§ 2.38 p.m.
§ Amendments reported (according to Order).
§ Clause 1:
§ The Iron and Steel Corporation of Great Britain
§ (3) Every member of the Corporation shall hold and vacate his office in accordance with the terms of his appointment and shall, on ceasing to be a member, be eligible for reappointment:
§ Provided that any member may at any time by notice in writing to the Minister resign his office.
§ (6) A member of the Corporation who is in any way directly or indirectly interested in a contract made or proposed to be made by the Corporation, or in any contract made or proposed to be made by a subsidiary of the Corporation which is brought up for consideration by the Corporation, shall, as soon as possible after the relevant circumstances have come to his knowledge, disclose the nature of his interest at a meeting of the Corporation; and the disclosure shall be recorded in the minutes of the Corporation, and the member shall not take any part after the disclosure in any deliberation or decision of the Corporation with respect to that contract.
LORD WOLVERTON moved in subsection (3), to omit all words from the beginning down to the commencement of the proviso and to insert:
The Minister shall make regulations with respect to the appointment of and the tenure and vacation of office by the members of the Corporation.
The noble Lord said: My Lords, in moving the Amendment which stands in my name, perhaps I may remind the House that I moved an Amendment on Committee stage suggesting that there should be laid down in the Bill a rotation for the retirement of directors. My noble friend Lord Bridgeman moved an Amendment, just after mine, about the disqualification of directors. The noble Lord who spoke on behalf of the Government said in each instance that the Amendment was drawn too narrowly and did not allow enough flexibility and that the Government would prefer the matter to be dealt with by the letter of appointment, but that they would look into the question again. The Amendment which now stands in my name makes it obligatory on the Minister to make public regulations respecting the matter. I feel that these are public companies and that
Parliament should know what are the terms of engagement. The House may remember that it was done by regulation under the Electricity and Gas Acts and that similar provision was made in the Bank of England Act. It is much more satisfactory if the thing is done by regulations, and the regulations are laid before the House. I urge the Government to accept this Amendment as a compromise. I beg to move.
Page 2, leave out lines 16 to 19, and insert the said new words.—(Lord Wolverton.)
My Lords, I rise to support this Amendment standing in the name of the noble Lord, Lord Wolverton, Lord Davidson and myself. It seems to me that it produces a happy compromise. It was suggested in Committee that statutory provision should be made in the Bill itself for the appointment of members of the Corporation, but I think the noble Lord, Lord Morrison, pointed out that this made it rather too rigid. The suggestion in this Amendment is that the appointment of members of the Corporation should be made by regulation of the Minister, and it seems to me that that is the right way to do it. The third method is by the letter of appointment, but I do not think that that is right. Moreover, it seems to be rather a backhanded compliment to the person concerned to send him a letter of appointment as a member of the Corporation and tell him in the same letter what will happen if he misbehaves, and how you are going to get rid of him. Surely it is better to put it into a regulation, so that everybody knows exactly what are the terms of the appointment. There have been discussions since the Committee stage, I understand, but they have not reached any finality, and I think that this Amendment forms the best compromise.
My Lords, I should like to add one or two words in support of this Amendment. Your Lordships will remember that there was a good deal of talk in Committee about the form of the letter of appointment which was suggested by the noble Lord, Lord Morrison. I am not concerned with the term or period of the appointment, which I admit has a bearing on this particular issue, but I think it must be agreed by the Government that a letter of appointment cannot properly contain the sort of 5 thing that we discussed during the Committee stage. However, if the appointment is made only by a letter of appointment, irrespective of the term for which it is made, the letter must contain, unless there are other provisions, the conditions upon which the appointment is tenable, The restrictive conditions upon which the appointment of any directorship is tenable are stated in the Companies Act. If a regulation were issued by the Minister it could simply refer to the Companies Act so far as the general provisions are concerned. It seems to me much more appropriate to do it in the form proposed in this Amendment rather than by trying to incorporate in the letter of appointment the provisions of the Companies Act. I speak without firsthand knowledge, only from what I have heard. For instance, when directors have been appointed to the Civil Aviation Corporations, the letters of appointment have not referred to the pains and penalties that might be incurred or the reasons why a man must resign or be "sacked" for misbehaviour—in other words, they are just plain letters of appointment. That would not satisfy the public generally. The public would require to know a little more than that, and that little more could be made public in the regulations, rather than be elaborated in detail in the peculiar circumstances which might arise in any particular letter of appointment, which is private between the Corporation and the recipient. Without reference to things like salaries, for instance, the public have a right to know the general conditions upon which these kinds of appointment are tenable. It would be easier to do that in the form of a regulation than in a letter of appointment, and therefore I am in favour of the insertion of something of this nature in the Bill.
§ LORD LUCAS OF CHILWORTH
My Lords, His Majesty's Government have given careful consideration to all the points which were raised during the Committee stage upon the Amendments to which the noble Lord, Lord Wolverton, has drawn attention. I cannot add much to the full answers which were then given by my noble friend Lord Morrison. After this consideration, His Majesty's Government have come to the decision that they cannot accept this Amendment. The noble Lord, Lord Gifford, said that it 6 was rather a "back-handed compliment" to put in a letter something giving a particular member of the Board all the reasons why he could be dismissed. In our experience in appointing members of the Transport Commission by letter, we have not found that any of them have thought that they had received a "backhanded compliment."
My Lords, did the noble Lord really put in his letters to the Transport Commission all the misdemeanours for which they could be dismissed? Does he really mean to say that?
§ LORD LUCAS OF CHILWORTH
I will come to that point in a moment. The noble Lord, Lord Rennell, said that all these terms could not properly be included in a letter of appointment, and then he cited the Companies Act. The Companies Act, and the regulations regarding directors in the Companies Act, are there to protect the shareholders against misdemeanour by the directors. The Companies Act has nothing to do with the Iron and Steel Corporation. That is not set up by the shareholders; it is set up by His Majesty's Government. It is an entirely different conception. I cannot add anything useful to what my noble friend Lord Morrison said in short we feel that the required degree of flexibility could not possibly be introduced into a set of regulations. A letter of appointment will contain all the major points which have been raised by noble Lords opposite during the Committee stage. All that is proper to be included in that letter will be included, but the terms may vary as between different members of the Board. I will just cite one case by way of example. It may be that one very desirable member would not give up his present occupation unless he had a substantial period guaranteed, whereas it may be that another very desirable man would perhaps be so advanced in years that he would consent to serve only for a short period.
On behalf of His Majesty's Government, I am prepared to give this firm undertaking: that normally the appointments to the Corporation would not be for periods exceeding five years. Retiring members would be eligible for reappointment and the Minister would make such arrangements as were appropriate to the circumstances of particular 7 appointments to secure suitable staggering of retirements. I am prepared to give that undertaking on behalf of His Majesty's Government, but for the reasons that have been so well put all through the Committee stage, and which I have now reiterated, I regret that I cannot accept this Amendment.
My Lords, I was not going to speak on this Amendment, but the noble Lord told us something about the letters of appointment to the members of the Transport Commission containing a list of the things they must not do, failing which they would be removed. I asked him if he could confirm that, and he has not confirmed it. Later on in his speech, he went on to say that different terms might be applicable to different members. Are we to understand that certain members of the Transport Commission hold office so long as they attend 50 per cent. of the board meetings, and another 25 per cent. so long as they remain of sound mind? Possibly, for great intellects, there is not the same discretion. The noble Lord has definitely told us that. I think he should be more specific as the general public are interested in this matter.
§ LORD LUCAS OF CHILWORTH
My Lords, may I, by leave of the House, speak again? I thought I said that all the points raised by noble Lords opposite which were proper to be put in a letter of appointment would be so put. They have ranged from insanity to insolvency.
§ LORD LUCAS OF CHILWORTH
They have been in the case of the Transport Commission, and they will be carried on with that degree of flexibility which in the Minister's discretion is applicable to the individual cases.
§ VISCOUNT BRIDGEMAN
My Lords, I can see the point which the noble Lord, Lord Lucas, has made about tenure of appointments of members of the Transport Commission, although I still agree with my noble friend behind me that that 8 could perfectly well be put into regulations. But I submit that nothing which the noble Lord, Lord Lucas, has said really affects that part of the case for this Amendment which rested on the Amendment which I myself moved during Committee stage of the Bill—namely, the Amendment which dealt with the compulsory retirement of the members of the Transport Commission when they become insolvent or become of unsound mind and so forth. The noble Lord opposite has made a plea for flexibility. Flexibility is something which we on this side all want in proper cases, but I would ask whether the noble Lord or His Majesty's Government really want flexibility in the following matters which were the subject of my Amendment on the Committee stage—namely, that a member should retire compulsorily if he took another job when he was a whole-time member; became bankrupt; made personal profit out of a contract; dealt with other interests which he had not disclosed; and so on and so forth. Those are matters on which there ought to be no flexibility at all, and my Amendment on the Committee stage was designed to make sure that there could be no flexibility there, any more than there was under the Companies Act.
With regard to the question which the noble Lord raised as to whether the Companies Act applied, of course he is perfectly right in saying that where there is only one shareholder there is no need for the Companies Act to apply, and that a public corporation is not a company under the Companies Act. So far, so good. But my point is not quite covered by that answer, because a public corporation ought, surely, to have the same standards in its conduct of business as any company, public or private, constituted under the Companies Act. My original Amendment was designed to make sure, and to write into the Bill, that the standards regarding members of the Corporation would be the same high standards as Parliament rightly expects in public or private companies. Therefore, though I can see the point of wanting enough flexibility to make special conditions for the tenure of office, retirement by rotation and that sort of subject which would be dealt with by regulations, I am still absolutely unconvinced that the point which I originally made cannot be written into the Bill. 9 If His Majesty's Government require flexibility to appoint lunatic directors, or to allow directors to take another job at the same time, or to make money out of a contract, then I for one am entirely against it.
§ THE EARL OF DUDLEY
My Lords, I hope that the Government will give serious consideration to this matter before the next stage of the Bill. Although I made rather a flippant speech on this matter in Committee, I do feel that it is considerably more dignified to make regulations in regard to all these basic matters—from insanity to insolvency, I think the noble Lord said—which affect all members of the Corporation, rather than to embody them in a letter. Because it is done in that way in regard to transport it does not mean that it is the right way to do it. I believe that that is the only nationalisation Bill which has adopted that form of procedure. The noble Lord talked about flexibility. I cannot see that the more flexible way of dealing with the matter is to put all these things in the form of a letter. It must be a very long letter and, if I may say so, rather a stupid letter—and certainly a very undignified letter. Surely the right way to do it is to embody it in regulations. I hope the noble and learned Viscount, the Lord Chancellor, will lend his ear and his weight to the matter of this rather important procedure, although I have no doubt it is not important enough for noble Lords to press to a Division. But if this is to be a dignified business, as I think noble Lords hope it will be, it is important that the Government should deal with this matter in the proper, sensible and dignified way, rather than in the stupid way in which it is to be done.
My Lords, we feel that the Government's answer in not accepting this Amendment moved by my noble friend is not satisfactory. Surely it is desirable that certain basic standards should be applied uniformly to all members of the Corporation; and surely the best way of doing that is by way of regulation. The noble Lord, Lord Rennell, said that plain letters of appointment would be insufficient, and I think his point is true. The public have the right to know the general content of appointments, and regulations must be the best way of conveying that information to the public. It is not a matter that we feel 10 should be pressed to a Division, but I hope the noble Lord, Lard Lucas, will be able to give us an assurance that letters of appointment will embody a uniform series of disqualifications; otherwise such letters may lead to variations in the terms of appointment as between different members of the Corporation. I am sure that with this assurance my noble friend would be willing to withdraw the Amendment.
§ THE LORD PRIVY SEAL (VISCOUNT ADDISON)
On behalf of my noble friend, may I say that I hope noble Lords will realise that the Minister will exercise his powers with ordinary good sense and with due judgment. I think we are entitled to assume that, otherwise he ought not to be a Minister. I do not think it will be possible to, give a uniform letter in view of the variety of persons, with varying experience and so forth, whom it may be desirable to appoint. I think noble Lords are pressing the case too hardly, and it really is not practical.
§ LORD WOLVERTON
My Lords, I must say that I have not been very impressed. Although I am sure we all agree that the present Minister would write a good letter, Ministers come and go, and if this measure reaches the Statute Book it will last for a long time. I cannot see why, since it has been adopted in two Acts—the Electricity anti the Gas Acts—His Majesty's Government cannot accept this Amendment. I hope they will give further consideration to the matter between this stage and the next stage of the Bill. If they can do that, I am willing to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 2.58 p.m.
LORD LLOYD moved, in subsection (6) to leave out "disclosure" (where that word last occurs) and to insert:
the relevant circumstances have come to his knowledge.
The noble Lord said: My Lords, your Lordships will remember the discussion which we had in Committee on this question of disclosure of interest by members of the Corporation. With the permission of the House, I would like to discuss both this and the next Amendment now; they hang together, and I think it will be easier to discuss them in that way. On the Committee stage we put down the
first of these Amendments, and our intention was to prevent a member of the Corporation taking part in the deliberations of the Corporation once his interest had come to his knowledge, not once he had disclosed it—which was a slightly different thing. The Government's objection to that Amendment at the time—and I think it is a very valid objection—was that since the Corporation was not covered by Section 180 of the Companies Act, if a member intentionally or accidentally took part in proceedings when he had an interest (he might not know it, or he might have failed to disclose it) doubt would be cast upon the validity of the Corporation proceedings. I am advised that that is a perfectly substantial argument.
§ Accordingly, we have tried to get over that difficulty by adding this second Amendment, which, broadly speaking, is modelled on Section 180 of the Companies Act and which attempts to cover the Corporation if a member acts whilst he is disqualified in any way. I must confess I am not entirely certain whether even this Amendment will work, because again there is a possibility of a certain inconsistency with paragraph 3 of the First Schedule which deals with the quorum of the Corporation. I would ask the noble and learned Viscount who sits on the Woolsack if he would deal with that point in his reply.
§ Apart from that reason, I was impressed by the argument of the noble Lord, Lord Morrison, during the Committee stage, to the effect that if the member in question were an honest man—and of course we hope that he will be—these Amendments would be unnecessary, whereas if he were not an honest man the Amendments would in any case be inadequate. Nevertheless, I think the situation needs clearing up, and particularly the position of third parties. As the Bill is drawn, it seems to me that the contractual rights of third parties are adequately protected, because no member can be disqualified until he has disclosed his interest. Once he has disclosed his interest, he is specifically debarred from taking part in proceedings of the Corporation. If we could have an assurance on general lines that third parties' contractual rights cannot be upset under the Bill as it stands, I think that would go a 12 long way to satisfy noble Lords on this side of the House. I beg to move:
Page 2, line 47, leave out ("the disclosure") and insert ("the relevant circumstances have come to his knowledge").—(Lord Lloyd.)
THE LORD CHANCELLOR
My Lords, I have been asked to reply on this matter. I confess that I think the noble Lord would be very ill-advised to press this Amendment for it would have exactly the effect which he does not want to achieve. As subsection (6) of this Clause is drawn, your Lordships will see that it provides an obligation for disclosure by a member "after the relevant circumstances have come to his knowledge." The subsection goes on to state that:the disclosure shall be recorded in the minutes of the Corporation, and the member shall not take any part after the disclosure in any deliberation or decision of the Corporation with respect to that contract.Now suppose that a man is dishonest and does not disclose. He thereby commits one offence under that subsection and not two. He has not disclosed the relevant circumstances, but in that the second limb of the subsection deals with what is to happen after the disclosure, and there has been no disclosure, then consequently the second limb never comes into play. In our view it is very important that it should not come into play. What we want to ensure is that third persons who are dealing with the Corporation in perfectly good faith are in no sense prejudiced. There is a provision under Section 180 of the Companies Act, which providesThe acts of a director or manager shall be valid notwithstanding any defect that may afterwards he discovered in his appointment or qualification.If we took these two Amendments—I think the noble Lord was probably acting for the convenience of the Committee in discussing the two together—I am afraid that we should get into considerable trouble. The second of the Amendments deals with any defect that may afterwards be discovered in the appointment or qualification of a member of the Corporation. There can, I think, be no question of a defect in his qualification unless he is a Member of Parliament, because, for 13 the rest, his qualification depends on the opinion of the Minister and so on—it is not objective, it is subjective to the Minister. It is hardly conceivable that the Minister would appoint a Member of Parliament—that would be much too obvious a breach. The real difficulty conies from the Amendment that was made to the First Schedule. If your Lordships will turn to page 67 of the Bill you will find that paragraph 3 of the First Schedule contains these words:The quorum of the Corporation shall be such number, not being less than three, as the Corporation may from time to time determine, and where any member is disqualified from taking part in any deliberation or decision of the Corporation with respect to any matter he shall be disregarded for the purpose of constituting a quorum of the Corporation for deliberating on or deciding that matter…Observe what would be the effect of the Amendments with regard to a quorum. As we have it at the present time, there is no question of disqualification, because the obligation is disclosure and after disclosure disqualification. If you eliminate the word "disclosure" and put in some such words as "the relevant circumstances" and so on, you might bring about disqualification. That might have an adverse effect on the words in paragraph 3 of the First Schedule, and mean that some innocent third person might find himself in a difficult position because, owing to the disqualification which these Amendments would bring about, there would no longer be a quorum. Consequently, if I may suggest it to the noble Lord—I know that he wants the same thing as I do—I think it would be unfortunate from the point of view of innocent third persons that such Amendments should be put in.
As to the director who ought to have disclosed and who does not disclose, he conies under the full wrath of the Minister, because he has already prejudiced his position in not disclosing, and he can he dealt with or dismissed or whatever it may be, for that. To go further than that would, I think, bring about a result exactly the opposite of that which the noble Lord wishes to achieve. I can give the noble Lord the assurance that under the Bill as it is drafted the proceedings of the Corporation will not be invalidated under subsection (6) of Clause 1, to the prejudice of third parties. Under the subsection as 14 drafted, disqualification arises only where an interest has been disclosed. If you altered the Bill in the way which the noble Lord has suggested you might bring it about that disqualification resulted because there had not been disclosure when there ought to have been and, consequently, you would find all sorts of results arising with regard to the quorum. If I may suggest it, the noble Lord would be well advised, in his own interests and in order to achieve the result which he wants, not to press these Amendments.
My Lords, the noble and learned Viscount, the Lord Chancellor, has dealt very effectively with the more obvious points of these Amendments, but there is one point—actually it may not be a point at all—which is still obscure to me. That relates to the question whether the acts of a member of the Corporation are covered—I refer to acts committed by him out of board meeting. If he is an executive of the Corporation and has delegated powers to decide contracts and so on, it seem; to me, as the Bill is now drafted, he can decide contracts to which he might happen to be an interested party and then be not bound to declare his interest until the next fleeting of the Corporation. That is so far as the disclosure of interest by the man is concerned. As regards the third party would they be covered too? In such circumstances, does the Bill validate any acts that a man may have done, notwithstanding that at the tine he was an interested party?
My Lords, if I follow what the noble Lord, Lord Hawke, has said, I think the instance which he has in mind would be something like this—perhaps it may serve to clarify the matter if I put it in this way. A person being a member of the Board is delegated by the board to negotiate a particular contract. After that board meeting he disqualifies himself by some act such as is provided for in subsection (6). I think the noble Lord is inquiring whether at that point a third party might not be injured by reason of the delegated powers having been invalidated by an action committed by the person between the time of the delegatior of power and the time he committed the Corporation by his signature of the contract.
THE LORD CHANCELLOR
My Lords, I speak again only by leave of the House. We are dealing here only with the proceedings of the Corporation, and not with those of individuals. If an individual is authorised by the Corporation to make a contract, if it is within the scope of his authority, the Corporation are bound. If outside the scope, they are not bound. If he acts fraudulently towards the Corporation, possibly by entering into a contract with a third party, then he is responsible to the Corporation. This clause deals only with the proceedings of the Corporation.
My Lords, after what the noble and learned Viscount has said, this is not an Amendment I would desire to press. I hope your Lordships will not feel that time has been wasted; I felt it worth while to clear up this matter. I am still not absolutely certain about my noble friend's point being covered or not, but in the circumstances I beg leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 4:
§ General duty of the Corporation.
§ 4. It shall be the general duty of the Corporation so to exercise their powers as—
- (a) to promote the efficient and economical supply of the products of the principal activities of the Corporation and of the publicly-owned companies, and to secure that those products are available in such quantities, and are of such types, qualities and sizes, and are available at such prices, as may seem to the Corporation best calculated to satisfy the reasonable demands of the persons who use those products for manufacturing purposes and to further the public interest in all respects; and
- (b) to secure that neither the Corporation nor any publicly-owned company shall show undue preference to or exercise unfair discrimination against, any such persons or any class thereof in the supply and price of those products, but without prejudice to such variations in the terms and conditions on which those products are supplied as may arise from ordinary commercial considerations.
LORD CLYDESMUIR moved, in subsection (4) (a) to omit all words beginning "to secure" down to and including "prices," and to insert:
the availability of those products in such quantities, types, qualities and sizes and at such prices.
The noble Lord said: My Lords, your Lordships will recollect that during the Committee stage one night, at a late hour, at eleven o'clock, we had a Division and
inserted an Amendment in the Bill. The noble Lord, Lord Lucas, in resisting the Amendment, said that in one respect our Amendment would impose on him an impossible task. We had laid certain duties on the Corporation, and the noble Lord said that to produce enough to satisfy the consumers' demands was a difficult thing to do if the Corporation did not own the whole trade. I admitted that that was so, but I said that that was not the only duty laid down; and on balance your Lordships decided to pass this Amendment. With this Amendment, I attempt to overcome the difficulty to which the noble Lord, Lord Lucas, took exception. My suggestion to the Government is this. The previous Amendment having been carried, if they will accept this Amendment as making a workable proposition then the whole matter may be considered in another place; and if the original Amendment is retained, it will, with this addition, be workable. If it is not retained, of course, that is another matter on which I cannot comment here. I do not want to make a long speech, because my Amendment is designed only to make the Amendment already carried by your Lordships reasonable and workable. I hope the Amendment as a whole will be retained with this improvement. If it is not, I can say no more. It is part of a general effort to secure decentralisation, to which the Government are fully a party.
Page 5, line 27, leave out from the second ("and") to ("as") in line 30, and insert the said new words.—(Lord Clydesmuir.)
§ THE EARL OF DUDLEY
My Lords, I beg to support the Amendment moved by my noble friend Lord Clydesmuir. It is really only consequential upon the Amendment which was carried by your Lordships in Committee. It is clear that as the Corporation will not have a monopoly over the whole field of steel production they cannot possibly secure all the necessary products for the whole field of consumers (I see that the noble Lord, Lord Lucas, nods his assent); therefore, while they can promote a total production, they cannot secure it. For that reason this Amendment is necessary. As my noble friend Lord Clydesmuir pointed out, it also gives effect to the decentralisation policy to which noble Lords opposite agreed. I hope it t will be brought into effect because the 17 Corporation, as the Corporation, cannot secure the necessary products from the publicly-owned companies and the publicly-owned companies themselves must be responsible for providing the necessary products to satisfy consuming interests. For that reason, also, the Corporation can only promote; they cannot secure. This seems a very common-sense Amendment, and I hope the Government will accept it.
§ LORD LUCAS OF CHILWORTH
My Lords, may I preface my remarks on this Amendment by offering to the noble Lord opposite my complete and total sympathy? As he said, at eleven o'clock, much against his own better judgment, he was pushed ink) the Division Lobby to support an Amendment which was entirely nonsensical and could not work, though no persuasive powers of mine could persuade the noble Viscount, Lord Swinton, that such was the case. That is as I understand it, and I had hoped that the noble Lord, Lord Clydesmuir, was going to be helpful to-day. With your Lordships' permission, I suggest that we consider four Amendments together—namely, those on page 5, line 27; page 5, line 32; page 5, line:33; and page 5, line 37. In manufacturing these four Amendments, the noble Lord tried to make two lifeboats in which he hoped to row to the shore from the torpedoed wreck in which he had left himself by the previous Amendment. There are two alternatives here. I have puzzled these out as best as I can. The first alternative is a combination of the three Amendments on page 5, at lines 27, 32 and 37.
