§ 5.10 p.m.
§ House again in Committee (according to Order).
§ [The EARL OF DROGHEDA in the Chair]
§ Clause 7:
§ Compulsory purchase of land
§ 7.—(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.
§ (2) Paragraph (b) of subsection (2) of section five of the Town and Country Planning Act, 1947 (which enables land to be designated in a development plan as land subject to corn-pulsar), acquisition by any Minister, local authority or statutory undertakers) and section nine of that Act (which provides that in certain circumstances such land may cease to be so designated) shall have effect as if the references therein to any Minister, local authority or statutory undertakers included references to the Corporation and as if, in the said section nine, the words "who could be authorised to acquire it compulsorily under the provisions of this Act" were deemed not to apply to the Corporation.
LORD LLOYD moved to add to subsection (1):
Provided that the Corporation shall not be authorised under this section to purchase compulsorily any premises which for the time being are used or held by any other person wholly or mainly for or in connection with the carrying on of any activity which the Corporation or any subsidiary of the Corporation is authorised to carry on.
§ The noble Lord said: This clause gives the Corporation compulsory powers to acquire land. These powers are similar to those introduced in the past by most public utilities, and a similar clause to this appears in most of the previous nationalisation Bills. But this particular Bill differs from previous nationalisation measures in two important respects. First of all, in previous measures the undertakings which were to be nationalised were all public utility undertakings, like gas and electricity; whereas in this case iron and steel is a competitive industry. Secondly, while in previous cases the whole of the industry was acquired by His Majesty's Government, in this case only a part of the industry 532 is so acquired and there will be a large number of private concerns remaining in operation if this Bill becomes law.
§ If your Lordships look at the clause you will see that it is drawn very widely indeed. It enables the Corporation to acquire any land it likes for any of the activities which it is authorised to undertake. Moreover, I am advised that the expression "land" includes buildings and fixed plant erected on that land. The fact that this clause was drawn so widely in previous Bills was not so important as it is on this occasion, because in previous Bills the nationalised industry had no competitors. In this case the Corporation has competitors, and although in Clause 2 it is provided clearly that no new businesses can be acquired by the Corporation except by agreement, yet in this clause the Corporation can acquire the land and thus can compulsorily acquire the works and the buildings of any of its competitors. The object of the Amendment is to safeguard private firms against this possibility. If the Amendment is accepted, the Corporation will still be able to acquire land compulsorily for development purposes, and will even be able to acquire the land surrounding its competitors and so prevent their development. In both ways the Corporation will still have great advantages over its private competitors. I am not at all sure that it has not got too great an advantage, and I am not at all sure that it is right that it should have these great advantages, if competition is really to be fair.
§ We are anxious to try to meet the Government on this, and to meet the point that the Minister made in another place when he said that the Corporation must have compulsory powers to enter land, where necessary, for the extension of a steel works where, may be, the landlord was holding the Corporation to ransom. If this Amendment is accepted the Corporation will still be able to do that, and the only restraint that will be placed upon the Corporation is this proviso that under this clause they shall not be able to acquire the works of their competitors. We have had a great many assurances from the Minister and other members of His Majesty's Government that they genuinely desire competition—in fact, they have said that competition will be a very healthy thing. I am sure they are sincere in that desire, and I am 533 sure that by competition they mean fair competition. But if their assurances are sincere, as I think they are, it seems to me inconceivable that the Government should envisage the Corporation using this clause for the purposes I have outlined. Indeed, if they do not envisage such a possibility I must admit that I can think of no good reason why they should resist this Amendment and, therefore, I hope I shall receive a sympathetic reply from the noble Lord opposite. I beg to move.
Page 9, line 26, at end insert the said proviso. —(Lord Lloyd.)
§ THE EARL OF BUCKINGHAMSHIRE
In other nationalised measures, as Lord Lloyd has said, public utilities, such as gas and electricity, were given compulsory powers to acquire land. But the iron and steel industry is not a public utility; nor, I would add, was coal. These powers were not granted to the coal industry when it was nationalised. I would like to ask the noble Lord this question: Why grant these powers to the nationalised iron and steel industry, especially when, as appears from the Bill at the moment, such wide powers for acquiring land, including apparently the works and factories, seem to be given?
THE MINISTER OF CIVIL AVIATION (LORD PAKENHAM)
The noble Lord, Lord Lloyd, in his very persuasive speech, if I may so describe it, asked for a sympathetic answer, and I can offer him my sympathy without restraint. But I am torn between a desire to be sympathetic and a desire not to mislead the Committee or to encourage elaborate discussions which might lead nowhere. I believe the Committee is anxious to make fairly rapid progress this afternoon, but of course I am entirely in their hands as to how long we spend over this matter. The noble Lord accepted, at any rate for the purposes of discussion, the principle that in general one acquired powers of compulsory acquisition of this kind in nationalised measures.
Well, I do not know how he defines "public utilities." They are given in the Civil Aviation Act, which concerns a competitive industry in more senses than one, and there are pro- 534 visions in the Town and Country Planning Act which enable the Coal Board to be invested with powers of this kind. I feel he will accept a small correction with regard to that part of his speech. However, he summed up his case—and the noble Earl, Lord Buckinghamshire, supported this point— by saying that the Government does not need these powers unless it is intended to misuse them. That puts one essential pact of his case, and I would venture to suggest that that is not so. Admittedly we all agree, whether we like it or not, that the powers conferred on the Corporation under this Bill will be very wide, but I am afraid that if the noble Lord's Amendment were accepted it would have a purpose which I do not think is at all in his mind, because it would in fact prevent the Government obtaining land where some not very well-disposed person insisted on retaining the land for the purpose of parking vehicles or for the storage of timber. These powers are permitted to the Corporation under the Bill, and if anybody else were doing those things then the Government could not use, the powers of compulsory acquisition if the noble Lord's Amendment were earned. I am not saying that the noble Lord could not think of some other form of words, but I am bound to say that we have ourselves looked at many possible forms of words and have reached the conclusion that the kind of thing he has in mind cannot be put into the Statute.
I would only say that the safeguards are quite considerable in this case. They are rather more substantial than perhaps some noble Lords are aware. The powers under Clause 7 can be exercised only on the authority of the Minister, who will be answerable to Parliament. The Minister made it clear in another place that this measure was not to be the vehicle for nationalising industries outside the iron and steel industry—for example, the motor industry. So if any noble Lords have anxieties upon that point I can allay them to that extent. I add these further words: that as a matter of fact it would be very costly to acquire a going concern, which I think is particularly in the noble Lord's mind under the powers of Clause 7. It would be very costly indeed. We are advised that the cost would certainly be a price not substantially different from the open market willing-seller price, plus compensation for disturbance 535 and, possibly, plus cost of reinstatement. In our view, that would effectively prevent the clause being used for wholesale acquisition of undertakings, which is certainly not its purpose. I hope, therefore, that the noble Lord will feel that in desiring to keep the clause as we now have it in the Bill we are not intending to misuse it. His Amendment would, in fact, in certain respects hamstring the Corporation, and I therefore ask him seriously to consider whether he cannot agree to withdraw it.
§ LORD BALFOUR OF INCHRYE
This is a very important point which was hardly touched upon in another place. While we are all anxious to progress, I think the Committee will agree that the matter is deserving of a few moments' consideration. We want, if possible to try to arrive on common ground with the Government, and Lord Pakenham did not give us much encouragement in what he said. The principle to which we take exception, and with which I believe the Government themselves would not agree, is that the Bill should be so drafted as to allow—if you like to assume such things—an ill-intentioned Corporation and an ill-intentioned Minister of the future to take steps to enable the Corporation to acquire the land or the prospective land or buildings of a competitor. Lord Pakenham has told us that the Minister has said that there is no intention at present of using the powers—
§ LORD BALFOUR OF INCHRYE
At present we have, I am sure, a good Minister, though we may disagree with him politically. I am sure also that we are going to have a Corporation of good honest men, though they may be misguided in certain ways. In future that may not always be the case, and we on this side of the Committee feel that we should not allow a measure to get on the Statute Book which contains these very wide powers which could be so used by the Executive, should they so wish, at some time in the future. I would like to ask the noble Lord whether I misinterpret the feeling of the Government when I say that they would be willing to see some Amendment in the Bill to ensure that the powers should not be 536 misused. If I do not misinterpret the noble Lord's willingness to go that far, then I think we could withdraw the Amendment on the understanding that the Government would use their best endeavours to think again, and we on our side would co-operate with the noble Lord and others to see whether we could find an appropriate form of words. If he says that the Corporation must have these powers as a matter of principle, then we are differing in principle, but I hope that is not so. From what he said I do not think we are. I think we are differing simply as regards our ability to find a method to achieve what we desire. If so I believe we could proceed on the lines which I have suggested. If, however, it is a matter of principle, perhaps the noble Lord will be good enough to tell me so.
Lord Balfour of Inchrye was right in saying that this was an important issue. I am afraid I cannot give him a categorical pledge that the Government are looking for a formula that would make it impossible in any circumstances for the Corporation to acquire an enterprise which would be in competition with them. I cannot give an undertaking that such a formula would be accepted. I have made plain what the Government feels upon this matter but I must not give the impression that some sort of guarantee will be written into the Bill. Our object is to prevent the Corporation being hamstrung in any of their many activities. To take action in the circumstances which have been described would mean that the whole procedure of the Acquisition of Land Act, 1946, would have to be gone through. That Act makes provision for the hearing of objections and generally provides a substantial form of safeguard. I do not want to bang the door if there is any chance that by keeping it ajar we might catch sight of one another in the end. But the Government have looked at this very often, and it would, perhaps, be misleading to suggest that as the result of having another look at it they are likely to reach some solution which has not hitherto been revealed to them. The noble Lord would not only be welcome but would be given a friendly reception by myself and my colleagues if he wished to discuss this point between now and the next stage of this Bill. Whatever the outcome of any discussions, it will still 537 be open to him to move an Amendment at the Report stage.
§ VISCOUNT SWINTON
If we really intend the same thing, I expect some way can be found to deal with this matter. The noble Lord, Lord Pakenham, said that the Minister had given pledges that he would not go outside the iron and steel industry—for instance, to nationalise the motor business. That is not what we are directing our minds to here. What we feel is that certain businesses, competitive businesses, are exempted from being nationalised, and you ought not, while exempting those businesses, to take a power which—though admittedly it might be very difficult to exercise such a power—will enable you to acquire one of these businesses against its will. The noble Lord said that to do such a thing would be expensive. I dare say that is so. Compulsory purchase is expensive. Also it is common knowledge that when you buy a business against its will, you have to give a large price. What one is anxious about—because this is to be permanent—is that there should not be a power, even though it involved paying a considerable price, to acquire compulsorily a business which desires to carry on itself. If that is common ground between us, I think words can be found. I appreciate that the noble Lord also said that a business might do something, I will not say mala fide, but just rather mischievously, to prevent the Corporation acquiring some land which it wanted to have.
§ VISCOUNT SWINTON
This land would, we will suppose, be something which the private business did not really require for its own purposes. I agree that if a power of compulsory purchase is given at all, some unwilling person ought not to be able to make it nugatory in that sort of way. If we really mean that no business is to be acquired compulsorily against its will, that this power is to be exercised only to acquire land, or land which might have some odd building or other upon it or some stock, then I think words could be found to meet the situation. If the noble Lord can give me an undertaking—and I rather gather he can—that it is not desired to use this power to acquire any business which is exempt from the Bill at present, I feel that between us we ought 538 to be able to find some words which will give that assurance to people in private businesses who might be concerned, and would let them know that the power would be exercised by the Ministry in only a reasonable way.
The noble Viscount has expressed himself, as he always does, most clearly, but he has gone a little further than I am authorised to go, and I think it would be unwise for me to give any more assurances to-day. I must consult with the Minister. I am sure he would welcome discussions, but again I am anxious not to suggest to the House that he is optimistic about finding a formula. Nevertheless, let us try hard to find one.
Before the noble Lord withdraws his Amendment, if he has decided to do so, I should like to make one point. The Amendment concerns itself with buildings belonging only to competitors of the Corporation, but I think it is worth considering the possible effect on other industrial undertakings not at all connected with iron and steel. The power given would cover the purchase of land and buildings belonging to such undertakings and I have some doubt whether the safeguards referred to by the noble Lord, Lord Pakenham, are really adequate in that respect. The 1946 Act, which lays down the procedure for compulsory purchase, allows arbitration or appeal to the Minister, but so far as I know there is nothing in the Act which defines the grounds on which the Minister must or must not confirm a compulsory purchase order which has been applied for. In connection with either land already bought for use or land on which are existing factory buildings in the genuine use and employment of industrial concerns, I would like to see laid down some guidance or some conditions about which the Minister must satisfy himself to ensure that by confirming such a compulsory purchase order he is not doing serious harm to any other branch of industry.
It might well be that the Minister of Supply would consider that the extension of a steelworks was more important than allowing a textile factory to continue in operation. It would be natural that he would be influenced by the fact that iron and steel was his concern, though it might be in the real interest of the 539 country that the other activity should continue. I wonder whether the whole matter could be solved by treating both the Corporation and other industrial concerns in the same way and inserting words to say that before confirming an order the Minister must he satisfied that no undue harm is done to industrial production of any kind. That might relieve some of the anxiety.
I am grateful to the noble Lord for coming so far as to agree to discuss this point, and on that understanding I agree to withdraw my Amendment, reserving the right to put it down again on Report.
§ Amendment, by leave, withdrawn.
§ 5.34 p.m.
§ LORD LLOYD moved to omit subsection (2). The noble Lord said: This Amendment is on the same lines as the previous one but it is perhaps slightly more complicated. Subsection (2) of this clause treats the Corporation in such a way that, by going to a planning authority, it can get land designated in a development scheme. As your Lordships will be aware, any land can be so designated if the Minister considers that it is likely to he used within ten years of the time of planning, and it would be possible for the Corporation to have land designated and in effect freeze that land effectively for ten years. In the event of land being designated by a planning authority, twelve years would have to elapse, even if nothing were done to the land, before the unfortunate firm whose land was so designated could put in an application to have it decontrolled. We feel that under subsection (1) of the clause the Corporation has all the power it requires for the acquisition of land. I apologise if I seem to harp on this point, but under the Bill the Corporation will be competing with private firms who have no such advantages, and who are unable to have land designated under the Town and Country Planning Act. The Corporation ought not to require this subsection.
Page 9, line 27, leave out subsection (2).—(Lord Lloyd.)
§ THE EARL OF BUCKINGHAMSHIRE
I should like to support this Amendment. As my noble friend said, subsection (1) gives the Corporation all the power they 540 reasonably need for compulsory acquisition. I want to emphasise what my noble friend said about the ten years' period. If a Minister designates land, it will take twelve years before the owner can get it freed again. I hope that the Government will consider accepting this Amendment.
On my side I hope that the noble Lords, now they have explored the subject, will not wish to press this Amendment. I labelled it in my mind, perhaps too optimistically, as an exploratory Amendment. The short answer, as the Committee are aware, is that this designation procedure was one approved by Parliament in the Town and Country Planning Act as a desirable method of giving advance notice that certain land is likely to be acquired compulsorily within a limited period. It does not give the Corporation power to acquire land they would not otherwise acquire, but it does enable them to give notice and therefore avoid waste of effort and time on the part of people who might otherwise embark on long-term operations. I should point out that this is common form. The designation procedure is applied in other Acts. While I am perfectly ready to discuss the Town and Country Planning Act with the noble Lord at any other time, I feel that now we can hardly go into the merits or otherwise of the 1948 Act which was approved by this House at the time. If we are going to have compulsory acquisition by the Corporation, as the Government think is necessary and as I understand the noble Lord accepts, subject to reservations to be discussed, it would be very peculiar if we did not carry out this procedure, which does not enable the Corporation to get land they would not otherwise get but which gives advance notice for the great convenience of all concerned.
§ LORD BALFOUR OF INCHRYE
I think the noble Lord, Lord Lloyd, has raised a good point and one well worth the attention of the Committee. If he were to ask me, I would suggest that we did not press this Amendment any further, for this reason: that the whole Town and Country Planning Act, as many noble Lords on this side of the House expected, and as noble Lords on the other side denied, is working so badly and is having such ill effects on development that when we come into power, as we on this side of the Chamber hope may be 541 the case, one of our first tasks will be to overhaul the whole of that Act. Therefore, the comparatively minor effect the Act has in this particular case is something with which we need not concern ourselves at any length to-day.
It is not for me to question the reasons that have led the noble Lord to his very helpful conclusion. Whatever may be in his mind, he has, at any rate, suggested to the noble Lord, Lord Lloyd, that he should withdraw the Amendment, and naturally I am hopeful that he will follow that advice.
