, many of the subjects which are dealt with by co-partnership arrangements at the present time. As I understand it, this differs from Clause 56 in that it does not depend upon any fresh agreements, though it contemplates them. But, in the meantime, it gives the power by regulations to prolong co-partnership arrangements. I need not say that I welcome that, because, although it does not go so far as I should like it to go, it goes some distance in the direction which I have ventured to advocate before your Lordships on more than one occasion. My only object is to see that the clause embraces all those arrangements which may properly be called co-partnership arrangements, and particularly the most important part of them—namely, those which bring the workers into a genuine management and (although I admit this is no longer possible) ownership of the concern and undertaking. I regard that as by far the most important result of co-partnership arrangements.

My difficulty about this clause is that it is in terms applied only to cases where there is an arrangement to share profits. I think that sharing profits is a useful way of determining the reasonable and proper remuneration of those who work, but it does not amount to co-partnership. In my view, it does little more than lay the foundation for a subsequent direction of a co-partnership scheme. Therefore, I am anxious that those parts of the co-partnership theory which do not depend merely upon sharing profits should not be left out of this clause. To take my first Amendment first, I propose to add the words "or management" after the word "profits" in line 2, on page 73. I am not wedded to the word "management," but it indicates the kind of process that I have in view. The practice of the old days, when workers sat on the boards of directors, is now very difficult of achievement. Still more, I believe that the creation in each works of those co-partnership committees to which the noble Viscount, Lord Buckmaster, has referred and to which I also have referred, has been of the first importance in maintaining really good relations between parties, because it brings man-to-man discussions of these matters. It is a question not merely of rules, regulations and officials, but of the promotion of really human relations. Therefore, I hope the Government will consent to the insertion of these words, so that the clause will read: Where any scheme in force immediately before the vesting date provides for enabling persons employed by any undertaker…or any class of persons so employed, to participate in"— I have left out those words which do not affect my particular point— the profits or management of the undertaking…"— and so on. I should like to add "where such an undertaking exists"—then it would be possible to prolong the scheme by regulation. I need not develop the argument which I ventured to address to your Lordships yesterday in favour of the general principle of co-partnership, because that has all been said. I beg to move.

Amendment moved— Page 73, line 2, after ("profits") insert ("or management").—(Viscount Cecil of Chelwood.)

THE MARQUESS Or SALISBURY

I should like to support the Amendment which has been moved by the liable Viscount, Lord Cecil, but in doing so I should like to make a suggestion to the Government. It appears to me that there are here a number of Amendments which deal with much the same subject, and it might perhaps be convenient if we had something in the nature of a general discussion which would be based upon the Amendment itself but which might extend beyond the limits of the actual wording. If I might deal first of all with the Amendment, I would beg the Government if it is practically possible to do so, to consider accepting it. As I am sure they will agree, it is certainly not a revolutionary Amendment; it is not even very far-reaching. All it seeks to do, as I understand it, is to enable the existing machinery to continue for only a limited period—

VISCOUNT CECIL OF CHELWOOD

And subject to regulation.

THE MARQUESS OF SALISBURY

—beyond such period from the vesting date, which will be specified in the regulations. Therefore, the Government retain complete control of the situation. All they are required to do is not to bring this system, which has produced great benefit w the industry, suddenly and drastically to an end. I would not have thought that: there could be any proposal much more moderate than that. The attitude which the Government adopted last night with regard to a rather similar proposal, I am afraid—and I do not say this from any controversial point of view—could not help but give ground for a certain suspicion that they do not really want industrial democracy. I do not wish to misinterpret them in any way, and no doubt: the Lord Chancellor will be able to completely controvert what I say, but their attitude does give a slight impression that what they have in mind is something in the nature of a strictly limited oligarchy—not the same oligarchy as has existed in the industry of the past, but an oligarchy composed of the State and the great trade unions, and not what I call strictly an industrial democracy.