§ LORD LUCAS OF CHILWORTH
The Amendments to lines 27 and 33 together form the second alternative. If we add them all together, we get even less sense than from the original Amendment. If noble Lords will bear with me, I will read the first alternative. I will not ask your Lordships to puzzle it out for yourselves; that would take too long. The first alternative reads:(a) To promote the efficient and economical supply of the products or the principal activities of the Corporation and of the publicly-owned companies and the availability of those products in such quantities, types, qualities and sizes, and at such prices as may 18 seem to the. Corporation best calculated to satisfy the reasonable demands of consumers of those products desiring to purchase them from the Corporation or from a publicly-owned company and to further the public interest in all respects; and(b) To secure that neither the Corporation nor any publicly-owned company shall show undue preference to, or exercise unfair discrimination against, any such consumers or any class thereof in the supply and price of those products…and so on, to the end of the paragraph.
The second alternative says something entirely different—namely,(a) To promote the efficient and economical supply of the products or the principal activities of the Corporation and of the publicly-owned companies, and the availability of those products in such quantities, types, qualities and sizes and at Arch prices as may seem to the Corporation best calculated to satisfy the reasonable demands of the persons who use those products for manufacturing purposes and desire to purchase those products from the Corporation or from a publicly-owned Company, and to further the public interest in all respects…The first alternative brings back our old friend, the stockist, as the noble Earl, Lord Dudley, said, because it mentions the word "consumers." The second alternative leaves out the stockist and reverts to the person who is a manufacturer. Frankly, I do net know what the noble Lord wants to di
§ LORD LUCAS OF CHILWORTH
No. It is the first alternative, because in that you bring in the consumer, and in the definition of "consumer" in the Interpretation Clause is the merchant, whether he be stocking Dr otherwise. In the second alternative you entirely ignore the stockist.
Just to clear this up, I would like to have the alternatives clearly. I have not yet moved the Amendment that brings in the word "consumers."
§ LORD LUCAS OF CHILWORTH
I am sorry, but we cannot deal with these Amendments except at a group. In one alternative the noble Lord wants to bring in the reasonable requirements of the consumer—that means the stocking merchant—which we argued previously, and an Amendment was then somewhat reluctantly withdrawn. We could not take into consideration the requirements of 19 the stockist, because they are sometimes duplicated. I argued last time, and I argue again, that the only effective demand comes from the manufacturer. Noble Lords opposite accepted that argument with some reluctance. The first alternative brings in the stockist, and the second alternative leaves him out.
Would the noble Lord repeat the alternatives as he has put them? It is the second Amendment of the group that mentions "consumers."
§ LORD LUCAS OF CHILWORTH
The Amendments to page 5, at lines 27, 32 and 37 hang together; it does not make sense unless they do. There is then the second alternative of the Amendments at page 5, lines 27 and 33, which go together. I would say this to the noble Lord. If he will treat either group as consequential, he can have which he likes. I cannot anticipate, but it was mentioned that this Bill will go to another place. All I can hope is that they will not only throw out this Amendment but that they will throw out the first Amendment; that is the only way in which the noble Lord will be rescued from the impossible situation in which he has landed himself through not taking my advice in the first place. But if the noble Lord accepts the first Amendment, I must reserve the Government's position securely upon this question of the consumers. Therefore, as it is a consequential Amendment, I now leave the noble Lord to "pay his money and take his choice."
§ VISCOUNT SWINTON
My Lords, we have had a very entertaining, if not very enlightening, discourse from the noble Lord. I do not know what is the difference between a Government maintaining their position and a Government maintaining their position securely. No doubt this Government appreciate that rather fine metaphysical—or, indeed, physical—distinction, and have to safeguard it. I would like to say a word about the main Amendment to which this Amendment is consequential. Of course, nobody was hustled into the Amendment by a mistake. We had every intention of moving the Amendment and, if the Committee did not accept it, every intention of dividing upon it. It was an 20 extremely sensible Amendment. What did it do? The Bill as drafted gave the Corporation and their subsidiaries the power to manufacture what are called Second Schedule products—broadly, what ordinary people have understood as iron and steel manufacture. It then proceeded to take in a number of other things, which for convenience are called the principal activities, embracing an enormous range of engineering works, from bridge building to ping pong balls.
§ VISCOUNT SWINTON
And babies' bottles, as the noble Lord says. From the cradle to the grave, this industry is to be taken over—and I am afraid there is likely to be more grave than cradle about it. The Corporation then put upon themselves an obligation to be efficient and to supply the requirements of their customers as regards their Second Schedule activities—iron and steel in the ordinary sense—but they impose no obligation upon themselves vis-à-vis their customers for all the other activities they take over. The very fact—and this is an elementary rule of construction in Acts of Parliament—that you include one thing with a special obligation and exclude another means that you impose upon yourself an obligation as regards the first duty from which you exclude yourself with regard to the second. Therefore, if the Bill had stood in the brilliant way in which the Government presented it to us, they would have had an obligation to be efficient and serve the interests of consumers with regard to iron and steel but no obligation whatever to be efficient or to serve the interests of the consumers with regard to the other principal activities.
That was too much for your Lordships to swallow. Therefore, we decided—quite rightly, if I may respectfully say so—that if the obligation was to be put upon the Corporation and the subsidiaries at all in the terms of the Act, obviously that obligation should extend both to Second Schedule products and to the principal activities. And we stand by that. If it came to the issue as to which proposition is right, I do not think any impartial observer, or indeed any reasonable draftsman, would have the least hesitation in saying what ought to be done. The only defence which the 21 noble Lord can raise for his incontinent rejection of this proposal is that in the words of the Bill as drafted—for which he was responsible—it would not read very well, because it would impose on the Corporation, as regards products in which they had a monopoly, an obligation which was not strictly applicable in its wording to those principal activities in which they had not a monopoly.
I think the noble Lord was only partially right over iron and steel—the Second Schedule products—because actually the Corporation are not taking over the whole of the Second Schedule activities. We had all this out on the Second Reading. In some cases they take over 99 per cent., in other cases 60 per cent., and in another case only 40 per cent. Therefore the glib assurance with which the noble Lord commended this to us before contained a good many loopholes. If he wishes to be logical he will have to re-cast his obligation to vary it with the variation of monopoly which he is applying. We agreed that it was reasonable, if we placed upon the Corporation the new obligation to promote efficiency as regards the other activities—which certainly ought to be there—that we should try to help him to make it not only a better Bill but a better drafted Bill, and include a provision which would best fit both those products in which the Corporation had a monopoly and those in which they had only a subsidised competing interest.
Our proposal, I think, achieves that end. I would say that the first Amendment, at page 5, line 27, and the third, at page 5, line 33, undoubtedly have that result. The others are only partly alternatives. It is true that to be 100 per cent. embracing, and to include a special obligation as regards the stockists, then some special words are required; and I agree that the words about the consumers of those products would probably have to come in. If I may suggest it, I think the need would he sufficiently met if the first alternative were taken and the Amendments at lines 27 and 33 were added. We have a further stage in the Bill and we can look at them to make sure they are right. As regards the Amendments themselves, of course they are consequential upon the main Amendment which the Committee have already made. I do not in the least anticipate what will happen, but obviously if that Amendment is 22 retained Oren the two consequential Amendments will be retained, but if that Amendment should go—I hope it will not—then these Amendments would follow.
§ VISCOUNT ADDISON
My Lords, on behalf of my noble friend I would like to say that we concur with what the noble Viscount has said with regard to these Amendments being consequential—rather distantly consequential, it seems to me—on what your Lordships did before. So far as we on this side of the House are concerned, we shall not resist them. With all respect to the noble Viscount's reflections upon other aspects of the Bill, he quite properly and discreetly steered clear of the Amendment which was passed in Committee. It is just rubbish and it will not work. However, so far as we are concerned we leave it to noble Lords opposite to choose which alternative they like. We consider they are both absurd.
My Lords, the noble Viscount has had an opportunity of a very pleasant opening to the debate. The alternative of taking the first Amendment—which, indeed is the only one before the House—and the third Amendment in this group, is the one that we would select. That will secure that the Amendment which was made on the Committee stage is in every sense workable. We can only hop; that the other place will leave it so and thereby improve this Bill, if that is possible.
§ On Question, Amendment agreed to.
§ 3.35 p.m.
LORD CLYDESMUIR moved, in subsection (4) (a) to omit "the persons who use those products for manufacturing purposes" and to insert:
consumers of those products desiring to purchase them from the Corporation or from a publicly-owned company
The noble Lord said: My Lords, during the Committee stage there was a discussion about the position of the stockholding merchants. My noble friend Lord Dudley moved an Amendment to ensure that they would have representation on the Consumers' Council. We did not get a wholly satisfactory reply from the noble Lord, although he attempted to give us some assurance. I wonder whether, between that time and to-day, he has thought the matter over and is able to say anything more about the protection which might be provided. I beg to move.
Page 5, line 32, leave out from ("of") to ("and") in line 33 and insert the said new words.—(Lord Clydesmuir.)
§ LORD LUCAS OF CHILWORTH
My Lords, I thought I made it abundantly clear in Committee that the merchants, whether they are stockists or whether they are not stockists, are included in the definition of "consumer" in Clause 60. It says:'consumer,' in relation to any products, means a person who uses those products for manufacturing purposes or is engaged in the merchanting of those products.That covers a merchant, whether he carries stocks of steel or whether he does not—if he is just one of those ordinary intermediaries between the producer and the consumer. I explained that during the Committee stage. If I did not make it clear then, I trust I have now. Both types of merchant are included in the definition "consumer" in the definition clause and, therefore, are included in the representation upon the Consumers' Council.
§ THE EARL OF DUDLEY
My Lords, that does not answer the question. The stockholding merchants are a special tribe. They cannot be included as consumers and be represented as consumers on the Consumers' Council. We want to know definitely whether there will be at least one representative of stockholders on the Consumers' Council. This is a matter upon which the National Association of Iron and Steel Stockholders feel very strongly. They want an assurance that:a stockholder will definitely be included amongst the fifteen to thirty persons constituting the Consumers' Council to be set up under Clause 6.I am quoting from a letter from the National Association of Iron and Steel Stockholders. Whatever the Minister may say in defining stockholding merchants, they supply a very significant proportion—in some cases over 10 per cent.—of consumers' requirements, and they are entitled to representation on the Consumers' Council. Their function is a most important one. As I said on the Committee stage of the Bill, a Committee of the Federation has been set up for some years now, which means that these stockholding merchants study their requirements in every possible way. That state of affairs should be continued by giving 24 them representation on the Consumers' Council. I hope we shall get a definite answer from the noble Lord about whether they will be represented as an association of stockholding merchants on the Consumers' Council to be set up under this Bill.
§ LORD LUCAS OF CHILWORTH
My Lords, by the leave of the House I would reply to this one point. I will try to make it crystal clear. Will the noble Earl refer to Clause 7 (2) (b), where it says that the Council shall consist ofnot less than fifteen nor more than thirty other persons appointed by the Minister, after consultation with such bodies (which may include organisations representing workers) as he thinks fit, to represent the interests of persons (hereafter in this section referred to as 'the consumers') who are consumers of the products of any of the principal activities of the Corporation and the publicly-owned companies…In the definition clause, "consumers" includes those engaged in merchanting, so I would suggest to the noble Earl that the common-sense interpretation of paragraph (b) of Clause 7 is that the Minister will consult with the authorities representing merchanting interests when he comes to select the people to fill this Council of "not less than fifteen nor more than thirty." I would suggest to the noble Earl that it is perfectly well covered. The interests are going to be consulted with a view to nominating representatives to represent those interests on the Consumers' Council.
§ VISCOUNT BRIDGEMAN
My Lords, the noble Lord opposite has come very near to giving the assurances that we want, but he has not done exactly what my noble friend hoped he would do, and that is to assure us that the Minister would include the Iron and Steel 'Stockholders' Association as one of the bodies which he thought fit to consult. If that assurance can be given we shall get very near to agreement.
§ Amendment, by leave, withdrawn.
§ 3.41 p.m.
LORD CLYDESMUIR moved, in subsection (4) (a), after "purposes," to insert:
and desire to purchase those products from the Corporation or from a publicly-owned company.
The noble Lord said: My Lords, I move this Amendment but I am not going to
speak to it, as the matter was discussed on an earlier Amendment. This is the third Amendment in the same group, and I understand the noble Lord is prepared to accept it.
Page 5, line 33, after ("purposes") insert the said words.—(Lord Clydesmuir.)
§ On Question, Amendment agreed to.
My Lords, the effect of this Amendment will be to make paragraph (b) of this clause into a subsection no longer governed by the opening words of the clause, and this will lay upon the publicly-owned companies themselves the duty not to show undue preference or exercise unfair discrimination. Your Lordships will recollect that the Government accepted an Amendment in Committee providing that this paragraph should apply to preference or discrimination on the part of publicly-owned companies as well as the Corporation. It was a matter upon which we divided. The Government saw good reason for acceptance of this Amendment, and my Amendment now is intended to improve what has already been done. As the paragraph stands, it is left to the Corporation to secure that companies under the Corporation do not show undue preference or exercise unfair discrimination. It is inconsistent with the principle of decentralisation to which the Government and the Opposition alike are committed that the Corporation should have to secure this. It seems right that the companies should stand on their own feet and should be responsible for seeing that discrimination or undue preference is not exercised. The point is a very clear one and need not be elaborated. If the Government accept this Amendment there will require to be an amendment of the marginal note in the Bill. I beg to move.
Page 5, line 34, leave out from ("respects") to ("neither") in line 35 and insert ("(2)").— (Lord Clydesmuir.)
§ LORD LUCAS OF CHILWORTH
My Lords, it is a pity that in the middle of the very good-humoured conversation which we have been having on four Amendments there should be inserted this Amendment which has nothing to do with 26 the others. This is a very serious point. I must, I am afraid, join issue with the noble Lord when he said that we did not object to the original Amendment; it was forced upon us in this House at eleven o'clock at night It brings up once again a vital principle to which we cannot agree: it is putting a statutory obligation not only upon the Corporation—which we accept fully—but upon the publicly-owned companies. The effect of the Amendment would be to split the clause into two distinct sections, and it would place an absolute obligation not only on the Corporation but on the publicly-owned companies not to show undue preference; and the placing of an obligation of this character directly by Statute on the publicly-owned companies does not fit in at all with the conception of this Bill. The conception of the Bill is that the publicly-owned companies shall operate as independent units under the Statute under which all public companies have to operate, and hat is the Companies Act. We say that to impose a statutory obligation of his nature over and above anything in the Companies Acts is something which cannot be done. We suggest that a statutory obligation of this character is a matter—if I may so put it—of moral policy. You cannot put that obligation upon the publicly-owned companies. You can put it on the Corporation, and it will be for the Corporation to see that all their subsidiaries conform to it. We maintain that the duty imposed by Clause 4 must rest on the Corporation, who exercise the duty through control of the companies; it cannot rest on the companies themselves. For that simple reason I must say I cannot accept the Amendment, and I hope the noble Lord will not press it.
§ VISCOUNT SWINTON
My Lords, I must say this Bill gets queerer and queerer as the debate goes on, and the ideas of what are the duties of the Corporation and the independence of the companies become more involved. What the noble Lord has just said has a bearing upon the more important series of Amendments which will follow presently and upon which I shall have something to say. I would ask the Government this question: Do you or do you not intend that these companies shall show undue preference? The answer must surely be "No." I should have thought that at any rate there should have been an 27 answer to that, because it may be that if there is not a perfectly clear answer we shall have to divide upon it. Who is going to show undue preference? It is not the Corporation, because they are not going to be entering into any contracts. The people who might show undue preference are the people who sell the commodities; and the one body who are not going to sell the commodities are the Corporation. Every selling transaction will be entered into by one of these publicly-owned companies. Therefore, the people who are to be prevented from showing undue preference—and I hope it is common ground between us that undue preference is not to be shown—must be the companies. It seems to me beside the point to say that because we do not find in the Companies Act, which deals with other things, provision concerning undue preference, we ought not in this Act to impose a duty in respect of undue preference upon the individual companies. It has nothing to do with the Companies Act. The Companies Act is the code to which all companies registered in this country, public and private, are subject; and it would be entirely inappropriate to put into the Companies Act anything about undue preference.
How does undue preference arise? Parliament has always said that where something in the nature of a monopoly is created—such as the railways—an obligation should be imposed that those companies (and there were in the old days a large number of railway companies) which are given a special franchise and monopoly by Parliament shall so exercise it that, broadly speaking, they treat all their customers alike. Therefore, the obligation was put upon the railway companies. In the General Act of Parliament which deals with undue preference with regard to the railway companies, you will find that the obligation is imposed upon all railway companies. Therefore, it is quite irrelevant to say that because it is not in the Companies Act it ought not to be imposed upon the individual companies.
It is agreed that there shall be an obligation to ensure that the companies do not grant an undue preference. Very well. And then the noble Lord says, "But it is for the Corporation to see to that, and I am so keen on decen- 28 tralisation that I will not allow Parliament"—which, after all, was the body which had something to say as to how this industry was to be run—"to lay down in an Act of Parliament that no company shall give an undue preference. I will insist on having it done in this way: that the obligation is put upon the Corporation and then the Corporation must go to every one of these companies to give them their overriding orders and see that they do not give any undue preference." I should have thought that that was the antithesis of decentralisation. I should have thought that that was putting a wholly unnecessary duty upon the Corporation to go and interfere with every one of these companies, and that the natural thing would be that Parliament, which says, "There shall not be undue preference," should lay the obligation upon the people concerned, and that that principle should be followed also in the case of the subsidiaries. If what we all want to do is to put an obligation upon the companies that they shall not be guilty of undue preference, it would be a more commonsense method to put in the Act of Parliament, "Neither the Corporation nor the companies shall…"
§ On Question, Amendment negatived.
§ 3.53 p.m.
LORD LAYTON moved to add to the clause:
It shall be the general duty of the Corporation to secure the largest degree of decentralisation consistent with the proper discharge by them of their duties under this Act.
The noble Lord said: My Lords, it may be convenient if we discuss at the same time this Amendment and the two which follow. It has been stated a number of times from this side of the House that it is a matter of great regret that in this Bill there is no group of clauses defining the rights, duties and functions of the publicly-owned companies. A great deal is said about the Corporation, but almost nothing about the publicly-owned companies. To use a political analogy, it is as though we were drawing up a federal scheme. A phrase which has been used about this Bill is that it is a new departure, or inclined to be a new departure, from previous nationalisation Acts. But it would be a strange federal scheme which defined the duties
and responsibilities of the central authority and said nothing about the State rights.
§ This series of Amendments is put forward with a view to bringing to the front that aspect of the nationalisation of the iron and steel industry and endeavouring, as was suggested in the discussion during the last debate, not merely to talk about the Corporation but to state positively what is expected of, and what protection is given to the autonomy of the independent units.
§ From that point of view these three Amendments are small and moderate. But they at least serve the purpose of opening the issue of giving some kind of protection to the individual companies. The first Amendment is a statement of the general principle of decentralisation. The second requires that the Corporation should proceed to do something about it, and not leave it merely as a vague and general aspiration. That having been done by the Corporation in drawing up any statement of the rights, duties and functions of the separate companies, it is essential, if the separate companies are to act on their own, to some extent in defiance of authority, and in order to have time to prove themselves right, there must be some sort of security of tenure for the directors while they are doing it. The third Amendment represents an attempt to give some sort of security of tenure. Though these Amendments are a very small charter for the independent companies in the iron and steel industry, they embody the three points I have mentioned—namely, a statement of general principle, an obligation to prepare a statement as to how decentralisation is in practice to be carried out, and an indication that there must he security of tenure for the directors.
§ It may be said that as the Government are in general terms in favour of decentralisation, and believe that this Bill should be built up on the basis of decentralisation, then all that is necessary is to pass the first of these Amendments and leave the others to the good sense of the Corporation. I venture to say that that is not sufficient. First of all, an assurance cannot bind a succeeding Parliament, even if that assurance is given in the utmost good faith. We accept 30 absolutely at their face value the various assurances that have been given by the present Minister of Supply, but before the Minister carries out in detail the provisions of this Bill there is, first, the hurdle of a General Election and, secondly, the question whether, even if Labour is returned to power, the present Minister of Supply will still be in charge of that Department, seeing that the turnover of Ministers in that particular office has been rather rapid.
§ It is not merely that we are unwilling to depend upon assurances. The fact of the matter is that the Government themselves will have to include safeguards against a trend in the opposite direction. A strong tendency towards bureaucracy has shown itself under the present Government. But I want to make this point: it is not merely the tendency towards bureaucracy that has to be resisted; it the fact that very definite arguments in favour of centralisation can be adduced. Indeed, they have been heard even during the course of this debate. It is true that if there were intervention in the management of all the firms concerned, and if all were made to work on what is at this moment the best practice, in an attempt to secure increased efficiency, the results might at first be beneficial. The argument has been used by analogy with war time, and I myself am convinced that a great deal of the background of feeling in favour of this Bill arises from wartime experience. It is said, with truth, that when the Government took control of the engineering shops and told them how to do this and that, there was built up a tremendous production. But it is always possible to do that in war time, and in the short run, when there are standard products. You will even get an advance in technical development under the high pressure of war time. After all, the enemy is producing product after product and your life depends upon matching and beating him.
§ But in spite of the fact that war time is a time when the maximum initiative must be shown on the home front, war-time experience showed that this tendency to centralisation led to stereotyping production; and many of your Lordships know the difficulties and the problems of getting innovations accepted and passed under conditions of war. You can raise efficiency by standardisation, and raise it 31 to the highest level. But that, after all, is the totalitarian argument; it is the case put forward by the Communists. The point is that in the long run you undermine efficiency; you standardise; and you rule out the enterprise which is absolutely essential if an industry of this type is to do that which it is necessary to do for the country as a whole.
§ Therefore, we need all these three things—a statement of principle, the instrument to draw up a plan of relationship between the centre and the units, and security of tenure. I strongly urge the Government to accept these three Amendments, first for their own protection against what they know will be a strong pressure towards centralisation and, secondly, because I think it is exactly the kind of thing that your Lordships' House should do. This Bill was under discussion for months in another place and never was this point raised. I suggest that it is essentially the kind of thing that your Lordships' House should do—namely, to put these three Amendments into the Bill and send it back to the other place amended in that way. My Lords, I beg to move the first Amendment standing in my name.
Page 5, line 42, at end insert the said new words.—(Lord Layton.)
§ VISCOUNT SWINTON
My Lords, all your Lordships will be grateful to my noble friend Lord Layton for putting down this Amendment and for continuing the important discussion we had on an Amendment of mine in Committee. I believe that the whole House felt then that something had to be done. We were not happy to leave the Bill as it stood; nor were we altogether happy with any of the suggestions put forward on that occasion. Since then we have had an opportunity to reflect and to have a good deal of discussion, and these three Amendments do three things to give effect to the policy of decentralisation. First, they lay down a cardinal principle in the Bill; secondly, they provide that the Corporation, when they have made their plan as to how they are to decentralise, shall inform the Minister, and the Minister Parliament; and thirdly, there is the provision about security of tenure for the directors.
32 Let me first say a word about the last point, because, frankly, I attach much less importance to that one than I do to the first two. The first two I regard as essential. I think the Government would be well advised to accept the third Amendment because it would give a feeling of confidence to all the boards of these companies. The Government may say that when the Corporation becomes the sole shareholder in these companies, it could, upon twenty-eight days' notice, get rid of every board of directors from the companies—it could sack the lot; and I agree that in those circumstances it is not much use inserting into this Bill a provision to the effect that with regard to the rotation in the appointments of directors the Articles of Association shall not he changed when, by this overriding arbitrary power the Corporation can do everything they please with any board. Therefore, while I feel that it would be a sensible thing to do, I do not attach overwhelming importance to it.