I am sorry, but I would like to ask the noble Lord, Lord Balfour, or his noble Leader, the Marquess of Salisbury, to reply to my question. We have had statements made outside, more or less from members of the Conservative Party, that if they are returned to power they intend to repeal this Bill. We are spending many hours of the day and night on discussions—in some cases laborious—of this Bill. Is all that shadow acting? If it is their intention to repeal this Bill if they come to power, why do they take up so much time in examining the Bill so meticulously and in such detail?
§ THE MARQUESS OF SALISBURY
If the noble Lord wants an answer, it is very easy to give one. It is our job in this House to make every Bill the best Bill we can, irrespective of what happens in the future.
With great respect to the noble Marquess, several of the Amendments which he and his friends have moved, I should have thought—and the noble Lord, Lord Pakenham, has thought with much more authority than I—were not to make the Bill better, but to wreck it.
I have been anxiously waiting for some time to respond to the noble Lord's invitation to withdraw the Amendment, but owing to the desire of 542 the noble Lord opposite to make a speech it has been very difficult for me to do so. Now that I have at last managed to get to my feet, I would say that I am always responsive to the noble Lord's blandishments, and I am prepared to withdraw the Amendment. However, there is one thing I would like to mention. I do not think the noble Lord is quite clear on what. I said. He said that this is common form. It is common form for public utilities, but this is the first Bill of its kind where we have had competition between a public Corporation and private companies. That seems to me to raise an entirely separate issue. However, I do not press the Amendment, and I beg leave to withdraw it.
§ Amendment, by leave, withdrawn.
§ Clause 7 agreed to.
§ Clause 8 agreed to.
§ 5.43 p.m.
§ Clause 9:
§ Corporation not to be exempt from taxation, etc.
§ 9. 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.
LORD HAWKE moved, after "exempt" to insert or relieve." The noble Lord said: We now come to Clause 9, which embodies the national pastime of exemption from taxation. With your Lordships' permission, I will discuss this and the next three Amendments together. With these Amendments the clause would read:
Nothing in this Act shall be deemed to exempt or relieve the Corporation from or in respect of liability for any tax, duty, rate, levy, or other charge whatsoever, whether general, local or otherwise.
I feel that on the general principle there can be nothing between us. Clearly, the Government do not wish to relieve or exempt this Corporation from any taxation. If they desire in the Bill to refrain from exempting them, it would clearly be logical to add the words "or relieve," because at a certain stage relief might almost become exemption. Our object in moving this Amendment is three-fold. We want to see that there is always fair competition between this industry and its unnationalised competitors; we want to see that the public, accounts are comparable; and we want to explore the tax
position of the Corporation and their subsidiaries. I think what I have said covers the first two objectives.
§ I do not propose to go into the tax position at great length on an exploratory basis, especially as we cannot expect an answer from the noble Lord this afternoon, as he will not have had an opportunity of making himself fully acquainted with the points. In the first exploration comes the question of profits tax. The ordinary law for an ordinary company is that it pays profits tax at 10 per cent. on its profit, and it pays an extra 15 per cent. on anything that it distributes to its shareholders by way of ordinary dividend. On the other hand, it secures relief for amounts required to pay interest on fixed capital. Under Section 40 of the Finance Act, 1947, it is laid down that where the Crown is the sole beneficiary in the ordinary capital of a company, then that company does not bear the extra 15 per cent. if it pays a dividend; but against that, the company does not obtain the corresponding relief in respect of the interest on its capital. The doubt arises that it is by no means certain that the subsidiaries of this Corporation will he regarded as having their capital held by the Crown as sole beneficiary. If that is so, it means that a subsidiary of this Corporation will pay tax in a different manner from one of its competitors. It will pay 10 per cent. on the lot, whereas its competitor will pay nil on some portion, 10 per cent. on another portion, and 25 per cent. on the rest. This, of course, might react to its advantage or its disadvantage, but in any case the position would be the same. The position would be much as the noble Lord will remember we had in the question of the pension rights of the coal industry employees. The Regulations provided something better or worse, but not the same. We should like to know whether it is the intention of His Majesty's Government that this section of the Finance Act shall apply and, if so, whether they have any proposals to make whereby the incidence of taxation on the subsidiary companies can be made to be the same as that on their competitors.
§ There is one further point that I would like to explore on a different problem—namely, the question of income tax and discontinuance. Certain companies will 544 have split into half; one portion will be nationalised, and the other portion will stay outside. It will make a great deal of difference in taxation as to their treatment by the Inland Revenue under the discontinuance rules. The most favourable treatment would be that they were regarded as being in discontinuance to the extent of the business that passes to the Corporation. It would be more unfavourable to them if the Inland Revenue, seeing the portion the business carried, said: "You are not a discontinuance business at all, and discontinuance cannot apply." Perhaps the Government will look into that point, and on the Report stage we may have an answer from the noble Lord. I beg to move.
Page 10, line 1, after ("exempt") insert ("or relieve").—(Lord Hawke.)
I certainly am not going to inject anything to upset the atmosphere of sweet reasonableness that has reigned on this discussion to-day, but I would like to raise a point on the question of taxation. However, I, too, do not expect the noble Lord to be able to give a definite answer to-day. I raise the question because, for various reasons, the question of the type of taxation to which the Corporation and subsidiaries will be subjected was not discussed fully in another place, and it does, I submit, merit a certain amount of discussion and a good deal of attention, if only for the reason which the noble Lord, Lord Hawke, mentioned, of the complicated effects on income tax under the discontinuance rule and under another set of rules brought in by the 1945 Act and known as balancing charges. There is an analogy between what is proposed to be put down under this Bill and what in fact was done in the nationalisation of the coal industry, where, as your Lordships will remember, in the case of certain companies parts of their activities were hived off, and a similar procedure is likely to be followed in some, at any rate, of these companies. I think I am right in saying that only the one scheme of hiving off has been discussed up to date, but there are a certain number pending, and in each case both the discontinuance rule and the balancing charges rule of income tax apply.
In the case of the coal mining industry, assurances were made at the time that 545 consideration would be given to the special situation in which these companies, who either had a bit of themselves left outside the nationalisation scheme or who continued their activities, having transferred part to the nationalisation scheme, found themselves. Those assurances were, in fact, carried into effect by the Finance Act, 1947. The rules in the 1945 Act to which the noble Lord, Lord Hawke, referred were not complete at that time. The 1947 Act made provisions for these special cases and did, as a matter of fact, carry out the assurances given at the time, but those provisions refer specifically to the coal industry and not to any of the other industries. Therefore, the section in the 1947 Act—or so I understand—would not apply to the iron and steel industry unless or until a similar clause were inserted in some future Finance Act. I refer as, the noble Lord will be aware, to Section 29 of the Finance Act, 1947, and the Seventh Schedule of the same Act. Both of them refer to the coal industry. In fact, the Seventh Schedule is entitled:Income tax in relation to assets transferred under the Coal Nationalisation Act, 1946.What I am seeking at the moment—and if the noble Lord is unable to give it now, I will seek it again on the Report stage—is an assurance that some similar provision will be made in the next appropriate Finance Act to deal with income tax problems under these very complicated rules applicable to the companies which will be taken over in the Iron and Steel Corporation when the time comes—if the time comes.
I am sure that the four Amendments on the Marshalled List are not such as would seem to the noble Lord, Lord Hawke, to be matters of principle. They are in order to provide an opportunity for information, and I am sure that he will not seek to press them.
As a general rule in life, I do not know whether it is wise or foolish to accept the nugatory, but in our view these Amendments make no difference. They add nothing, and they take nothing away. On general grounds, I think it would be wise to stick to the words of other Acts, and 546 more still to use as few words as possible to express anything, rather than add words which have no meaning. However, I recognise the important questions which have been put and which will require a considered answer at a later stage. Through the courtesy of the noble Lord, Lord Hawke, I am in a position to answer one of his questions of which he gave me notice. I understand that the subsidiaries of the Corporation would not in fact be regarded as owned by the Crown, so that particular difficulty will not arise. But I would desire an opportunity of studying the other points at greater length.
I would just say this generally, because I think it should be understood and should be said without qualification. No special advantage is conferred upon the Corporation or its subsidiaries in respect of taxation by the fact of nationalisation. The fact of nationalisation does not give any kind of taxation advantage. I am not saying that none of the subsidiaries may be affected for good or ill by the grouping which takes place under the measure, and that is something upon which noble Lords might require more information. But so far as nationalisation is concerned, there is no taxation advantage at all, and I think it right to make that plain without any doubt. I hope the noble Lord will feel that our words do as much as his, and that he will sec lit to withdraw his Amendment.
Could the noble Lord say anything about the question I asked: Whether he is able to give an assurance, such as was given at the time of the Coal Industry Nationalisation Bill, about the introduction of suitable clauses or legislation under the, Finance Act in relation to the iron and steel industry?
I think the noble Lord was perhaps rather kinder in his opening observations, when he said it was most unlikely that, without notice, I should be able to give that information. The noble Lord was right, for I could not possibly give an assurance of that kind, although I will gladly look into the matter and help him in any way.
§ VISCOUNT BRIDGEMAN
I think the noble Lord, Lord Pakenham, has gone quite as far as we expected him to go at this time in a discussion of this kind. 547 But if my noble friend behind me is going to withdraw his Amendment, I think we should all be quite clear that we have not had anything like an answer—I am not saying we expect it—and we have touched only the fringe of three important problems: that is to say, profits tax, the discontinuance rule and the balancing charges. They are all extremely important, not only to the industries themselves, if and when they are nationalised, but to those who are now the proprietors of those industries, and very important indeed in the case of industries which have either been hived off or have claims going forward to hive off. Sooner or later all these questions of tax will have to be put in a very clear form, not merely as undertakings in Parliament but as definite regulations put forward in the proper way. I know the noble Lord opposite will agree that the sooner that happens the better. Therefore, if this Amendment is to be withdrawn, it is obvious that sooner or later—and probably sooner—something will have to be done to make it clear to the large number of people affected. I hope the noble Lord is going to take steps to that end.
I entirely agree with what the noble Viscount has said, but I am bound to warn him that at a later stage I shall be no better equipped to answer the many complex questions that may arise unless I am given notice in advance, because obviously there are any number of questions which might arise although they do not spring to the eye under these rather demure Amendments. I only hope that before the next stage I shall be told what information the House requires, because I shall be only too anxious to supply it.
With those assurances, and understanding that the word "exempt" is the same as "relieved," I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 9 agreed to.
§ Clause 10 [Liability of Corporation in actions, etc.]:
§ On Question, Whether Clause 10 shall stand part of the Bill?
I wish to raise a point on Clause 10. I regret that I did 548 not give longer notice, but I have had a word with the noble Lord, Lord Lucas, and he is seized of the particular matter about which I wish to ask for information. Your Lordships will notice that in subsection (2) the limitations against actions at law allowable against the Corporation is reduced from six years to three, and I suggest that this requires a word of explanation. Subsection (1) of this clause leaves the Corporation open to action at law and deprives them of the protection of the Public Authorities Protection Act, which I believe I am right in saying prevents an action being started against a county council or other local authority after twelve months.
Yesterday I listened with great interest to a closely argued debate, principally conducted by the noble Viscount, Lord Swinton, hanging upon the words "public interest" in paragraph (b) of Clause 3. I heard him argue, with great eloquence, as always, about the rights and liabilities, and so on, of the poor private employers who are left outside this Bill and who would have no recourse in law. This clause provides for recourse to the law courts in case of unfair discrimination, but I think we ought to be told why the limitation is being reduced in this clause from six to three years. That has been done in other nationalisation measures—coal, electricity, railways and so on, but these undertakings are rather different, as has been pointed out by noble Lords on the other side of the House. As a result of this Bill certain undertakings will remain in private hands and similar undertakings will be in public hands. I welcome this; I think it is an excellent thing. But at the same time I suggest that the period of the right of appeal should not be reduced.
I am speaking with some little knowledge here because I have a considerable personal interest in a concern which makes a certain commodity from steel. There is only one other concern in the country making the same commodity. Both of us produce very large quantities, both of us export the commodity and both of us sell it in the domestic market. Our friendly rivals are now coming under the harrow of this Bill; they are one of the scheduled firms. We do not manufacture steel and so we are being left out; we start only at the steel strip stage. It will be possible in the future for discrimination to be used against us, just 549 as the noble Viscount suggested in his efforts to frighten your Lordships yesterday. We should then have recourse to the law courts. Although I am not a lawyer, I know a good lawyer when I hear one, and if I could get the noble Viscount, Lord Swinton, to return to his practice at the Bar and fight our case I should be well content. Why is a limit imposed upon people such as myself? I repeat that this Bill is rather different from previous nationalisation measures, for the reasons I have explained. I suggest that we should look very carefully at any apparent limitation. There may be good reasons for it, but it seems to me a limitation of the rights of the subject against the Corporation.
We have not had notice of this point and therefore I must speak with some reserve. I understand that it is felt that in certain circumstances six years would give encouragement to speculative litigation against a Corporation with such large funds. Three years is regarded as a suitable compromise between twelve months, which is the normal period for a public authority, and six years, which is the normal period for everybody else. Three years, therefore, seems a reasonable period. If the noble Lord desires to discuss the matter further I am ready to do so, but I should be very much surprised if any further discussion would alter this workable, and common-sense arrangement.
I do not want to embarrass the noble Lord or waste the time of the House, but I feel that this is a point of substance. I apologise for not giving longer notice, I would ask my noble friend if he would be good enough to look at this matter. There may he very good reasons with which he could satisfy me. Perhaps he could explain the matter to me in private.
I shall certainly be glad to discuss the matter further, and I hope that as a result of discussion the noble Lord will feel that the reasons for this course are entirely satisfactory to him.
§ Clause 10 agreed to.
§ Clause 11:
§ Transfer to Corporation of securities of scheduled companies
§ 11.—(1) Subject to the provisions of this Part of this Act, all securities of the companies 550 specified in the Third Schedule to this Act shall, on the first day of May, nineteen hundred and fifty, or such date later than the date aforesaid, but not later than the expiration of eighteen months from the passing of this Act, as the Minister may by order substitute for the date aforesaid, vest in the Corporation by virtue of this Act, free of all trusts and encumbrances:
§ Provided that—
§ (2) References in this Act to "the date of transfer" shall be construed—
- (a) in relation to any company whose securities vest in the Corporation by virtue of this Act, as referring to the date on which those securities so vest; and
- (b) in relation to any other company which comes into public ownership under this Part of this Act, as referring to the date on which dial company comes into public ownership;
§ 6.7 p.m.
§ THE MARQUESS OF SALISBURY had given Notice of five Amendments, the effect of which was to alter the vesting date of the companies referred to in the Third Schedule front May 1, 1950, to July 1, 1951, or such later date as the Minister might, by order, substitute, but not later than eighteen months from the coming into force of the Act. The first Amendment was, is subsection (1) to leave out "May" and insert "July." The noble Marquess said: I rise to move the important group of Amendments standing in the name of myself, the noble Viscount, Lord Samuel, the noble Viscount, Lord Swinton, and the noble Lord, Lord Rennell. As your Lordships will see, there are five of these Amendments and I suggest it would be convenient if we discussed them together. In view of the hear of the weather I shall try to be as brief and as uncontroversial as possible.
§ These Amendments, of course, even if you take the five, do not stand by themselves. They deal only with the vesting day, when the shares of companies which are to be taken into public ownership under the Bill are actually transferred to the Steel Corporation. They are subsidiary to, and indeed almost consequential on, the new clause which we are proposing to introduce on the Committee stage, which postpones the coming into operation of the scheme until 551 October 1, 1950. It may, however, be to the convenience of the House that we should take at one time the debate on both these questions. It would be somewhat absurd to pass over this Amendment and defer until the very end of the Committee stage all discussion on what is, I suppose, the main issue between the Government and the Opposition. If, therefore, the Government will agree—and I understand they will—I propose to deal to-day with the whole question of postponement, in order that we in this House and the country may hear the views of the Government on that particular point as soon as possible.
§ THE LORD PRIVY SEAL (VISCOUNT ADDISON)
May I interpose? I am quite agreeable to the course proposed by the honourable Marquess. I take it that if that is done, whatever may be the decision arrived at on the Amendment immediately before us, there will not be a repetition of the discussion when we come to Clause 60.
§ THE MARQUESS OF SALISBURY
No; one advantage of this proposal is that that will not be necessary.