I thought that was clear from a very remarkable speech which was made by the noble Lord, Lord Lucas, to which I listened, as I have no doubt many of your Lordships did, with great interest and a certain amount of surprise. The noble Lord said: Suppose that you started representation upon these Boards by popular vote. I need not say much upon some of the evils of popular voting, and mandated representations. That is an argument, I should have thought, against any form of democracy, either political or industrial. He went on to say: I wonder what would have happened if a fortnight ago had been the period for electing two or three dockers' representatives upon the dock authority. I do not know, but I cannot believe that the fact that there have been one or two dockers' representatives upon the dock authority would have made the situation much worse than it was, because we all know that 157 ships were held up for a fortnight; that the military had to be called in to clear the ships; and that for far too long a time a complete deadlock existed. I cannot believe that the representation of workers upon that Board would have made the situation very much worse than we found it to be.

LORD LUCAS OF CHILWORTH

If I may intervene, I would point out that there are representatives upon the dock authority to-day. The point was not the presence of workers' representatives upon the dock authority. But they have been put there in a direct manner, a manner which has been agreed by the employers. What I was saying was that if the system of electing the dockers' representatives to that authority had been open to the unruly elements which were so evident there, the representatives elected would not perhaps have been of the calibre which we have seen in the past.

THE MARQUESS OF SALISBURY

That does not seem to me to make the situation any better. Applying that principle to political elections, would the noble Lord say that the British people would have no right, in a moment of popular excitement when a General Election took place, to elect the majority from whom the Government was formed?

LORD LUCAS OF CHILWORTH

No. I draw a distinction between industrial organisation and national political organisation.

THE MARQUESS OF SALISBURY

I am very glad the noble Lord said that. That is just the point with which I am going to deal. I do not accept that differentiation at all and I hope to show that it is not a valid one. The noble Lord went on to say Surely the members of these Boards have to run this concern in the national interest, and not to look over their shoulders all the time they are on the Boards to appease and collect the votes of the people who put them there. That is an example of what he means. I expect he says that there is a differentiation. I do not accept that differentiation. I know that this idea of industrial democracy, this idea of co-partnership which is another form of it, has had what may be called a very bad Press in the past. It has been disliked both by the employers and by trade unionists. It has been disliked by old-fashioned employers because they thought that it fettered their freedom of action. I expect it is disliked by a number of employers still for that very reason. It has been disliked by old-fashioned trade unionists because, to them, the whole position of the trade unions was built up on the fundamental antagonism between employers and employed. I wish to make it clear that I am not putting this argument as an attack on trade unions. They came into existence because conditions under which people worked at a certain period were admittedly, according to our present ideas, very unsatisfactory and this led them to gather together into trade unions.

I do not think the noble Lord would deny that there was a section of trade union leaders who felt that the workers could never have a fair deal unless they organised. I am only saying that there was that attitude. They were opposed to co-partnership (I have heard them say so in the old days in the House of Commons) because they believed that there was a fundamental antagonism between employers and employed, and they thought the only remedy for it was the existence of trade unions. They also thought that if there was a proper system of co-partnership which was intended to do away with that fundamental antagonism and replace it with a spirit of partnership, trade unions would become unnecessary and gradually disappear. They did not like that and the noble Lord may dislike it. That is the impression which I have had. I have, I hope, stated the case fairly about employers. I have also, I think, stated quite fairly the case of a certain section of old-fashioned trade unionists. I am not pressing this point about co-partner-ship with the view to embarrassing the Government. My noble relative has for many years been preaching this doctrine for private industries, just as much as he has for State industries. Personally I have for long taken the same view.