Having said that, however, I think it makes the first two of the Amendments all the more essential. It is agreed even, I think, by the Government—that decentralisation is desirable. If so, and if it is to be (as Lord Lucas told us to-day) the cardinal principle on which the Act is based and the method on which the Act is worked, I should have thought that the cardinal article of faith and conduct would find its place even in the shortest of short catechisms—and much more in the long catechism which contains all the faith. The noble Lord, Lord Lucas, told us on June 28, when dealing with the particular Amendment in regard to decentralisation:I can tell the noble Lord frankly that we accept it in principle, but there is no necessity for it because the principle is there now. The very set-up of this system by which we keep in existence the identity of the individual firms shows that we require decentralisation as much as possible.But in that argument the noble Lord forgot that one wholly new factor has come into consideration. The set-up is not the old set-up of ninety-six competing companies; the set-up now is that of a Corporation which will become the sole shareholder and controller of every one of those companies. As Lord Layton said, one learns from experience that the whole tendency, the inevitable tendency, of these nationalised monopolies is towards centralisation and uniformity.
33 When we said that on the first of the nationalisation Bills we were told that we were talking theory. To-day, we are not talking theory; we are talking in the light of experience. Look at the experience we have had! As an example may I take coal, which to-day is centralised to a very large degree? There is great complaint, both among the miners and among the managers, about this excessive centralisation. Even the Government admit it, and yet they said on the Bill we discussed the other day, "We know we shall have to alter all this, but the time is not yet ripe." I thought the time was ripe when one had found the mistake. But having fallen into that error in coal, let us guard against it in the much more diverse and difficult conglomeration of industries with which we are dealing here. It is not only so in the case of coal; in the case of transport it is even worse. In the coal industry there are regional boards with some independent power. In the transport industry, regional boards have been set up on a pattern which makes any individuality quite impossible. The members of these regional boards are really projections of the people on the board at the centre. Each member of the regional boards is responsible to his opposite number at the centre, and, as we all know, a completely centralised policy is carried out.
We put a great many duties upon the Corporation by this Bill. It is made the duty of the Corporation to see to efficiency and all the rest of it. The noble Lord emphasised just now that it is for the Corporation to see that there is no undue preference. Of course, the Corporation will have to give broad directives on policy. It may well be that they will sometimes have to get down to a certain amount of detail. Suppose, as I said during our previous discussions, there was a slump and the production of steel had to be curtailed. It may well be that plans which have been made and which the Government said were inadequate will, in a normal world, be rather more than adequate. If steel production has to be cut down, clearly the Corporation must say how much steel is to be produced; they must say how production is to be cut and where it is to he cut. The difficulty is not in regard to giving broad directives on policy but with respect to the method 34 of execution. That, of course, is the field of the managements, and we say that it is essential that these firms should be free to carry out their own ideas.
I cannot say how much I agree with Lord Layton as to the value of diversity in this matter, as against uniformity. You have to consider not only steel making in the broadest sense but particular engineering enterprises the names of which have become household words because of the particular way these individual firms do theft jobs, whether it is in producing structural steel, in bridge-building or whatever it may be. What is right for firm A is not necessarily in the least right for firm B. Surely the wise thing to do is to say in the Bill that a diversity of practice is required. If we do not do that we shall certainly get uniformity. A duty is imposed on the Corporation to see that each of these firms is most efficient, and that the most efficient practice is followed. I have heard it said that one of the things the Government will do—I thought it was going to be the Corporation but now I hear it said by a Government spokesman that it is going to be the Government—will be to make less efficient firms more efficient, presumably by applying to the less efficient firms the standards of other firms. I can visualise the Corporation saying: "We have that duty. It is our duty to compare, it may be, Dorman Long's with Guest, Keen's, and see which, in our view, gives the better results. Then it may be that to carry out our duty of seeing that the industry is efficiently conducted, we shall have to say to Dorman Long's: 'You shall work in the way Guest, Keen's work if we think it the better way.'"
Even if on occasion the Corporation were right and they succeeded in improving the efficiency of one firm by making; it carry out the practice of another, in the long run it appears to us to be certain that tendencies to centralisation and uniformity will destroy all the initiative of competing practice and will land us in a far less competent, because far less practical, practice in steel and engineering than we have at present. Companies must retain their initiative; and not only that, but they must have confidence that they will retain it. And the Corporation, on their side, must know, by the direction given by Parliament in the Bill, that hat is the inten- 35 tion of Parliament and that that is the policy which they have to carry out. Therefore I think it is essential that we should lay down that decentralisation shall be a principle under which the Bill is to work. It is no mere question of administration. So I think the first Amendment is absolutely essential. And I am bound to say that I think the second Amendment is hardly less necessary. After all, what are the Corporation going to do when they get started? Presumably the first job of the Corporation during the nine months' period of gestation before the companies are absorbed—that metaphor may not be quite the right one; the Corporation no doubt will proliferate too; indeed it will do both—will be to decide how they are to run their business. They are given no direction in the Bill or by the Minister. In fact, I beg leave to say that I do not believe the Minister has the faintest idea how the Corporation are going to do their job. Therefore, what they have to do, in consultation with the companies, which they will not by then have taken over, will be to work out how this principle of decentralisation is to be applied. Why should we not know? It is not going to be easy.
I was reading recently—and I am sure the noble Lord, Lord Lucas, who reads the best books has read it also—T. S. Eliot's Definition of Culture, and I came upon this sentence in it.Decentralisation under central direction would be a contradiction.The noble Lord, Lord Lucas, is much more cultured than I am, but I am bound to say that that is a contradiction which the Government have not yet attempted to overcome. And I do not think they have the least idea how they are going to overcome it in the operation of this Bill. Surely it is reasonable that Parliament should know how they are going to do it. That is all we are asking here. We do not ask for it to be laid down in regulations or in any orders to be brought forward. We ask that the Corporation, when they have made up their minds how decentralisation is to work, should inform the Minister. Presumably they will do that because he has the responsibility. And when the Minister is told by the Corporation how they are going to work why should not Parliament be informed? After all, it is with us in Parliament that responsibility lies. The Minister is respon- 36 sible to Parliament. Why should he not come to Parliament and say: "This is the way in which the Corporation will do it"?
Perhaps the noble Lord will tell us to-day exactly how they are going to work, but I shall be surprised if he does. If he is honest with the House—and I know that he will be—I am sure he will say to the House in effect: "I have not the least idea how this is going to work." I am sure that if he has been instructed correctly—and he must have been instructed as to what he is to say—the Minister will say: "I do not know how they are going to work. I am not going to give the Corporation any direction. If the Bill goes through I, or my successor, will form a Corporation." And then what? If he is asked: "Do you know what the Corporation are going to do?" he will reply: "Of course I do not. I shall not know until the Corporation are appointed. The Corporation, when they have been appointed, will not know until they have directed their minds to it and engaged in contemplation and"—I hope—" in consultation as well. Then they will make up their minds as to how they are going to do it and I shall know."
If that is the position, why on earth should not Parliament know? We have had far too much—I do not want to use an offensive word; I was going to say "evasion"—may I say, "avoidance" in these matters. The Minister may say, "I am not concerned with details. It is not for me to answer to Parliament for that. This is an administrative detail, because it is the responsibility of the Corporation." If the Bill is left as it is, the Minister would be constitutionally able to say that to Parliament. But your Lordships will agree that that is not good enough for us. This is a most hazardous experiment. No one knows how it is going to be carried out. No one knows, and many of us are anxious or suspicious, how it is going to succeed or fail. At least we have the right to be informed about how things go. That is all the Amendment asks. It says that when the Corporation have made up their minds about how they are going to carry out this process of decentralisation, they shall inform the Minister and the Minister shall inform Parliament. Parliament has a clear right to that information. Ordinarily, when we have Bills brought before us, we are told how they are going 37 to work. But this Bill does not tell us. Never has such a Bill been presented to Parliament in the history of the country. At least Parliament is entitled to say, "If you do not know now, when you do know, come and give Parliament the information."
§ 4.22 p.m.
My Lords, since this group of three Amendments also stands in my name, and since it has been agreed that the general principles underlying them should be debated now, I should like to turn to one aspect which seems to me to be of outstanding importance. The question of decentralisation is now accepted, I hope. The status of the Corporation as a holding company and the question of decentralisation have been the subject of many debates, and I do not propose to continue on those lines; but there is one aspect which I do not think has been fully emphasised in the course of any of the debates that have so far taken place on the Bill. I would go back to what the noble Lord, Lord Lucas of Chilworth, said this afternoon in connection with the Amendment to page 5, line 34, where the Amendment sought to place statutory obligation on one of the publicly-owned companies. The noble Lord said that the whole scheme behind this Bill was that statutory obligations should be imposed on the Corporation but not on the publicly-owned companies—the publicly-owned companies being governed in their existence by the Companies Act—and that the obligations which were not contained in the Companies Act but which were contained in this Bill should be placed on the Corporation and not on the publicly-owned companies. That was the gist of his argument—the noble Lord will correct me if I am wrong.
The fact remains, however, that while these publicly-owned companies continue to exist and have their being under the Companies Acts under which they were founded, and under the last Companies Act, so far as it governs their activities this Bill alters their status to a remarkable degree. In the first place, the Ninth Schedule alters the rules and regulations which govern them under the present Companies Act. Not to put too fine a point on it, what this Bill does is to create an entirely new relationship for the companies which have their 38 existence under the various Companies Acts. The relationship which they will have with the Corporation hereafter will be something quite new. The main method by which the Corporation will impose their wishes on these companies, however much decentralised they are, is ultimately through getting rid of the directors; that is the sanction. The status of directors will be profoundly modified by the provisions of the Ninth Schedule. Therefore, having modified that position, it is essential to consider what the status of the directors and boards will be after that modification has been effected.
Under the present provision which governs companies and commercial relations generally, no one can give an order to a board, yet this Bill requires that the Corporation shall in fact give orders to boards. That is an essential difference. The whole theory behind the governing of companies up to date has been that the directors of a company take certain actions, and ex post facto they are held responsible to and by the shareholders for all they have done—but after the event, not before. No shareholder to-day can in law go to a board of directors and say he wishes them to do this; no man can go to any director and say he wishes him to do that. Yet this Bill, as is manifest throughout, requires that the Corporation shall in certain circumstances go to these boards and tell them that the Corporation wish them to do this or that. That imports an entirely new relationship and, broadly speaking, it is with that new relationship which these three Amendments deal, especially the second.
If this Bill had had a little more thought given to it before it was drafted and presented to Parliament, a Committee or a body of people would have been summoned to consider what might be the relationship between the Corporation and these separate companies. There are all sorts of administrative questions that must leap to the mind upon even a superficial consideration of this matter. Do the board or the Corporation, through their chairman or collectively, send for the chairmen of the companies they are taking over under the Third Schedule and tell them what their programme is to he for the next week or the next month? If properly decentralised, the answer is 39 "No, they do not. They wait until after the event." Throughout the Bill, nevertheless, the Corporation are required to do some things which involve anticipation of the event and not approval or disapproval after the event. How then is that direction, those orders, those programmes, to be conveyed? Does the chairman, through the secretary or the machinery of the Corporation, say to every individual company, "I want you not to draw wire, but to make rods," or, "We want sections of this size and not of that size for the next two months." Or do the directors of those companies still, in their wisdom, as they do to-day, roll the sections which they think, by ascertainment from the Iron and Steel Federation, the market requires and will require for the next few months? In other words, what is the administrative relationship between the Corporation and the companies?
I can readily see that a centralised machine would be much easier to work, at any rate in theory, than a decentralised machine. Do not think I am in favour of centralisation, because ever since the Second Reading I have been harping on that subject, as have most of your Lordships on this side. If we were to reduce the boards of all the Third Schedule companies to nonentities, to rubber stamps, and have a direct relationship between the managerial set-up in the Corporation and the managerial set-ups in the companies, then we should have a single operating Corporation throughout. I can conceive that that would be workable, at any rate on paper, but we have been assured by the noble Lord, Lord Lucas, and by other noble Lords throughout the debate—and we have heard it said in another place—that that is not the intention. We have been told that it is the intention to keep both the management and the directors of the Third Schedule companies in existence as independent bodies, and to have that minimum of control which will direct them alone the lines of the various clauses in this Bill.
If you disregard the centralisation theory in favour of the decentralisation set-up, which Lord Lucas and everyone has accepted, that connotes a new relationship for which there is no provision anywhere in this Bill. But even these three Amendments will provide 40 only a slight indication of the administrative change made, which would become public only on the laying before Parliament of the scheme referred to in the second of this group of Amendments. I confess that I am still left with the idea that, even if the Government accept all these three Amendments (I do not know how many they will accept, if any), the question of what is or ought to be the administrative connection between the top and lower levels has not been thought out. It was not considered when the Bill was drafted, and does not appear to have been in the Government's mind at any time during the months that this Bill has been debated by both Houses. We have had no indication that this matter has been considered. If it had been thought out, I believe that we should have had some sort of indication.
I agree with the noble Viscount, Lord Swinton, that if Lord Lucas were to give a straightforward reply to the question as to what this administrative connection between headquarters and the companies ought to be, he would say: "I do not know." If he said that, he would probably go on to say: "It will not be the same between the Corporation and company A as it will be between the Corporation and companies B, C, D and E." In other words, he may say (I do not know what he will say, and I do not want to put words into his mouth) that it will be a different relationship in each of the cases of the larger companies. If it is different in each of those cases, it nevertheless creates a new relationship, because if it is tight in one case and loose in the other it requires a whole new corpus of administrative thought, and, indeed, a legal set-up, which goes far beyond anything contemplated in the Companies Act or in this Bill. It is quite clear that there is no such scheme as yet in existence, because otherwise not only would it have figured in statements made but I believe it would also have figured in the Ninth Schedule, whereas in the Ninth Schedule all we find is one sanction only—namely, the removal of the directors.
The removal of the directors is a very interesting subject. It is open to a board of directors, on being told that the Corporation desire to remove Mr. A from the board because they consider him obstructive or difficult—I am not talking 41 about the removal for incompetence, but the removal for disagreement—to say that they also will resign. Obviously that would create a good deal of publicity if it happened in the case of a large company, and it would necessitate the Corporation, after consultation with the Minister, invoking the powers provided in the Ninth Schedule to get rid of the whole board. But as a piece of administrative machinery, is it really suggested that it is a good and easy working machine where you provide only one sanction—namely, the sanction of sacking? It is rather like trying to use a shotgun to exterminate flies. There may be a little piece of grit in the administrative machine between the Corporation and a company. Are the Corporation, every time that little piece of grit appears, from the mentality or the actions of a person on the board, always to hold out the threat of the big gun, always to hold out the threat of sacking—and sacking not only that director but also the other directors if they happen to agree with the candidate for removal? That suggests to me so crude a relationship that I am fortified in my conviction that what this relationship is and ought to be has never been thought out, and that if it had been thought out we should have had a differently drafted Bill.
I shall have one other thing to say when we come to the third of these three Amendments, but I will not anticipate that now. I hope the Government will find it possible to agree with the first of the three Amendments, to which other noble Lords and I have spoken, and I now beg to support it.
§ 4.35 p.m.
§ LORD LUCAS OF CHILWORTH
My Lords, may I first express my gratitude to the noble Lord, Lord Layton, for putting these three Amendments together? As he quite rightly said, they hang together. May I also, with respect, say how much I appreciate the tenor, not only of his speech but of those of the noble Viscount, Lord Swinton, and the noble Lord, Lord Rennell? These Amendments raise the general question of the relationship between the Corporation and the publicly-owned companies, a matter which was raised in Committee by the moving of two Amendments—namely, the new clause after Clause 4 and the addition to 42 the Ninth Schedule. I agree with most of what has been said this afternoon, and I do not think there is much between the Government and the noble Lords who have spoken on these Amendments. To show the Government's sympathy with the spirit that is behind these Amendments, I am prepared on their behalf to accept the first Amendment, if the noble Lord, Lord Layton, will move it in slightly different terms, which I will mention in a moment. However, I hope to be able to persuade the noble Lord to withdraw the other two, by convincing him that they would be absolutely inoperative.
On a number of occasions the Minister has declared his intention that the Corporation should act as a holding company, leaving a wide measure of discretion and initiative to the boards of the underlying companies—I am now trying to deal with the question of centralisation that has been raised. The holding company technique has been well developed, not only in this country but throughout the world. The precise form which it has taken in any particular group has varied according to the circumstances of the industry concerned. However, there has been one common element in them all—namely, that the shareholding concentrates the ultimate control at the centre. That is the one common factor in any holding company that has been formed, not only in this country but throughout the world. The precise way in which this technique will be applied to the iron and steel industry following the implementation of this Bill must depend in large measure on the respective personalities of the Corporation and the directors of the underlying companies. These directors will retain a large measure of independence and initiative. Surely, there is no reason why, with good will and common sense, those qualities cannot be preserved and enlarged upon quite a substantial scale.
The next two Amendments are an attempt to write into the Statute something which in the ultimate must depend upon the human relationships. Quite frankly, they fail in exactly the same manner as the two Amendments on the same subject, which were moved in Committee, because they attempt to define the indefinable. It is the view of the Minister that his responsibility for the success of this Bill is at its height when 43 he makes the initial appointments of the members of the Corporation. It is his intention to find persons who can set and maintain a course of high policy and who can run the organisation, not as a single manfacturing unit directed from above at every point but as an organisation which depends upon the good will, tolerance and integrity of those at every level, including in particular the chairman, directors and technicians of the individual companies. I submit to your Lordships that if the good will and tolerance of these people cannot be secured by good sense, no statutory provisions, however brilliantly drafted, will ensure that success will be achieved. Those are the general grounds on which I ask the noble Lord not to move the second and third Amendments. As an earnest of the Government's firm intention—it has been repeated times without number—that we shall carry on this policy of decentralisation, if the noble Lord will move his first Amendment in the following terms I shall be prepared to accept it. It will be to insert as a new sub-paragraph (c):to secure the largest degree of decentralisation consistent with the proper discharge by the Corporation of their duties under the preceding provisions of this section and under any other provision of this Act.With the second Amendment, the noble Lord is really asking the Corporation to do something which is absolutely impossible. The noble Viscount, Lord Swinton, made my case when he said that the conditions which will suit firm A are totally different from the conditions and the set-up which will suit firm B. Yet you are asking, by this Amendment, that, before the date of transfer, the Corporation shall disclose to the Minister and public at large some cut-and-dried scheme showing the manner in which they propose to exercise their rights. There may be all sorts of schemes appropriate to a wide division of 250 firms. How can you ask the Corporation, nine months before the vesting date of this Bill, to come before Parliament and say "This is precisely how"—
§ VISCOUNT SWINTON
Will the noble Lord forgive me? It is not to come nine months before the vesting date. It is between the date of the Act's coming into force and the transfer date, which is again nine months. One job of the Corpora- 44 tion will be to find out how they are going to do it. That is what we ask that they should tell us.
§ LORD LUCAS OF CHILWORTH
It may be nine years before the technique is worked out with some of the divers interests in the steel industry. You are asking the Corporation to do something which I suggest no noble Lord sitting as chairman of that Corporation would ever take the responsibility of doing. For an industry like the iron and steel industry to arrive at a cut-and-dried plan in nine months everybody's interests would have to be ridden over roughshod. How are you going to have consultation with boards of directors of 250 firms to see whether an overall plan suits every particular set-up? The noble Lord does not want this uniformity or cast-iron rigidity of working to a planner's plan. It is an absolute impossibility, and it could not but break down. It could not succeed, because you could not have the necessary consultations with the 250 boards of directors of the principal companies in this industry. I suggest that the plan in some regards will never be finalised at all.
§ LORD LUCAS OF CHILWORTH
Not even before the Judgment Day—or at least before the noble Lord appears on the Judgment Day. With regard to the third Amendment—
§ LORD LUCAS OF CHILWORTH
Then the noble Lord will have an opportunity of answering anything I say now. The noble Lord who moved the first Amendment really spoke to all three, and I thought I should deal with the points he raised.
§ LORD LAYTON
In moving the first Amendment, I suggested that it should be possible for the debate to cover the other two.
§ LORD LAYTON
But I take it that there will also be an opportunity of speaking to the other Amendments.
§ LORD LUCAS OF CHILWORTH
When the noble Lord has listened to me, I hope there will be nothing further to be said. So far as I understand the third Amendment—and I may be wrong—it appears to me in any event to be ineffective unless you alter the provisions of the Ninth Schedule in paragraphs 4 and 5. You could not have this Amendment and leave those paragraphs as they are. That may be a technical reason for not accepting this Amendment. The purpose of this Amendment, as the noble Lord said when he moved it, is to freeze for five years the boards of these companies and to freeze the Memorandum and Articles of Association as affecting the appointment and the dismissal of the directors.
§ LORD LUCAS OF CHILWORTH
If you say that the provisions of the Articles of Association as they affect the dismissal are to be inoperative, I do not know what it is but freezing. I think the noble Viscount, Lord Swinton, gave the noble Lord the best answer. Is it conceivable that any Minister, unless he qualifies for that category about which noble Lords were so anxious this afternoon—the category of insanity—for the sole purpose of riding roughshod over the board of directors would "sack the lot"?—they were the noble Viscount's words. That is the only object which has emerged from the discussion we have had upon the third Amendment. If it is because you think their security of tenure is necessary to give them the incentive to carry on that they should have the fear of the sack removed, are you going to extend it to the technicians?
This is very important. The noble Lord is definitely giving out to the world at large that our Amendment freezes the directors in their jobs. I cannot see that at all. They hold their jobs according to the Articles of the company, and the company can always get rid of them.
§ LORD LUCAS OF CHILWORTH
The Amendment says:A publicly-owned company shall not, within the period of five years immediately following the date of transfer, add to or alter any of the provisions of its memorandum or articles of association which relate to or affect the appointment or tenure of office of its chairman or 46 president or similar officer or of its directors or any of them, except in pursuance of a recommendation of its board of directors.
§ VISCOUNT SWINTON
That does not mean that every director is to hold his appointment for five years. The ordinary Articles of Association provide that some of the directors come up every year for re-election. If you leave the Articles alone the Bill goes through and the Corporation is formed. On July 1, five directors of Dorman Long come up, under the Articles of Association, for re-election. The Government, without altering the Articles of Asscciation, could say "We do not want these five gentlemen, we want five other gentlemen." It does not freeze anybody.
§ LORD LUCAS OF CHILWORTH
Perhaps I had better wait and hear what the noble Lord, Lord Layton, says is the purpose of this Amendment because I cannot see its force. If it is not to make security of tenure for existing directors then I do not know what it means. Perhaps I have entirely misunderstood the clause, and I will therefore wait until the noble Lord speaks again in the hope that he may throw on the Amendment some light which has escaped me at the present time. But with regard to the first Amendment, if the noble Lord will move it in the terms I have suggested I am prepared to accept it.
My Lords, I should like to draw your Lordships' attention to the very serious position into which the Government have got themselves. As the noble Lard has said, they have given assent to the principle of decentralisation and are prepared to go further by accepting the first of these Amendments, but they are quite unready to consider what decentralisation means and are quite prepared to visualise a period, which might be up to nine years, before the principle of decentralisation can be defined.
§ LORD LUCAS OF CHILWORTH
Will the noble Lord forgive me? I did not say that. I said before the ultimate plan can be worked out.
I will accept the noble Lord's amendirent, "before the ultimate plan can be worked out." This is in line with what has all the time been happening in relation to the Government's treatment of the iron and steel 47 industry. Ever since the present Government took office there has been indecision, and the Bill has been brought forward only after many vicissitudes and changes; and now they do not know what the Corporation are going to do. I speak from experience of the industry in Scotland, and it is a long way from London. As I said before, there is no iron curtain across the Border; the industry in Scotland is integrated with the industry in England, but on a voluntary and flexible basis; and there is a great anxiety that decentralisation should not only be accorded to it in name but should be a fact. I therefore suggest that the noble Lord should press this Amendment and should seek from the Government something more than the Micawber-like attitude of "waiting for something to turn up" which is all they have shown up to the present time. Surely it should be possible, in the time before the general date of transfer, for some serious thought to take place and a provisional scheme brought forward; otherwise, the noble Lord's assurances that decentralisation is the intention of the Government are without avail. I hope the noble Lord will press his Amendment.
§ LORD LAYTON
My Lords, I am quite prepared to accept the Government's redrafting of the first Amendment. I beg leave to withdraw my original Amendment.
§ Amendment, by leave, withdrawn.