I do not want to traverse again all the ground I covered in my speech on the Second Reading. But I would urge once more that the proposal contained in these Amendments and in the new clause is both moderate and reasonable. It would have been possible for your Lordships' House to have taken a much stiffer line. Not only do the great majority on both Conservative and Liberal Benches dislike and distrust this Bill, not only do we believe that it is against the best interests of the country, but we have every reason to think that we have behind us a substantial majority in the country. During the Second Reading debate, I mentioned the fact that the Government were elected on a minority of the votes cast at the last General Election. I would emphasise this by quoting the figures. At that Election, the Labour Party received just under 12,000,000 votes—very little below, a few thousands below. The Liberal Party received 2,200,000 votes and the Conservative Party received 10,000,000 votes. If noble Lords will add those last two figures together, they will see—and I do not suggest otherwise—that there was a majority against the 552 Government. It was a very small majority, but it was certainly not a majority in favour of a Bill of this kind.
As I explained before, I fully recognise that at the Election the anti-Socialist vote was split, and it was for that reason that the Government got in by a very large majority. But Liberals and Conservatives are at one on this particular Bill. They are absolutely at one, and surely on an issue of this importance, which affects the whole industrial future of this country—maybe, indeed, its very existence—the fact of this preponderance of opinion, even on the Election figures, against the proposal ought to be taken into account. Moreover, I think that everything goes to show that there has been a further swing of opinion since that date. In 1945 nationalisation had never been tried in practice, and there was a large section of the voters who still thought that it was the cure for all our ills. A new spirit was to inspire industry; men would be working for the community and not for the private employer; strikes and industrial troubles would be a thing of the past. There were a great many people who really believed that. But it now transpires that that is not at all the case. Strikes and industrial troubles are continuing as before. What is more, as I tried to point out yesterday, they are concentrated in, if not entirely confined to, the nationalised industries. It is the coal and transport industries where friction is most evident. And the reason given by the men themselves is even more revealing.
Let me quote only one instance within recent weeks. At a mass meeting of the London and Essex District Councils of the National Union of Railwaymen, the Secretary of the London District Council, who is quite an important person, said:After eighteen months of nationalisation, money is being squandered here, there and everywhere. At the top of British Railways at the present time jobs have been created, and superintendents in every department you go into have increased.That is a quotation from the Daily Herald of June 14 of this year. A further confirmation of the dissatisfaction of the workers is to be found in the decision of the National Union of Railwaymen which, unhappily, was announced this morning. Therefore it is evident that nationalisation has not produced the results that were sincerely hoped for by 553 its champions. This, beyond all doubt, has already made an impression, not only on the workers themselves in the nationalised industries, but on the minds of many electors who were ready in 1945 to give it a chance and judge by results. Even if, therefore, the Government could claim a mandate for this measure at the time of the General Election—and I think that is not borne out by the figures—I should have thought it inconceivable that they should say that they are confident that they have a mandate now. Moreover, the issue before the country in 1945 was not the same as that before Parliament to-day. What was then contemplated, as I understand it, was nationalisation of the primary processes in iron and steel production. Even in 1946 the Government confined themselves to "appropriate sections" of the industry.
But this Bill goes much further than that. It enables the Government to engage in far more extensive operations, with potential ramifications over a wide field of British industry. That proposition was never before the British people. For these reasons I say again that I believe this House might well have felt justified in rejecting this measure on Second Reading and, in doing so, they might fairly have claimed that they had the majority of the people behind them. If I did not advise that course to your Lordships it was because I have always believed that it is the function of your Lordships' House not so much to interpret the will of the people as to give the people an opportunity of expressing their own views. If that could be done without a direct clash upon the principle of the Bill, so much the better. In this case, fortunately, as I tried to explain on Second Reading, it is very simple to obtain that result; it does not even involve any very material delay with regard to the Bill. By great good luck—or possibly because of some disagreements within the Government's own ranks—the Government have postponed the introduction of this measure until the last months of a dying Parliament. Even if they hang on to the last moment, the final stage, the vesting day, under the Government's own scheme, can take place within only a month of the latest possible date for a General Election.
Surely, in such circumstances, the proper constitutional course would be to give the electorate a chance of expressing 554 a further considered view. Our simple device—and it is extremely simple—for producing that result is to postpone the coming into operation of this Bill until October 1, 1950, and the vesting date until July 1, 1951. That is the subject of this particular group of Amendments which we are now discussing. They would enable the Government to make certain whether they have the support of the people with regard to this measure before they actually bring it into force. We are happy to have been able to give them the chance of adopting this thoroughly democratic course. I hope they will take it. If, unhappily, they feel unable to do so, I am afraid they will have some very pertinent questions to answer. The first is this: Why are they so absolutely sure that since the General Election there has been a powerful swing of opinion in the country in favour of the nationalisation of iron and steel? There was no majority at the time of the Election. Why do they think there is a majority now? If they are not confident that there has been any such swing, why are they so reluctant to test public opinion at the cost of a very few months' delay?
Secondly, if they ate determined to go ahead without further expression of view from the British people, what reason have they to believe that the nationalisation of this industry will lead to an increase of production or to a lowering of costs and, what is perhaps most important of all, to an improvement, and not a deterioration, in the spirit of this industry, which hitherto has been so good? Up to now, no economic reason has been given in this House—nor, so far as I am aware, anywhere—to justify this measure. On the Second Reading we were treated by the noble Viscount, Lord Hall, if he will forgive my saying so, to a set of arguments unsupported by any effective facts or figures. Indeed, the noble Lord went so far as to say (I quote from column 985 of May 24):I am not going to base the case which I will submit to your Lordships on the question of the efficiency or otherwise of the industry.Those are the noble Viscount's own words. At the end of that debate we had some agreeable trifling (I can describe it only in that way) from the Leader of the House, which he delivered with his own inimitable charm. He talked about roads, he talked about the licking of stamps, he talked about this 555 and he talked about that. He covered an immense amount of ground in a very short time. But he never really dealt with any of the main issues of the debate. He said indeed at one moment, coming to the point, or coming somewhere near the point, that not enough steel was being produced at the present time, although he admitted that the industry had already passed the target set for them by the Government. But he did not adduce one single argument as to how nationalisation would increase that production. And that, after all, is the one thing which this House, and indeed the country, wants to know.
Surely a measure of this scope, with all the implications involved, deserves a weightier advocacy than that. Your Lordships may have read a powerful speech that was made by the Attorney-General at Atlanta, Georgia, which was reported in The Times of yesterday. In the course of this speech the right honourable gentleman said:No doctrinaire theory, no political ideology is allowed to affect the adoption of what seems to be the best policy in the circumstances. We approach these matters in an empirical way; we do that which seems best for the country.If that means anything, it means that the Government are basing their case for this measure, not on Socialist theory but on hard economic facts. That, according to the Attorney-General, and presumably according to his colleagues, with the possible exception of the noble Viscount, Lord Hall, who we already know takes a different view, is to be the test. It is to give the Government time to produce convincing economic arguments in favour of this measure, which they have certainly not done up to now, and the British people time to consider those arguments, if they exist, and to declare their views on them that we propose this Amendment. As I have said before, our proposal is moderate, it is democratic and I recommend it with confidence to the judgment of the House. I beg to move the first of these Amendments.
Page 10, line 21, leave out ("May") and insert ("July").—(The Marquess of Salisbury.)
§ VISCOUNT SAMUEL
The noble Marquess who has just spoken has said he would be brief and, so far as possible, 556 uncontroversial. I shall be at least as brief, but possibly not quite so uncontroversial. On this occasion we on the Liberal benches find ourselves in the not very usual position of seeing eye to eye with the Conservative Party. We have given to this Amendment in particular the wholehearted support which is indicated by the fact that our own names are added among its proposers. The one purpose of this Amendment, and of all the consequential Amendments attached to it, is to secure that this Bill shall not come into operation until after the next General Election. That was made clear to be our joint purpose in the debate on the Second Reading, and this Amendment does no more than give point to the speeches and arguments in that debate. For good reason which was explained at the time, we did not invite the House to divide against the Second Reading, but it is necessary that we should ask the Committee to declare its opinion very definitely on the merits of this Amendment.
Necessarily, the argument to be addressed to the Committee on this occasion must be substantially the same as on the previous occasion. We urged then, and we urge now, that there is no real mandate, based upon a clear expression of the popular will, in favour of this Bill. It is not to be denied that in the programme at the last Election this Bill was present, but in the electoral campaign it was wholly inconspicuous. It was in the queue, the long queue of measures to be proposed, but coyly hidden at the end of all the others. Mark the difference between the nationalisation of steel and the nationalisation of mines. The whole country knew about the mines; it had been argued for years; everyone knew the pros and cons, and the country was alive to it. When the Bill for the nationalisation of the mines was introduced in the first Session of the present Parliament, no one for a moment said that it had not been approved by the judgment of the electorate. But how different with steel! Can anyone here honestly assert, with his hand on his heart, that when the people voted in 1945 they did know, understand and expect that in this Parliament this tremendous change (for this Bill is quite different from all the other nationalisation measures; it does not deal with a natural monopoly 557 such as many of the others were but with an important portion of our foreign trade, an industry of great complexity on which a great number of others were dependent) was to be made law and placed upon the Statute Book without any further reference to the people?
I have never known, during a lengthy political life, a Bill of the first importance which has been received with so little attention at the beginning and supported with so little enthusiasm from any quarter at the end. The crisis in the fortunes of this Bill occurred in recent weeks. Just now there has been a gathering of all the forces of the Government Party at their annual assembly at Blackpool. Their forces were arrayed, the trumpets were sounded, the banners were flown and many able speeches were made by the leaders of the Party, all of whom spoke. I read purposely all these speeches, as fairly fully reported in the columns of the Press, with a view to seeing what they would say on nationalisation of steel. Would your Lordships believe it, from beginning to end not one word was said by any of the Party leaders on nationalisation of steel—or perhaps I should not say that not one word was said, because the reports may not have been conclusive. But was there any sign that the Party were making this a battle cry for the Election which is now only a few months away? Is it not strange that when they had the whole of their Party gathered together on the most important occasion of the year, dealing with all important questions, with speeches from the Prime Minister, from the Deputy Prime Minister and Leader of the House of Commons, Secretaries of State, and Party managers, not a single word was said with regard to this most important act of this Administration? The banners were there, no doubt, but so far as steel was concerned, they were like the banners one might see of the trade unions on a miners' gala clay when the weather was wet: they were there but furled, and kept in cases out of the rain.
The reason why this course has been taken is quite clear. This is not a Bill which can be defended on its merits but only as part of a general principle. I believe the Labour leaders now realise that. And the reason they are playing down this Bill is that they realise it has 558 been destroyed in argument on merits. Until now they have been very skilful, both in strategy and in tactics, in the conduct of their legislative business during the whole of this Parliament. But I think they have made a mistake in judgment in the presentation of this particular Bill, which will prove fatal. On Second Reading I quoted from the speech that had been made by the noble Lord, Lord Kershaw. There were not many noble Lords in the House then, but we have a bigger attendance now, and I feel bound to refer to it again, because the noble Lord gave the essence of the matter. He did not express only his own view but prayed in aid the principal spokesman of the Government on this Bill, the noble Viscount, Lord Hall. This is what Lord Kershaw said:My noble friend Lord Hall touched on the fundamental basis of this matter when he said yesterday that the logical sequence of social democracy is economic democracy. If democracy is to govern, it must take over basic industries.That is the fundamental reason for this Bill. In another part of his speech the noble Lord said:If a Socialist Government were to be untrue to the principles which they have adumbrated for a generation …then their own Party would be much discontented.
There is no question there of legislation seeking to deal empirically with the needs of the country, as the Attorney General said a day or two ago, in the speech quoted by the noble Marquess. Noble Lords opposite say that in spite of all opposition, apart from all other considerations, at any sacrifice, they will promote their own fundamental principle of Socialism, which they interpret to be the nationalisation of industries in general. They are, in fact, intoxicated by their own theories—Eke the old Irishwoman who said that she was "a martyr to the drink." But I believe that the Government are now inclined to think they may have made a mistake; that they are uneasy in their consciences as to whether they are justified, in view of the course of events at the last General Election, and the entire absence of any large body of public opinion now in support of this Bill, in carrying through this scheme.
So, with the noble Marquess, I would offer them an easy way of satisfying 559 those consciences. Let them accept this Amendment. Why not? Let them accept this Amendment and say, "We refer this to the electors. We do not wish to take the responsibility of carrying out this really revolutionary industrial Bill without the plain and obvious consent of the whole country. We will accept this Amendment and put the responsibility on to the nation itself." By accepting that, with a graceful bow, they may let the curtain drop on the tragi-comedy of this Bill, with perhaps some little measure of faint-hearted and partial applause.
§ 6.34 p.m.
§ VISCOUNT HALL
We have just witnessed a complete political marriage between the Liberal Peers and the Conservative Peers.
§ VISCOUNT HALL
Well, divorce comes very easy to some individuals in political Parties. This is politics—there can be no question at all about it—and I do want to reply in the sense that it is a political issue. It reminds me of the debates which took place on the Amendment of the Parliament Act. Then the Liberals sided with us. Now the Liberals are quite prepared to join up with the Tories in an attempt to defeat the will of the people. It is all very well noble Lords laughing and adopting an attitude of that kind. I want to challenge the figures which were given by the noble Marquess in relation to the last General Election. He said the Labour Party never had a majority mandate for the nationalisation of any of these industries. Well, I deny that. I say the Labour Government did have a majority. Let me take the figures as I extracted them only to-day. I rather expected this would be the line adopted by the noble Marquess. At the last General Election the Labour Party received 11,985,700 votes—
§ VISCOUNT HALL
The Conservative Party received 8,693,000 votes. I will give the figures, and then if the noble Marquess desires to dispute them afterwards I shall be quite prepared to hear what he has to say. Now I come to the Liberal Party. What a situation has 560 been brought about as a result of the policy of the Liberal Party and the Liberal leaders during the course of the last twenty years! It is because the Liberal Party will not face up to the economic issues which to-day are the real political issues that they find themselves in the condition in which they are at present. They cannot hope to revive their position until such time as they give much more attention to the political issues, and not side with the Conservative Party when economic questions such as this are raised. At the last election the Liberal Party polled 2,253,000 votes. It is true that the Liberal National Party, which I have no doubt the noble Marquess included in the Conservative vote, polled 759,000 votes. The combined vote of the Conservatives, the Liberals and the Liberal Nationals, was 11,706,000. Those are the figures which I have obtained today. It is true that there are other votes such as those of the Ulster Nationalists and all the others. You will find that even then the Labour Government received a majority of votes for their policy at the last election. I can give the noble Marquess the figures if he cares to have them, but if we add the Commonwealth, the I.L.P. and the anti-Conservative vote to the Labour vote, then it will give a complete majority over all the other Parties including—
§ VISCOUNT HALL
If the noble Marquess added that to his vote to get the number up, we are quite prepared to give him it, but even without it we have a majority.
§ THE MARQUESS OF SALISBURY
I think that my figures do not entirely coincide with those of the noble Viscount. But what it comes to—and I think he will not disagree with me—is that it is a question of one or two hundred thousand either way. That is what it comes to. But the point is that it does not constitute a mandate for a revolutionary measure of this kind.
§ VISCOUNT HALL
It is a majority, and the Conservative Party during the twenty years between the two wars, when the Liberal vote was very much higher than it is now and because of the split vote, with the exception of 1931, seldom had what might be regarded as a majority 561 vote behind them in the House of Commons; and the whole of the legislation from 1918 to 1939, damaging and damning as it was, was legislation based upon a minority vote of the people of this country. Now the Labour Party has a majority, and it is surprising that almost at the end of the Parliament this matter has been brought into question.
§ VISCOUNT SAMUEL
May I ask the noble Viscount whether, in view of what he has just said, he does not think it is time that we reformed our electoral system, so that we should have Governments based on majorities and not on minorities, whether of one kind or another?
§ VISCOUNT HALL
That has been one of the planks in the political platform of the Liberal Party for the last twenty years. They wanted Proportional Representation only when they could see that they were going down and down, because of their lack of knowledge of economic conditions and, indeed, because of their desire to get away from and not face up to realities in relation to that matter. The noble Marquess also, in the course of his speech, referred to certain dissatisfaction amongst individuals in the nationalised industries. I have no doubt there are certain individuals who are dissatisfied. But I would challenge him to take a plebiscite of the workers in any of the nationalised industries—because that would be a true test—on the question whether they would be prepared to go back and to work under private enterprise. That would be a true test, and I have no doubt what the result would be.
The noble Viscount, Lord Samuel, suggested that the present Government had no mandate based on the popular will. I deny that. They have that mandate and they are entitled to use the mandate which was given them at the last Election. The noble Viscount also rather suggested that the electorate of this country did not really know what they were voting, for. That might be the opinion of noble Lords opposite, but those of us who have been engaged in electoral contests for almost the whole of the last fifty years will not write down the intelligence of the electorate of this country to the very low standard to which the noble Viscount is apparently prepared to write it down.