I believe—and this is where I come up against Lord Lucas—that the only way in an unrestricted democracy is to balance political power with economic responsibility. Where you have a political democracy you should allow an element of what I should call economic democracy as well. One must balance the other. Just as you have an unrestricted vote for adult persons to Parliament, so you ought to have representatives of the working people elected in order to take their share in the control of industry. Without that, I do not think that you will ever get a sense of responsibility in those who belong to the working class. Moreover, the lack of that spirit of partnership—the lack of the spirit which I have tried to describe—is, I believe, much more dangerous now that we have State-owned industry than it was when we merely had privately owned industry. After all, under privately owned industry, if there was a dispute between employers and employed there was always in the hack-ground the impartial State who could act as an arbitrator, But in a State-owned industry, the State is itself the principal; it is the employer. 4f there is a conflict between the employers and the employed in a State-owned industry, there is no impartial power in the background to arbitrate between the two sides. Therefore, you might very easily get that spirit of antagonism between the employer and the employed which all your Lordships know exists at the present time; it is one of the greatest tragedies at the present moment. Unless you can do away with that, you may easily get a revolutionary deadlock in the State-owned industries.

As I understand it, the only way to avoid that is to alter the whole spirit of industry and do away with or reduce the antagonism between employers and employed by an action of co-partnership. I think that that can be done only by bringing in—equally in private industry and in State-owned industry—representatives of the working people upon the boards of the various firms in industry, so that those who have lent their manual labour will feel that they are on absolute equality with those who have lent their money. I have believed that for a long time. It is not a Party matter; I think it is one which ought to be accepted by all Parties. That is the principle which underlies the Amendment of my noble relative. It is a principle which, as I say, I believe to be absolutely vital to this country. Therefore, whether in its present form this Amendment is applicable to the changed conditions of industry or not—and of that I am not certain—I do hope that the Government will give the matter which the noble Viscount has raised most careful consideration before the Report stage; and, if they find they cannot accept it in its present form, I hope they will consider benevolently and sympathetically whether some amended form cannot he produced to give effect to what the noble Viscount and so many of us want.

THE LORD CHANCELLOR

The fact that the noble Viscount who moved the Amendment and the noble Marquess who has just spoken have both spoken with the conviction which they have on this matter is in itself complete and absolute justification for giving the matter further consideration. I will gladly look into it and see whether anything can be done. My difficulty at the present time is that I do not see how it is possible. I will gut it quite frankly to the noble Marquess and the noble Viscount. Let me assume that everything they have said about the merits of co-partnership is right. Let me assume—and I have nothing to acid to the contrary—that it is an important principle which has worked well in the past. I will not say a word against it. What we are doing in this Bit, for better or for worse, is this: we are destroying the old companies, which are ceasing to exist, and we are having them all merged in some great new Area Board.

The South Metropolitan Gas Company is a very good illustration of one of the most important. On the vesting day, the South Metropolitan will cease to exist; it will become merely a part of—I do not know what Area Board it will be, but probably the Southern or South-Eastern Area Board. What is the scheme of the Bill? The scheme of the Bill is contained in these two clauses, Clauses 56 and 58. Clause 56 says, broadly speaking—I am not quoting it textually—that you must get together with your operative organisations and try to hammer out suitable agreements. Clause 58 says that until you have hammered out those agreements the existing agreements in certain respects shall continue, or may be continued by regulations. I think that is a fair, though not an entirely accurate, summary of the position.

VISCOUNT CECIL OF CHELWOOD

That is sufficient.

THE LORD CHANCELLOR

When the agreement is made under Clause 56, then by Clause 58, subsection (2), the existing scheme is to give way to the new scheme. The noble Viscount wants to put in here after the word "profits" the words "and management"—management of the undertaking. Be it observed that any such scheme is to be continued by regulations. I do not see how it can be done—I say this with some reluctance. I see, with some difficulty, how the profits scheme can continue because, although the South Metropolitan Gas Company is merged in this large area, I suppose it is possible for an accountant to pick out of the composite profits that share which may fairly be said to be attributable to the South Metropolitan Company. I assume that that is possible, and that the scheme can be continued with such adaptations and modifications as appear to the Minister to be necessary or desirable—and he will have to make some modifications to make that possible. But I do not see how you can go on with the "management" of the South Metropolitan Gas Company. I think the noble Marquess realises that I am not seeking to raise difficulties; I am trying to face up to the problem. But I do not see how that can be done, because the South Metropolitan Company ceases to exit on the vesting date.