§ Amendment moved—
Page 5, line 42, at end insert—
(c) to secure the largest degree of decentralisation consistent with the proper discharge by the Corporation of their duties under the preceding provisions of this section and under any other provision of this Act."—(Lord Layton.)
§ On Question, Amendment agreed to.
§ 4.55 p.m.
LORD LAYTON moved to add to the clause:
The Corporation shall, before the general date of transfer, prepare and submit to the Minister a scheme showing the manner in which they propose to exercise the rights conferred on them by the holding of interests in publicly-owned companies so as to secure for those companies the largest measure of
autonomy consistent with the proper discharge by the Corporation of their duties under this Act, and the Minister shall lay a copy of such scheme before each House of Parliament.
§ The noble Lord said: My Lords, I beg to move the second of these Amendments, and in doing so may I say that I find Lord Lucas's explanation completely unsatisfying. After all, it is not as though this were a new problem; it is not something that has to be discovered by experiment. The holding company technique existed in this country, in Germany and in the United States many years ago. I.C.I. has its holding company; there is Unilever, and the German steel cartel—they all have long experience of drawing up the relationship between the centre and its subsidiaries. Generally speaking, this problem of decentralisation in huge mammoth organisations is one which has been growing and developing over a decade. The Government now seek to ask us to accept the view that they will find out by trial and error. This proposition of trial and error, and nothing more, which the Government offer us, will, I fear, end in error.
§ The noble Lord said the ultimate solution will not be reached for ten years. Of course not. We are not here asking the Government to write out from A to Z a complete organisation, with every detail of the relationship of the centre. All we are asking them to do is to indicate the limitations of the power which the Corporation will exercise over the management of the companies. We are not asking them, for instance, to enumerate every single possible thing that they will not do. It is significant that in this Bill there is hardly a clause which contains the phrase "the Corporation shall not" do anything. This is a very mild Amendment asking the Corporation, before they begin to function, to say that they will not go beyond a certain line. It is absurd to say that it is impossible to give any general indication. Of course, in the first instance, it will be a general indication, and of course it will be flexible. It is not suggested that once it is laid upon the Table of Parliament it is there for all time; naturally it can be changed by experience.
§ I am left completely cold by the suggestion that one would not find anybody to accept a position on the Corporation on these terms. It is not a very astonishing proposition to try to collect a group 49 of people and say, "We want you to launch this particular industry; we ask you first to band yourselves together and say how you are going to do it, and we then want to have a look at the result before it is brought in." I cannot conceive anybody saying that that is an intolerable proposition to put up. I do not feel disposed to withdraw this Amendment; indeed, I ask your Lordships to carry the Amendment for its own sake, as well as for the argument which I made in the last sentence of what I said before: that this is the sort of function which we can properly undertake—namely, to present an Amendment like this to another place and ask them to consider it. I beg to move.
Page 5, line 42, at end insert the said words.—(Lord Layton.)
§ THE EARL OF DUDLEY
My Lords, I do not think your Lordships realise what a very important function the British Iron and Steel Federation plays in this industry. It controls the policy of the industry, and it has a wide network of committees which cover every aspect of the industry. I think I may safely claim that the good conduct story of the industry and the high standing which it enjoys in the eyes of the public, and particularly the consuming public, is due lamely to this highly efficient organisation which governs the policy of the industry. For many years now it has formed an effective link between the Ministry and the individual companies, and yet they are outside the ambit of the Federation. Once the policy has been laid down by the Federation—a policy which is, of course, largely directed by the Government—the individual companies, under their boards of directors, are entirely free to carry on within the ambit of that policy. We have not been told to-day what is to take the place of the Federation. I think that is a most important question; we must know that. We must be told at the earliest possible moment what kind of organisation this Corporation is going to set up. Will it take the place of the Federation? Will it have a similar constitution to that which the Federation now has? If so, noble Lords will be well satisfied, because the Federation has worked well. But we must have some kind of idea of how this organisation is going to work; 50 and I submit that the matter is being left on a very unsatisfactory footing. For that reason alone I am glad to hear that the noble Lord is going to press his Amendment to a Division.
There is another aspect. Every manager, at a great many levels, is wondering what his position will be. These managers, as I have explained before, are men upon whom the industry depends. Many of them are very independent men—they are by no means "Yes men"; and it is their healthy, stubborn and independent point of view which has been largely responsible for the success of the industry. Theirs is a healthy, independent point of view. These men will not continue in the industry unless they know that under nationalisation they will have the same measure of responsibility as they enjoy at present. Therefore, if the Government are going to retain the services of these men at various levels they must offer them some security of tenure and some responsibility in the future—I am speaking not only of the present managing directors but of men at various levels who are working up to that position. It is very important that the Government should give some indication of what they are working to and what the position of these people will be in the future.
§ VISCOUNT BRIDGEMAN
My Lords, I think the noble Lord, Lord Lucas, when he was discussing this second Amendment during the passage of the first Amendment, dealt more or less under two headings with the problem of what is to happen to the nationalised companies. There was the questien of the directors themselves, and also the question of how the administrative arrangements would be worked by the Corporation and the nationalised companies. As this debate has proceeded, I, for one, have become less and less clear about what is going to happen; and I can assure noble Lords opposite that the steel companies themselves, small and large, are getting very perplexed about it.
Take the question of the directors themselves. I understood the noble Lord, Lord Lucas, to say that the Corporation would like to wait and see how the directors behaved themselves and what they were like. If they were satisfactory they would no doubt remain in office, but if not, the Ninth Schedule 51 would be brought into play and they could be put out straight away. Then the noble Lord likened the position between the Corporation and the publicly-owned companies to the position between a holding company and its subsidiary companies. I do not think that is quite a fair parallel, because if the noble Lord will reflect on some companies of which he knows, he will recall that there is an exchange of directorships between the holding companies and the subsidiaries—if, in fact, the directors are not the same. That produces a different personal aspect from the aspect in this case, where the Corporation will consist of one set of people and the boards of the publicly-owned companies of another, with no connection. That is why the noble Lord's argument that it will be the same in this case as in the case of a holding company and its subsidiaries will not fill the bill, and why it is necessary that some sort of indication should be given of what are going to be the relationships between two entirely different sets of people.
I was interested to hear the noble Lord's remarks about the administrative aspects. What is the working going to be between the publicly-owned companies and the Corporation—and possibly the Federation? This is really fundamental, whereas, perhaps, the question of the directors themselves is not. This question of administrative working takes us right back to the good old days, when it was still thought necessary by noble Lords opposite to say that this Bill for the nationalisation of iron and steel was necessary for making certain administrative improvements, to improve the integration and to increase the efficiency. If that was ever true, then presumably the Government must have had some idea in mind how they were going to work it and what they were going to do. It makes a great deal of difference, because if the companies are to carry on with their commercial and productive operations in the same way as before, why in the world is nationalisation necessary? Conversely, if nationalisation is necessary, then what steps are to be taken to bring about the benefits which Parliament and people have been assured will flow from it? The noble Lord, Lord Rennell, when he spoke on the preceding Amendment made a great deal of 52 that point and I wish to emphasise everything he said about it. There must be some commercial changes which have been thought of in the Ministry of Supply; there must be the question concerning the way in which responsibility will be placed. Technicians, for instance, may have their own technical channel of communication independently of the boards. If that has not been thought out, then the case for the Amendment standing in the name of the noble Lord, Lord Layton, is a cast-iron one.
But when the noble Earl, Lord Dudley, began to talk about the Federation, then, I think, the full case for this Amendment came out. He dealt clearly with the matter and with the co-ordinative functions exercised by the Federation. If the Federation disappears, or if arrangements are made whereby the companies have to work for the Corporation on subjects in respect of which they now work for the Federation, then there will be major interference with the day-to-day administration and with the commercial business of the companies, and therefore interference with the day-to-day production of steel. Surely, if we want—as we all do—to maintain the record-breaking production of steel, we ought to use the time we have in getting down to the problems posed by this Amendment. It is in order to make sure that these problems are really studied that this Amendment has been moved.
§ LORD LUCAS OF CHILWORTH
My Lords, I fear that nothing that has been said by the noble Lord who proposed the Amendment, or by any other noble Lord, has convinced me that this would be other than the greatest burden and handicap to put upon the Corporation. You are asking the Government to manufacture in nine months a strait jacket into which to place approximately 250 companies. Are you asking it to produce this master plan before consultation with those companies? If so, what are you going to do with 250 companies who disagree with the plan and say: "That particular plan will not suit my method"? How are you going to consult 250 companies and get a large measure of agreement in nine months?
§ THE EARL OF DUDLEY
My Lords, may I interrupt for a moment? Noble Lords may remember that in 1930 the steel industry was invited by the then 53 Chancellor of the Exchequer and the Prime Minister to appoint an independent chairman and entirely reorganise its constitution on condition that it was given a preference to bring it into line with the industry in competing countries. That was done within the space of six months and the constitution then drafted has never been altered.
§ LORD LUCAS OF CHILWORTH
My Lords, there is no parallel at all between the two. I cannot accept this Amendment, for the reasons already stated. It may seem desirable. It is rather like one of those delightful educational graphs that appear in a weekly periodical which the noble Earl knows as well as I do. It looks lovely as a graph, but I am far more interested in the practical, human difficulties of resolving some of the problems which will have to be resolved by 250 boards of directors in nine months. I am surprised at the noble Earl. I hope he will forgive my saying that a speech like his about security of tenure is a damaging speech and is far more likely to undermine any sense of security in the industry than do otherwise. Other noble Lords on these Benches and I—indeed the Minister himself—have made it plain that we intend that the boards shall run largely as they now do. They will have a great measure of decentralisation. And now the noble Earl makes a speech like that. It is a shameful thing to try and make a point in this debate by introducing discord.
§ VISCOUNT SWINTON
My Lords, I think that is the most extraordinary speech that anybody has ever heard from the "Ministry of Planners." A Bill is introduced, and the whole industry is to be transferred to the Corporation. We ask the Government: "What is the broad, plan of relations between the commander-in-chief and the corps commanders?" They reply: "We do not know." We say: "We think it rather odd that you should have produced the Bill without in the least knowing how it is going to work. When you have set up the Corporation and know what their plan is and how it is going to work, will you tell us?" The reply is "No." When we ask why, we are told "It is because we do not know when they will have a plan or whether they will have a plan." I say that you have no business to transfer ninety companies, 290 companies or even one company to this Corporation until you know, or, at any rate until the Corporation know, how it is going to work. The short answer of the planner—I am not sure whether the Minister of Supply is an Etonian, but I rather think he is, and no doubt he relies upon the "Distant Prospect" of his old school—is:Where ignorance is bliss,'Tis folly to be wise.
§ On Question, Whether the said words shall be there inserted?
§ Their Lordships divided: Contents, 63; Not-Contents, 21.55
|Cholmondeley, M.||Swinton, V.||Hawke, L.|
|Salisbury, M.||Trenchard, V.||Howard of Glossop, L.|
|Townshend, M.||Jessel, L.|
|Willingdon, M. [Teller.]||Sheffield, L. Bp.||Layton, L.|
|Beatty, E.||Ashton of Hyde, L.||Lloyd, L.|
|Buckinghamshire, E.||Baden-Powell, L.||Mancroft, L.|
|Dudley, E.||Balfour of Inchrye, L.||Milverton, L.|
|Fortescue, E. [Teller.]||Barnby, L.||Montagu of Beaulieu, L.|
|Halifax, E.||Blackford, L.||Moyne, L.|
|Howe, E.||Brassey of Apethorpe, L.||O'Hagan, L.|
|Lindsay, E.||Carrington, L.||Remnant, L|
|Munster, E.||Cherwell, L.||Rennell, L.|
|Selkirk, E.||Clanwilliam, L. (E. Clanwilliam.)||Rochdale, L.|
|Ypres, E.||Rockley, L.|
|Clydesmuir, L.||Saltoun, L.|
|Bridgeman, V.||De L'Isle and Dudley, L.||Somers, L.|
|Buckmaster, V.||Derwent, L.||Strathcarron, L.|
|Caldecote, V.||Fairfax of Cameron, L.||Strathcona and Mount Royal, L.|
|Cowdray, V.||Forester, L.|
|Davidson, V.||Gifford, L.||Teynham, L.|
|Falmouth, V.||Grenfell, L.||Wardington, L.|
|Monsell, V.||Hacking, L.||Wolverton, L.|
|Jowitt V. (L. Chancellor.)||Ammon, L.||Kershaw, L. [Teller.]|
|Archibald, L.||Lucas of Chilworth, L.|
|Addison, V. (L. Privy Seal.)||Chorley, L. [Teller.]||Macdonald of Gwaenysgor, L.|
|Crook, L.||Marley, L.|
|Huntingdon, E.||Darwen, L.||Morrison, L.|
|Hare, L. (E. Listowel.)||Pakenham, L.|
|Hall, V.||Henderson, L.||Shepherd, L.|
|St. Davids, V.||Holden, L.||Strabolgi, L.|
§ Resolved in the affirmative, and Amendment agreed to accordingly.
§ 5.24 p.m.
LORD RENNELL moved to add to the clause:
A publicly-owned company shall not, within the period of five years immediately following the date of transfer, add to or alter any of the provisions of its memorandum or articles of association which relate to or affect the appointment or tenure of office of its chairman or president or similar officer or of its directors or any of them, except in pursuance of a recommendation of its board of directors.
§ The noble Lord said: My Lords, I beg to move this Amendment on behalf of my noble friend, Lord Layton. This is the third of the group of Amendments. I told Lord Lucas in the course of my remarks on the first part of this group that I would have something to say; as a matter of fact, I have many things to say. First, I think the noble Lord was misinformed in what he started to say but stopped saying when we dealt with the first of these Amendments. It is not true that this would "freeze" a board of directors. The intention is to leave the provisions in the Ninth Schedule as they are, but that the Corporation should not exercise their right as the sole shareholder to alter the method in which directors are appointed or re-appointed. For instance, if one-third of the directors of a company retire at the end of each year, the Corporation should not put in the articles a provision requiring that all the directors should retire every year. This Amendment by no means carries out our full intentions, but its sole object is to give the boards of directors a greater feeling of security during the initial five years; and it is limited in its operation to five years.
§ We have spoken a great deal, ad nauseam almost, of centralisation and decentralisation, and I am not going over that argument again. But suppose the Minister appoints a Corporation who find it difficult to organise the group of 56 companies for which they become responsible as the sole shareholder, otherwise than by centralising more than is the intention of the Minister and the Government to-day, the object of the Amendment is to ensure that the boards of directors shall not be made into "rubber-stamp" boards within a short period of the commencement of operation of the Act. At the end of five years things will perhaps have settled down a little and some of the plans to which the noble Lord referred may have evolved in the minds of the Corporation and the Government and they may have a scheme by then. The object of the Amendment is to avoid in the initial period a snap decision by the Corporation designed to alter the composition of boards of directors without taking sufficient time to think about it; and also to ensure that the people who have so effectively carried on the direction of the steel industry up to date shall feel that their work has been recognised by having at least five years during which to look around and, if they do not agree with the Corporation, eventually to fade out of the picture. This is not a powerful Amendment; it is an Amendment designed mainly to secure confidence and to ensure what the noble Lord himself, I think, had in mind—that there should be continuity and that people should not feel that they were at the mercy of the Corporation, to be got rid of each year by the simple process of altering the articles.
§ Before I close my remarks on this Amendment (because I dare say there will be a number of speakers upon it) I would like to point out that to-day we have eight Amendments to Clause 4. On Committee stage this particular clause was discussed for some time. I have not calculated the number of man-hours that have been spent in your Lordships' House in dealing with Clause 4, but the fact that so much has had to be said about Clause 4 shows how unsatisfactory it appeared to be to us in the form in which it came—and it is not satisfactory 57 even now. Much attention has been devoted to this clause and it is right that a great deal of attention should be devoted to it, because in a sense it is the most important part of the whole Bill. I wonder whether a case has not been made out, as shown by this debate and all these Amendments, for recasting the whole of Clause 4, and whether that course should not be taken between now and the time when the Bill as amended will have to be reconsidered in another place. I do not want to be controversial about it, but I do not think the question of the relationship between the Corporation and the subsidiary companies has been properly thought out. I do not believe that it was ever properly discussed with the industry; in fact, I do not think it was discussed at all. I believe that if Clause 4 remains even as now amended, it will still be a very bad statement of the duties of the Corporation as a whole. I hope the Government will consider the desirability of re-casting the whole of the clause so as to devise a text which will satisfy the real and sincere opposition which has been expressed from this side of the Committee to the clause in its present form. I beg to move.
Page 5, line 42, at end insert the said words.—(Lord Rennell.)
§ LORD LUCAS OF CHILWORTH
My Lords, I have only a very brief word to say in regard to this Amendment. I have said, and I repeat it, that the Minister and the Government recognise that the whole success of the Iron and Steel Corporation, under this Bill, must rest upon the confidence which can be brought into the relationships between the Corporation and the boards of the individual companies. If anything such as the noble Lord fears is likely to happen, no provision such as that which he has moved will alter the position. But if there is that confidence which I hope and believe there will be, nothing which he has set out in this Amendment will be necessary. I am sorry that I cannot accept the Amendment, but, as I say, I take the view that there will be that confidence of which I have spoken. The Government and the Minister will do everything they possibly can to inspire that confidence between themselves, the Corporation and the boards of the companies.
§ On Question, Amendment negatived.58
§ 5.33 p.m.
VISCOUNT SWINTON moved to add to the clause:
() If any such undue preference or unfair discrimination as aforesaid is shown or exercised or reasonably apprehended, any person affected shall have a right of action for damages, or for an injunction or other relief as may be just.
The noble Viscount said: My Lords, we had some discussion last time not as to the merits of this Amendment but as to whether special provision was necessary. I was advised by very high legal authorities that such provision was necessary. I have since been supplied with a report of a judgment delivered by the late Lord du Parcq, in a case as recently as April 1 of this year. I would like to read to your Lordships an extract from that judgment. Lord du Parcq said:
The question whether the imposition of a duty by a particular Statute impliedly gives a right of action to a person injured by reason of a breach of that duty frequently demands the attention of legal practitioners and of the courts.
The noble and learned Lord then went on to cite a number of authorities in which it depended upon the particular Statute, whether an individual had, or had not, a right. He went on—I am sure that your Lordships will pay to his words attention which you would pay to the words of few in matters of this sort—to deliver a passage which was characteristic of his very charming sense of humour.
To a person unversed in the science, or art, of legislation it may well seem strange that Parliament has not by now made it a rule to state explicitly what its intention is in a matter which is often of no little importance, instead of leaving it to the courts to discover, by a careful examination and analysis of what is expressly said, what that intention may he supposed probable to be. There are no doubt reasons which inhibit the Legislature from revealing its intention in plain words. I do not know, and must not speculate, what those reasons may be. I trust, however, that it will not be thought impertinent, in any sense of that word, to suggest respectfully that those who are responsible for framing legislation might consider whether the traditional practice, which obscures, if it foes not conceal, the intention which Parliament has, or must be presumed to have, might not safely he abandoned. The questions which this traditional legislative reticence so often brings before the courts are sometimes difficult…
Then he says that in the case before him the question is not so difficult, and he goes on to state the conclusion to which he came.
§ I think we should pay this tribute to Lord du Parcq's memory. We should carry out the very serious advice which he gave us—that when Parliament means there to be a right of action in a case like this it had better say there should be a right of action. I beg to move.
Page 5, line 42, at end, insert the said new subsection.—(Viscount Swinton.)
My Lords, this Amendment looks attractive at first sight. Before saying a few words about its merits I am going to suggest that the language of the Amendment is capable of improvement. If the noble Viscount will look at the last line I think that if instead of the words "or for an injunction or other relief as may be just" he might agree that we should substitute: "or for an injunction or for such other relief as may be just." I suggest that the addition of the two words "for such" would he an improvement, if it is intended to press the Amendment.
With regard to the merits of the Amendment I understand that, in any case, it is really redundant as there is ultimate recourse to the courts long before that stage is reached. There is also the most elaborate procedure of the appeal, by way of the Consumers' Council, to the Minister, and I presume that the most rapid way to obtain redress in the case of a flagrant example of discrimination would be for a consumer to approach his own Member of Parliament and get the matter raised in the House. I imagine that it would be perfectly in order to do so. That being so, I suggest that the Amendment is redundant, although, as I admit, at first sight it may seem attractive.
§ THE LORD CHANCELLOR (VISCOUNT JOWITT)
My noble friend the Leader of the House has asked me to speak on this matter. By reason of his kindness and his determination to see that I do not try to do too much, I have not had a great deal to do with this Bill, so I bring, I hope, a rather fresh mind to bear upon it. I would say by way of excuse only that I have not been altogether idle in regard to other Bills which 60 have been, and are being, dealt with. I have looked at this clause, and may I say that of course I am familiar with the speech which the late Lord du Parcq made in the recent case. I think the broad general legal principle is this: that whenever you find an obligation imposed you have to try to find out, from the whole purview of the Act, whether it was or was not the intention of the Legislature to give a right of action to an individual aggrieved by what is alleged to be a breach of the Act. It is by no means always an easy matter to decide. I strongly take the view in this case that on the general purview of this measure an individual would have such a right of action. That is my view as the Bill now stands.
But when I advise your Lordships upon points of law, I always try to give you the benefit, for what it is worth, of my honest opinion, and I cannot say that I think the matter is beyond any doubt. I think that any lawyer who might be listening to me would agree with what I say. If asked for my opinion I say that I take the strong view that the man would have such a right of action. But I do not say it is one of those cases in which I cannot be wrong. I have often in my life been wrong, and this may be one of the cases of that sort. So I state at once that there is an element of doubt. I do not think there is very much, but that element of doubt could be removed if this Amendment were inserted. So far, I think I have candidly given the noble Viscount what he wants.
When the noble Viscount the Leader of the House asked me to take on the task of dealing with this Amendment I looked at it and I also looked at the clause more critically than I had done previously. I must say that to my mind Clause 4 is a most amazing clause—I speak with particular reference to paragraph (b). I am quite familiar with the obligation not to grant undue preference. We might have such a thing as an electricity company or a railway which has particular rates, or anything of that sort, and it is then fairly easy to work. But when you have a concern like the iron and steel concern—not be it observed merely the Corporation, for this applies to every publicly-owned company—when I am told they must not give undue preference. I begin to wonder what on 61 earth it means. When I see the obligation qualified in Clause 4 (b) by the wordsbut without prejudice to such variations in the terms and conditions on which those products are supplied as may arise from ordinary commercial considerationsthen I say, with the greatest respect, that all this talk about no undue preference is meaningless.
As a statement of intention, this Amendment is no doubt unexceptionable. Obviously we do not want by malice to put anybody out of business. We are all agreed that would be most improper. Equally it is obvious that these publicly-owned companies must not be hampered in the ordinary conduct of their business. They must not have to say, "If I charge 5s. to Mr. A, I must remember that I charged only 4s. 9d. to Mr. B, and some other public companies somewhere else charge only 4s. 3d." It may be that these would be ordinary commercial considerations. I do not know whether the fact that one has dealt with a man for a long time or the fact that one wanted to secure his patronage is an ordinary commercial consideration or not. These matters are really not fit for the courts at all. They lie in the realm of vague intention, of general moral principles. I suggest that what we ought to do is what we did in the Transport Act. It is true that the Transport Act contains no section against undue preference, because the conditions are so different, but in the Transport Act there are sections imposing duties for the purpose of particular users, as, for instance, reserving for them the right to have a certain method of transport if they like that best. What we did in that case—and your Lordships passed it—was to insert this provision:Nothing in this section shall be construed as imposing on the Commission, either directly or indirectly, any form of duty or liability enforceable by proceedings before any court.That is to say, the remedy is a Parliamentary sanction and the right of appeal to the Minister. I suggest that is the way to do it here. I very much hope that the courts will not be burdened with trying to make sense out of this quite unprecedented provision about undue preference.