§ VISCOUNT HALL
Why should you suggest, then, that the electorate of this country did not know what they were voting for?
§ VISCOUNT SAMUEL
Because it was not properly put before them at the General Election by the Party which is now in power. It was obvious that the Labour Party did not bring it home to the electorate. It is the business of Parties to tell the electorate plainly what are their intentions and what is to be expected if they are returned to power. I have the highest opinion of the intelligence of the electorate.
§ VISCOUNT HALL
The Labour Party published its election programme almost a year before the election, and in that programme was included the nationalisation of the steel industry. To say that that is not so is just not true. In addition, the Prime Minister, speaking in the House of Commons on November 21, 1947, used the words which the noble Marquess (as one would expect of him) has quoted quite correctly. That was a clear declaration by the Prime Minister. But how easy it is for noble Lords opposite and the Opposition in another place to change their ground! Take the statement of Mr. Oliver Lyttelton. Speaking during the committee stage of this Bill he did not suggest that there was no mandate. What he did say was:It has long been recognised that a mandate, like most things in human life, gets a little stale with the passage of timeThe noble Marquess on the Second Reading of the Bill in this House did not use the word "stale"; the word he used was "faded." Mr. Oliver Lyttelton went on to say that much of the action of noble Lords opposite was designed to prevent a mandate which had become stale from being put into force.
§ THE MARQUESS OF SALISBURY
I cannot speak for Mr. Lyttelton, I can speak only for myself. I understood the noble Viscount to suggest that I changed my ground and that I spoke of a "faded mandate." I always said, from the Second Reacting onwards, that there had been no mandate for this Bill, and that is the position to which I hold now.
§ VISCOUNT HALL
I. looked through the report of the noble Marquess's speech on the Second Reading and the only reference I found in it to the mandate was 563 in the terms which I have just mentioned—namely, that it was a "faded mandate." Then there is another aspect which must be remembered with regard to public opinion, if public opinion is to be the deciding factor. An unprecedented situation has developed, for the Labour Party has not lost a single by-election since the last General Election—not one by-election. If there has been the swing which has been alleged, and if these issues such as the nationalisation of steel were not brought out in the by-elections by the Liberal Party or the Conservative Party, it is not the fault of the Labour candidates. If the project for the nationalisation of the steel industry could have been made the subject for speeches which would have adversely affected the prospects of the Labour candidates, then the Liberal candidates, if any, and the Tory candidates could have brought it out with all the force at their command. They could have drawn attention strongly to what, in the opinion of the noble Lords opposite, is likely to happen in the event of this industry being nationalised.
I am afraid that this is a political matter, but I am not going to apologise for referring to it because it was introduced by the noble Marquess and the noble Viscount. I think that the crux of the whole question is, as the noble Viscount, Lord Samuel, said in the debate on the Parliament Bill, where is there any Government which will tolerate a situation in this country in which the House of Lords can interfere with legislation which has been introduced in the last two years of the life of Parliament? I have no doubt, for my own part, that if in the programme of the nationalisation of industry steel had been placed at the top of the queue, and the steel industry had been nationalised in 1946 instead of the coal industry or the Bank of England, and the nationalisation of the coal industry and of the Bank of England had been left until 1948 or 1949, we would have heard exactly the same arguments and the same speeches, and the Parliament Act would have to be used to get the legislation through.
§ VISCOUNT SAMUEL
I am sorry to interrupt the noble Viscount again, but I do so only because I do not recognise the quotation which he has given from my speech. I do not recollect those 564 words. I do not think I could have said any such thing as he has quoted.
§ VISCOUNT HALL
It may be that the noble Viscount did not, but it seemed to me that that was running through his speech. As a matter of fact he did support us in getting the Parliament Bill through, and the whole purpose of that was to enable Governments of the future to get placed upon the Statute Book legislation introduced in the last two years of a Parliament. That was the whole position.
§ VISCOUNT SAMUEL
I do not want to argue the point; it is a side issue. But I would say, for the sake of the record, that I do not concur that I ever used the words which the noble Viscount previously used; nor in substance.
§ VISCOUNT HALL
If the noble Viscount did not use these words, I regret referring to them. But I am as concerned with actions as with words, and all the actions of noble Viscount, and his support of the amendment to the Parliament Act, led towards that purpose. Now he is going to use his support for quite another purpose.
I do not want to detain your Lordships for any length of time, but I would say this. The date, May 1, was put into the Bill by the Government because they thought it was in the general interests of the industry to have the vesting date as early as possible, while giving a reasonable time for the Corporation to get down to the job. In the normal course of events the Bill will become law by the end of July. If that is carried out, it will allow nine months after the Royal Assent for the necessary arrangements to be made before the vesting date. It has been suggested that it is impossible for the Corporation to reorganise the iron and steel industry in nine months—or indeed to reorganise it at all. No one suggests that the industry will be reorganised before transfer to the Corporation. It is because of the experience with other nationalisation schemes that the Government can say with confidence that it is expected that within nine months the persons who will be invited to serve on the Corporation will be able to secure, without any difficulty and by the date fixed, all the information and knowledge necessary for the transfer.
565 There is a little inconsistency in the argument against the method adopted both with regard to the fixing of the date and the flexibility which follows. In previous nationalisation measures the Government inserted a fixed date. In this Bill, as I shall indicate a little later, the Government provide for some flexibility. It has been generally ignored that the Government have taken power under this clause to deal with all possible eventualities which might arise, so that the date of transfer can be postponed for eighteen months after the Royal Assent. I think that is the right way to proceed with this proposal. On the assumption that normal development will take place then, in the opinion of the Government, the right date is May 1. But there might be industrial or political difficulties which would make it harmful for the iron and steel industry to be transferred at that date; so the Minister of Supply is given the power, which he will use if it is in the interests of the industry and in the national interest, to postpone the date of the general transfer until any time under eighteen months after the Royal Assent. Therefore, ample flexibility is provided by the Bill. We consider that no case has been made out for the postponement of the fixing date. I am afraid the Government cannot accept the series of Amendments which have been proposed.
§ THE MARQUESS OF SALISBURY
We have listened to the speech made by the noble Viscount, Lord Hall. It was the type of speech we should have expected from him and we have no complaint about the manner in which he delivered it. It was a good, straightforward statement of the Government case; but it intensified the feeling that this is a vital issue, because he made no bones about it—this is not an economic issue. The noble Viscount implied that he did not care very much about the economic implications of this Bill; it was a political issue, and part of a long series of evolutions
§ by which the Government are to take over one after another the industries of this country. That is an important admission to all of us. I shall not take up the time of the House any longer. I cannot say we are convinced by the arguments of the noble Viscount, and we have no option but to take the matter to a Division.
§ VISCOUNT ADDISON
My Lords, before this matter goes to a Division—and I will not detain the House for more than a minute—I want to make one matter clear. Putting; aside all the various points which have been raised, and it would take too long to go over them, the issue before the House is this. Under the Parliament Bill, as we have introduced it, we have sought to go to the utmost limit to provide that a Government not of a complexion acceptable to noble Lords opposite shall be able to give effect to their legislation during at least the first four Sessions of the life of a proper Parliament. There is not a doubt that this proposal could have been brought in earlier, in which case the same arguments that we have had to-day would have been transferred to whatever proposal was brought in during the fourth Session. We have taken the view, and we stand unalterably upon it, that we will not accept that this unrepresentative House, completely unelected, shall be able to demand a second mandate of the people and shall refuse to give authority to Bills introduced in the fourth Session of a Parliament by a Government with a large majority in the representative Chamber. We refuse absolutely to accept that position. I say to your Lordships that the Labour Party never will accept it, and it will be a very undesirable thing if this House insists upon it.
§ On Question, Whether the said word shall stand part of the clause?
§ Their Lordships divided: Contents, 22; Not-Contents, 89.567
|Addison, V. (L,. Privy Seal.)||Foley, L.||Morrison, L.|
|Hare, L. (E. Listowel.)||Nathan, L.|
|Hall, V.||Henderson, L.||Pakenham, L.|
|Stansgate, V.||Holden, L.||Pethick-Lawrence, L.|
|Kershaw, L.||Piercy, L.|
|Ammon, L. [Teller.]||Lucas of Chilworth, L.||Shepherd, L. [Teller.]|
|Chorley, L.||Macdonald of Gwaenysgor, L.||Strabolgi, L.|
|Crook, L.||Marley, L.||Williams, L.|
|Aberdeen and Temair, M.||Long, V.||Grenfell, L.|
|Cholmondeley, M.||Monsell, V.||Harris, L.|
|Reading, M.||Ridley, V.||Hawke, L.|
|Salisbury, M.||Samuel, V.||Hindlip, L.|
|Willingdon, M. [Teller.]||Swinton, V.||Howard of Glossop, L.|
|Templewood, V.||Layton, L.|
|Buckinghamshire, E.||Llewellin, L.|
|De La Warr, E.||Aberdare, L.||Lloyd, L.|
|Dudley, E.||Airedale, L.||Lyle of Westbourne, L.|
|Fortescue, E. [Teller.]||Ashton of Hyde, L.||Milverton, L.|
|Gainsborough, E.||Baden-Powell, L.||Monkswell, L.|
|Halifax, E.||Balfour of Inchrye, L.||Moyne, L.|
|Howe, E.||Balinhard, L. (E. Southesk.)||O'Hagan, L.|
|Iddesleigh, E.||Barnby, L.||Polwarth, L.|
|Munster, E.||Belstead, L.||Rea, L.|
|Onslow, E.||Brand, L.||Remnant, L.|
|Radnor, E.||Brassey of Apethorpe, L.||Rennell, L.|
|Rothes, E.||Braye. L.||Ritchie of Dundee, L.|
|Selborne, E.||Broadbridge, L.||Rochdale. L.|
|Carrington, L.||Roche, L.|
|Allenby, V.||Clanwilliam, L. (E. Clanwilliam.)||Rockley, L.|
|Bledisloe, V.||Royden, L.|
|Bridgeman, V.||Clwyd, L.||Saltoun, L.|
|Buckmaster, V.||Clydesmuir, L.||Sandhurst, L.|
|Cecil of Chelwood, V.||De L'Isle and Dudley, L.||Sherwood, L.|
|Cowdray, V.||Derwent, L.||Stamp, L.|
|Elibank, V.||Dunleath, L.||Swaythling, L.|
|Falmouth, V.||Ellenborough, L.||Teviot, L.|
|FitzAlan of Derwent, V.||Foxford, L. (E. Limerick.)||Teynham, L.|
|Hailsham, V.||Gifford, L.||Waleran, L.|
|Harcourt, V.||Gorell, L.||Wolverton, L.|
On Question, Amendment agreed to.
§ Resolved in the negative, and Amendment agreed to accordingly.
§ VISCOUNT ADDISON
I take it that the other Amendments will be moved formally. We shall raise no objection, but it will be understood that we retain our view.
§ Amendments moved—
§ Page 10, line 22, leave out ("fifty") and insert ("fifty-one")
§ Page 10, line 23, leave out ("passing") and insert ("coming into force")
§ Page 11, line 11, leave out ("May") and insert ("July")
§ Page 11, line 12, leave out ("fifty") and insert ("fifty-one").—(The Marquess of Salisbury.)
§ VISCOUNT HALL
In another place the Opposition moved certain Amendments to secure the deletion of certain firms which were on the borderline for acquisition. My right honourable friend agreed that, in the case of some of them, exclusion might be justified, and following discussions agreement was reached on a formula which would have the desired effect. The formula was believed to exclude only those firms which had been the subject of the agreement, but it has 568 since been found that the drafting was faulty. The present Amendment, therefore, is in the nature of a drafting Amendment to give effect to the understanding to which I have referred. I beg to move.
Page 11, line 48, at end insert ("no account being taken in either case of persons wholly or mainly employed in administrative or clerical work or on the provision of services common to the said activities and other activities of the company, including welfare and recreational services").—(Viscount Hall.)
I am grateful to the noble Viscount for this Amendment. It improves the drafting and emphasises the intention of the subsection.
§ Clause 11, as amended, agreed to.
§ [The Sitting was suspended at thirteen minutes past seven o'clock, and resumed at half-past eight.]
§ Clause 12 agreed to.
§ Clause 13:
§ Disclaimer of agreements and leases
§ 13.—(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 569 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 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 tame, 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 "was not reasonably necessary" down to and including "at the time" and to insert:
was not a proper transaction made in the ordinary course of business regard being had to the circumstances at the time and was connected with a provision made by this Act or with an anticipation of the making of such a provision.
The noble Lord said: It generally falls to my privileged lot to move Amendments which I can see no reason for His Majesty's Government not accepting, and this is no exception to the general rule. Both sides want to achieve the same object here, which is to provide that those gentlemen whom His Majesty's Government consider of evil mind, the directors of companies, shall not be able to flout
the provisions of this Bill by any actions directed towards dissipating their assets.
§ This clause deals with the question of improvident leases or deals. His Majesty's Government's method of dealing with this matter is as follows. They say, first, that the Corporation can challenge these leases or agreements on the grounds that they are not reasonably necessary or were made with unreasonable lack of prudence; and thereupon the other party can go to an arbitration tribunal. In that tribunal the criterion is slightly modified, and it lets out any transaction which is a proper transaction made in the ordinary course of business, regard being had to the circumstances of the time, and in no way connected with the provisions of this Act. This is precisely what we seek to do in the first instance by this Amendment. We in fact believe the criterion of a lease or agreement in the first instance to be the same as that which His Majesty's Government lay down for the arbitration tribunal. I really do not quite know why they have chosen their way to do it, because I should have thought it was being unnecessarily suspicions—and it still lays them open to the charge, which I think they have merited on occasions, that they are wedded to the principle that a man shall be deemed to be guilty until he proves himself innocent. We on this side of the Chamber, the guardians of a thousand years of liberty in this island, always subscribe to the traditional view of British justice that a man is innocent until he is proved guilty; and this Amendment is directly in accordance with that view.
May I ask the noble Lord whether he will apply that principle—that a man is innocent until he is proved guilty—to Ministers?
Ministers, I admit, have a natural and automatic taint of guilt! As His Majesty's Government would have this clause worded, it means that all sorts of transactions could be questioned—and questioned two to three years after the event—including transactions which were concluded in good faith on the basis of the commercial conditions of the covenant. Three years later a transaction may look very different. For instance, there may be great extensions planned for the steel industry. These things may haw: gone ahead on the 571 basis, perhaps of a Minister's speech. But in three years' time we may be in the midst of a slump and the Corporation might be tempted to challenge some of these decisions that were taken in good faith at the time. Can one say that to follow a Minister's speech, for instance, is an unreasonable lack of prudence? Of course, when the transaction came to be considered by the arbitration tribunal it would undoubtedly be passed, but why should the company be put to the onus and the expense of proving to an arbitration tribunal that the perfectly genuine opinions of its directors at the time were in fact genuine and not imprudent? For those reasons, I think that his Majesty's Government ought to accept these words. They do, in fact, practically reproduce the machinery that they provide under the arbitration clause a little later on. I beg to move.
Page 12, line 31, leave out from ("lease") to the first ("the") in line 36, and insert the said new words.—(Lord Hawke.)
In supporting my noble friend's point, I want to emphasise the extraordinary inconsistency between what more than one Government spokesman in another place has said about this very matter, and what the clause, as it now stands in the Bill, actually says. On one occasion in another place, the Minister said this:I want to make it clear now that no proper action taken by any company in the normal course of business would be challenged.He said much the same thing again on the Report stage. The noble Viscount, the First Lord of the Admiralty, made exactly the same point. He said:No proper action taken by any company in the normal course of business would be challenged.I think it would have been more in keeping with the words in the Bill if he had said that they would not be "disclaimed." If he really meant "challenged," if that was the intention of the Government, I should not have a great deal with which to find fault but, when I read the clause, the impression I gain is completely different. Apparently, as my noble friend Lord Hawke has said, any agreement in existence on the date of transfer, if it has been made on or after October 21, 1947, may be 572 "challenged" on one of the two grounds which my noble friend has pointed out. Who is to say three years afterwards whether at the time that a particular course was taken it was "reasonably necessary" or prudent? Surely that must be always a matter of opinion. One man may consider that one course was right; another may consider that another course was right. It may be that in time events may prove that one or the other was right in his judgment; or perhaps that both were right, or that neither was right. One could go on arguing indefinitely without coming to any clear decision on that point.