VISCOUNT CECIL OF CHELWOOD

I do not want to interrupt the Lord Chancellor, but I am satisfied that it could be done.

THE LORD CHANCELLOR

I am perfectly willing to discuss it with the noble Viscount (I have no authority to agree anything) but so far as I am concerned, I do not at the present moment see how it can be done. The noble Viscount may convince me; he has convinced me on many matters before, and he may do so again; but at the present moment I do not see how it can be done.

VISCOUNT CECIL OF CHELWOOD

If it will facilitate the debate, I will shortly explain. One particular point in this I quite agree. I said just now that you cannot continue the device of having elected workers on a board of directors because there will be no board of directors. That I can see. We did not go quite so far as I wanted to go with reference to the Area Boards, but that matter must be dealt with on that line, and can be dealt with only on that line. There is one particular system to which my noble and learned friend has been good enough to refer, which exists now—and I know exists in many other companies—and that is the system of what is called the co-partnership committee. That is a committee jointly representing the employers and the workmen. Their main business is to talk things over, to come to agreement if there is any dispute, to promote further advantages for the workers and so on. I cannot see why that system cannot continue.

The Area Board could still nominate to the undertakings—to such undertakings as the South Metropolitan Gas—and the workers could go on electing their own representatives on those boards without any difficulty, and with the same admirable results. I speak perhaps a little too definitely, but I speak in the presence of people who know the system from the point of view of its working, and I do not think any other scheme has been devised which has been so successful in avoiding all disputes and in promoting every kind of amenity and advantage for the workers. I see no reason in the world why that should not continue to be used. In a sense it is quite voluntary, and it should be continued on a voluntary basis—subject, of course, to the regulations. I will not say anything to approve of government by regulation, but I admit that in this case the whole of the clause proceeds on the theory that whatever must be done must be done by regulation.

THE LORD CHANCELLOR

I am obliged to the noble Viscount. I quite follow him. That is what I should call—I think I am using the right phrase—a production committee, a works committee, or something of that sort. But it does not concern the management of the undertaking; that is the dilemma.

VISCOUNT CECIL OF CHELWOOD

These are merely words, and, of course, I am ready to modify the words. I do not pretend to be a draftsman, but in point of fact the management of a business is largely dealt with in such discussions. I have not actually sat on such committees, but see the noble Viscount, Lord Buckmaster, who has. Some difficulty may arise in the way of working a particular arrangement of labour, or a particular machine, or something of that kind. Is that not a matter of management? It may come before the co-partnership committee, before whom men who know about it can be heard, either themselves or through their representatives—this is quite a common thing—as to how work could be better carried on. And those actually engaged in that work can put their views before the management. It is up to the co-partnership committee. That is what I intended by using the word "management"

THE LORD CHANCELLOR

I still do not think that the word "management" is appropriate. Those are the things which this production committee could bring before the management for their consideration, but I should not include them in the phrase "management of the undertaking." I should have thought that "management of the undertaking" meant, in the last resort, that all these ideas had been put up, and that you were dealing with a man who had to give authority.

LORD LUCAS OF CHILWORTH

Executive committees.

THE LORD CHANCELLOR

Yes. That is what I understand by that. Therefore, whilst not disputing the beneficial idea lying behind this Amendment, I honestly think that, having set our hands to this particular plough of taking over all these concerns, merging them into Area Boards and bringing them all to an end on the vesting day, this particular Amendment is impossible. But as I say, if anybody can convince me that these words are possible or that other words are possible—I do not mind which words you have, so long as I am convinced they are possible—I will gladly go into this matter and take it up with the Minister to see whether I can get authority to accept an Amendment. I do not believe that as things are to-day, under the scheme of this Bill, it is possible to have the words "the profits or management of the undertaking"

VISCOUNT CECIL OF CHELWOOD

May I just explain? The drafting is this: They shall "participate in the profits or management"—

THE LORD CHANCELLOR

Management of the undertaking?