This Amendment is pointing a sort of signpost to everybody, and there may be evilly disposed people who want to bring this scheme into discredit and who would start all sorts of actions in the 62 courts. The unfortunate judges would then have to try to determine the meaning of a clause which is really almost meaningless. I suggest that the remedy here is the Parliamentary remedy. If any of these things are done, then do not go to the courts with it, but to the Consumers' Council and the Minister, and have the question raised in Parliament. Though, of course, I agree with the noble Lord who moved the Motion and with Lord du Parcq's reasoning, that we intend that benefit to inure to a particular individual, thanks to this Amendment I have had my attention directed to the statement in Clause 4 dealing with "no undue preference" and to the qualification which is placed upon such preference, and I take the very strong view that this is not a matter for the courts at all. I take the view that the right thing to do is for the Government to table an Amendment at Third Reading (and my noble friend the Leader of the House will be able to speak presently and say whether in his opinion this is not the better course), making it plain that though we accept the general statement that the Corporation and the publicly-owned companies shall not, by means of undue preference, put a man out of business, we consider that this matter is fit not for the courts but for the Consumers' Council and the Minister. The sanction against these things being done shoal be Parliamentary control and not the control of the courts. For these reasons, I am not prepared to accept the Amendment. It is pointing a finger and inviting everybody to bring actions in the courts, when the courts are not fit tribunals to determine an issue of this sort.
§ VISCOUNT SWINTON
My Lords, while we are indebted to the noble and learned Viscount the Lord Chancellor for his legal advice on this matter, I am sure the House is greatly taken by surprise. After all, this was not our plan at all. It is true we inserted this provision, but it was by common consent. The noble Viscount in charge of tie Bill said he welcomed the Amendment providing that it was the duty of the Corporation to secure that there would not be undue preference; but the duly not to give undue preference was always in the Bill. It was the Government's plan that it should be in the Bill. There was a great deal of discussion in another place and 63 upstairs, where they had the benefit of the advice of the Law Officers, and the only issue then raised was not whether there should be a right of action—that, the Government said, was their intention —but whether, if there was to be a right of action for a breach of statutory duty, it was necessary to have a provision to that effect. Then the Law Officers gave advice which was contrary to the advice which is tendered to-day on the purely legal aspect by the noble and learned Viscount the Lord Chancellor. The Law Officers in another place said that undoubtedly there would be a right of action for breach of statutory duty. The noble and learned Viscount said to-day that on a construction of this Bill, if it goes through in this form, he is fairly sure there would be a right of action, but the matter is certainly open to doubt, and if we intended to give a right of action we should follow Lord du Parcq's advice and insert a provision that the right of action would lie.
I thought that the natural conclusion was that the noble and learned Viscount would say the House should accept this Amendment. But he has made the most extraordinary proposition. On an Amendment which is merely to clarify a common legal intention, he has asked the House, without any notice or anything on the Order Paper, to revise the whole structure of the Bill and the whole intention of the Government as presented by the Minister of Supply in another place and presented in this House by the galaxy of talent which has occupied the Front Bench throughout your Lordships' debates on this measure. If it be the considered intention of the Government to make us a proposal on Third Reading which is entirely contrary to everything the Government have advanced and advocated hitherto, we shall, of course, see it on the Order Paper and your Lordships, I am sure, will always consider such a proposition on its merits, even if it is produced as a complete change and at the last moment. I do not know what view your Lordships will take about it. Frankly, I do not know what view I shall take about it, because I have never had the chance of considering it. We will certainly consider it between now and Third Reading, but I think it would be most unreasonable of the Lord Chancellor to ask the House to reject my Amend- 64 ment, which he agrees is necessary and desirable if the Bill is to retain the structure and purpose which up to now, both here and in another place, every Government spokesman has said it shall have. Therefore, with great respect, I would suggest to your Lordships that the right course now is to insert my Amendment, which is necessary if the Government plan as hitherto before us is to be made effective. The Lord Chancellor, if he is so disposed, could then on Third Reading put down an Amendment to delete the Government clause and my Amendment, and whatever other provisions have to be deleted if this plan is to succeed, and to insert all the constructive Amendments about the Consumers' Council and reproducing the provisions which exist in the Transport Act. We must have time, of course, but we will certainly consider those matters when they come before us.
I make no complaint of the Lord Chancellor—he was not invited to study it—but it is a little odd that we should have got so far and then be told (we are grateful that we have been told) by the highest legal authority on the Government side that everything the Government, fortified by their Law Officers, have said hitherto is quite unintelligible—they were almost the Lord Chancellor's words, though I do not want to misquote him. I ask your Lordships to make the Government scheme a workable scheme by passing my Amendment now. We can then decide on Third Reading whether my Amendment and the Government's main clause should be deleted.
§ VISCOUNT ADDISON
My Lords, perhaps I may intervene for a moment; I do so with considerable hesitation when these highly legal questions are at issue. May I first of all call attention to the history of this particular Amendment, about which I confess I caused more careful inquiries than usual to be made for my own information? It appears that this provision was not in the Bill at all when it was introduced; it was moved on Report in the other place at the instance of the Federation of British Industries. The qualifying words were always intended and understood to reduce the number of cases going to the courts. But I agree with the noble Viscount, Lord Swinton, that it is not fair to Parliament 65 to pass a Bill in which there is a provision which is open to doubt. Therefore, when these explorations were continued more carefully, I definitely took the line that we were not acting fairly by leaving the question in doubt, whichever way it was.
There then came the question as to whether that doubt should be resolved in the way the noble Viscount has suggested. His is an attractive and simple way of resolving it, but when one thinks about it a little more carefully, on the question of whether this really is fair, one finds that it would open the door to vast numbers of actions and claims for damages by all sorts of people on exceedingly vague terms. Your Lordships will notice that the clause, as the Lord Chancellor pointed out, uses the wordsexercise unfair discrimination against"—what "unfair" means I do not know—or actedwithout prejudice to such variations in the terms and conditions.…
§ VISCOUNT ADDISON
I know. But when you come to suggest that these things are to be put in the Bill, and are to be grounds for actions for damages, vague as they are, one begins to wonder what masses of cases may not be presented. It would be hopelessly embarrassing to the Corporation. There is also this point, which to my mind makes it worse. This is a part of the ordinary duty of the Corporation. In general terms I suppose it would be sufficiently well understood, but if you look at paragraph (a) you will see that it is the duty of the Corporation to supply products of certain types, qualities and sizes and at certain prices, to various people. If a case of unfair discrimination is to be brought into the courts, I should have thought that any one of a multitude of questions arising out of the others might, with the same fairness, be brought into the courts.
§ VISCOUNT SWINTON
The noble Viscount will forgive me for interrupting. We have suddenly been faced with this without notice at all.
§ VISCOUNT SWINTON
I would like to clear up this matter. If my Amend- 66 ment is not accepted, the Lord Chancellor has told us—not because of the difficulty of construing this, but because of this particular case—that he is practically certain that a right of individual action will lie by the imposition of the statutory duty. My Amendment does not make the action any more difficult; it only makes perfectly clear that that is the intention.
§ 5.58 p.m.
§ VISCOUNT ADDISON
I am well aware that what the noble Viscount seeks to do is to resolve the doubt—if there be a doubt—in one particular way. I say quite definitely that he would resolve it. But what I am addressing myself to is the question whether this is the right way to deal with it. This is the business of the Corporation, just as is the provision of bars, wire, and other things, under paragraph (a). What is the provision we have before us? It is not that the Corporation should be brought before the courts if one firm or another does not get the right casting or bar or whatever it is; that is not the scheme at all. It seems to me to be completely impossible to run the business on those lines. This Corporation I hope will behave sensibly and have the confidence of the different boards, and there will be the Consumers' Council to deal with questions brought before them. But one thing which I am sure will make the scheme unworkable is if all these business details are to be the subject of actions in the courts. We could not do it. Therefore, I myself—I confess it to the noble Viscount opposite—have reluctantly come to the conclusion that what we ought to do is to adopt the provisions in the Transport Act and say deliberately that cases shall not be brought before the courts. That resolves the doubt in the other direction.
In the Transport Act it is provided in Section 3 (5):Nothing in this section shall be construed as imposing on the Commission, either directly or indirectly, any form of duty or liability enforceable by proceedings before any court or tribunal to which they would not otherwise be subject.That was specially put in, and we agreed to it. Quite honestly, Mien you look at the considerations involved in paragraph (b) and compare them with the considerations involved in paragraph (a), which are very much akin in a hundred different ways, it seems to me that the 67 better thing to do is to say that these cases must be dealt with in the ordinary business dealings of the Corporation. The proceedings of the Consumers' Council will be reported to the Minister, and if there is any grievance it will be brought before Parliament, just as in the case of the Transport Commission. The better thing to do is to remove the doubt by saying that grievances shall not come before the courts, but will be dealt with in the practical businesslike way. I admit that this is unexpected, and it is only as a result of the most anxious consideration, but I am quite sure it is the right way of dealing with it.
§ LORD BALFOUR OF INCHRYE
My Lords, the noble Viscount the Leader of the House has put forward the proposition that the doubt which is admitted to exist should be resolved in a particular manner. But, with respect, the manner in which the Leader of the House suggests it should be resolved is not the proposition before your Lordships' House at the present time. Therefore, I think we are put in some difficulty. Surely, that would come at a later stage in the Bill. What is now before your Lordships is: Shall we pass the Report stage of the Bill to-day with that doubt existing, or shall we remove that doubt by adopting the Amendment moved by my noble friend? Again, with respect, I do not think that the alternative is really germane to our discussions here this afternoon. That must be decided when your Lordships have had time to consider the proposition, and no doubt it will be decided one way or the other. But surely it would be wrong in Parliamentary practice, and would not be a right course for your Lordships to pursue, to leave the matter in doubt now with the intention at a later stage of doing something in a completely different way to correct it. Therefore, I submit that the right thing to do is for the Government to accept this Amendment now, removing the doubt, and leave themselves free to put a proposition to your Lordships at a later stage to deal with the matter as the Government feel is correct.
§ VISCOUNT ADDISON
My Lords, with the leave of the House may I speak again? I hope noble Lords will not insist on this Amendment. On the Third Reading we will put down what is now being sug- 68 gested, and I think it would be much better to leave it open for discussion then.
§ VISCOUNT SWINTON
My Lords, I really cannot accept that. We are not debating whether the plan which the Lord Chancellor has put forward is good or not. The only issue now before the House is: doubt, or no doubt? All my Amendment does is to resolve a doubt which should certainly be resolved. At a later stage let the Government put on the Paper whatever Amendment they think right to knock out most of their own clause as well as my own.
§ THE LORD CHANCELLOR
My Lords, there are two ways of removing this doubt which I quite agree has to be removed. One way is the way the noble Viscount is suggesting, and the other is the way I suggest. Surely, the right thing to do is to discuss them both on Third Reading, when we shall have before us both methods of removing the doubt, and then the House can decide which is right.
§ VISCOUNT SWINTON
My Lords, with great respect, I submit not. We have no proposition before us except the Government's original proposition. If your Lordships will pass my Amendment, that makes the Government's original proposition a logical Bill, as it ought to be. Then let us discuss on Third Reading whether the whole of that should be knocked out and something else substituted. We should have an impossible debate if we had three alternatives before us. We should have the present alternative, which at present holds the field, that the whole matter is left in doubt with the betting a good deal on an action lying. That is what the Lord Chancellor said. The second alternative would be to have the Government's original proposal with that doubt removed, making sure the action would lie. Then we should have to debate the third alternative, which is that the Government's present plan should go entirely by the board and the new plan of the Lord Chancellor to substitute the Transport Act provision for it should be adopted. I think we should have the most extraordinary debate when there were three horses in the race. Let us have a perfectly clean race between two horses, each horse being a logical horse and a probable runner, running under the proper rules.
§ On Question, Whether the said subsection shall be there inserted?
§ Resolved in the affirmative and Amendment agreed to accordingly.
§ Clause 7:
§ Appointment of Consumers' Council and committees
§ (4) The Council shall be charged with the duties—
§ 6.14 p.m.
LORD BALFOUR OF INCHRYE moved, in subsection (4) to insert as a new paragraph:
(c) of considering and making recommendations to the Minister with respect to any representations which may be made to them by any person who has applied for a licence required under section thirty-one of this Act in regard to such application.
§ The noble Lord said: My Lords, this Amendment aims at providing that an applicant for a licence under Clause 31—that is. an applicant in respect of a new business or an existing producer—may have his application considered by the Consumers' Council. I would like, in a very few words, to remind your Lordships of the position of this question as it was left on the Committee stage of the Bill.70
§ Their Lordships divided: Contents, 60; Not-Contents, 22.69
|Aberdeen and Temair, M.||Falmouth, V.||Grenfell, L.|
|Cholmondeley, M.||Long, V.||Hacking, L.|
|Reading, M.||Monsell, V.||Hawke, L.|
|Salisbury, M.||Simon, V.||Howard of Glossop, L.|
|Townshend, M.||Swinton, V.||Layton, L.|
|Willingdon, M. [Teller.]||Trenchard, V.||Llewellin, L.|
|Beatty, E.||Ashton of Hyde, L.||Mancroft, L.|
|Buckinghamshire, E.||Baden-Powell, L.||Milverton, L.|
|Dudley, E.||Balfour of Inchrye, L.||Moyne, L.|
|Fortescue, E. [Teller.]||Barnby, L.||Moynihan, L.|
|Halifax, E.||Carrington, L.||O'Hagan, L.|
|Howe, E.||Cherwell, L.||Remnant, L|
|Lindsay, E.||Clanwilliam, L. (E. Clanwilliam.)||Rennell, L|
|Munster, E.||Rochdale, L.|
|Selkirk, E.||Clydesmuir, L.||Rockley, L.|
|Ypres, E.||De L'Isle and Dudley, L.||Saltoun, L.|
|Ellenborough, L.||Somers, L.|
|Bridgeman, V.||Fairfax of Cameron, L.||Teynham, L.|
|Buckmaster, V.||Forester, L.||Wardington, L.|
|Caldecote, V.||Gifford, L.||Wolverton, L.|
|Jowitt, V. (L. Chancellor.)||Ammon, L.||Kershaw, L. [Teller.]|
|Archibald, L.||Lucas of Chilworth, L.|
|Addison, V. (L. Privy Seal.)||Chorley. L. [Teller.]||Macdonald of Gwaenysgor, L.|
|Crook, L.||Marley, L.|
|Huntingdon, E.||Darwen, L.||Morrison, L|
|Faringdon, L.||Pakenham, L.|
|Hall, V.||Henderson, L.||Shepherd, L.|
|St. Davids. V.||Holden, L.||Strabolgi, L.|
At that stage an Amendment was moved which was designed require the Minister to consult the Consumers' Council before refusing a licence to a prospective new entrant into the industry or to an existing member. That Amendment was resisted by Lord Morrison on behalf of the Government and he said:
The Government feel that it is not necessary to have a statutory prevision in order to ensure that the consumers' interests are taken into account. That would he done in any case through the machinery of Clause 6."—
which is now Clause 7.
It will also be open to other interests wishing to provide new or additional production to represent their point of view to the Consumers' Council or its committees, with the object of securing support for new manufacturing projects.
There is in fact no such provision in Clause 7 which entitles an existing producer or a new entrant producer to complain, and this Amendment seeks to write into the Bill the assurance given by Lord Morrison, and to make it perfectly clear that a prospective licensee has a right of access to the Consumers' Council if he feels the Minister is likely to refuse his application.
I would ask your Lordships to note that the words of the Amendment do not require the application to be made in the first place to the Consumers' Council, because that we admit would be improper, since it is the Minister who issues the licence and it is the Minister to whom the intending licensee must apply; but the Consumers' Council is, by this Amendment, able to make a representation to the Minister on behalf of any person who has applied to the Minister for a licence. I want to remind your Lordships of one sentence which is appropriate in respect of this Amendment, and perhaps in respect of other Amendments, which was spoken by a member of the Government—I think the Parliamentary Secretary to the Ministry of Civil Aviation—which explains why we have asked for this Amendment. The Parliamentary Secretary said:
An Act of Parliament must be operated as an Act and not in the way that persons who speak about it would like it to be operated.
That is a very germane expression in connection with another Bill given by a Minister of the Government, and it is in accordance with that expressed view that "an Act of Parliament must be operated as an Act and not in the way persons who speak about it would like it to be operated" that I beg to move this Amendment.
Page 8, line 13, after ("Corporation") insert the said new paragraph.—(Lord Balfour of Inchrye.)
§ THE FIRST LORD OF THE ADMIRALTY (VISCOUNT HALL)
My Lords, now that we are in calmer waters I think we may, by just a brief speech on my part, make some progress. The noble Lord who moved the Amendment will realise that without this Amendment there will be nothing to stop applicants for licences endeavouring to secure the views of the Consumers' Council, but we have no objection to the position being made clear as is proposed in this Amendment. Indeed, I think there is an Amendment later in the Marshalled List which will be governed by the same principle. I am therefore prepared to accept the Amendment.
§ On Question, Amendment agreed to.72
§ Clause 9:
§ Compulsory purchase of land
§ 9.—(1) The Minister may authorise the Corporation to purchase compulsorily any land required for the exercise and performance of their functions or the carrying on of any activity by a publicly-owned company, and the Acquisition of Land (Authorisation Procedure) Act, 1946 (except section two thereof) shall apply as if the Corporation were a local authority within the meaning of that Act and as if this Act had been in force immediately before the commencement of that Act.
THE MINISTER OF CIVIL AVIATION (LORD PAKENHAM) moved to add to subsection (1):
Provided that the Minister shall not authorise under this section the acquisition by the Corporation for the purpose of the carrying on of any activity by them or any publicly-owned company of land which is being used wholly or mainly by any other person for the purpose of carrying on that activity or for purposes incidental to the carrying on of that activity.
§ The noble Lord said: My Lords. I hope that this Amendment will go far enough to meet the apprehensions expressed by the noble Lords opposite at the last stage. I remember that the noble Lord, Lord Lloyd, spoke particularly compellingly on this subject, and I hope he will feel that we have gone a long way in his direction. As I understood the argument of the noble Lord, he was nervous lest the Government should use the compulsory powers of land acquisition, which in principle he did not question, to take over and operate competitive businesses. That I thought was his main anxiety. This Amendment is intended to make sure that that cannot happen.
§ We are certain that it will effectively prevent the Corporation from acquiring works in order to carry on the activity which was already being carried on at those works. The Corporation cannot acquire someone else's business and then run it themselves. We feel sure that the noble Lord should be satisfied, if he is in a helpful mood. The Government Amendment in some ways (I do not say in all ways) goes rather further than does the noble Lord's own Amendment. In one way it does and in another way it does not say in the essential way it does go further. Having said so much, I hope the noble. Lord will not move his Amendment but will recognise that he 73 has persuaded us to go forward with a suggestion that meets his point.
Page 13, line 3, at end insert the said proviso.—(Lord Pakenham.)
Let me say at once that I am grateful to the noble Lord for the advance which he has made. I cannot pretend that I think his Amendment entirely meets the point, or that I do not rather prefer my own Amendment below it on the Marshalled List. It is perfectly true that the noble Lord, by his Amendment, has now provided that the Corporation cannot acquire the business of a competitor in order to carry out exactly the same operations as the competitor was carrying out in those premises. For example, the Corporation could no longer buy up a rod mill from a private competitor and then proceed to turn out rods. On the other hand, they would be able to acquire a private competitor's rod mill and use it for drawing wire, or something like that. That case is not covered by the noble Lord's Amendment; and that is why I prefer the Amendment which we have put down on the paper, for it would cover a case of that kind. However, I am so delighted that the noble Lord has come so far that, lest he begin going back again, I had better say now that I shall not move the Amendment in my name next on the paper.
§ On Question, Amendment agreed to.
§ Clause 11:
§ Corporation not to be exempt from taxation, etc.
§ 11. Nothing in this Act shall be deemed to exempt the Corporation from liability for any tax, duty, rate, levy or other charge whatsoever, whether general or local.
§ 6.24 p.m.
§ LORD HAWKE moved, after "exempt" to insert "or relieve." The noble Lord said: My Lords, this and the next Amendment are moved in order to provide an opportunity for His Majesty's Government to make some statement on the question of taxation of these nationalised companies. There are four main items of information which we require, and I understand that notice has been either given by me or sent through other channels to the Minister who is to reply. First, there is the question whether in respect of profits tax the companies owned 74 by the Corporation are to be considered as being owned by the Crown. The noble Lord, Lord Pakenham gave an assurance on that point on a previous stage of the Bill, and I have no doubt he will confirm it this time. Then again, there is the question of split establishments, the treatment of a company that is split—one half going to the Corporation and the other half staying out. Will it be treated as a "continuing company" or as a "discontinuing company" in respect of that portion which passes to the Corporation? We should, of course, like an assurance that it will be treated as a "discontinuing company" to the extent of the portion that passes.
§ Then there is the case of the same company and the incidence of balancing charges. We should like an assurance that in respect of the part that passes to the Corporation no balancing charges shall be levied. The fourth point, which was not raised at the last stage of the Bill, is this: What is the position of a company of which some portion passes to the Corporation and the company receives in return Government scrip? Not requiring those reserves in its business it proceeds to distribute that scrip to its shareholders. Will this attract or will it not attract profits tax? We should like to hear that it will not. I hope the noble Lord will be able to give me these assurances. I beg to move.
Page 13, line 23, after ("exempt") insert ("or relieve").—(Lord Howke.)
The noble Lord and other noble Lords have been kind enough to give me notice of these questions and I have furnished myself with full replies. I ask leave of the House to take up a few minutes while I read them —slowly and carefully because they are not easy for a layman to follow. I have obtained these answers from the Revenue authorities. I understand from the remarks of the noble Lord that he is chiefly concerned with three distinct points in connection with this clause. The first is the question of what is perhaps loosely called "double taxation." The problem seems to arise where segregation of assets takes place in connection with nationalisation. For instance, a company now in the Third Schedule might, with the approval of the Minister, hive off its iron and steel interests to a new company in 75 return for shares in that company, so that the new company may be taken into public ownership and the original company with its remaining interests be taken out of the Third Schedule and remain in private ownership. In such a case the Opposition seem to fear that the original company in the year following the transfer may be liable for income tax on the profits of the original complete business for the preceding year.
The tax position, in fact, depends on whether the hived-off part can be treated as a separate business for taxation purposes. If it can be so treated, and this is a question of fact, what is known by the Revenue authorities as "partial discontinuance" will operate, and no question will arise of the company having to pay tax after the date of transfer in respect of the transferred part of its business. It is, in fact, unlikely that the Minister would ever approve of any hiving-off schemes which did not leave a self-contained iron and steel undertaking for transfer to public ownership, and therefore it is unlikely that there will he any cases such as the noble Lord has in mind. However, some complications may arise, especially where the hiving-off was done before the publication of the Bill and for which the Minister's approval was not required. In all cases the individual companies concerned should, if they have not already done so, take up the matter with the Inland Revenue authorities (it is essentially a matter for them) in order that they may establish to the satisfaction of the Inland Revenue that the hived-off part of their business was a self-contained entity, and if this can be proved they will not, in the year after transfer, be liable for income tax on the profits of that part of the original business that is scheduled for nationalisation. I hope the noble Lord is reassured on the first question.
The second point which the noble Lord raised referred to balancing charges in cases where part of the original business is hived off in anticipation of nationalisation—and here I think I may satisfy the noble Lord completely. These charges arise where machinery and plant, or industrial buildings, are sold and the sale moneys exceed the capital expenditure not so far allowed for income tax pur 76 poses on such assets—that means the value written down for income tax purposes. The Opposition wish for an assurance that no balancing charge in respect of the transferred assets will be made in such cases; that is, where the value, which we may suppose was £10,000 at the beginning, was written down to £5,000 and the sale was for £6,000. I take it that is the case the noble Lord has in mind.
Where hiving off takes place in anticipation of nationalisation, however, the sale will normally be between the original company and a new company which, prior to the date of transfer to public ownership, will be a subsidiary of the original company. In such cases the provisions of Section 59 of the Income Tax Act, 1945, as to sales between associated companies apply and if the two companies so elect under subsection (4) of that section the assets will be taken over by the new company for taxation purposes at their written-down value and no liability to a balancing charge will arise. So that, if they arrange it properly between them no liability to a balancing charge will arise. The general answer, therefore, is that if the companies wish to ensure that no balancing charges should be levied, the transfer of the iron and steel assets should be carried out in such a way that Section 59 of the Income Tax Act, 1945, will apply. I feel that the noble Lord will be satisfied on that point.