In point of fact, the two criteria in the clause as it now reads have nothing whatever to do with whether the intention of the boards who take the particular courses that are being questioned was wrong or not. According to the present criteria the courses taken may depend not so much on whether the intention was wrong as on the particular skill or good fortune of the people making the decisions. These conditions are so wide that, considering that a company can be exonerated by the arbitration tribunal only after it has been challenged and made its appeal, a sense of uncertainty and hesitancy is bound in my view to arise, now and since the date mentioned. And that is the last thing one wants at this time, when everything depends on industry being run at the highest possible tempo. What is so objectionable, to my mind, about this clause is the fact that there is a danger, as my noble friend said, of `trading conditions worsening. We can already see that happening, and it may make it all the easier for perfectly proper intentions to be challenged.
It is true that there are one or two safeguards. There is subsection (7) which, as your Lordships well know, says:The section shall not apply to any agreement ֵ which … has been approved by the Minister.But of course that can apply only to individual cases that are put up to the Minister. No man is completely safeguarded there for it would be impossible for a board of directors to go to the Minister on every single decision on which they might be challenged. I hope very much that my noble friend will press this Amendment. It may be that the Government will accept it so that he will 573 not have to go to that trouble but it seems to me right and proper if only to make the clause agree with what Government spokesmen have said on more than one occasion.
§ LORD LUCAS OF CHILWORTH
My Lords, I agree with the noble Lord, Lord Hawke, that both sides here are anxious to do the right thing, and I shall address an argument to the noble Lords opposite which I think will convince them that what we propose to do here is the right thing. The purpose of Clause 13 is to enable the Corporation to disclaim certain agreements or leases which may have been entered into by publicly owned companies between October 21, 1947, and the date of transfer of the company.
As the clause is drafted—this is a close technical argument, as I know the noble Lord, Lord Hawke, appreciates—it enables the Corporation to serve a notice of disclaimer if they are of opinion either (a) that the making or variation of the agreement or lease was not reasonably necessary for the purposes of the activities of the company, or (b) that the agreement or lease was made or varied with an unreasonable lack of prudence on the part of the company. If the notice is challenged, the Corporation must satisfy the arbitration tribunal on one or other of these points, and then, under the proviso to subsection (2), the persons responsible have the opportunity of proving that 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 that it was in no way connected with any provision made by the Bill or with anticipation of the making of such a provision. The purpose of the Amendment, coupled with the proposed Amendment to page 12, line 46—and I am assuming that the noble Lord's arguments were as much directed to that Amendment as to this, because they are really interlocked—
§ LORD LUCAS OF CHILWORTH
Then I ask the indulgence of the Committee to argue them both at the same time. The Amendment to page 12, line 46, is to take away the existing liability of the Corporation to prove what I have just stated, and in its place to make them 574 prove the two matters which at the present lime are the two grounds of defence under the proviso. The Amendments are not really effective for this purpose, because the first one deals only with the matters upon which the Corporation have to form their opinion, and the second fails to make clear that the arbitration tribunal must be satisfied on those matters.
I suggest to the Committee that it is reasonable enough that the Corporation should have to prove one or other of the matters covered in (a) and (b) that I have already mentioned, but it would be quite unreasonable that the Corporation should instead be required to prove the two matters covered by the proviso to subsection (2). These are matters of motive rather than of fact. The Corporation can hardly be expected to prove them, especially after a considerable interval of time. The noble Lord, Lord Rochdale, mentioned three years. He expects the Corporation to prove something after three years when all the evidence is with the other side. The noble Lord, Lord Hawke, said it was a principle of British justice that you are innocent until you are proved to be guilty. But surely that presupposes a fair distribution of the evidence. If all the evidence is on one side, what can you do? I suggest that this clause, as drafted, has a most reasonable history. So reasonable is it that I am going to charge the noble Viscount. Lord Swinton, with being either the father of it or the mother of it—or the foster parent.
§ LORD LUCAS OF CHILWORTH
The noble Lord makes history every time he stands up. A section in substantially the same terms, but without the additional safeguard contained in the proviso to subsection (2), is included in the Transport Act and the Electricity Act; and when the Gas was introduced it contained a clause similar to the corresponding sections of the two Acts I have mentioned. On the Report stage in your Lordships' House we made a concession to the Opposition and inserted what is now the proviso to subsection (2) of 575 Section 22 of the Gas Act, a similar proviso to subsection (2) of the present clause. If I may be allowed to do so, I will quote what the noble Viscount, Lord Swinton, said upon that occasion. I quote from column 936 of Hansard of July 19, 1948. This is what the noble Viscount said:… the noble and learned Viscount the Lord Chancellor said that whether a contract was a personal one or an ordinary commercial contract, what we ought to do (and I think his was a more practical proposal), was to see whether there was evidence that that contract had been entered into to get round the anticipated nationalisation Bill, or whether it was an ordinary business contract, which might be good or bad business, but in any case was entered into in the ordinary course. If the latter, nobody wants to stop it; if the former, there ought to be the right to revoke it. I have had two 'shots' at proposing alternatives in these five Amendments. The noble and learned Viscount has just shown me a manuscript Amendment which I think is better than mine, and which the noble and learned Viscount will move later. On that understanding I will not move any of the Amendments which stand in my name to this clause.The manuscript Amendment referred to was this:Provided that, if the arbitration tribunal are satisfied that the agreement or variation thereof was made in the ordinary course of business 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.That was inserted in the Gas Act, and it is practically the same as the proviso already in this Bill. There is an alteration which I will point out to your Lordships. The latter reads:… 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.That is the new proviso. The new words inserted are "a proper transaction" and "regard being had to the circumstances at the time."
The truth is that by a process of trial and error through these nationalisation Bills we think we have now got this clause and the proviso right. It is, in our view, thoroughly satisfactory, and I hope to persuade noble Lords opposite that it holds the balance fairly between the necessity of protecting the legitimate interests of the Corporation and giving every opportunity to the parties to the transaction to prove that they behaved 576 honestly and ought not to come within the clause. I hope noble Lords will see the fairness of my argument and will not press this Amendment.
§ VISCOUNT SWINTON
I am greatly interested, equally honoured, and somewhat embarrassed to hear that my speeches are regarded by the noble Lord now in charge of the Bill as having such an inspirational value and authority that they must always be accepted as a precedent. I take note of that. I did not speak on the last Amendment, but I commend this to the notice of the noble Viscount the Leader of the House who, with admirable, synthetic indignation, just before we adjourned expressed in short words his view of my speech on the Second Reading, and also of some other Amendments which have been put forward. But, after all, the same action is not always required in different circumstances. If a man bowls you a half-volley and you have a fairly decent eye, you hit it for six. But you do not play the same stroke if he bowls you a yorker. If you do, it is not likely that the result will be the same. The noble Lord has proceeded on the assumption that history always repeats itself. I would commend to his notice a very admirable chapter in a recent book with which I am sure Lord Pakenham is acquainted—I refer to Professor Arnold Toynbee's recent work—which points out the danger of assuming that history does or does not repeat itself. What was, I think, quite a reasonable compromise on gas and transport really does not have much application here.
This, I think, must be a generally accepted proposition—that when someone is charged with doing something wrong and you seek to set aside an agreement, not only in the ordinary principle of law but in ordinary equity—and law and equity are one in this country, happily—the onus of proof is on the person who wishes to set aside the agreement. It is true that in the case of the Gas Act and, I think, in the Transport Act we rather grudgingly made an exception, because in those cases the only contract which was likely to be challenged was some contract which had obviously been made in anticipation of the Bill and in order to defeat the aim of the Bill—a piece of nepotism or something of that kind. It being common ground that that was the kind of contract we wanted to get at, it was not 577 unreasonable on the whole to say that where it looked obvious that it was, if I may use a vulgar phrase, a "fishy" contract, the onus should be on the person who had made the contract to justify it and say it was reasonable. I was prepared to go against the ordinary principles and practice of the law on that occasion and accept it.
There was another reason. In both transport and gas, legislation followed rapidly on the announcement that legislation would be made, and the legislation, which was of a comparatively simple kind, was to come into force rapidly after the Act of Parliament had been passed. There was no great variety of contracts which the people concerned with the business had to carry on. For example, in the railways it was not a difficult thing to do because in fact they were already carrying on as agents of the Government. The gas company ordered its coal—there was not much room for nepotism there. I understand the noble Lord has two grandsons. If he had put one into a gas company and another into an electricity authority as general managers, there would have been a natural presumption that that was "a bit of a racket," particularly if it was done on the eve of the Bill becoming law. We are dealing with a wholly different situation here. Here we have the Government taking over ninety-six firms and Heaven knows how many subsidiaries, all of which are engaged every day in making contracts, not only for the great development schemes which are to run into £150.000,000—
§ VISCOUNT SWINTON
Into over £200,000,000, where hundreds of contracts have to be placed in very difficult market conditions, but also for hundreds of day-to-day commercial transactions. It is extremely easy to be wise after the event. In the writing of history, one of the hardest things is to put oneself in the position a man was in three or four years ago. We can all say to-day exactly what ought to have been done. Noble Lords opposite tell us all the things we ought to have done between 1918 and 1939. And even when we were happily together in the years of the war there are many things we might have done differently if we had possessed then the knowledge 578 which we have to-day What are you going to do here? You are going to say: "I may challenge a contract, because it was entered into with an 'unreasonable lack of prudence.'" Look at the state of affairs in the world to-day; look at the markets!
§ VISCOUNT SWINTON
I know that they can go to the tribunal, but I am not dealing with that now. Contracts are entered into to-day when nobody knows what the price will be to-morrow. At the same time, you are saying to them—and the Chancellor of the Exchequer has been saying it, quite rightly—"For heaven's sake take your courage in both hands; go forward and make your contracts; be aggressive in foreign markets." If a firm is going to take risks of that sort in a falling market it may easily lose money. In the long run, it is probably the right thing to do. Then, in the cold light of two years afterwards, as it may he, somebody sitting here—I do not know how the Board is constituted probably a careful civil servant, trained not to take risks—will say: "I wonder whether it was wise to do that? Was this contract entered into with reasonable prudence? If I had been in your place I would have kept my talent in a napkin and done nothing." That is the sort of thing that is going to happen. If the Government carry this clause in its present form, without this proviso, they will be encouraging everybody to sit back and do nothing. It will be encouraging them not to take risks, just at a time when they ought to be taking risks.
I know that I shall be told: "You can go to the Minister." How can ninety-four companies go to the Minister every morning and say: "Am I to enter into that contract?" In difficult times, when you are selling in foreign markets—as every one of us who has experience in international business knows—when the chance comes of doing something, you have to trust the man representing you outside to close on the spot. The venture may turn out right. Sometimes you will make losses, and sometimes you will make profits. The Corporation will not have regard to cases where the decision turns out right—where the gamble, if 579 you like, has turned out right; all they will be concerned with is to see the cases where a loss has been made. There they will say: "Was this entered into with a reasonable regard to prudence?" If the Government expect these people to carry on this business aggressively and venturesomely, they have no right to put this risk upon them.
I know the firms can go to the Tribunal. But when they get to the Tribunal with whom should lie the onus of proof in this case? I say that the onus should be upon the Corporation, if they are seeking to set this thing aside, as it would be in any other arbitration in the world and in any court of law in the world. Why should not the onus be upon them to prove that this contract was entered into with an unreasonable lack of prudence? I think this raises a great principle. I am bound to say that I think I was right to accept it in transport and in gas, but I think I should be wrong if I felt myself bound by those entirely irrelevant precedents and accepted it in the case of this industry. I think that on reconsideration the noble Lord will see that this Amendment, or something very like it—certainly an Amendment which changes the onus of proof—is a fair thing for him and the Government to accept.
There is one point in Lord Lucas's defence of this clause which I did not understand, and which perhaps he will explain. I understood him to say that in these cases the Corporation would be faced with a situation where the evidence was all on the other side. It would seem to me—perhaps I have not read the Bill with sufficient attention—that where any company comes into public ownership, all the minute books and all the correspondence of that company, which are the property of the company, would also come into public ownership. It appears to me, therefore, that on the contrary it would be the directors of the old company who, in seeking to defend themselves, would be without evidence. I should be glad if the noble Lord would explain that point, because it seems to me that either I am right or I am under a great misapprehension.
THE MARQUESS OF READING
May I put one suggestion to the noble Lord? 580 It may or may not be helpful. The circumstances in which an agreement may be attacked is that it was "not reasonably necessary" or that it was entered into "with an unreasonable lack of prudence." If either of those two contentions is advanced, then either party may go to the tribunal, and the Corpora-will be joined. I was wondering whether the Government would consider putting into the proviso, beginning at line 40, words to the effect that the onus of showing that the contract entered into was not "reasonably necessary" or was entered into with "unreasonable lack of prudence" should be upon the Corporation. That might be a way out of the difficulty. It seems to me reasonable that, if exception is taken to the contract, it ought to be for the person taking that exception to show to the tribunal, by positive substantive evidence, that it is open to criticism on one or other of the grounds contained in the clause.
There was a similar provision in the Electricity Act, in which I was interested as chairman of an electricity holding company. We found that this particular provision had a stultifying effect when agreements were coming before us. A similar provision to this had been put into the Electricity Act, and our board then began to consider what would be the position of the directors if we made the agreement, or whatever it was. We were in the position of possibly finding ourselves mulcted in damages later, in the event of that section of the Act being carried out. In some cases the board applied to the Minister for approval before they entered into those agreements, but the general effect in the electricity industry throughout the country was that the board stopped making agreements unless they were absolutely satisfied that there would be no recourse against them.
To-day boards in the iron and steel industry are in the same position as boards were in the electricity industry; they will consider very carefully indeed before they enter into any fresh agreements, for fear that they might be brought into the courts or before this arbitration tribunal and be held liable for what has happened. I strongly support the Amendment of my noble friend and I urge that the position should be made absolutely clear, because this is not a 581 moment in which we wish to hold up business in the country so far as the iron and steel industry is concerned. It might have a very serious effect in directions which it is not possible to foretell at present.
§ 9.13 p.m.
§ THE EARL OF DUDLEY
I am very loath to intervene in this debate again, but perhaps I might be allowed to say a word or two, because I am more affected by this Amendment than anybody else in your Lordships' House, or perhaps anybody else in England. On October 1, 1947, I and all the other steel owners became in a large sense trustees for the Government. We are quite ready to accept that and to accept the fact that we must "take the rap" for anything we do in bad faith during the intervening period. We are ready to take the risk. But we are not ready to take the risk or the rap for anything we do in good faith.
I do not think your Lordships realise the enormous responsibility that rests on our shoulders in the vast development scheme which we have undertaken. As the noble Viscount, Lord Swinton, has said, the steel industry is committed, with the full approval of the Government, who are its potential owners, to a development scheme which may cost over £200,000,000. I am committed in my own works to an expenditure of over £3,000,000 for revamping my works, putting down new melting shops, new cogging mills and so on. I have an enormous potential future, which is to go to the State. I can assure your Lordships that I, in common with all my colleagues, are entering into our responsibilities with just as much energy and accepting just as much responsibility as if this Bill were not before us and as if this dreadful sword were not hanging over our heads. Your Lordships will perhaps appreciate the real risks and worries that attach to development schemes of this sort in these days: the rising costs, the frightful blows one gets from day to day in regard to the delivery of materials and so forth. It keeps me awake at nights. I have to spend my time in going to see contractors and sub-contractors all over the country and all over the world, using what persuasive powers I have to stop them from threatening to postpone their deliveries by nine months or sometimes a year and 582 completely wrecking my scheme. I have all sorts of risks to take and all sorts of decisions to make, over and above the ordinary day to day business.
It really is not fair that we should have this added onus and this added responsibility. I submit to your Lordships, most sincerely and without any heat, that, if we are pressed too hard, we shall not take those risks. The money that I am spending is only partly mine. It is partly the money that we, as a works, have saved by the sweat of our brows over a good many years. The rest of it is borrowed from the Finance Corporation of Industry. It could not have been borrowed but for the goodwill that we have built up over years past. I take a little credit for that for myself, because I have worked hard for thirty years to build up that goodwill and I raised that money without difficulty. I owe an obligation to the Finance Corporation and to the Government. I am ready to accept that obligation, and anything I do in bad faith I am ready to suffer for—and that applies to all my colleagues—but for anything we do in good faith, allowance must be made.
I have been engaged in business all my life, and I have been fairly though not entirely successful. I have done many things on my own initiative and also under advice that have eventually shown a lack of prudence. Whether it was an unreasonable lack of prudence or not I do not know, but it has certainly turned out to be a lack of prudence. I shall go on doing that, and so will everybody. One cannot take risks without subsequently, at some time, suffering. The Greatest business man in the world is at some time or other guilty of imprudence. It is not fair that we should suffer for that. We take risks in good faith, and it is most difficult for us. These are the most difficult days in which we or any business men have ever had to live. If you put that added onus on our shoulders, it is not fair. The result is that we will not go ahead with this development scheme. We will not go on taking those risks, as we can and will so long as we are to be blamed only for acts that we commit in bad faith. I hope the Government will accept this Amendment.