VISCOUNT CECIL OF CHELWOOD

Yes, certainly. "Undertaking" applies to profits too. I do not see that you can say that the participation in the management did not exist before the vesting date. It certainly did, and that is the only thing that is necessary.

THE LORD CHANCELLOR

The noble Viscount should read on— …provision shall be made by regulations for continuing the scheme…

VISCOUNT CECIL OF CHELWOOD

Yes, for providing such modification as is necessary. But it cannot be continued with regard to profits. Everything that the Lord Chancellor has said applies to profits. The question is, are you to take this clause beyond profits? Surely we can find the right phrase.

THE LORD CHANCELLOR

You have obviously got to have such adaptation and modification as is necessary, and the only way you can have adaptation and modification is to isolate from the whole mass of profits of the Area Board those particular profits which are attributable to these particular works. I conceive that that may be possible, but I do not see how it is possible to continue a scheme of management of the undertaking. At the present moment, with the best will in the world, it seems to me impossible.

10.32 p.m.

VISCOUNT RIDLEY

I feel that in the way it is put here it is wrong. This is quite different from the point about management which we discussed yesterday. There, if your Lordships remember, it was a question of the appointment of members to the Boards. This is a question of the people taking part in the management of the undertaking. Those two things, are, I think, rather different. You may have a man who is working part of his time as a stoker, but who shares with the manager the job of appointing the foreman who supervises him when he is stoking. It is a contradiction in terms. I go as far as any noble Lord in thinking along the lines of what has been referred to as industrial democracy, but I want to see it run in a way in which it can work. It seemed to me, from our discussions yesterday, that what we are seeking is a means for people starting in the industry at any level to train themselves to become experienced and skilled work-people, to rise gradually from one position to another, to qualify themselves by training and experience for increased responsibility and for taking an important share in the conduct of the industry. There is a parallel in the Army, where everybody now starts as a private soldier and the Army selects the men it thinks most suitable and trains them up and sends them to an Officer Cadet Training Unit. That is the way to approach this kind of problem, to achieve the feeling that there is an opening for anybody, wherever he starts, to take the best job he can according to his own abilities.

But I think that, as expressed in this Amendment, the proposal is entirely and absolutely meaningless. I do not see how it can work, either in operating that part of the undertaking which has gone or as being a system which can be extended to cover the whole of the functions of the Area Board. I think that we must be realists in a matter of this sort, and we must also remember that the co-partnership scheme, as it exists in the gas industry, is not at all similar to the two cases which have been quoted by the noble Viscount who moved this Amendment. There are two companies in which part of a co-partnership arrangement is that there are members appointed to the board on behalf of the workers. There are dozens of other companies which have not got any such scheme. I have never heard any evidence to show, either that the results of those two companies are any more successful than even the average run of the rest of the industry, or that they achieve by that means any more satisfactory relationship between the men who work in them and the management who run them. Therefore, I think that it would be a mistake for the House to pass this Amendment. I hope that it will be withdrawn.

THE MARQUESS OF SALISBURY

I should like to add one more word, if I may. I personally think that there is a considerable force in what the noble Viscount has said about the difficulty of applying this exact Amendment to the new situation which is created, because formerly the management in certain firms was undertaken by the management, and it has now been taken over by a much larger organisation. We must consider this point. The whole gist of the noble Viscount's argument was that such a partnership for workers was possible in a smaller private firm, but it is practically impossible in a nationalised industry. Really, that was the inevitable conclusion which I drew from his remarks. I hope that that is not the case. I hope that the Labour Party will give attention to this point for, after all, they are the people who set up these great State-owned industries. Though I do not approve of them, I think that, if we are to have them, it is better that they should be successful industries than unsuccessful industries. I do not think that they will be successful unless we get over this appalling difficulty of friction between the employers and the employed. That friction still persists, even when the employer is the State. Therefore, it is a problem which faces the Socialist Government just as much as it faces the private enterprise man.