The third point relates to the question of profits tax in cases where the Government compensation stock is received by holding companies in exchange for shares of subsidiary companies which are being nationalised under the Iron and Steel Bill, and where the stock is subsequently distributed to the shareholders of the holding company. The Opposition suggest that such a distribution of Government stock should not be treated as a distribution for profits tax purposes attracting the higher rate of 25 per cent. Of course there is no obligation on a holding company to distribute the Government stock to its shareholders. It can either keep it as an investment, or realise it and acquire a new investment, and then there will be no question of a profits tax charge. If the company wishes to distribute the stock to its shareholders but reduces its capital correspondingly, because 77 of the reduction of its activities, there will again be no profits tax charge. It is only— and this is the point—when there is a distribution of stock and no corresponding reduction of capital that a charge to profits tax arises; and even in that case the charge is limited by reference to the amount on which relief for undistributed profits has been given since January 1, 1947, which, of course, may be a small fraction of the total capital.
On this point, the Solicitor-General recently explained in another place that, in cases like that of the holding company referred to, where Government compensation stock was given in exchange for shares of a company which was being nationalised, that effect was merely that the holding company was substituting one investment for another. If the company goes into liquidation, or otherwise distributes the Government stock it receives, there is no reason why it should not pay profits tax upon the amount it distributes, on liquidation or otherwise, just like any other company in parallel circumstances.
My Lords, the noble Lord has made a very important statement and, as he rightly supposed, a statement which will require a good deal of digestion. Obviously, it is not the sort of statement to which one can just listen and say: "Yes, that is quite all right," or indeed that it is quite all wrong. There were really four points raised when the Amendment was moved in Committee stage. There was the question of discontinuance with which the noble Lord has dealt—I will come to my conclusions a little later. Then there was the question of balancing charges with which he dealt: and there were two questions of the incidence of profits tax. If I recollect rightly, the first one was, how far the Corporation would be treated like any other company or any other corporation in the trade in its liability to profits tax—-1 am not now talking about the distribution of stock. On that point, I do not recollect that the noble Lord said anything just now.
So far as we were able to make out when this matter was debated in Committee, the Corporation would have an advantage over other companies in the trade in respect of profits tax, but would, on the other hand pay a slightly higher 78 amount in income tax by reason of paying the lower rate in profits tax. That comes under the Finance Act, which deals with national corporations. The general effect of that was that it would leave the Corporation in a slightly more advantageous tax position than an ordinary commercial corporation in the same trade. I do not think the noble Lord dealt with that point—I did not hear him refer to it—whether the position of the Corporation would be mere advantageous or less advantageous, or that there was nothing in it as between the Corporation and the companies in a heavy industry that was not being nationalised.
My Lords, I should make it clear dirt I did not feel it necessary to-day to repeat what I said last time. I said last time that the fact of nationalisation gave no legal advantage to the Corporation or its subsidiaries. The advantages might or might not accrue from the form of nationalisation, but that would take into account every sort of interest. That could not be pushed very far at present. As I said last time, the fact of nationalisation gives no legal advantage.
But it was not the legal advantage; it was the financial advantage with which we were concerned.
The conclusion is that the Corporation ha; a slight advantage financially as compared with the commercial corporation in ordinary business.
No. The noble Lord says: "The conclusion is." I am advised that there is no ground for that conclusion, which is his conclusion.
No doubt we shall come to that later, but I thought there was a calculation made in the Committee stage which showed that there was a slight advantage.
My main point is on the question of the distribution of compensation stock received. Listening to aim, I gathered that the noble Lord made two points. A company receiving compensation stock could do either one of two things, and its shareholders would not be adversely 79 affected. First, it could distribute compensation stock and have a proportionate reduction of capital, so made that that distribution would then not fall to be taxed as a distribution of profits. Alternatively, the holding company—that is, the commercial corporation receiving compensation stock—might not deal with its capital at all, and, of course, it would fall to be assessed for distribution of profits. I think I heard the noble Lord say that if a corporation distributed compensation stock and did not make a reduction in capital, it would be liable for profits tax on distributed profits.
But that is not a distributed profit at all, and that is one of the main points that was raised by, I believe, the noble Lord, Lord Hawke, in Committee. It is not a distribution of profits. A commercial corporation which has most of its business taken over, or indeed all its business taken over, is left with compensation stock which is much in excess of any possible requirement of capital for the remainder of its business. What it has received is compensation for capital. If it distributes that, it is a distribution of capital. It does not seem fair that that should be treated as a distribution of profits and that the company should be forced to reduce its nominal capital, which, as we know, as the result of the accumulation of years of profits in reserve, often bears no relation to the total amount of capital invested in the business.
What we are seeking here is an assurance that a holding company shall not be penalised because as a result of nationalisation it has received compensation stock which it is riot likely to be able to use but which it does not want to sell and re-invest, thereby becoming an investment company. There is no reason why shareholders in an iron and steel company should want to invest in, for instance, a company making cigarettes. What they want back is the money which they have had in their business and which has accumulated in a period of years—money which they could get back by the sale of the compensation stock and its distribution as a capital asset. For them to be taxed on that as a distributed profit seems to be a contradiction in terms. They have had their capital assets taken away; they have had pieces of paper to a certain value in the market given to them in exchange: and 80 to represent the sum of those pieces of paper and the distribution to the shareholders of money as a result of the sale of those pieces of paper as a distribution of profit, is monstrous. It has nothing to do with profits; it is the actual capital value that they have in the business.
I do not want the noble Lord to get too heated. I will explain what I said in one rather long sentence that I offered the House before, with an explanatory sentence. What I said was that it is only when there is a distribution of stock and no corresponding reduction of capital that the charge to profits arises and even in that case the charge is limited by reference to the amount on which relief for any undistributed profits has been given since January 1, 1947. I added, though I am not quite sure of the exact words that I used, that that would be only a fraction of the total capital sum.
No, the sum on which there would be tax would be only a fraction. The charge is limited by reference to the extent by which the company has hitherto profited by the lower rate of profits tax on undistributed profit. It is only the extent to which they have profited; that is the only extent to which they will be taxed. The noble Lord really is barking up an unnecessarily awkward tree, because I can assure him that what I have said need not cause him anxiety at all.
I am very glad to hear what the noble Lord has said, and I sincerely hope that I am barking up an awkward tree. But what I understood him to say was that if capital stock were distributed, though there would be relief in the conditions to which he referred on a certain part of it, the rest of it would be treated as a distribution of profits. If that is so, I submit I am not barking up either an awkward or any other tree, but I am justified in saying that that would not be fair. But I shall have to study this and, so far as I am concerned, I should like to feel free to move an Amendment on Third Reading if the examination of this statement which will appear in Hansard to-morrow does not meet the various points which were made.
§ VISCOUNT BRIDGEMAN
My Lords, I have been looking carefully at the tree up which my noble friend Lord Rennell has been barking, and I am fairly certain that there is at least one cat, if not two, at the top. First of all, I agree entirely with Lord Rennell that Lord Pakenham's statement, which is very technical, will have to be looked at between now and Third Reading; anything I may say on it now must be the result only of a first impression, and not of a detailed reading of it. But in regard to partial discontinuance what struck me when I first heard the noble Lord was that the question of a separate business which he mentioned would probably work out all right, and it ought to work out all right—if only because there is such a thing as the Second Schedule to this Bill. Surely Second Schedule activities ought to be capable of being treated by the Inland Revenue as distinct from any other activity, just as they are capable of being treated by the Ministry of Supply and by those who drafted this Bill. Therefore at first sight it looks as if there ought to be no reason for double taxation because of partial discontinuance. I am not absolutely certain, because the statement which the noble Lord read out—and I am sure we would like to thank him for the carefulness and detail of the reply—appeared to have been drafted by the Inland Revenue in the light of their general practice without consideration of the fairness and unfairness arising out of this Bill. The Bill is not yet an Act, but there are here special problems which the Inland Revenue ought to consider which have not yet arisen in any other nationalisation Bill and which will have to he dealt with sooner or later. I think the solution to the problem is for the Inland Revenue to take the line that the fact that there is such a thing as Second Schedule activities is a sufficient warrant for them to be able to say without further ado that any segregation of assets between Second Schedule assets and other kinds of asset constitute a certain activity from the point of view of partial discontinuance.
When it comes to the balancing charges, I formed the opinion that if companies made use of their existing rights and privileges under the existing Finance Act that would work out fairly 82 well. There again, I do not want to commit myself definitely until we come to Third Reading. But it is when we come to the question of profits tax on distributed profits that I want very strongly indeed to support my noble friend Lord Rennell in what he said, because here is another problem which is entirely new. The rules were made by the Inland Revenue for profits tax, and the situation under the Bill is not at all in line with the ordinary financial state of affairs where this question of profits tax on distributed assets applies. The common ease is where, out of an ordinary carry-over in the profit and loss account, the company seeks to distribute a dividend which may be as high as 300 per cent. arising through the ordinary operations of the company.
But here we have a different state of affairs. It is no part of the shareholders' will or wish that this Dart of their business should be discontinued. The money comes back to them and then, as Lord Rennell said, you have the dual tax. To discontinue that part of the business and give the money back to the shareholders, which is what most shareholders in most ordinary iron and steel companies would wish, you pay profits tax unless you decide to reduce your capital; otherwise you keep the money there, realise no doubt the British Iron and Steel Stock, and really carry on as an investment trust or acquire some other business, no doubt with the approval of the shareholders. That, I think, would he the exceptional course, as I think Lord Rennell agrees. But if you want to do the ordinary thing, by paying the money to the shareholders who subscribed it for a particular purpose, then either you pay profits tax or you reduce the capital of the company. Reducing the capital of the company means destroying an asset of that company: capital duty was paid on that capital, and that capital duty will be lost. Why should you involve a company in this destruction of an asset, however small? Why involve a company in having to go to the courts?—because, unless I am much mistaken, a claim for reduction of capital does have to go to the courts. And on top of that you propose to charge profits tax. This part of the Government answer will require study between now and the Third Reading, but to-night two points do emerge clearly. One is that the 83 Inland Revenue Authorities have given a stock answer, and have not yet applied their minds to the special problems connected with this Bill. The second is that, if we have the views of the Inland Revenue authorities correctly, then profits tax will be charged in cases where a company wishes to make a distribution and yet not to reduce its capital. That point is unfairly taken. It is unfair to the companies and to the shareholders. This is not an ordinary case, where a company of its own volition returns capital. It is a case into which it has been forced, and it should have the full benefit to which in these circumstances we think it is entitled.
My Lords, we have listened to a clear statement from the noble Lord—I might say that it was a clear statement by the Inland Revenue of the law as it stands to-day. We had hoped that we should get some undertaking that His Majesty's Government would look into the position with a view to introducing legislation to amend these anomalies, as in fact they did in respect of the coal mines. As it is, I fear that the statement has "passed the buck" firmly into the hands of the Inland Revenue. Unless something is done, either in a Finance Bill or in this Bill, the existing law stands and the existing anomalies stand. Therefore, though the statement is a clear one, as a satisfying draught, I can only tell the noble Lord it comes out in my estimation at a gamtna minus. We shall have to examine the position between now and the next stage of the Bill. I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ The Sitting was suspended at seven o'clock, and resumed at a quarter past eight.
§ Clause 15:
§ Disclaimer of agreements and leases
§ 15.—(1) Where any company which comes into public ownership under this Part of this Act has made or varied an agreement or lease on or after the twenty-first day of October, nineteen hundred and forty-seven, and before the date of transfer, and the agreement or lease remains unperformed or unexpired, in whole or in part, on the date of transfer, and the Corporation are of the opinion that the making or variation of that agreement or lease was not reasonably necessary for the purposes of the activities of the company. or that the agreement or lease was made or varied with 84 an unreasonable lack of prudence on the part of the company, regard being had in either case to the circumstances at the time, the company shall, if so directed by the Corporation, by notice in writing given to the other parties to the agreement or lease at any time within six months after the date of transfer, disclaim the agreement or lease:
§ Provided that any of the said other parties may. within two months after the date on which the notice is served, refer to arbitration under this Act the question whether or not the agreement or lease ought to be disclaimed under this section. and the Corporation (as well as the publicly-owned company) shall be made a party to the arbitration.
§ (2) If the arbitration tribunal are satisfied on any such reference that the making or variation of the agreement or lease was not reasonably necessary for the purposes of the activities of the company, or that the agreement or lease was made or varied with an unreasonable lack of prudence on the part of the company, regard being had in either case to the circumstances at the time, the tribunal shall confirm the notice and if not so satisfied shall revoke it:
§ Provided that, if the arbitration tribunal are satisfied of the matters aforesaid but are also satisfied that the making or variation of the agreement or lease was a proper transaction made in the ordinary course of business, regard being had to the circumstances at the time, and was in no way connected with any provision made by this Act or with any anticipation of the making of any such provision, the tribunal shall revoke the notice.
LORD HAWKE moved, in subsection (1) to omit all words from and including "reasonably necessary" down to and including "either case" and to insert:
a proper transaction made in the ordinary course of business, regard being had.
§ The noble Lord said: My Lords, in Committee we moved an Amendment with a similar effect but slightly more embracing. We made it necessary that the Corporation should prove that any action which defeated the purposes of the Bill, had been taken for that purpose. The noble Lord, Lord Lucas of Chi/worth, probably rightly, said it was a question of motive and it was not reasonable that the Corporation should, in the first instance, have to prove a question of motive. So we have dropped that part of the Amendment. Now we move on more simple and common-sense lines. The Bill as drafted provides much too wide an opportunity for the Corporation to challenge the actions of these companies before the date of transfer. We think that this very wide wording would act as a Sword of Damocles hanging over the heads of these companies from 85 August, 1947, up to the ultimate date of transfer.
§ What is a reasonable or unreasonable lack of prudence? That seems to me an extraordinarily difficult thing to define. Is it reasonable or unreasonable lack of prudence when the Ministry of Supply are long at the top of the market and short at the bottom of the market? I do not think the Minister himself would know. I do not know. Therefore, why should the directors of these companies be put into the position of having to answer a possible charge, when they are unable to judge whether their actions could be set aside or not? Of course, if the Bill goes through as drafted, the directors will immediately have to take every step to cover themselves, and they have the means of doing that. Under subsection (7) of the clause they can apply to the Minister for his permission in writing to do anything which they think might be subject to criticism afterwards on the ground that it was "unreasonable lack of prudence" on their part. I wonder whether the Minister has really stopped to think what he is letting himself in for! He has 250 companies—so the noble Lord, Lord Lucas, has said to-day—and every one of them will want to cover up on this particular aspect.
§ I would remind your Lordships that there is a similar clause further on in which there is another list of their deeds which might be questioned. There is going to be an absolute flood of applications to the Minister, that means to the permanent officials, which means in turn to Whitehall, the Ministry of Supply; and each one is going to demand in writing to be "whitewashed" in advance for something they are thinking of doing. Anyone who has had any dealings with Whitehall knows that the one thing you cannot get out of them is a quick answer in writing; they have to consult too much. The result will be that the whole of the day-to-day business of these 250 companies will be stultified, frustrated and held up by this clause. Even if the Minister has realised what he is doing, has he the staff to do this? If he has the staff to do it, why have the Treasury not been looking at what they have been doing in the past for some time?—because this is entirely new work that will be thrust on the Ministry. I believe he has not the staff, and that there are not the arrangments 86 for doing (his; and if the Bill goes through as it is there will be a grave holding up of all vital decisions of the 250 companies. To my mind it is the old, old story of the Minister and his advisers aiming at the very small bulls-eye of the improper contract, and in order to hit it they sorround it with an immense target background comprising every conceivable action that these companies can take. I beg to move.
Page 16, line 16, leave out from ("not") to ("to") in line 20, and insert the said new words.—(Lord Hawke.)
My Lords, my noble friend Lord Hawke has made it quite clear how we have altered this Amendment, as compared with the Amendment that was moved in Committee, in order to try and overcome the objection the noble Lord, Lord Lucas, had to that Amendment. That was the Amendment on which the noble Lord said it would be difficult to prove many years afterwards a question of intention as opposed to ore of fact. We have attempted to meet that point, and I think we have met it. As I see our Amendment now, not only does it meet that objection of the noble Lord opposite, but it is also completely consistent with the assurances that many Government spokesmen, both in your Lordships' House and in another glace, have given on the whole question of disclaimer. I do not want to repeat what was said in Committee more than I need, but let me remind your Lordships that, either in this House or in another place, over and over again Government spokesmen made the point that no proper transaction would be challenged. That is exactly what we say we have put into this Amendment. The assurance was that no proper transaction will be challenged, and yer the clause does not say that. The clause says that a transaction may be challenged if it is not reasonably necessary or if it shows unreasonable lack of prudence. That is entirely inconsistent with the assurances which have been given, and we think that by this Amendment we have brought the clause into line with those assurances.
I would like for a moment to visualise how the new clause, as compared with the present clause, would operate. Under the 87 present clause, it lies with the Corporation to prove that there is a prima facie case against one or other of the companies, and then it lies with the company to prove to the tribunal that that is not so. We think that is an entirely wrong point of view. We see our Amendment working something like this. First, the Corporation would form the opinion that a transaction was not a proper one made in the ordinary course of business. It would then order a disclaimer to be issued. The company would presumably dispute that and take the matter to the arbitration tribunal. The arbitration tribunal would then require the Corporation to establish that the transaction was not a proper one and, of course, if the Corporation succeeded in establishing that and the company was unsuccessful in establishing that the contrary was the case, the disclaimer would have to stand. We regard that as the proper procedure and entirely in accord with all Government spokesmen's assurances.
The noble Lord, Lord Lucas, strongly urged one further point. He spoke of the difficulty which would arise in establishing these matters owing to the lapse of time which might have occurred. The question is, why should it be any more difficult for the Corporation after such a lapse of time to form the opinion that a transaction was not a proper transaction, than it would he for them to form the opinion that a transaction had not been reasonably necessary or had shown unreasonable lack of prudence? The time factor enters into it in either case. I hope that when the noble Lord comes to reply he will realise that in putting down this Amendment all we have tried to do is to meet his objections and to comply with the repeated assurances of various Government spokesmen.
My Lords, I intervene for a moment only to say that this Amendment is of considerable practical interest to the iron and steel trade at the present time. Many contracts entered into in connection with the development plan will remain uncompleted at the date of transfer if the Bill is enacted. A very large development plan which may affect many firms is proceeding at the present time. Great developments are in progress, and to the credit of the steel industry let it be said that those 88 plans are going ahead and are not being held up. It is right that they should go ahead, because upon that depends to a great extent the prosperity of the country and the employment of the workers. Most of these contracts will have been entered into in a sellers' market, and in anticipation of a shortage a company may have to build up an excess stock of materials at high prices. As your Lordships know, the market has changed and these shortages may not occur. A firm may have contracted at an abnormally high price to secure delivery of plant in three years' time and by the time delivery is due the plant may be easily obtainable. I would call your Lordships' attention to the fact that such a firm might find itself in considerable difficulty in proving its case under the existing terms of the Bill. Therefore I urge that this Amendment will provide a reasonable safeguard for firms that have in fact gone ahead with a development plan as part of a national plan of national importance. I hope your Lordships will press this Amendment.
§ THE EARL OF DUDLEY
My Lords, may I, like the noble Lord, Lord Clydesmuir, narrow this issue down to the development plan? May I ask one question for the sake of guidance? If the noble Lord does not know the answer I hope he will ask his advisers. What is the correct procedure for persons engaged in the development plan to safeguard themselves against the dangers of this clause? The development plan has been agreed in principle as a whole by the Ministry and, therefore, by the Minister. Does that cover the developers in detail? If it does not cover the developers in detail, what must they do? That is all I am asking. Have they to cover themselves by writing every single detail of their development plan to the Minister and by obtaining his sanction to all those details? What is our exact procedure? I hope the noble Lord will tell me because I am very much affected by it. As I say, the plan has been approved in principle by the Ministry, but not in detail. How are we to cover ourselves in detail?
THE MARQUESS OF READING
My Lords, I intervene now, having taken a somewhat brief and somewhat unrehearsed part in the discussion in Committee, only to say that I hope the Government will see fit to accept this 89 Amendment. The objection, as I understood, to the clause as it stood then and stands now was largely that although it might ultimately work out satisfactorily there was considerable doubt as to where the balance of proof of these curious phrases about not being "reasonably necessary" or "an unreasonable lack of prudence" lay. It seems to me that the words now on the Order Paper considerably clarify that issue. After all, taking it on the broad line, the clause lays down that if the agreementwas not reasonably necessary for the purposes of the activities of the company or…was made…with an unreasonable lack of prudence on the part of the company…and so on. What those somewhat prolix words seem to me to mean, when reduced to their proper essence, is that it was not a proper transaction made in the ordinary course of business.
§ THE LORD CHANCELLOR
I have spoken once and received my baptism of fire in regard to this Bill. I had to confess that I thought a particular clause dealing with undue preference was misconceived, but in regard to this clause I must say that I think it is exceedingly well drafted. This clause is quite clear and it should not be departed from. Now, my Lords, what does it say? I would remind your Lordships of a very old saying which is often quoted by the lawyers:The Devil himself knoweth that the thought of [nail is not triable.What you have to try to find here is certain objective tests; if you find them present, then and then only you have to consider whether or not what has been done is proper. I believe we all want the same thing here. I believe we all think it proper that if one of these companies has been deliberately dissipating its assets, has been giving things away or selling them at inadequate prices, the transaction should not, be allowed to stand. If, on the other hand, what is done has not been done from that point of view, but merely was an imprudent or unwise contract—if, in short, it is a proper contract—I think it should stand. I believe that that issue is what we all want.
Now let us see how this clause is expressed. The wording is not the same but the principle is the same as in the Gas Act, and when I suggested an Amendment like this at that time the noble Viscount, Lord Swinton, accepted 90 it. Let us see what this Amendment does. Let me first say to the noble Lord, Lord Hawke, who said that t he Ministry would be flooded out with applications as to whether contracts were good or not, that this clause dates back to February, 1947. The Bill was published nine months ago, and in those nine months there have been fifty applications—no more; and, incidentally, I may add that all those have been granted. So let us have a little reality in our views about this clause. The clause says:Where…the Cor7oration are of the opinion that the making or variation of that agreement or lease was not reasonably necessary for the purpose of the activities of the company, or that the agreement or lease was made or varied with an unreasonable lack of prudence en the part of the company, regard being had in either case to the circumstances at the time, the company shall, if so directed by the Corporation…disclaim…I would point out to Lord Hawke that subsection (2) says:If the arbitration tribunal arc satisfied…that the making or variation of the agreement…was not reasonably necessary…or that the agreement…was made or varied with an unreasonable lack of prudence…regard being had in either case to the circumstances at the time, the tribunal shall confirm the notice and if not so satisfied shall revoke it.Now I pray in aid what Lord Hawkesaid—that it may be difficult in some cases to determine this matter. All the better: if it is difficult to determine, the tribunal will not be satisfied. But suppose they are satisfied that it was made with an unreasonable lack of prudence. Even then it does not necessarily follow that the agreement is to he avoided, because business men, perfectly honestly and with no sense of trying to dissipate assets, do sometimes make unwise or imprudent contracts. Sometimes a man's mind is not following his pen, or perhaps he has neglected to consider a particular factor—I am not talking about a case where a man has been misled or something of that sort, in which the Court of Chancery might interfere; I am talking of a case where a man has made a thoroughly bad contract by neglecting to keep some consideration in mind.
Your Lordships will remember that I assume that the tribunal would then be satisfied that the contract was made "with an unreasonable lack of prudence." If that is so, it is right surely that the onus should shift. But then you have 91 the proviso to, subsection (2) which provides that, even if the tribunal do consider the contract was made with an unreasonable lack of prudence or was not reasonably necessary, yet if it is shown to their satisfaction (you will note that the onus is on the company) that it was made properly—and by that I mean that it was not an attempt to dissipate the assets and was not a dishonest affair—then, notwithstanding the lack of prudence, and notwithstanding that it was not in the interests of the company, the contract shall stand. That seems to me absolutely fair. I see nothing whatever the matter with it.