§ LORD LUCAS OF CHILWORTH
I am grateful for what has been said, and 583 especially for what has been said by the noble Earl, Lord Dudley. I do not find myself in disagreement with one word of anything that has been said, starting with the noble Viscount, Lord Swinton. What did he say? All we are out to do is to catch the "fishy" contracts. I agree with the noble Earl, Lord Dudley. We want you to take risks, and we admire the way you are going about the job. The noble Earl is quite right when he says that no business man in this world could ever say that he had acted with prudence in everything he had done. In the case of people such as he and, if I may say so, I myself in a small way, it is the mistakes we have made and the risks we have taken that have been responsible for the measure of success that may eventually have come to us.
So the issue between us is not one of principle; it is one of interpretation. I hope to prove to noble Lords that the wording we have here covers the point which the noble Lords have made. We quite agree that transactions which may be entered into in all good faith, in the light of time may be queried as to whether or not they were prudent. We can all be wise after the event. But may I direct your attention to what the clause says—perhaps the noble Marquess will follow me:… 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"—and these are the important words:in either case to the circumstances at the time.Now the reason those words were put in was to make it clear that the clause does not affect agreements or leases, the making or variation of which seemed necessary at the time, even though subsequent events might expose this action to criticism. Then if the noble Marquess will look at the second proviso I suggest his point is met. Subsection (2) contains a proviso thatIf the arbitration tribunal are satisfied …and so on—I need not read that, because the noble Lords are well aware of what is said.
§ LORD LUCAS OF CHILWORTH
The proviso says: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 LUCAS OF CHILWORTH
I am going to answer your question. The tribunal can be expected to form only an opinion. They may say: "In our opinion this was a wrongful agreement to enter into." If the noble Viscount will look at subsection (7) of this clause, which was specifically put in to give the opportunity for anybody to apply, he will see that it says:This section shall not apply to any agreement or lease the making or variation of which has been approved in writing by the Minister for the purposes of this section either generally or specially and whether before or after the date of the making or variation of the agreement or lease.That can apply retrospectively, and in every case which has been put to the Minister he has approved it retrospectively. Lord Saltoun asked me a question—
§ VISCOUNT SWINTON
Will the noble Lord answer the specific question that I put to him which is really the whole essence of this thing? The clause says if "the Corporation are of the opinion." Now that opinion is formed by the Corporation after the business is vested in them, which may be two or three years after the transaction was entered into. They have formed the opinion, in the light of after events, that a thing was unreasonable, and they claim to rescind the contract and there is a right to go to arbitration. I ask the noble Lord to say categorically on whom is the onus? I know what the tribunal has to find. On whom is the onus of proof? Is the onus of proof on the Corporation who seek to set aside the contract, or upon the defendant company—upon Lord Dudley who, two or three years after the event, is put in the dock as defendant? Upon whom is the onus? I have read this very carefully. I see that the Corporation have 585 a right to take him there and that the onus of proof is then shifted because the Corporation say, "We are of opinion that he has been guilty of an unreasonable lack of prudence'." Do let us face this. Let us discuss this and get it absolutely clear as to what the clause means. If it means what I say, I think it is entirely unjust. If it means that the onus of proof that there was "unreasonable lack of prudence" is upon the Corporation, then I have no objection to the clause.
THE MARQUESS OF READING
May I say one word? The noble Lord, Lord Lucas, has drawn attention to the expression… that the arbitration tribunal are satisfied of the matters aforesaid.I rather think that what he has in mind is that they must he satisfied of the truth of the allegation of "unreasonable lack of prudence" by the case advanced by the Corporation, and that from that point of view the onus is already on the Corporation.
THE MARQUESS OF READING
I am not sure that that is right, if I may say so, because in all these matters you have got what may be called a positive and a negative test. Somebody has to make a case; somebody has to endeavour to upset it. The whole question is: Who starts—not who ultimately brings evidence which the Corporation are prepared to accept, but who starts the proceedings; who makes the positive case; and whose business is it to make the negative, destructive case which may, or may not, in the end lead the tribunal to decide whether or not they are satisfied of the matters aforesaid?
§ LORD LUCAS OF CHILWORTH
I am very much obliged to the noble Marquess. He has put the case precisely. At page 12, line 46, it says:If the arbitration tribunal are satisfied on any such reference ….I hesitate to say this in front of a lawyer, but they have to be satisfied that there is a prima facie case to go before them; on any such question they have to be satisfied that the Corporation has made its case to go before them.
§ VISCOUNT SWINTON
Let us have it quite clear. The Corporation give notice 586 that they wish to rescind a contract—nobody denies they ought to have the right to do that. It is challenged by the other side. The matter then goes to arbitration. The Minister has said that the Corporation have to satisfy the tribunal that their claim is sound. If those words mean that—I do not think they do—and if that is the intention of the Government, then I am satisfied, because the Corporation have to prove their case.
§ LORD LUCAS OF CHILWORTH
It ill becomes me to enter into an argument between the noble Marquess, a learned lawyer, and the noble Viscount, who was and still is, perhaps, a learned lawyer. But I am advised that this clause means precisely what the noble Marquess has said it does—namely, that the onus is on the Corporation through that first line.
§ LORD LUCAS OF CHILWORTH
Yes, that is what I am advised. I cannot say any more. We are as anxious as noble Lords opposite that this should be correct, and if we can receive any advice from noble and learned Lords we shall be only too pleased to have it.
§ 9.28 p.m.
§ VISCOUNT SWINTON
I am extremely grateful to the noble Lord because he has greatly clarified what I had completely misunderstood. I gather that now we have a common intention. There is a right by the Corporation to challenge —nobody denies that that right ought to be there—and the Corporation may allege that a contract was entered into with—whatever it may be: I will not argue whether they are the right words or not, but that it was a wrong contract to enter into. The noble Lord says that if that is denied, the matter goes to arbitration, and the onus is upon the Corporation to establish, exactly as a plaintiff would in any civil action, that the facts are such that the Corporation, as plaintiffs, should win their case. If that is the intention of the Government—I aria bound to say I do not think it is well expressed—I am sure my noble friend will be perfectly prepared to withdraw his Amendment. If there is any doubt that the words of the clause fail to carry out what Lord Lucas has said is the intention—namely, 587 that the onus of proof is on the Corporation—then let us take the words of the noble Marquess, Lord Reading, which I think are much better than our words, and, on Report, make it absolutely plain that the onus is on the Corporation. On that understanding, I feel sure that the noble Lord will be willing to withdraw this Amendment. We can consult together as to what are the best words to make it clear that the onus throughout is on the Corporation.
I gather that noble Lords are to consider this clause again. I do not know—not being a lawyer—what the precise force of the words "reasonably necessary" may be. I would ask them to consider whether the words "a reasonable step" would not carry out the intention better than the words "reasonably necessary."
In the course of our consultations we shall certainly pay heed to the words of the noble Lord, Lord Saltoun. I hope I shall be able to persuade noble Lords that the words of my Amendment are not unreasonable. We are to have these consultations, and therefore I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 13 agreed to.
§ Clause 14 [Effect of Act on certain loan and other agreements]:
Page 15, line 17, after ("compensation") insert ("from the Corporation").—(Lord Lucas of Chilworth.)
§ Clause 14, as amended, agreed to.
§ Clause 15 [Compensation to holders of securities.]
LORD RENNELL moved, after subsection (7) to insert:
( ) (a) If it is proved by the stockholders' representative or by the Minister that the values of a company's securities as agreed or determined under the provisions of subsections (2) to (7) inclusive and subsection (9) of this section (in this section referred to as "the Stock Exchange values") in the aggregate fall
short of or exceed the value of the company's undertakings and assets on the first day of October nineteen hundred and forty-eight the amount of such short fall shall be added to the Stock Exchange values or the amount of such excess shall be deducted therefrom as hereinafter provided and the Stock Exchange values as adjusted by such additions or deductions shall become the values of those securities for the purposes of this section;
(b) for the purposes of this section the value of a company's undertaking and assets on the first day of October nineteen hundred and forty-eight shall be such amount as they might have been expected to realise if:
(c) if with respect to any company the stockholders' representative or the Minister desires to prove any matter which may be proved by him under this subsection, he shall so inform the Minister or the stockholders' representative (as the case may be) by notice in writing given within three months after the date of transfer.
§ The noble Lord said: Here we come to perhaps a slightly less legal and more controversial point. Before dealing with the exact terms of the Amendment, I wish to refer to two points which came up in the course of the Second Reading debate in this Chamber. I want to dispose of them because, although they are not really germane to what I have to say in support of the Amendment which stands in my name, they have aroused a certain amount of comment, and I feel it is proper that they should be dealt with. If noble Lords opposite wish to "shoot" at me I am standing on my feet for the purpose of being "shot at." The first of the two points arises out of something that was said by the noble Viscount the Leader of the House in his closing speech on the Second Reading debate. He quoted certain index figures dealing with the value of iron and steel share prices in the course of the last few years. I do not know why the noble Viscount quoted those figures because, as a matter of fact, no one on this side of the House had made any reference to the level of iron and steel share values on the Stock Exchange. If the noble Viscount will allow me to say so, I think the quoting of those figures was something in the nature of what might be called a "red herring."589
§ VISCOUNT ADDISON
Oh, no, that is not so. The noble Lord used the expression "dishonest" as applied to the terms of compensation. I objected to the use of that expression, and in order to prove that they were not dishonest I gave actual figures of the rise in value of shares since the basis of the compensation was announced. If the compensation proposed had been dishonest, the opposite would have happened.
I do not know that I agree with that conclusion. I do not think it has much to do with the subject. I had not referred to the level at which compensation was to be paid. In due course I am going to show that the Stock Exchange values are entirely irrelevant to the question of compensation, but before going on to that point I should like to comment on the figures which the noble Viscount quoted. So far as I am concerned, the index which the noble Viscount quoted is not recognisable. I am aware of an index which is very well known in the Press and in financial circles—the Actuaries' Index of iron and steel shares—but the figures he quoted are evidently not these. I am unable to recognise the index, and perhaps the noble Viscount or whoever is to reply will enlighten me as to how the index figures quoted are composed.
However that may be, I shall take the only index I know, the Actuaries' Index, and go on to say that it is perfectly true that the general value of iron and steel shares, as exemplified by this index, has shown an increase over the value of other industrial securities. Therefore it is perfectly correct also to say that if compensation is paid on the basis of Stock Exchange values the relative value which the holders will get in the market would be more than if the same compensation had been applied in the case of the nationalisation of other industries in the ordinary industrial field. What is peculiar, however—and I think it shows how irrelevant these figures are—is that if the noble Viscount had studied the Actuaries' Index of iron and steel shares he would have observed that, of the eighteen securities that go to make up that Index, no fewer than ten are not scheduled companies—that is, they are companies not to be taken over; and only eight of them are companies to be taken over. I am bound to suppose that 590 the noble Viscount did not take the Actuaries' Index for fear of somebody saying that it was irrelevant because more than half the shares which are quoted are shares of companies not to be taken over. Had I been in his place, I would also have been wary of using that Index. He used another and, I must suppose (though here the noble Viscount will correct me if I am wrong, because I do not know how his Index is composed) that the Index was composed entirely of shares of companies that are to he taken over. Is it not rather peculiar, and does it not require a certain amount of explanation, that where there are two Indexes, one composed of shares of companies which in the majority are not to be taken over, and another of shares of companies which are to be taken over, they show not identical, but parallel results? It is logical to conclude that there must be an element in common in both the shares that are not to be taken over and those that are. It is perfectly clear what that common element is. It is the general prosperity of the heavy industries in this country since their rehabilitation during and after the war and the very high level of production at which they have been working. That is the explanation, but that is not a reason to put forward to show that the method of compensation is a fair one. It is an interesting fact, but it is, I claim, entirely irrelevant. So far as the indices are concerted, there I propose to leave that point.
The next point is one which I made, and which I think possibly is what provoked the noble Viscount to his rejoinder just now and to his rejoinder in the Second Reading debate—namely, that the mere fact of taking Stock Exchange values in the circumstances in which we are now situated must, by the nature of things, be unfair, leaving aside the question of whether the principle is right or not. This Bill is the first nationalisation Bill which has been introduced since the Chancellor of the Exchequer invited industrial concerns in this country to limit their dividends. Therefore, this is a new set of circumstances which was not applicable to the compensation terms of the other industries which have been nationalised. You have here something new. That "something new" is that the Chancellor of the Exchequer asked 591 people voluntarily to agree to a certain course of action on the grounds that it was in the national interest for them to do so. By and large, the industrial world have fallen into line with his request; that is to say, by and large, industrial concerns, including iron and steel concerns, have limited their dividends, and have done so for over a year now. They were asked again in the spring of this year to repeat their undertaking, in a slightly different form, and they have done so.
The effect of that is—and it must be obvious to all your Lordships—that a great many of these concerns have not paid as large dividends as they could have paid. Had they paid higher dividends, the prices of their shares would have gone up. As I commented in the course of the Second Reading debate, it is idle to say that a company which does not increase its dividend increases the value of its shares. The Chancellor of the Exchequer referred in another place to the increase in the capital values involved. That is a very important point. It is, of course, perfectly true that if a company does not distribute a dividend, but puts all its profits to reserve, or ploughs them back into the business, the capital value of the business will be increased. But that is not the same thing as to say that the value of the shares will go up; it is a totally different thing.
If the scheme of compensation had been based on the capital or the assets value of these iron and steel companies, the values which the holders would have received would certainly have reflected the money which had been ploughed back into the business. As it is, the capital or asset value of the companies has not been taken as the basis for compensation. What has been taken as the basis for compensation is the Stock Exchange value. I referred in the course of my Second Reading, speech to one or two examples of concerns which did not, for one reason or another, fall in with the request of the Chancellor of the Exchequer, but in fact paid increased dividends. Two of those concerns—I have given private information as to which they are, and they are only two of quite a number that could be quoted —by failing to follow this particular injunction have secured very much 592 increased compensation for their shareholders through the fact that the shares have increased in value as a result of the larger dividend being paid.
To show how illusory this idea is that money ploughed back into the business is reflected in the value of the shares (I do not want to quote any concern by name, because I do not like the practice) I may say that in recent days an announcement has been made about the profits of one of the large oil companies. A fantastic figure of profit was made and was ploughed back into the business—it was not distributed; the dividend was not increased. The amount of money which was ploughed back into the business runs into something between £10,000,000 and £20,000,000. The precise effect on the price of the shares of the ploughing back of that money into the business, and thereby increasing the asset value of the business, has not only been nil but has been less than nil, because the shares fell in value. So much for the idea, therefore, that the limitation of dividends can benefit a shareholder under the compensation scheme which is proposed in the Bill. I will now go on to the question of compensation itself. Those were the two points I had to discuss before coming to the Amendment.
The Amendment which is now proposed accepts the principle of Stock Exchange values which was put into the Bill as it came to your Lordships' House from another place, not because I—or, I think, most noble Lords on this side of the House—agree with that as a basis for compensation, but because it would seem to me that it would ill become your Lordships' House to propose a method of compensation which might involve the Exchequer in a larger expenditure by way of compensation. We have therefore decided to accept the basis of compensation of Stock Exchange values, but to amend it. I will come to that in a minute. Before going on to that point I would like to say that, though the Stock Exchange value had been admitted in other cases, and it was argued against in those other cases from this side of the House, there are other methods of achieving a basis for compensation. We have had the basis of compensation which was used in the case of the coal industry, and which, so far as I know, has been 593 accepted by all Parties without complaint, either in regard to fairness or in regard to the method by which that basis of compensation was reached. I can see no reason why the same or a similar basis could not have been adopted for iron and steel shares—namely, to value the ninety-six companies which are taken over on their asset value. That is not a fantastic proposition.
I want to forestall any possibility of a noble Lord from the other side saying that it is a superhuman task, and that nobody could hope to achieve it in the next twenty years, during which time nobody would receive any compensation. Quite frankly, that position, in my view, is not tenable. It is perfectly practical to value these iron and steel companies which are to he taken over on an asset basis. In the first place, the major companies have all had recent valuations in connection with capital issues which they have made, and under the provisions of the Companies Act they are bound to disclose asset values which can be taken as a basis and from which an interim compensation could have been paid out, subject to later adjustments. The only fair and reasonable basis is to take what a company is worth—not what its shares are worth on the Stock Exchange.