I suggest that it can be got rid of only by making the employed feel that they are getting a square deal from the State or from the private employer. I know that these things are easy to preach but difficult to put into practice, as many industrialists will no doubt tell me. However, I think that the easiest way of letting the workers know that they are getting a square deal is through somebody whom they can trust, somebody who has the full facts of the business. These people should feel that they are not being "done down" and should know that a contract has been entered into or has not been entered into; they should know that they are not being kept in the dark. That is one of the main functions of the members of the board. I agree with what has been said, that that sort of function has nothing to do with management. That is not management, but it is a certain function which directors upon the average board do perform. At present, the people who have lent their labour do not get that; but the shareholders get it. It would lead to a great increase of confidence if the workpeople had the same assurance as the shareholders have. I do not know how that principle can be applied to a nationalised industry, but it is most urgent that some means should be found of applying it. It is very important that it should be applied to private industry as well. Therefore I hope that the noble and learned Viscount and the Leader of the House might perhaps talk with the Minister and see whether any provision could be put into this Bill which would give effect to that principle. I believe if they did that they would do a good day's work, not only for the gas industry but for other industries as well.

THE LORD CHANCELLOR

May I answer one point made by the noble Marquess? I did not mean to say (and I hope I did not say) anything to preclude the possibility of any such arrangement as he has suggested under Clause 56. Whether or not it will be made I do not know, but there the field is perfectly open. What I meant to say is that I do not believe you can continue—and I emphasise that word—into the new situation an agreement which was made under an old and completely different situation. That I do not believe to be possible. But so far as making a de novo agreement is concerned, that is expressly provided for in Clause 56. It is a very wide field, and it may be that an agreement on the lines that the noble Marquess has suggested may be made. Speaking for myself, and I am sure for the Leader of the House, we would be most happy to go into it with the noble Marquess and his noble relative, and see what we can do to help. I am quite certain, however, that this particular Amendment will not work, and it is no good.

VISCOUNT BUCKMASTER

As my noble friend Lord Cecil has been good enough to refer to me, and as I am perhaps the only member of your Lord- ships' House who has had the privilege of serving on a co-partnership committee, I feel it incumbent upon me to say something, though I fear what I say will not be regarded by the noble Viscount as altogether helpful. My experience on a co-partnership committee was a very happy one. We never had a strike in my company in a hundred years, and the relationship between the workers, directors and management was as happy as it could be. After a certain probationary period, the workers all held shares in the company; they received the accounts of the company and they knew what was happening. In regard to the point that the noble Viscount has made on this question of management, of coarse they did not manage the company, in the sense of deciding whether we should open a new branch in an adjacent town; that was a province of the board of directors on which they were not represented. On the point of whether they ought or ought not to have been so represented, frankly I have an open mind. Personally I would have liked to see them there. But the system worked with great effect in regard to the settlement of conditions of labour and wages and so on. When it came to the question of working on Christmas Day, and matters of that kind, it was settled by the men themselves, in consultation with the general manager and in the presence of one or two of the directors who were privileged to serve on this committee.

I feel two things on this. I feel I may be considered unhelpful—though I trust I shall not be regarded as provocative, but merely trying to be realistic. The first is that I do not see how it is practicable, as the noble and learned Viscount says, to translate this elementary stage of management (or any wider stage most certainly), into a nationalised industry. I feel that that is not an easy thing to do. The second is this—and here I hope the First Lord particularly will not think I am seeking to be vexatious. The spirit of these co-partnership schemes tends to go when you get trade union recognition. The moment my company was forced to recognise the trade anions we were to a large extent hampered. We always allowed all workers freedom to belong to any union they pleased, but the moment we ourselves were compelled to join the employers' union, from which we had consistently abstained, we were forced to settle all conditions of work and wages in London through the union; we could not settle them on the spot, and all the happy spirit of that co-partnership committee disappeared, to the regret of many of the most loyal and the most keen trade unionists who served on it.