First, the Corporation have to satisfy the tribunal that the variation was not reasonably prudent or that it was not necessarily made and if they do not satisfy the tribunal on that point, if they leave any doubt, the next question never arises. But, if the tribunal are satisfied that the variation was not prudently made, or that it was not reasonably necessary, then the onus shifts and the company has a chance of saying: "In spite of those things, it was a perfectly honest contract. It was imprudent. We made a mistake. We did not realise this, we did not realise that or we did not realise the other, but we were acting with propriety in the sense that we were not seeking to dissipate our assets, though we made fools of ourselves." If they establish that, the disclaimer is avoided. That is what we did in the case of gas. This is a properly-balanced clause and is perfectly fair.
So far as the development plan about which the noble Earl, Lord Dudley, asked, is concerned, we are here dealing with agreements and leases. I do not pretend to be competent to discuss this matter. I do not understand it. I have not gone into the details of this Bill but if by "development plan" he meant to, refer to some agreement or lease, then the agreements or leases will be dealt with in that way. There is always this further method of dealing with the matter so far as a company is concerned. Under subsection (7) they can always refer to the Minister if they are in doubt. If they want to put the matter beyond any argument, they can go to the Minister and say: "Look here, we propose to make this lease," or "We propose to 92 make this agreement. On the face of it, it may seem rather strange. Those are the circumstances in which we make it, they may be peculiar, but we want you to approve it." That has been done during the course of the last nine months. It has been done in fifty cases, every one of which the Minister has approved.
That is the scheme. I think it is entirely unfair to ask the Corporation to put the burden upon themselves of proving impropriety. They cannot do that. They will not know. You can ask the Corporation to prove, and prove up to the hilt, and satisfy the tribunal that the contract which has been made is a contract which was made "with an unreasonable lack of prudence" or "was not reasonably necessary" for the company's business. If they prove that and satisfy the tribunal of those facts, then it is right that the contracting party should still have the right to say, "Although those things have been said about the contract, and although all those things are true, yet it was an honest contract. We made a mistake, but we did not mean to dissipate the assets." That is the scheme which we worked out in the Gas Act, with your Lordships' approval. I believe it to be a fair and sensible scheme. I commend the drafting of this clause which is quite clear, and I ask your Lordships not to accept this Amendment.
§ 8.44 p.m.
§ VISCOUNT SWINTON
My Lords, I am glad that the Lord Chancellor has intervened on this clause because we know that, as he has intervened, everything that can be said for the Government proposal has been said for it. With a longer experience of this Bill and perhaps a longer experience of this industry than the Lord Chancellor—I am not being at all offensive because, as he said, he has looked at the Bill only within the last day or two—I am bound to say that I am left entirely unconvinced that this is a fair or a reasonable clause in the circumstances. Just observe what it is we are dealing with. We are dealing with the right of disclaimer of leases or agreements which are unperformed when the Bill comes into operation, if it is passed, or at the date of transfer, and we go back to transactions made as far back as October, 1947.
The Lord Chancellor has said that if there was a development plan he was 93 wholly ignorant of it. But with regard to the development plan and the bearing of that upon this clause and of this clause upon the development plan, let me make this plain to him, subject to his correcting me if I am wrong in the law, although I understand there is no doubt about this. The development plan is an enormous plan of, I believe, £250,000,000. It will involve the placing of a great number of contracts—some very large, some for the complete erection of this or that, but in some cases involving a vast and intricate number of inter-locking contracts which are required in the development of a steel works. You have to go out and get every kind of material. Then you require all sorts of finished articles. You have to go into the electricity industry if you want a development of your electricity plant. These orders have to be placed. I need not elaborate the point. Everybody who knows anything about an agreement to erect a new steel works or to make a large extension of one, knows that it ranges over a vast number of contracts of a highly complicated kind. Every one of these contracts is an agreement within the meaning of this clause.
I am not in the steel industry; I am in the light and power business, and large developments are taking place. One of the most difficult things to know is whether to place an order at a high price, with a guarantee of delivery if you can get it, or to wait. At the same time people are pressing for supplies, and they are being pressed for steel supplies. You have to weigh the matter up. The Leader of the House, in commending this extraordinary Bill to your Lordships on Second Reading, said, "Of course, we have got to take over this industry. We are short of steel at every point. Everything is held up for lack of steel." I am not so sure that he is going to say that quite so emphatically in six months' or a year's time. But the justification he advanced to the House for passing this Bill was the urgent need for steel and therefore for nationalisation.
Nobody is accepting the urgent need for steel more readily than these companies who have not only surpassed every target that has been set them but have increased their output as the target has been put up and up. That seems to depart from any practical use of the term. You say you raise a target, but you probably 94 put it a greater distance away. They have gone right ahead with the development plan, but they have to enter into all these contracts and are urged by the Government to get on with the job. I have no doubt that many of them have quite rightly placed contracts at high prices, because they had to place the contracts a year or a year-and-a-half ago. Some of those prices—if you are looking at the matter as an economic proposition—may appear improvident or imprudent to-day; they may seem much more improvident or imprudent in 1950 or 1951. Yet it is those contracts which are going to be reviewed. The Lord Chancellor said that we had a similar clause in the Gas Bill and that I agreed to it. I agree that that is so. But we were dealing with an extraordinarily simple matter when we were dealing with gas. Making gas is a uniform process. It has some by-products and some people may make it better than others. But compared with steel, and not only with steel but with this infinite variety of activities embracing almost the whole of the engineering industry which, big or small, are being taken over here—
§ THE LORD CHANCELLOR
Will the noble Viscount forgive my interrupting him? It was not to the making of gas that the clause related, but to the making of particular contracts by gas companies —contracts, it might be, for steel and all sorts of things.
§ VISCOUNT SWINTON
I am quite aware of that and I do not propose to shirk the question. The noble and learned Viscount will, I think, agree that I am not apt to shirk these problems. What I am saying is that gas is a simple proposition and that the ordering of plant for gas concerns is a comparatively simple proposition. There was not a great development plan in the gas industry to the extent of £250,000,000, nor were there a variety of engineering products to be considered. It was quite different altogether. Also we were dealing with it at a time when markets were not fluctuating as they are to-day. I accepted the idea then because it was a simple and straightforward matter. But I maintain that the last thing that ought to be claimed is that because it was right in the case of gas it is right now in the case of steel.
Let me come to the words of this clause. The Corporation is to judge this 95 thing three or four years after the event, in wholly changed circumstances. They are going to be able to attack it, first on the ground that it was "not reasonably necessary for the purposes of the activities of the company." The Leader of the House said that I was guilty of some rather loose words in an Amendment which I put forward. I daresay I was. I am not as experienced a draftsman as the noble Viscount. But what about these words for looseness—"not reasonably necessary for the purposes of the activities of the company"? Suppose a thing was not necessary but very desirable. In business you enter into a great many contracts that are not necessary. If you limit yourself to what is necessary you are apt to take no risks and to do a very limited amount of business. Contracts you may have made, though not necessary when construed strictly in a legal sense, may have been highly desirable contracts to enter into. Then, take the next words:or that the agreement or lease was made or varied with an unreasonable lack of prudence on the part of the company.Observe that the judgment is going to be formed and the challenge is going to be made not at the time when the contract is made—which is really the only time when you can get into a man's mind and decide whether what he did was reasonable or unreasonable—but it is going to be looked at in 1950 or 1951. It is not going to be easy to envisage the circumstances in which a man or a firm entered into a contract in 1948.
The Government who deal with our economic affairs on a wide scale are to-day pleading that though they have made some great mistakes, though they have acted with what appears to-day to be unreasonable lack of prudence, though they have done things which were not strictly necessary for the business, yet, having regard to the circumstances, not two or three years before but two or three months ago, it was not unreasonable or imprudent or unnecessary that they should have done what they did. I wonder how the Government would like it if they were, as perhaps they will be. questioned in 1950 or 1951 as to whether what they did in 1947 was altogether prudent or reasonably necessary for the conduct of the country. I am perfectly satisfied that what they are going to say 96 then is, "It is not fair of you to judge us by the circumstances that exist to-day. You should think of the difficulties we were in." If I may adopt the language of the noble and learned Viscount the Lord Chancellor, who spoke so charmingly, agreeably and persuasively on this matter, they would say, "In 1947 we, the Government, were fools; but we were not dishonest fools, we were honest fools. And that ought to be our escape."
Observe this: it is not even the whole conduct of the business that is going to be looked at. In a great business one enters into many contracts and agreements. Some of them turn out well and some turn out badly. In the best businesses, in the most easy times of doing business, they do not all turn out well. On balance, if 60 per cent. turn out all right and 40 per cent. do not come out so well, one has made not a bad show for the shareholders and workers. But it is not the 60 per cent. that have come out well that are going to be called into question. One single isolated transaction entered into three years ago is going to be picked out and it is going to he said that that transaction was entered into with an unreasonable lack of prudence or was not reasonably necessary at the time. We could go even farther back than 1948. This clause goes back a year beyond the introduction of this Bill.
Is that really the course we want to encourage? We have heard a great deal to-day from the noble Lord, Lord Lucas, and from the noble Viscount the Leader of the House, about the determination of the Government to encourage initiative in these firms, to leave firms their independence even after they have been nationalised. What do you want them to do at the present time? Are they to come running to the Minister—running to mother!—about every contract they are to make, in order to be safe? I should have thought that the Minister, like most wise mothers, would say, "Do not come worrying me about everything." He would he quite right. If that is how the Government are going to encourage them. I do not know what will become of initiative and decentralisation.
The proposal we make is to use the words, in perfectly simple language, "a proper transaction made in the ordinary course of business." We all agree that nobody is going to defend a "racket"— 97 anything that is not bona fide. We have deliberately dropped from this Amendment the provision that it had to be shown that it was done in contemplation of or in order to defeat the Bill. I think it is reasonable to drop those words. Everyone knows a "racket" when he sees one, and I am not going to define it in an Act of Parliament. If we have a transaction the terms of which are so odd that it raises the presumption of a "racket," then by all means disclaim it and say, "You are entering into a racket"—if that is what you want to get at. The noble and learned Viscount the Lord Chancellor said he wanted to get at only the thoroughly bad contract. I took the words down at the time, and I think I am right, I ask the House which words better describe what the Lord Chancellor says he wants to get at—namely, a thoroughly bad contract—our words here:a proper transaction made in the ordinary course of businessor this rigmarole about a contract thatwas not reasonably necessary…or was made…with an unreasonable lack of prudence…I say without hesitation that any practical man would say that if you want to know whether the contract is thoroughly bad you must see whether it was made in the ordinary course of business. The noble Lord, Lord Lucas, said (I sympathised with him when we debated this matter last time; in fact, I thought he would rise now to accept this Amendment, as I thought it meant exactly what he said) that we ought not to be concerned with intention; we ought to confine ourselves to fact. I thought that was very reasonable and convincing. Therefore, we deliberately cut out all question of intention made in anticipation of the
§ act, and so on, and confined ourselves to fact, as the noble Lord asked us to do. I cannot state a fact more factually than to say it was a proper transaction made in the ordinary coarse of business.
Finally, may I refer to what was said by the noble Viscount Lord Hall, who presented the Bill to us so persuasively on the Second Reading? He then said:
No proper action taken by any company in the ordinary course of business will be challenged.
If the Lord Chancellor would like us to substitute the word "normal" for the word "ordinary" I dare say my noble friend who moved this Amendment would accept that. I know the noble Viscount, Lord Hall, meant what he said. Surely, this Amendment gives effect to it. This is a matter on which we cannot compromise. The Government have said all that can be said. In the face of the difficulties this industry is encountering, in view, of the urge the Government have placed upon them to continue with the development plan, and the response of the industry to all that has been urged upon them, is it right, reasonable or fair to put this Sword of Damocles over the heads of men who are trying to bring this country through its economic difficulties at the present time, and say, "Three years hence you will have this Sword of Damocles still suspended over your heads"? The Bill is a bad Bill, and the country will decide whether or not it is to go through. But if it does go through, let it be said that you have dealt fairly by men who have dealt more than fairly by you.
§ On Question, Whether the said new words shall be there inserted?
§ Their Lordships divided: Contents, 48; Not-Contents, 20.99
|Aberdeen and Temair, M.||Caldecote, V.||Fairfax of Cameron, L.|
|Cholmondeley, M.||Davidson, V.||Forester, L.|
|Reading. M.||Falmouth, V.||Gifford, L|
|Salisbury, M.||Hailsham. V.||Hawke. L.|
|Townshend, M.||Swinton, V.||Howard of Glossop, L.|
|Willingdon. M.||Llewellin L.|
|Ailwyn, L.||Mancroft, L.|
|Buckinghamshire, E.||Ashton of Hyde, L.||Mendip. L (V. Clifden.)|
|Dudley, E.||Baden-Powell, L.||Moyne, L.|
|Fortescue, E. [Teller.]||Balfour of Inchrye, L.||O'Hagan, L.|
|Howe. E.||Barnby, L.||Remnant. L.|
|Lindsay, E.||Carrington, L. [Teller.]||Rennell, L.|
|Munster, E.||Cherwell, L.||Rochdale, L.|
|Selkirk. E.||Clanwilliam, L. (E. Clanwilliam.)||Rockley. L.|
|Vane, E. (M. Londonderry.)||Clydesmuir, L.||Teynham, L.|
|Derwent, L.||Wardington, L.|
|Bridgeman, V.||Ellenborough, L.||Wolverton, L.|
|Jowitt, V. (L. Chancellor.)||Ammon, L.||Kershaw, L. [Teller.]|
|Archibald, L.||Lucas of Chilworth, L.|
|Addison, V. (L. Privy Seal.)||Chorley, L. [Teller.]||Macdonald of Gwaenysgor. L.|
|Crook, L.||Marley, L.|
|Huntingdon, E.||Darwen, L.||Morrison, L.|
|Douglas of Kirtleside, L.||Pakenham, L.|
|Hall, V.||Hare, L. (E. Listowel.)||Shepherd, L.|
|Stansgate, V.||Holden, L.|
On Question, Amendment agreed to.
§ Resolved in the affirmative, and Amendment agreed to accordingly.
LORD HAWKE had given Notice of an Amendment to leave out subsection (2) and insert:
(2) On such arbitration, the arbitration tribunal shall either confirm or revoke the notice.
The noble Lord said: My Lords, on rereading this Amendment my noble friends and I have come to the conclusion that it does not quite fit the bill; we think we can word it better. We therefore propose to move something different at the next stage of the Bill. I do not move.
§ Clause 27 [Other transactions resulting in dissipation of assets]:
My Lords, the Amendment to this clause is complementary to that in Clause 15 upon which we have just divided. This Amendment deals with the other types of transaction which can be disclaimed and I feel that almost precisely the same arguments apply. I beg to move.
Page 39, line 6, leave out from ("not") to the end of line 10 and insert ("a proper transaction made in the ordinary course of business, regard being had to the circumstances at the time").—(Lord Hawke.)
§ THE LORD CHANCELLOR
My Lords, I am inclined to agree with the noble Lord that this seems to be the same point, in a somewhat different setting, as that concerned in the Division which we have just had. Therefore, subject to what the noble Leader says, I hardly think it necessary to divide again, it being understood that we are as strongly opposed to this Amendment as we were to the last. I may point out that the word "proper" brings in this subjective element: it depends on the thought of the man, and wherever you use the word "proper" it is right therefore that the man himself should prove the propriety of the transaction. He is the only person who can. 100 If I may take this opportunity of speaking, I would again say that the right thing to do is to have first of all the objective tests. The objective tests on this, having regard to the time the contract was made, are whether it was an unreasonable contract or an imprudent contract. Those are the objective tests. Then if you have established that it is for the man who made the contract which has been found to be "imprudent" or "unreasonable" to say, notwithstanding all those facts, that it was proper, in the sense that he was not concerned in deliberately dissipating the assets. He is the only person in the world who can prove that. I have said those things again because I wanted to make it quite plain beyond peradventure that I am not accepting this Amendment. We are resisting this Amendment, but at the same time we realise that this is the same Amendment as we had last time, and therefore it does not seem to be necessary to trouble the House to go to a Division again.
§ LORD HAWKE had given notice of an Amendment in subsection (3) to omit all words from "applies" down to and including "any such provision". The noble Lord said: My Lords, the same considerations apply here as to the last Amendment, one which I did not move with a view to putting down something at the next stage. I do not desire to move the Amendment now.
§ Clause 31 [Activities in Second Schedule not to he carried on except under licence]:
LORD BALFOUR OF INCHRYE had given notice of an Amendment, after subsection (2) to insert as a new subsection:
() A licence shall not be refused under the last foregoing subsection unless before refusing the same the Minister has satisfied himself after a consultation with the Iron and Steel Consumers' Council that it is in the
public interest that such licence shall be refused.
The noble Lord said: My Lords, in view of the acceptance of the Amendment on Clause 7, that covers this point, I do not wish to move this Amendment.
§ Clause 32:
§ Rights of existing businesses.
§ (4) Where the Minister is required by this section to issue a licence to a person in whose case the average annual output during the years nineteen hundred and forty-six and nineteen hundred and forty-seven of the works used for carrying on any such activity of the business at the passing of this Act was greater than the quantity specified in the second column of the Second Schedule to this Act in relation to that activity, the licence shall, instead of being subject to the condition specified in paragraph (a) of the last preceding subsection, be subject to a condition limiting the extent of the production of that activity to the average annual output of the works during those years; and the licence shall be subject also to a condition that the Corporation may require the holder of the licence to sell to them so much of the output to which the licence relates as the holder of the licence does not require for purposes of manufacture in the works of the holder of the licence, at such price as may be agreed, or, in default of such agreement, as may be determined by arbitration having regard to the prices at which similar products are sold in the open market by the Corporation or publicly-owned companies.
§ THE EARL or DUDLEY moved, in subsection (4) to omit all words beginning "and the licence" down to the end of the subsection. The noble Earl said: My Lords, this Amendment is consequential on the acceptance—the ready acceptance—by the Government in Committee of the Amendment moved by my noble friend, Lord Balfour of Inchrye, to Clause 31—which was then Clause 29 —deleting the provision that a licence may impose restrictions as to the persons to whom Second Schedule products may be sold, and in particular conferring on the Corporation the option to purchase any such products. If this provision is unnecessary for new entrants to the industry and for existing businesses requiring supplementary licences (and indeed the noble Lord, Lord Morrison, agreed to this deletion without any question) then it is equally unnecessary for the concerns to which this subsection applies.
§ As the Bill was originally drafted this subsection applied only to the Ford Motor 102 Company, and it was intended to enable the Corporation to buy that company's surplus pig iron. The company are now making about 200,000 tons of pig-iron per annum, of which nearly three-quarters is sold outside their own works. However, it is only in very exceptional circumstances that they produce pig-iron suitable for steel making. Their output is entirely of low phosphorous foundry iron, which gives a wide range to consumers in the foundry industry. Admittedly, after the vesting date the Ford Motor Company will be competing with be blast furnace products of the Corporation's companies, but such competition is rightly regarded as healthy. Moreover, the price of these blast-furnace products would be controlled, either by the Prices Board which this House accepted in Committee, or, if that should die an unreasonable death, then by the Minister; and there can therefore be no justification for the retention of this subsection so far as Ford's are concerned. Any attempt at profiteering by them can be controlled by statutory price control.
§ As the result of an Amendment made on Report in another place, some additional companies are now eligible for licences under this subsection: Bayliss, Jones & Bayliss, Limited, the Carron Company, the Clay Cross Company, Limited, Richard Johnson & Nephew, Limited, and the Executors of James Mills, Limited. However, nearly the whole of the Second Schedule output of these firms is absorbed, either in their own works or in the works of firms belonging to the same group, and the proportion sold outside is negligible. The Corporation need have no fear of competition in Second Schedule products from any of these firms, and there thus no case at all for the retention of the words proposed to be left out. I feel sure that the Government will accept this Amendment as readily as they accepted the corresponding Amendment in Committee. I beg to move.
Page 44, line 16, leave out from ("years") to the end of line 24.—(The Earl of Dudley.)
§ VISCOUNT HALL
Lords, I am afraid there is some misunderstanding in this matter, because the Government are not inclined to accept this Amendment. As the noble Earl rightly said, this subsection deals with companies which have 103 been specifically exempted on the grounds that their main activities lie outside the production of iron or steel. Each of them takes up in some form of finishing activity a good proportion of its output of Second Schedule products. The principle of subsection (4) is that they should be able to produce on the same scale as in recent years—this is fortified by the assurance which I gave with regard to cases where output in 1948 or under a development scheme exceeds the output which would be authorised by Clause 32 as drafted—and that within their permitted output they should be able to continue to absorb the output required for their own finishing purposes, but that in order to ensure distribution in conformity with a comprehensive plan, the Corporation should be able, if they so wish, to acquire the disposable surplus at a price related to that of the similar products of the publicly-owned industry Although subsection (4) would require that the licence should contain the condition conferring an option on the Corporation, the exercise of the option is entirely at the discretion of the Corporation The option will probably be exercised only in times of shortage in order to direct the licensed products to the most essential uses at a time when the licensee might otherwise be tempted to sell for non-essential but highly profitable purposes.
The noble Earl referred to the fact that the possibilities are that the additional production would be negligible. He mentioned Ford's. In the case of foundry pig iron particularly, the annual output disposed of in 1946 and 1947 was about 140,000 tons, or over 10 per cent. of the total United Kingdom output. Indeed, in the case of Ford's, their average output for 1946–47 was 171,600 tons, and the approximate annual output disposed of was 96,000 tons—a fairly substantial proportion of their output. The same can be said of some of the other concerns. For instance, in the case of the Clay Cross Company, the average output for 1946–47 was about 41,000 tons, and the approximate annual output disposed of was 26,000 tons—well over 50 per cent. of their total output. I think it is important to ensure that output on this scale can, if necessary, be brought within the Corporation's general distribution plan. There is no hardship to the licensees since the Cor- 104 poration must pay a price corresponding to their own companies' selling price for similar products at the time, the price or prices to be agreed or, failing agreement, determined by arbitration, having regard to the price charged in the open market by the Corporation for the publicly-owned companies for similar products.
This point should also be made: that whereas in the case of Clause 31 licensees the Minister can ensure that their production does not interfere with the general plans of the Corporation—he will licence only to the extent that it does not do so and, if need be, he can refuse a licence altogether—in the case of Clause 32 producers their production is on such a scale that, were it not for the special circumstances attaching to the companies concerned, their Second Schedule assets would have been taken into public ownership. In these circumstances, it is important that there should not be a loophole whereby the very considerable production of the companies concerned could be marketed in a manner which might prejudice the national planning of the production and distribution of iron and steel which will be the responsibility of the Corporation. The distinction between Clause 31 and Clause 32 cases rests primarily on the difference in scale of production. I am afraid that for the reasons I have given we cannot accept the Amendment.
§ LORD BALFOUR OF INCHRYE
My Lords, I am somewhat disappointed that the noble Viscount, Lord Hall, does net give this Amendment the pleasant reception which was given by Lord Morrison to another and similar Amendment of mine on the previous stage of the Bill, because I do not think the arguments made by the noble Viscount are very convincing. He gave us a number of figures which it was difficult to take down straight away and to absorb, but I think he said that these companies were responsible for some 10 per cent. of the pig iron output in the United Kingdom. Then, from those figures he took two particular companies and gave us examples of how much of their output of pig iron was disposed of outside and not required for their own purposes. Roughly, I think the percentage was something about half; therefore there is something in the nature of 5 to 7 per cent. of the total output of 105 pig iron in the United Kingdom which may be disposed of by these companies outside their own requirements. I should have thought that that small amount would be welcomed by the Corporation and by the Government as an opportunity to bring about the healthy wind of competition and to form a yardstick by which the Corporation could he judged in relation to the efforts of private and free enterprise. It cannot upset the conformity of the comprehensive scheme of distribution of the Corporation, that some 5 per cent. of the output is outside its own particular price control.