May I give one example to show how absurd a Stock Exchange valuation can be? Let me instance this case or this proof. Your Lordships will be aware that there are a large number of investment trust securities quoted on the Stock Exchange. The majority of the holdings of those investment trusts consist of securities which are also quoted on the Stock Exchange. It is therefore possible to arrive by means of Stock Exchange values at the values of those investment trust securities. It will not surprise your Lordships on this side of the House, but it may be difficult for noble Lords on the other side to explain away, that in practically every case of any of the reputable investment trusts the ordinary share capital is quoted at a figure which is anything from 20 per cent. to 40 per cent. below the break-up value of securities quoted on the Stock Exchange which those companies hold. You there have a perfect example of how ridiculous a Stock Exchange security value can be. That valuation is the basis which His 594 Majesty's Government propose to use for compensating the owners of the scheduled companies. I say that that is not a fair way—it is an improper way—of valuing those assets.
I now come to the Amendment. For the reasons I have given, it accepts unwillingly, without regarding it as either a proper or a right method of valuing, the principle of Stock Exchange values. But it introduces one element which might be described as an escalator and a "descalator" clause—in other words it enables the Stock Exchange values to be corrected by an element where the assets are largely in excess of the compensation which would be received on the Stock Exchange value basis and, equally, gives the right to the Minister to claim that the Stock Exchange values represent too high a compensation value for that company. It is not only reasonable, fair and proper that there should be a power to increase as well as a power to decrease the value, but there is another good reason for it. In the case of the major companies I believe the asset value is substantially in excess of compensation values that will be achieved on the Stock Exchange valuation basis, although I believe there are one or two companies where the Stock Exchange value would involve the payment of an excessive price for the assets. It is therefore only proper that the Minister should be able to decrease, as well as the owner to increase, the amount of compensation which he will receive.
I would add only this: that the view that the Stock Exchange basis of valuation is not a fair one is shared by two bodies who possibly should know more about this than anybody in this country. The first of these two bodies is the Council of the Stock Exchange. I will not deal with that, because the noble Lord, Lord Ritchie, who is on the Council, will no doubt deal with the matter himself. I want, however, to draw your Lordships' attention to a document which has appeared, and which I think needs further reference, and that is a statement addressed to the Minister of Supply by the two bodies that look after the corporate investors of this country—namely, the Association of Investment Trusts and the Investment Protection Committee of the British Insurance Association. A memorandum of this 595 Association dated December 23, 1948, has been published in the Press. It is too long for me to read to your Lordships to-night to refresh your memories, but I commend to noble Lords opposite a further review of that document which I regard as of very great importance. The keynote of it is contained in a sentence which reads:Our Associations profoundly regret that a basis has been chosen which has the effect of penalising companies which have followed a conservative dividend distribution policy and raising doubts in the minds of their directors whether their caution has in fact benefited the shareholders whom they represent.I do not think that any more unwise basis than that which has been suggested could have been found to guide the directors of companies in future regarding the proper policy to be followed in the payment of dividends or the creation of reserves. I beg to move.
Page 17, line 36, at end insert the said subsection.—(Lord Rennell.)
§ VISCOUNT BUCKMASTER
I am glad to have an opportunity of supporting my noble friend Lord Rennell in this Amendment. He has covered the ground fully and, as I am to be followed by my noble friend Lord Ritchie of Dundee, who now sits on the Council of the Stock Exchange, a position which I was once privileged to hold, it would be out of place for me to detain your Lordships for more than a few moments. T would say at once that, in the present state of the market, even noble Lords opposite may be relieved to learn that the Stock Exchange prices are absurd. That may be some consolation. However, in all seriousness, I suggest that Stock Exchange prices cannot be accepted as a basis for acquiring a company as a going concern. They do not purport and they cannot purport to be a valuation of the assets of a company. They are the isolated transactions of a few shareholders fluctuating according to the state of international affairs, or the whims and vagaries of the market. Some alarm may cause a collapse which might produce a fall in value of from 20 to 30 per cent. In the case of concerns which are expanding and increasing month by month and which are to be taken over, it would never be suggested that, because the shares had fallen in such a way, through some sort of panic, the assets of those great con- 596 cerns had fallen in the same way. Such a suggestion bears no relation at all to reality.
While I have no connection with the City, I have tried to make some further examination into these matters. I find that in the week before last there were 301 recorded transactions in the shares of companies which are to be taken over. As my noble friend Lord Ritchie of Dundee knows well, it is not compulsory to record every transaction, but most transactions of any importance are recorded. Many of those that are recorded are really transactions of no importance and no substance. However, if we take a figure of 400 transactions in all these shares, that means that 200 shareholders only in the course of seven days have liquidated their holdings and, of those 200, a large part may be those who have sold because they had to. There are financial reasons not unfamiliar to members of your Lordships' House which sometimes compel the selling of shares. A few isolated transactions of such a nature can in no way reflect the asset values of these great companies which the Government are going to seize. If, as I suggest most seriously, this policy of Stock Exchange prices is unsound, it becomes not merely unsound but unjust when to it you add the fact that the prices are artificially depressed by the fear of nationalisation. And to that you add the crippling influence of dividend limitation.
My noble friend Lord Rennell dealt fully in his argument with the fact that if money is not distributed by way of dividend, if it is ploughed back in reserve, shares should retain their prices or should rise to a price equal to that which they would have achieved if the dividend had been paid, and I need not labour the point. I will give one example (I will not mention the name in this case because the noble Lords seem to think it is better not to mention names) but one of our leading' insurance companies recently increased its dividend, with the result that its shares rose £3 that afternoon. Does any noble Lord suggest that if that money had been put to reserve the shares would have risen by an equal amount? There is a further aspect of this matter. Not only have share prices been cut by the threat of nationalisation, not only superimposed 597 on that is there dividend limitation, but there is also the question of the compensation which the shareholders will receive.
It may be argued that these shares are speculative. But, my Lords, what about Government securities? When Government securities fall 2¾ points in one afternoon cannot they be regarded as speculative? May it not be that the shareholder in a steel company, a great, powerful and growing and vital interest, would prefer to receive 5 or 6 per cent. on his stock rather than 3 per cent. on a stock which he knows he will never live to see paid off? I do not hold any steel shares myself but I have been forced to participate in this "Gas gamble." Your Lordships are well aware that certain gas companies have claimed additional compensation under Clause 26. They were not paid off when other companies were paid off, and these companies have now seen a large part of their capital disappear into thin air by the collapse of the stock which has been foisted upon them. In all the circumstances this Amendment is restrained, moderate and reasonable; it accepts as a starting-off point Stock Exchange prices; it agrees that if the basis for assessing the value is accepted, and if that basis should result in a lower value than the Stock Exchange prices would reflect, then the shareholders are to take that lower value. In addition the method proposed is a method proposed by the Government in the Sixth Schedule to this Bill. I cannot conceive any proposal to be more just, more reasonable or more fair, and I urge your Lordships strongly to support this Amendment.
§ 10.4 p.m.
LORD RITCHIE OF DUNDEE
My Lords, I also regard it as a privilege to be amongst those who support the noble Lord, Lord Rennell, who has moved this Amendment so ably. I am glad that he dealt first—completely, to my mind—with this question of price indices, because we on the Stock Exchange take the view that, whatever price indices may or may not prove, Stock Exchange prices are not, and under no circumstances can be, the right basis for compensation of expropriated stocks. It may be that the shareholders are getting too little, or it may be that His Majesty's Government are paying too much, in 598 which case, my Lords, the taxpayer is getting a bad bargain. But whichever way it is, to take prices as the basis is and always will be wrong. I would like if I may to quote a short passage from the Memorandum which was forwarded to the Minister by the Council of the Stock Exchange in December, 1946, at the time of the nationalisation of transport. The sentences in question read as follows:The Stock Exchange, whether as an institution or as a body of individual members, does not determine the prices of which the official list is a record. The Stock Exchange may be likened to a scientific recording instrument which registers, net its own actions and opinions, but the actions and opinions of private and institutional investors all over the country and, indeed, the world. These actions and opinions are the result of hope, fear, guesswork, intelligent or otherwise, good or bad investment policy, and many other considerations. The quotations that result definitely do not represent a valuation of a company by reference to its assets and its earning potential. Moreover, any valuation by reference to Stock Exchange quotations must introduce indefensible anomalies as between one stock and another of similar standing.I would like now, if I may, to give one proved example of the kind of indefensible anomaly which is referred to in the Memorandum. The example I should like to give the Committee is in connection with railway stocks. I am fully aware that in doing sc I am on somewhat dangerous ground. It might be asked what the price would be to-day for some of the railway stocks if they had not been taken over. It might be said that stockholders did well. I say again, if stockholders did too well then the taxpayer did badly. But to give my example, I would ask the Committee for a moment to assume that there were two trusts, each of which some years ago had £5,000 to invest. In the first case, which we will call Trust A, Great Western Railway 5 pet cent. debenture stock was decided upon. In Trust B the trustees bought London and North Eastern Railway 3 per cent. debentures. Both those stocks were trustee securities and, for simplicity, I would assume that both purchases were carried out at what subsequently became the compensation price. In due time each trust received its proportion of 3 per cent. British Transport stock. Let us now see the effect on the beneficiaries in Trust A, which had Great Western stock. The beneficiaries income was reduced by some £25 a year. It might perhaps be held to 599 be reasonable, that in taking over a British Government security in place of a railway debenture, it was not unreasonable that there should be a small reduction in the income. Let us look and see what happened to the other beneficiaries, in Trust B. Did they make an equal sacrifice? Did they suffer a similar reduction in their income? No, they did not. The beneficiaries in Trust B were surprised and delighted to find their income increased by £5 a year. I ask what conceivable justification there can he for employing a method which can bring about such a lamentable muddle? I would remind noble Lords opposite that both the securities I have mentioned were full trustee securities, protected by the law; both were irredeemable debentures, and the one that suffered the loss was on all hands considered the better security of the two.
Finally, I would like to say a few words on the rather well-worn subject of dividend limitation and its effect on Stock Exchange prices. As the noble Lord, Lord Rennell, has already said, the Chancellor of the Exchequer in another place made some rather surprising statements on this subject. His actual words were that:limitation of dividends should, in fact, increase the capital value of industrial securities.As my noble friend has already said, what one would like to know is whether that was intended to mean the intrinsic capital value, or the market price. And I would go one stage further than my noble friend If the intrinsic capital value was meant, then the price which is being offered to stockholders is by that much the more unfair If the market price was meant, that is a very different story. If a company which has been paying 10 per cent. suddenly doubles its profit and puts all that increase to reserve, the shares may or may not go up. As we all know, if this same company, which for some years has been paying 10 per cent. doubles its dividend then you see a substantial rise in the price of shares. With the greatest possible respect, to say that the opposite is the case is nonsense. I am anxious not to offend the noble Viscount the Leader of the House but if Ministers have a mind to talk nonsense that is their affair, but if by talking non- 600 sense they make it easier to carry through what we call on the Stock Exchange "a fiddle" then we object. I say, in conclusion, that supposing these prices are used as a yardstick, the shabby part of the bargain—I have used that word in your Lordships' House before and I use it again—is that the yardstick is not only the wrong one but it is a yardstick which has been tampered with. And for that there is no polite word, and I make no apology for calling it what it is—a swindle.
§ LORD BRAND
I did not intend to say anything on this subject, but having listened to this debate, I wish to say how entirely I agree with what my noble friend Lord Rennell has said. I agree also with most of what those who have supported him have said. I personally consider that to take Stock Exchange prices as an indication of what a property is worth to those who own it is an entirely unfair measure of its value. I think I can give an illustration which proves that very clearly, as an addition to those which have already been given. I do not know whether any of your Lordships ever look at stockbrokers' lists or get hold of information cards which show all the assets, earning power and so on of different securities. If you do, you may be as astonished as I always am at the extraordinary fluctuations in the prices of shares of the same company in the course of a year. All these stock market cards quote "highs" and "lows" of the prices of the securities over the course of one year, and the difference between the "highs" and the "lows," even of non-speculative high-class securities always astonishes me. It cannot be that a price of say, 65s., which may he the "high" of a security and the price of, say, 35s., which may represent the "low" within a period of twelve months, can both represent the true value of the property. For that reason alone I consider that the Stock Exchange quotation as a measure of the value of a property is entirely wrong and incorrect.
I agree with the noble Lord, Lord Rennell, that one reasonable way of arriving at the value of a property is to take what is called its net worth—that is, the value of its assets. I think that earnings should also be taken into account. I believe the fairest way of all is to do what the Government did with Cable and Wireless Limited which they 601 took over—namely, to take its net earnings and multiply that by so many years' purchase. Of course, one might find great difficulty in determining what is a fair number of years' purchase to take. Nevertheless, either of these methods—and better still, perhaps, a combination of both—would be a just and reasonable way of arriving at the value of a property, whereas Stock Exchange quotations are no proper measure at all.
I am not a lawyer, but what shocks me very much is to read in the papers that the Government consider that all they have to do is to pay the owner of a share its Stock Exchange value at a particular date or over a few dates. That is not what his property in fact is: his property is the true value of all that he owns, and he owns all the assets—that is his property. The Government do not say that they have to Lind out the real value of what he owns, but they assume that what he owns is the purely fortuitous value given on a certain number of days by the Stock Exchange to his shares. It may be, of course, that the Stock Exchange valuation gives him more than the real value of his property, but it may often be true that it gives him too little. In that case I should have thought that, according to the laws of property, it was only reasonable to give him what one has taken the trouble to find out is the fair value of what he owns, his property; and any other method which gives him less may simply be confiscation.
§ VISCOUNT BRIDGEMAN
I think it is worth looking to see whether both sides have not started at the same point, and if they have, trying to find where they have diverged. In this case I think both sides have started from the same point. First in another place members of the Government stated that the object was to give the owners of steel companies a fair price. So far so good; we were all together. I think we diverged at the next stage, because the view was held by noble Lords opposite, and by their friends in another place, that the Stock Exchange price was in all circumstances a fair price; and, therefore, that the aim of giving a fair price would be satisfied if Stock Exchange prices were paid according to a formula in the Bill. It needs no words from me to reinforce the arguments of my four noble friends who have already 602 spoken, two of whom are active and important members of the Stock Exchange, and two of whom are closely connected with the investment business in the City of London. I will therefore say no more about the question as to whether or not Stock Exchange prices are fair.
I now come to this Amendment. We have started on the basis of Stock Exchange valuations, not, as noble Lords opposite will realise, because we think that is right, but because the Stock Exchange valuation is in the Bill. The Bill has come to us in that form from another place and, therefore, we have sought only the more limited objective of applying the corrective contained in the Amendment. I do not think one can have it both ways. If the intention is to give a fair price, and if the contention is that Stock Exchange values give a fair price, then the terms of the Amendment will stand up to the test. Either it will be proved that by an independent test—by a cross-bearing so to speak—Stock Exchange prices are right (and if so, all well and good), or it will be proved that they are wrong, in which case, surely., that decision ought to be accepted, whether it proves that the taxpayer is being "done down," whether it proves the proprietor of the company has been "done down." That is why, instead of taking going concern values as the starting point, we nave taken Stock Exchange values, and have applied the corrective in the Amendment. That corrective, if applied on the application of the Minister or on the application of the stockholders' representative, would lead to a valuation on going concern values.
A great deal has already been said in favour of going concern values. However, one or two things have not been said. One is the effect of what is sometimes called unfructified capital. Here we come to a state of affairs where a great deal of E.P.T. refund has not yet been used. That E.P.T. refund has been put into machinery and plant that is taking a long time to get into action. I have in mind the case of one blast-furnace company which is now engaged in using capital, partly from E.P.T. refund and partly capital that has deliberately not been paid to shareholders in increased dividends—whether in response to the Chancellor's request, or not—in increas- 603 ing the number of furnaces in blast from two out of four to three out of four. All that value goes for nothing, as my noble friends have explained, in Stock Exchange values. The real value of all these concerns, again as my noble friends have explained, is not the theoretical value under Stock Exchange conditions, but the actual value of the plant, the stocks, the debtors—which are cash—and so on and so forth.
Let me now come to another point, which again I think is a corollary to a lot of what my noble friends have talked about. I think most of us have had in mind the question of the market leaders in the steel trade. Let me put this to noble Lords opposite. Market leaders are easy to sell and easy to buy, and they command a better price because the market is always good; and except in the most difficult times they can be sold and bought easily. But when it comes to the smaller companies—quoted if you like, but seldom dealt in; perhaps quoted in the provincial stock exchanges—you will find the value of those shares is depressed far below the real value of their assets, and depressed in proportion perhaps to the market leaders, because of the difficulty of selling, especially in difficult times.