I beg noble Lords, with the greatest respect—and again I repeat that in saying this I am in no sense seeking to be provocative—to address themselves to this matter in a spirit of realism, appreciating the probable effect of the opposition which these co-partnership schemes will inevitably encounter in the future. May I, in concluding these remarks, say that I appreciate the spirit of the noble and learned Viscount's statement, that he will seek any method whereby the essence of these schemes can be preserved? I trust that, as a result of his skill, and of consultations with the noble Marquess, something valuable may be achieved.

VISCOUNT CECIL OF CHELWOOD

I will withdraw anything that I have moved, but in this particular case I have so much confidence in the noble and learned Viscount the Lord Chancellor that when he says he will make an effort to find some way out of this difficulty I am certain he will do so. His statement is a great inducement to me to trust him absolutely, and to hope for the best. I venture, however, respectfully to press upon him the desirability of a continuation of profit-sharing in an undertaking. I do not see any difficulty in providing that these consultative committees—let us call them by some phrase of that kind—shall also be continued in each works as they now exist. There is no reason why they should not continue in works which are subject to the Area Boards' control of the industry. However, I feel that it would be wrong for me to press this Amendment to a Division now, and I am sure that I should be advised not to do so by the noble Marquess the Leader of the Opposition. If that advice were given, I should certainly obey it. I therefore beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

10.48 p.m.

VISCOUNT BRIDGEMAN moved, in subsection (1), after "undertaking" to insert: or to receive any credit, bonus or bonus share issue according to the price of gas, quantity of gas sold, or otherwise according to the working result of the undertaker The noble Viscount said: The last Amendment has led to a discussion which has ranged high and wide, but in this Amendment we come back to what concerns the clause as originally drafted—namely the financial provisions of co-partnership schemes. We are all agreed, I think that the regulations mentioned should carry on for the time being all the financial provisions, particularly in co-partnership schemes, that are in existence at the time of the vesting date. But there is a doubt in our minds as to whether the clause as at present drafted, referring as it does only to profits, really carries out that intention. I understand that there are a number of co-partnership schemes which are based entirely on profits. There are also a certain number of co-partnership schemes not based on profits. Some, I understand, are based wholly on the current price of gas; others again, vary with output. So, if I am right in thinking that the clause is too narrowly drafted, all these schemes not strictly dependent on profit would not be able to be continued by the regulations referred to in this clause. For that reason I think that this Amendment is mainly a matter of drafting. There is really no difference between us. I think that the more because I noted that when this matter was discussed in another place, the Minister in charge said that co-partnership schemes need not be related to the scale of profits. Therefore, I would like to move this Amendment, to ask whether I am right in thinking that the clause as drafted refers only to co-partnership schemes which are strictly based on profits—in which case it seems that the Amendment is necessary—or whether I am wrong, and the clause as drafted allows regulations to continue co-partnership schemes which are based otherwise than strictly on profits. I beg to move.

Amendment moved— Page 73, line 2, after ("undertaking") insert the said words.—(Viscount Bridgeman.)

10.52 p.m.

THE LORD CHANCELLOR

Our idea and our intention in these words was that the continuance should apply not only to those schemes which are strictly based on profits, but to the sort of schemes which the noble Viscount has in mind. We thought that the words we used were wide enough for this purpose. The objection I have to the Amendment is that I think the point is already covered in the Bill. But I am not quite certain that I am right about that, and I have no objection to looking into the matter again, so long as I am not taken as promising to do anything except to look at it and consider it in the light of what the noble Viscount has said. As at present advised, we think the words we have are wide enough. It is difficult to say where co-partnership begins and ends and where mere incentive schemes come in. I would be very hesitant to give any definition. For instance, I think the Gas Light and Coke Company had a bonus scheme which was dependent on the amount of gas sold. Is that co-partnership, or is it a mere incentive wage scheme? I think I should call that an incentive wage scheme. I should be very hesitant to give a definition of where one ends and the other begins. However, there is nothing between me and the noble Viscount on this Amendment. I intend my words to be wide, but I will look into the matter again to see if they are wide enough.