The noble Viscount then took refuge in the argument that one of the reasons why the subsection was wanted was in order to see that all production in difficult times went where it was most needed. In Standing Committee in another place the Minister made it clear that he felt the best way of preventing exploitation of production by any outside source at a particularly advantageous time for profiteering, was by statutory price control. That is a principle which we on this side have stood by, and it seems to me that the argument of the Minister for the controlling of the market and prices of this outside output, is nothing but an added protection which the Government feel they must give to the Corporation in order that the monopoly may he complete and free from any danger of competition by free enterprise. I do not believe that my noble friend will want to divide the Committee on this Amendment but I think that both he and I would like to register our feeling that this is really an effort to give the Corporation an even more advantageous position than it should have, and to protect it from that small wisp of free enterprise which the Government allow to continue.
§ THE EARL OF DUDLEY
My Lords, if I may by leave of the Committee, say one further word, I will then withdraw this Amendment. Like my noble friend, Lord Balfour of Inchrye, I was most disappointed at the speech of the noble Viscount and the rather dog-in-the-manger attitude adopted by the Ministry of Supply in this matter. The noble Viscount talked about dangers of profteering. As I said in my speech, that is quite fantastic, because these prices will be controlled, in any case, by the Minister, so there cannot be any 106 question of profiteering. He also talked about the surplus products of Ford's, and he agreed entirely with what I said about three-quarters of Ford's output being disposable to outside consumers. What he did not say, and what I said, was that the bulk of that product is not pig iron for steel-making; it is ordinary foundry pig. The only reason for which, as I can suppose, the Corporation might want to buy that product—I repeat it is no good for steel-making—is so that they may he able to sell it at a profit. If that is so, then the Corporation would be profiteering in that way. Otherwise, the product would not be of the least use to them, except in very exceptional circumstances. I am not going to press this Amendment, but I want to register my view that it is completely illogical for the Corporation to demand first call on the products under this clause and yet not to demand it under Clause 31. I cannot see the difference—it seems to me that there cannot logically be any difference. I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 9.38 p.m.
VISCOUNT SWINTON moved, after subsection (4) to insert:
() Notwithstanding anything in subsection (3) or subsection (4) of this section, the conditions of a licence which is required by this section to be issued shall not limit the extent of any such activity as aforesaid to an annual output less than the highest output of such works as aforesaid in any calendar year between the thirty-first day of December, nineteen hundred and forty-seven, and the date of issue of the licence nor to an Annual output less than the estimated annual output of such works as aforesaid (as approved by the Minister) after completion of any measure of re-organisation or work of development authorised by or on behalf of the Minister.
§ The noble Viscount said: My Lords, we pass now from the field of acute controversy into the more placid country of agreement and how we should give effect to our agreement. This Amendment seeks to write into the Bill the undertaking which was given to your Lordships on the last occasion by the First Lord of the Admiralty. I think he will agree that I have set out correctly in the Amendment the undertaking which he gave on behalf of the Minister as to what the practice would be. The only question here is whether it is right and reasonable to insert these words in the Bill. I would submit to the Government that it is right and 107 reasonable for these reasons. The limitations are already in the Bill—that licences should be limited to 20,000 tons, or whatever it is, on the average annual output over the prescribed years. The limitations are in the Bill and this extension which the Minister proposes to give, I submit, should be in, too.
§ But observe that this does not apply to new licences; this refers only to existing people. Where there is an existing manufacturer who falls within the undertaking of the Minister, either because his output in the year beginning December 31, 1947, was higher than that laid down in the Bill or because he has put into operation an approved scheme of reorganisation or development and should get the estimated annual output of that development, it is intended that he shall have the increased amount as a right. There is no dispute between us over that matter, but I am advised that unless these words are inserted in the Bill, under subsections (3) and (4) as they stand, the Minister has no power to make these additions to a licence as of right. It is said that the Minister could do it by granting a supplementary licence. There is all the difference in the world between the two licences. Under subsections (3) and (4), the existing operator gets his licence as of right. The supplementary licence is a matter of grace; and in granting a supplementary licence the Minister can impose any conditions he pleases. I need not refer the noble Viscount to the words of the clause, but at the end there is a sort of omnibus provision that the Minister can impose any other condition he thinks fit. I am sure that is not the intention. When the noble Viscount gave his assurance, he meant that everybody would get it as of right and there would not be these conditions attached. I would like him to confirm that to-day.
§ That being so, the only objection the noble Viscount, the First Lord, raised was that it would be difficult to express the second of the two alternatives—namely, the estimated annual output of the works after extension. There is no difficulty in applying the concession to the actual output in any year after December, 1947. The only difficulty could apply to the product of expansion under an approved plan. But I am advised that these words follow exactly what is done to-day, and 108 I would be grateful if the noble Viscount would check me on this matter. When an operator wants to make a development, he sends his plans for the approval of the Minister, with a statement on the level of output to which the development or reorganisation will bring the concern. If the business is so small that it is not worth worrying about, he does not have to do that; but wherever the scheme is to cost over £5,000 in building or civil engineering, the operator must submit to the Minister of Supply details which show to what figures the output will he increased, and in approving the plan, the Minister at the same time approves the increased output. If that is so, and if before the plan is undertaken there has been agreement between the Minister and the steelmaker as to what the development plan shall be and what the results will be in increased output, then I suggest to the First Lord that it is quite reasonable and involves no difficulty to put into the clause "the estimated annual output of such work as aforesaid (as approved by the Minister)," because, in fact, before the thing has been approved the Minister will have agreed to exactly that figure of output. Therefore, I suggest it would be better to put into the Bill itself the conditions which the Minister has already said he proposes to apply. I beg to move.
Page 44, line 24, at end insert the said subsection.—(Viscount Swinton.)
§ VISCOUNT HALL
My Lords, I must say that I was somewhat optimistic when we discussed this matter on the Committee stage that it would be possible to do what the noble Viscount, Lord Swinton, asks us to do in this Amendment. However, I am afraid it is impossible. I am sure your Lordships will realise that the Minister went a long way to meet the points that were put in relation to the excess production which is provided for in this clause. The assurance which I gave was quite definite and was one of good faith on the part of the Minister. I am sure that is not open to question in any way. I think it is a little unreasonable, in these circumstances, for noble Lords to try and push the Minister further than the assurance which he gave. We feel that the under 109 taking ought not to be put in statutory terms. The noble Viscount suggested that there was the possibility that the assurance could not be carried out. I am assured that it can be carried out within the terms of this clause. I can tell the noble Viscount and noble Lords interested in this matter that the assurance will he kept for the reasons which I have given, and that it will be far easier to make satisfactory arrangements with the producers on this point than it will be if statutory provision is made in this matter.
§ VISCOUNT SWINTON
May I just say this? As I understand it, it will not be conditional. Provided the producer complies with the Minister's conditions, that he has a larger output over the years or that he has a development plan, he will have it as of right, and there will not be annexed to it all the conditions which can be annexed to a supplementary licence. That is very important.
§ VISCOUNT HALL
It is important, but I think the point is made quite clear in the assurance that was given by the Minister. That is what it is intended shall be carried out.
§ VISCOUNT SWINTON
I am obliged. If I may say so, it is of great importance that he should have it as of right. I think it would be more reasonable to write it in the Bill, but provided the assurance can be given that he will have it as of right and that supplementary conditions will not he attached, I do not think it matters very much.
§ VISCOUNT HALL
I can give the noble Viscount the assurance for which he asks. It is for that reason, and for the other reasons I have given, that I hope he will not press the Amendment.
§ VISCOUNT SWINTON
Having received that assurance from the Minister, while I think it would have been better to write it in the Bill I certainly do not consider it is worth taking the matter into the Division Lobby. In view of the clear assurance which the noble Viscount 110 has given, and the fact that this question is going to be decided as soon as the application is received, and it is once and for all, I do not think it very much matters. I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 39 [Sums which are to be chargeable to revenue account]:
§ 9.45 p.m.
My Lords, this is little more than a drafting Amendment, and I shall be very brief All it seeks to do is to bring the interpretation of the word "provision", when used in relation to sums to be allocated from revenue for different purposes, into line with the interpretation in the Companies Act, 1948. I beg to move.
Page 48, line 21, after ("depreciation") insert ("or diminution in value").—(Lord Rochdale.)
My Lords, as I stated at an earlier stage, this is not in our view necessary, but since the noble Lord attaches importance to it, and since the phrase he mentions does occur in the Companies Act, we are ready to accept his Amendment.
§ Clause 40 [Accounts and audit and statistics]:
LORD RENNELL moved to add to the clause:
() Where it appears from the accounts of a publicly-owned company that in any year such publicly-owned company has incurred a loss from its activities taken together, the report of the Corporation required under section four of this Act shall draw attention to such loss and to the circumstances in which it has been incurred.
§ The noble Lord said: My Lords, the Amendment which stands in my name, and in the names of two other noble Lords, is one of a grout of three Amendments which were proposed on the Committee stage dealing with the accounting of the iron and steel group. Unfortunately, I was not able to be present in your Lordships' House because I was in bed at the time. The Amendments were discussed, and I am sorry that the particular Amendment which is submitted now was not then carried with the other two Amendments. I submit that the Amendment still seems necessary, be- 111 cause, first of all, it is not quite sufficient to have the accounts at the office of the Registrar of Companies. What is required in addition is an explanation as to why an individual company has contracted a loss. If the interpretation which has been placed upon the remarks of the noble Lord, Lord Pakenham, at the time of the Committee stage is correct, it would not be the intention of the Corporation to make a statement in regard to the loss of an individual company. Without the Amendment we now propose, the accounting clauses are not quite so clear as they ought to be.
§ There is a point that the clause requires that all the accounts of all the companies shall be presented to the Minister and published and that that involves considerable labour. On the other hand, what we on this side of the House want to ensure is that it shall be possible for the public to find out, by presentation of the accounts to Parliament, what companies have made losses on what particular named products, so as to ensure that there is no subsidisation of one production by means of another production or of one company by another company.
§ If your Lordships will turn to the beginning of Clause 40, you will see that it is stated that the Corporation shall keep proper accounts and other records; that they shall prepare a financial statement of the accounts of the Corporation; that in respect of the first financial year, and each financial year thereafter, a consolidated statement of accounts shall be published, showing the profit and loss of the Corporation and the publicly-owned companies as a whole, and that these accounts shall conform to the best commercial standards. If the Government interpret the phrase "the best commercial standards" as one which would commit the Corporation to stating what loss had been incurred by individual companies of the 200 odd companies in the group, I should be perfectly satisfied, but that is not implicit in the remarks made by the noble Lord, Lord Pakenham, during the Committee stage of this Bill.
§ There are two alternative courses which can be pursued. If this Amendment is not pressed but we can have an assurance that, in stating the consolidated position and the consolidated profit and loss account of the group as a whole, 112 mention will be made in the report that had made a loss on this or that product, such and such a company of the group that would go a long way to satisfy me. Alternatively, if it is not intended to include that in the accounts of the group, then I think it is only reasonable that the accounts of the individual companies should be published as is provided for in the clause in the form in which it now stands, because that would oblige the Corporation to show when any one particular company of that 200 odd companies had made a loss. I do not know if I have made my point clear. In one of those two forms it seems to me that a statement is required of what losses have been made by individual companies in connection with particular products outside their main activities. That should result either from publishing all the accounts of all the companies individually or from a statement which should be made. It would satisfy me and possibly other noble Lords that where accounts are required to conform to the best commercial standards they should include a statement of the loss made by individual companies. I beg to move.
Page 49, line 42, at end insert the said subsection.—(Lord Rennell.)
My Lords, I stated our objections to a proposal of this kind at the last stage and I have little to add except that in our view those objections still hold good, and there is nothing that the noble Lord has said which in any way weakens them. But if the House and the noble Lord particularly desire to treat the Amendment as consequential on Amendments that were carried last time, we would, with all proper reservations and indeed indicating our very strong objection to the clause, not wish to hold up the business this evening.
I am much obliged to the noble Lord for his very fair offer. There is actually a mistake in the Amendment which is down in my name, in that it refers to "section four of this Act" and it should be "section five of this Act", because the clauses of the earlier part of the Bill were renumbered. If the noble Lord will accept this Amendment in my name with the modifications I have just referred to and treat that as a consequential Amendment to the two 113 Amendments which were moved in Committee stage, I shall he glad.
I do not think the suggestion the noble Lord has just put forward makes it any worse in our view, and we are perfectly prepared, subject to what I have said, to agree this.
§ Amendment, by leave, withdrawn.
§ Amendment moved—
Page 49, line 42, at end insert—
() Where it appears from the accounts of a publicly-owned company that in any year such publicly-owned company has incurred a loss front its activities taken together, the report of the Corporation required under section five of this Act shall draw attention to such loss and to the circumstances in which it has been incurred."—(Lord Remiell.)
§ Clause 43 [Compensation to officers in connection with transfers]:
§ VISCOUNT HALL moved, in subsection (3) (b) to omit the first word "may" and insert "shall." The noble Viscount said: My Lords, when a similar Amendment was before the Committee I promised to consult my noble and learned friend the Lord Chancellor on this matter. I have done so and this Amendment is the result. I beg to move.
Page 53, line 28, leave out ("may") and insert ("shall").—(Viscount Halt.)
§ LORD BALFOUR OF INCHRYE
My Lords, I cannot let this Amendment pass without saying how glad I am to see that it has come about. I remember how the noble and learned Viscount on the Woolsack leapt upon me when I moved exactly the same Amendment on the Gas Bill. The noble and learned Viscount is always so good in saying that he was not right, and I think in that particular instance he was not; but nevertheless we have come back to it here and I am glad that right has triumphed in the end.
§ THE LORD CHANCELLOR
My Lords, I cannot say that I remember the incident, but I am glad to see that if I did jump upon the noble Lord he is none the worse for it!
§ Clause 45 [Establishment of Iron and Steel Arbitration Tribunal]:
THE MARQUESS OF READING
My Lords, on the Committee stage I ven- 114 tured to surgest that it was undesirable that the arbitration tribunal having a legal chairman should be free to seek outside aid in their deliberations on questions of law and I suggested extempore that to make the position quite plain the words "not being a question of law" should be inserted after the word "proceedings." I am given to understand that if the Amendment is moved in a slightly different form from that on the Paper it may commend itself to the Government, and, therefore, with your Lordship's leave, I desire to move it in that form.
Page 55, line 39, after ("proceedings") insert ("not being a question which in the opinion of the tribunal is primarily one of law").—(The Marquess of Reading.)
§ THE LORD CHANCELLOR
My Lords, I have considered this matter, and have gone as far as I can to meet the noble Marquess. As he has moved the Amendment in this new form I have much pleasure in accepting it.
§ 9.56 p.m.
§ LORD PAKENHAM moved, after Clause 49, to insert the following new clause:
§ Treatment of land after extraction of iron ore.
. The Corporation shall take such steps as appear to them to be necessary to secure compliance by the publicly-owned companies with any conditions imposed or deemed to he imposed under the Town and Country Planning Act. 1947, with respect to the treatment of land after iron ore has been extracted there-from with a view to restoring the land to its former or same other beneficial use.
§ The noble Lord said: My Lords, I hope the House will feel that this clause allays the anxieties that were expressed last time; and in particular I hope that the noble Lords, headed by Lord Tevnham, who have their names down to the next Amendment will feel able to accept the proposal of the Government. I think we are all at one, as was clear on the last occasion, in desiring to make sure that there is proper restoration of land, and the only question in the mind of the House was whether the existing powers under the Town and Country Planning Act, 1947, would bring about that object. In spite of some entertaining remarks about the Ministry of Town and Country Planning I made it pain on the last occasion that there is no reason to sup- 115 pose that the Ministry of Town and Country Planning will not in fact possess the requisite powers and make full and adequate use of them. Having considered the matter further in the light of the views so strongly expressed on the desirability of making sure that this restoration of land takes place, we have come to the conclusion that it would be appropriate to insert a clause of the kind which appears on the Order Paper.
§ I would just call the attention of the House to what the effect of these words will be. The publicly-owned companies which produce iron ore already have an obligation to comply with conditions imposed on them under the Town and Country Planning Act. The Corporation, under the draft clause, will see to it that the companies have any assistance that can be provided by the Corporation, and they will make sure that the conditions are strictly complied with. I hope the House will feel that we have done everything in our power to meet the views expressed and will consider that this is a satisfactory Amendment. I beg to move.
After Clause 49, insert the said new clause.—(Lord Pakenliant.)
My Lords, we are grateful to the Government for setting down this Amendment, which meets our case as regards the restoration of land. We are also grateful for the assurance that the Minister of Town and Country Planning in fact has the necessary powers, which of course he will exercise with the local authority, to effect this restoration. On that assurance, I will not move the next Amendment standing in my name.
§ Clause 53 [Duty to furnish information]:
§ LORD LUCAS OF CHILWORTH
My Lords, with your permission I would like to deal with this Amendment and the Amendment on page 59, line 33, together. These are two Amendments that were foreshadowed by my noble friend Lord Morrison on the Committee stage. With these Amendments, Clause 53, subsection (1) will provide that the companies and persons referred to shall furnish such 116 information and produce such documents and so on,as may be reasonably required by the Minister for the purposes of the provisions of this Act or by the Corporation for the purposes of Part II and Part IV of this Act.As a result of these Amendments, the Corporation will have no powers whatever under the clause after twelve months from the date of transfer. Within the twelve months' period, it will be possible to obtain only such information as they reasonably require for the purposes of Part II and Part IV of the Act and it cannot be obtained except on the authority of the Minister. Thus, in effect, the Corporation could only obtain information needed in connection with the transfer of the companies to public ownership. I think that meets the wishes of noble Lords opposite. I beg to move.
Page 59, line 32, leave out ("or the Corporation").—(Lord Lucas of Chilworth.)
My Lords, again we are grateful for this Amendment set down by His Majesty's Government. I think it largely covers the points which I raise in the next Amendment standing in my name. Therefore, I shall not move that Amendment.
Page 59, line 33, after ("Act") insert ("or by the Corporation for the purposes of Part H and Part IV of this Act").—(Lord Lucas of Chilworth.)
LORD TEYNHAM moved to add to the clause:
() If any person, other than a company which comes into public ownership under this Act, reasonably incurs expense in the course of or for the purposes of complying with any requirement or request whether formal or informal, made or purporting to be made by or on behalf of the Minister or the Corporation under this section, other than a requirement or request made for the purposes of Part III of this Act, that person shall be entitled to recover the amount of that expense from the Minister or the Corporation as the case may be at the option of that person.
§ The noble Lord said: My Lords, your Lordships will remember that a similar Amendment to this was set down on the 117 Committee stage of this Bill and was withdrawn for further consideration of the points which were raised by the noble Lord, Lord Morrison, who pointed out that the powers under this clause to obtain information operate only for a period of twelve months. We accept the noble Lord's argument that it might be undesirable to make statutory provision for reimbursement of expenses involved in the issue of licences, and this Amendment has been framed to meet the point which he raised. On the other hand, we cannot accept the noble Lord's contention that the cost of supplying the information which might fall on companies outside the fold of nationalisation would necessarily be small administrative expenses during the twelve months period; we felt that a person might be involved in considerable expense in providing the information required. Accountants and auditors, for instance, might be required. I would like to point out again, as was pointed out (Luring Committee stage, that the precedent for such payment of expenses has already been established in the Electricity Act, 1947. I beg to move.
Page 60, line 5, at end insert the said new subsection.—(Lord Teynham.)
My Lords, I should like to support this Amendment which stands in my name and that of my noble friend who has just spoken. He has put the case thoroughly. It seems fair that companies not subject to nationalisation should under this clause be able to obtain reimbursement of expenses which they are called upon to bear. In some cases, the legal position may not be clear, and considerable legal expense may be incurred in the employment of auditors to certify the accounts and figures that have been put forward. That might often require considerable extra staff. In some cases, the expenses may be great, and in other cases not so large. In any event, I feel that they should be able to claim these expenses to which they have been put.
§ LORD LUCAS OF CHILWORTH
My Lords, while I agree with the noble Lord, Lord Teynliam, that this Amendment on the Order Paper is somewhat different from the Amendment which was on the Order Paper in Committee, I still cannot 118 accept it, because what the noble Lord seeks to do by it is to secure that expenses upon application should be allowed to any person who is required to give information in connection with the transfer of the industry under Part II of the Bill, other than a company which comes into public ownership. That is now the Part of the Bill to which this Amendment refers. There is no precedent in the Electricity Act, as the noble Lord claims. There are two classes of persons to which this Amendment applies. There is the first class of person who has since October 29, 1948, taken over property or rights of a company Which comes into public ownership; while the second class are companies which were wholly owned by Third Schedule companies on October 29, 1948, but have since ceased to be wholly owned. Information will be required from such persons within twelve months from the general date of transfer only if, as regards those in the first class, it is proposed to use the powers of Part II of the Bill to recover the property or rights in question under Clause 25 or, as regards those in class 2, to take the company into public ownership under Clause 22. What noble Lords opposite wish to do by this Amendment is, in effect, to suggest that no person should be put to any expense in supplying information which the Minister requires in the investigation of transactions for which there would be a prima facie assumption that they had been entered into with the object of evading the Government's nationalisation proposals The Government cannot accept such a principle, and it is upon those very clear grounds that I am afraid I cannot accept this Amendment.
My Lords, I am sorry to hear that His Majesty's Government cannot accept this Amendment. I should have thought it was a fair one, and it was framed to meet a particular point which was raised by the noble Lord, Lord Morrison, on the Committee stage—namely, that it would be inadvisable to put anything down statutorily on the question of recovering expenses in connection with the issuing of a lice ace. We agreed upon that, but I cannot see why His Majesty's Government cannot accept the payment of expenses which may be incurred during a twelve months period. It 119 is not a point that we want to stand on, and in the circumstances I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 60 [Interpretation]:
§ 10.7 p.m.
§ LORD BALFOUR OF INCHRYE moved, in the definition of "pension scheme" to leave out "customary practice." The noble Lord said: My Lords, with the permission of your Lordships I would like to deal with this Amendment and the next Amendment together, because the Amendment which I now move paves the way for the next. May I also say that when I come to move the next Amendment I shall ask permission to correct a small slip that has been made in setting down the Amendment. The word "include" should be "includes."
§ The purpose of these Amendments is to make quite clear and to secure the position of an individual who is serving in a company where there is no pension scheme, but where according to established practice he might reasonably expect to enjoy a pension. For some time we on this side of the House have felt that as now drafted the Bill does not give protection under the definition of "pension scheme" as contained in the Bill, since it cannot be said that customary practice is a "form of arrangements"—to use the words of the Bill. This Amendment overcomes the difficulty by making it clear that "pension scheme" includes "customary practice." I understand that there have been discussions through the normal channels, and I am hopeful that in the interests of those individuals to whom noble Lords on both sides wish to give protection this Amendment, and the subsequent one also, will find favour with the Government. I beg to move.
Page 64, line 24, leave out ("customary practice")—(Lord Balfour of Inchrye).
§ LORD LUCAS OF CHILWORTH
My Lords, how happy is my lot in deal- 120 ing with this, the last Amendment with which I have to deal at this particular stage! After having previously experienced a somewhat stormy passage in having to resist Amendments all day, I can now say that the noble Lord, Lord Balfour of Inchrye, has so correctly interpreted the Government's intentions that I am happy to accept both these Amendments.
Page 64, line 25, at end insert ("and also includes any customary practice under which pensions are paid")—(Lord Balfour of Inchrye).
§ Clause 61 [Application to Scotland]:
§ VISCOUNT ADDISON
My Lords, this is the first Amendment which I myself have actually moved today. Its purpose is to bring the law affecting Scotland into conformity with that of England and Wales. I beg to move the Amendment, and I hope that your Lordships will accept it with the same enthusiasm that you have shown in accepting the last two Amendments.
Page 66, line 28, at end insert ("and for the reference in section (Treatment of land after extraction of iron ore) of this Act to the Town and Country Planning Act, 1947, there shall be substituted a reference to the Town and Country Planning (Scotland) Act, 1947").—(Viscount Addison.)
My Lords, Scotland is always reluctant to be dragged at the coat-tails of England and Wales, but on this occasion the Amendment is obviously desirable and necessary, and I thank the noble Viscount for moving it.