VISCOUNT BRIDGENIAN

I am obliged to the noble and learned Viscount. He has given an assurance that he will look into the matter and, in the light of that assurance, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

VISCOUNT CECIL OF CHELWOOD

I do not know what the Government think about the next Amendment. I do not quite see why it is necessary to say that these schemes shall be continued only for a period. To put an end to them may very likely be the wiser thing. But if they can be continued for a period, why not continue them permanently, if they turn out to be valuable schemes? I beg to move.

Amendment moved— Page 73, line 3, after ("scheme") insert ("permanently or").—(Viscount Cecil of Chelwood.)

THE LORD CHANCELLOR

I think the only reason is that all these arrangements, and the regulations which continue them, are what are called in law "a condition subsequent." If you get an agreement made under Clause 56 with the Area Board or the Gas Council, then that agreement supplants the old arrangement, even though it is in identical terms. It is notionally a new agreement; and the parties to it are, of course, different, because one of the parties will be the Area Board or the Gas Council. Therefore, there can be no permanence about this matter. They can live only unless and until an agreement is made.

VISCOUNT CECIL OF CHELWOOD

Yes.

THE LORD CHANCELLOR

And that is why we cannot say "permanently"

VISCOUNT CECIL OF CHELWOOD

That may be so. If an agreement is made they will perish, but if an agreement is not made (supposing there is a discussion and, for some reason which we do not foresee at this moment, no agreement is arrived at and Clause 56 becomes inoperative) surely these arrangements which were prolonged should go on permanently—possibly qualified by saying "permanently or—"

VISCOUNT SWINTON

If the noble Viscount will look at Clause 56 he will see that it begins: Except so far as they are satisfied that adequate machinery exists. We all agree that the machinery in the trade to-day is extraordinarily good. The only reason why it has to be interrupted and something else put in its place is that the new structure which is being imposed on the industry is inconsistent with some of the plans which are at present in operation. But suppose that something in the nature of what I should call the partnership spirit is made a reality in the organisation that exists. It may well be then that the Gas Council, talking with the organisations, will say, "We have a perfectly good working arrangement for this." Then they will not make anything new; and where that exists, surely the system should become permanent. It cannot do any harm to put in my noble friend's words. I should have thought that if they were not in it would be an indication that all these schemes had to stop when the companies were liquidated.

THE LORD CHANCELLOR

I say frankly that I do not think they can do much harm. But I do not think "permanently" can be an appropriate word. Let us look at subsection (2) of Clause 58: If an Area Board or the Gas Council enter into an agreement with any organisation with whom they seek consultation under section fifty-six of this Act, for the making of arrangements by the Board or Council in place of any such scheme as aforesaid, regulations shall make such provision (if any) as may be necessary to give effect to those arrangements.… What you have here in this Bill is the fact that the continuance of the existing scheme must be subject to any new scheme made under Clause 56. If that is so, I do not see how the Minister by regulation can continue an existing scheme on a permanent basis. I do not see how it can be done, because in the very nature of things the continuance of the existing scheme can be only until the new scheme under Clause 56 is made. The suggestion that it should be "permanently or for such period" is all right, but in the nature of things I do not see how you can possibly say that it is to be permanent when in the very next subsection you say that it will last only until a scheme under Clause 56 comes into operation. However, as I am looking into the matter of the other point we will certainly embrace this point in our considerations.

VISCOUNT BUCKMASTER

The noble Viscount will allow me to point out that there is no obligation to make a scheme under Clause 56. Those schemes may never be made.

VISCOUNT CECIL OF CHELWOOD

I shall accept the offer of the Lord Chancellor to consider it again. But I beg him to observe that the fact that it is stated to be only a period on the face of it leaves an unpleasant aroma of dislike of the whole arrangement. If you say "permanently or for such period" that aroma is destroyed. However, in view of what the Lord Chancellor has said, I will not press it.

Amendment, by leave, withdrawn.

VISCOUNT ADDISON

I think that at this particular point, having reached agreement, it would be convenient that I move that the House do now resume.

Moved, That the House do now resume.—(Viscount Addison.)

On Question, Motion agreed to, and House resumed accordingly.