So we are led on to another point, which I will not discuss now, because there is an Amendment down in my name later; that is, the question of the unquoted companies, and the small quoted companies are about the half-way house. So we come to the object of this Amendment, which is to see that justice is done if one side or the other feel they are not getting a fair value on the basis of valuation. That valuation is an expert matter, whether it is made purely on the basis of assets against liabilities, or whether the element is introduced, as mentioned by the noble Lord, Lord Brand, of the purchase value of the profits. That is not a thing we need go into now. The principle is in the Amendment; the practice, surely, is for expert advisers. But I would mention that there is at least one company which, according to the Stock Exchange valuation, will produce only a three years' purchase for the profits. I quote that knowing well there are many other examples, perhaps some with too 604 many years' purchase, but certainly some with too little.
As the noble Lord, Lord Rennell, has said, this is not difficult. There are only twenty-six quoted companies in the Third Schedule, and nearly all of those have had the most exhaustive valuations made, in accordance with the Companies Act, in the last two or three years, for the purpose of the new issues which they had to make to finance the increased production of steel. Those figures have been tested many times from every angle. No one who believes in the honesty of British accountants can possibly doubt them. You have the experience of the transport concerns, Scottish Motor Transport and Thomas Tilling, where the valuation of the real assets showed an increase in the Stock Exchange price from 60s. to 120s. or thereabouts. You have the coal securities, all of which, so far as I know, have been accepted as satisfactory by everybody concerned on both sides of the bargain. This work would largely be done by those expert firms of accountants whom we were praising last night in the matter of price fixing. Their work in this matter has been accepted many times over in the past, and I have no doubt that it will be accepted in the future. There my noble friends and I complete the case for this Amendment, and I hope that we have convinced the noble Lord opposite that this is no frivolous Amendment but one well founded in the experience and figures behind it, and calculated to lead to the fair result which all of us desire.
§ LORD LUCAS OF CHILWORTH
I am in the hands of the Committee. I have no desire to stop this debate, but after having five Opposition speakers perhaps your Lordships would care to hear the Government reply. If not, I will resume my seat. We have had a most interesting debate (put with great courtesy with one exception, to which I intend to refer), the arguments being deployed with very great skill by noble Lords on behalf of that half per cent. of the population of this country for whom they speak. I make no complaint whatsoever. I would like to congratulate the noble Lord, Lord Rennell, the noble Viscount, Lord Buckmaster, and other noble Lords on their speeches. The one exception is the noble Lord, Lord Ritchie, who I regret should have found it necessary in this debate not to pay the com- 605 pliment usually paid in your Lordships' House, that we on this side hold our opinions sincerely and are entitled to hold those opinions, just as noble Lords opposite are entitled to hold theirs. To apply the words "shabby," "fiddling," "swindle" and expressions of that kind to those views and opinions falls far short of that standard. I would inform noble Lords opposite that we are debating an issue upon which we fundamentally disagree; but the morals of noble Lords on this side will bear comparison with the morals of any noble Lord opposite. Our honesty of purpose, our sincerity and our intellectual integrity will bear comparison also. When the noble Lord has been in your Lordships' House a little longer he will perhaps learn that invaluable lesson, illustrated at all times by the noble Marquess the Leader of his own Party, that one duty of a noble Lord here is at least to pay the other side the compliment of believing that they hold their views with as much sincerity as he himself does.
And now I will address myself to the Amendment. I am afraid that if noble Lords opposite were to carry on this discussion at even greater length they would not convince us, and I do not suppose that any poor powers of persuasion I may possess will convince them. I am not at all certain that every argument that has been worth using, and a heap of arguments that were not worth using, have not been used on this subject for months past. Therefore, I trust noble Lords will not think I am discourteous if I do not go into a wealth of detail or use a mass of figures. I always shy at figures, because I am ever mindful of the saying of the cynic about figures and those who use them.
What is this Amendment'? The Opposition's case is this: that we should take an arbitration tribunal's estimate of the asset value of these companies because Stock Exchange prices under-value the shares.
§ LORD LUCAS OF CHILWORTH
I am coming to that. Yet the Amendment itself states that the Stock Exchange price might over-value as well as under-value shares. That is what the Amendment states and I treat it as a serious one; I would not dare to do otherwise after the 606 noble Viscount told us the other night that every Amendment on this Marshalled List was a serious Amendment and should be taken seriously. And yet the noble Lord, Lord Rennell, seemed to suggest that that had been put in with little serious intent. But by the Amendment noble Lords opposite admit that there can be a Stock Exchange quoted price which over-values the true value of shares. I am very glad of that opinion, because that is part of my case. And so we come to this: that noble Lords opposite want to exchange one estimate—the estimate of a tribunal composed of some kind of experts to value the assets, for the estimate of another tribunal which is composed of the British investing public plus the Stock Exchange pundits, for whom the noble Lord, Lord Ritchie, had not got very much to say.
Let me state the Government's case without any equivocation. I do not expect noble Lords to accept it, but I ask them to believe that it is honestly and sincerely held. It is that we do not accept that the Stock Exchange price is not a fair basis and does not reflect the value of all those factors which should be properly taken into account in buying the shares of these companies. We do not accept the argument of noble Lords opposite that the Stock Exchange price is only a reflection of dividend yield. I am not going into a wealth of detail, but I can recall cases in my own personal experience of Stock Exchange values falling when dividends have increased. Why? Because, in the language of the Stock Exchange experts, there were not the assets behind to support the increased dividend. The Stock Exchange value takes into consideration the past record of the company, the future prospects of the company, the policy of the company and the integrity of the management, as well as the value of the assets of the company. That I maintain is the proper way, the only fair way and the least objectionable way in which we can acquire these shares on behalf of the 991 per cent. of the population whose interests we have to look after as well as those of the ½ per cent. whose case is now being specially pleated. I make no complaints against noble Lords on the other side for that.
Let me take the speeches made by the noble Lords, Lord Ritchie of Dundee and 607 Lord Buckmaster. From them one would think that the only people who sold shares on the Stock Exchange were forced sellers, that there were no willing buyers to buy these grossly undervalued shares, that there was nobody—investment trusts, companies or individuals—sitting watching the Stock Exchange every day to snap up undervalued bargains. It is just the holders' way of getting out of undervalued shares. We cannot accept that. So let us examine for one moment the alternative which this Amendment puts forward. How is an independent arbitration tribunal going to arrive at the value of the assets of these companies? It naturally will go into the past record and the past history of the companies. What is that? Since 1932, the steel industry has operated under the protection of His Majesty's Governments of varying shades of political opinion. From 1932 onwards, it has had protection. It has been sheltered by a tariff wall. I suppose the arbitration tribunal will take that factor into consideration.
What other factors is it going to take into consideration? Is it going to take into consideration the war conditions under which these assets have been built up? Is it going to take into consideration the unprecedented demands at the present time—unprecedented because of the economic circumstances of the country? And how will it estimate the figure? Will it have to estimate a continuance of the boom conditions in the export market? Will it take into consideration the prospects of independent companies' net maintainable revenues competing in the home market against each other? Will it take into consideration that those who work in that industry are going to continue to work as they have done, to their credit, a continuous shift right round the clock? So how is an arbitration tribunal going to arrive at these problematic values? Is the arbitration tribunal going to visualise the future to be as black as the days of 1933, when the earning capacity of the steel industry after paying debenture interest was 1.6 per cent. of its capital, when no dividend was paid on 48 per cent. of its capital; or in the days of 1932, the year when the Government had to come to the rescue and 82 per cent. of the capital received no dividend at all? Are they going to value the shares on that basis? 608 My Lords, rather than have that estimate—because it can only be an estimate—we would sooner have the estimate of the experts of the Stock Exchange and the investing public, with the result that the value can be paid out practically on the nail. Rather than set up a horde of experts and accountants who will take years (the valuations in the coal industry, I understand, will not be settled for seven years) to work out these figures, we prefer the method we advocate in this Bill.
May I deal with one or two of the arguments? There were only two to which I think I need reply. One was raised by the noble Viscount, Lord Bridgeman, and touched upon by the noble Viscount, Lord Buckmaster, about fresh development capital. My Lords, fresh capital or development capital comes into a company for one of two reasons or perhaps for both: either to replace obsolescence or to improve prospects. It is therefore reflected in the value of the assets and the shares. The next argument raised by noble Lords is based on one of the biggest fallacies possible and that is the argument about dividend limitation. Now what do the Opposition put forward? They say this: But for the voluntary limitation of dividends share values would be higher and therefore compensation greater. Was there ever such a fallacy?
The start of dividend limitation was the White Paper printed upon the Prime Minister's statement of February, 1948, on Personal Incomes, Costs and Prices, which set out the dire economic conditions of this country. He said there would have to be a limitation of personal incomes, costs and prices. That statement, and the action by my right honourable friend, the Chancellor of the Exchequer which followed it, was applauded by noble Lords opposite, and was accepted by industry in this country. Let it be said to their credit that the operation was voluntary. But they could see that unless voluntary limitation was put upon dividends we should have a rocketing inflation of prices and wages. What do the noble Lords now say, after having applauded Sir Stafford Cripps for his salvation of the economic position of this country? They now say, of course, if you put that policy upon everybody else but the iron and steel industry and let them increase their dividends as their pro- 609 fits increase, they would now get more compensation.
My Lords, if I said that that was shabby, I expect noble Lords on the other side would take me to task. But let me tell you this: that if it had not been for the policy of His Majesty's Government as set out in that White Paper, there would never have been any steel profits at all, and so dire would have been the consequences upon the economy of this country that there might not have been a steel industry. If there had not been voluntary limitation of dividends, do you think we would have held the level of wages? What would have happened to profits then? Noble Lords opposite now want to take, in isolation, the value of steel shares, and then say, "Of course, if you had not put the limitation of dividends upon us but had managed at the same time, by imposing this limitation on everybody else, to keep the economy of this country steady, look what a position we should have been in." That is the essence of your arguments upon dividend limitation and Stock Exchange values.
§ LORD LUCAS OF CHILWORTH
It cannot be anything else. So that is the Government's case. We think our way is the fairer. Never let it go out from your Lordships' House, I would beg of you, that you want to take advantage of the serious position in which this country found itself over these last two or three years in the way I have described to get what you might think might be an inflated value.
§ VISCOUNT SWINTON
I shall intervene for only two or three minutes to reply very briefly to the noble Lord. He began with a homily and a very severe stricture on my noble friend Lord Ritchie, and a rather glancing stricture upon Lord Brand and Lord Rennell. I am bound to say that I rather resented this. He said that Lord Rennell and Lord Brand were speaking for a half per cent. of the population. Their clients for whom they were advocates, as he called them in another part of his speech—
§ LORD LUCAS OF CHILWORTH
No such intention was in my mind. I said "all noble Lords on the other side." I 610 did not single out, nor did I mention, Lord Brand by name at all. I said that all noble Lords who have spoken were the spokesmen of the shareholders of the steel industry, which was a half per cent. of the population.
§ VISCOUNT SWINTON
I am much obliged to the noble Lord. He said he did not in terms mention the names of Lord Rennell and Lord Brand, that he said "all the noble Lords who had spoken." Among noble Lords who had spoken were Lord Rennell, Lord Brand—
§ VISCOUNT SWINTON
—Lord Ritchie and Lord Buckmaster. I do not think he is making it very much better. What he said of those was, that they were speaking as the advocates of the shareholders—one half per cent. of the population against the 99½ per cent. for whom he spoke. They were doing nothing of the sort. They were the advocates of justice and fair dealing. It will be a bad day in this House or in another place when people cannot stand up and speak for justice or fair dealing, whether it be for the few or the many, without being taken to task.
The noble Lord then said that if this Amendment were acceded to we should be taking advantage of the country as against the effort the Chancellor of the Exchequer had called upon the country to make. I have not complained of the limitation of dividends. I think it was quite right, and it was well responded to by industry. But the noble Lord forgot the advice and indeed the promise and the hope which the Chancellor of the Exchequer held out when he made that appeal. When the Chancellor of the Exchequer made his appeal to industry to stabilise dividends, to the workers to stabilise wages and to all of us to save, his words were, "Save now. Do this now, in order that you may be better off hereafter." The Chancellor did not say "Do this now in order that in a year or two if the Govern melt come along to acquire your business they may acquire it at a cheaper price because of what you have saved." So it really does not lie with the noble Lord to throw that in our teeth. As to the pledges that were given, there was an explicit pledge given by 611 the Minister and by the Chancellor of the Exchequer to the effect that people who ploughed capital back into businesses should certainly not be worse off because of doing so. If he had meant to say: "You shall have that taken over at the Stock Echange value of the shares, as has been done under other nationalisation measures," it would have been a very simple thing to say. But it was because a distinction was sought to be drawn between what had happened under other nationalisation measures and this ploughing back of capital that that pledge was given.
I have only two or three more things to say. The noble Lord, Lord Lucas, said assessment of asset value would be very difficult. He underrates his own business knowledge. After all, he has been in business now for some time. Every day, in business, amalgamations take place. One company acquires another and goes into partnership with it. I ask the noble Lord and any other members of this Committee whether any one of you knows of a case where an amalgamation has taken place between two companies or where one company has bought another in which the Stock Exchange value has been taken as the basis. Some regard may be paid to it, I grant, but when you go into matters with a view to doing a business deal the first thing you do is to get an auditor's certificate. You put in your auditors to find out what is the real value. Sometimes it may be even smaller than the Stock Exchange value and sometimes a great deal higher. No one but a fool would buy a business on any other basis than its real value and businesses are not bought and sold on any other basis. I put this to the Government. Suppose this Bill went through and the scheme did not succeed as well as they hoped and they decided to sell something back. I wonder whether they would sell back at the price of "Dalton's" or at whatever figure their stock stood at the time, or whether they would not want to get the real value. When businesses were taken over under another nationalisation measure and the Government said, "If you want the extraneous assets back, you can have them back," on what basis did they return them? They had to be taken back on what was considered to be the 612 real value. I think that was the practice followed in the Electricity Act.
One of the things said when the Transport Bill was going through Parliament was that there were a number of businesses which were to be acquired later on by agreement. What happened? Were they taken over at Stock Exchange value? No, they were taken over by the Government at what it was agreed (in default it was to be settled by arbitration) was the real value of the business. What was the result? In the case of Tillings, the actual value which the Government gave for the business was something like 100 per cent. above the Stock Exchange value—that is to say twice the Stock Exchange value—at the date at which it was taken over. I do not know whether the date which has been taken now comes in a time when Stock Exchange values were rather high or rather low. I do not think it matters, because—and here I speak not for ½ per cent. or for 99½ per cent. but on behalf of 100 per cent. of the people of this country, whether they be buyers or sellers—if there is to be fair dealing and these things are to work with decency and good will, the right course to follow is to give a fair price.
You should not give too much. If the Government think the Stock Exchange price is too high they should have the right to say a business is worth less. If the other side think the Stock Exchange prices are too low, they should have the right to get the real price. The shares which appear most speculative and which, under Stock Exchange valuation, are likely to come out best, are not those which ought to come out best. Those businesses which have ploughed back their profits and whose resources are solid, but whose solidity is not reflected in the dividends they declare, are the businesses which, on Stock Exchange valuation, come out less well, but they are the businesses which deserve best from the State and which ought to come out best. I think this is an absolutely fair Amendment and I cannot understand how in equity and fairness the Government can refuse it.
My Lords, I am very much obliged to the noble Viscount for his intervention. I am not in the least interested whether steel shareholders are ½ per cent. or 50 per cent. of the 613 population. I had always understood that justice was equal for all, irrespective of their numbers. The noble Lord has made out a very disappointing case, and I would like to comment on one or two points he has made. I do not think that the ridicule (and that is not too strong a word) which he poured on the idea of arbitration was fair. Arbitration on valuation is a common practice, as the noble Viscount, Lord Swinton, said. It is indulged in daily and is familiar to the Government and to all people in business. I cannot forbear to comment on his description of the Government as a tribunal. That is novel to me. I will not comment at greater length on the noble Lord's speech. I do not think anything he said improves the case for the Government and I despair of finding any common bridge between us. On this side we think that this Amendment imports a certain quality of fairness into an unfair proposition, an unfair basis which has been described both by the noble Lord, Lord Ritchie of Dundee, and by me, in hard terms which I myself am unable to withdraw. In
§ Resolved in the affirmative, and Amendment agreed to accordingly.614
§ these circumstances, I can see no other course but to ask your Lordships to divide.
§ VISCOUNT ADDISON
My Lords, I rise on a question of business. I shall be glad if the noble Lords will tell me whether it is in their minds that the issue now to be put to the House shall include the Amendment to page 18, line 26, in the name of the noble Lord and his friend. It appears to relate to the same subject.
My Lords, if it is convenient to take it all at once, that certainly would be agreeable to me. In my view the Amendment to page 18, line 26, and to page 17, line 37, go together, the first being consequential on the second. If it is the pleasure of the House to take them together, I have no objection.
§ On Question, Whether the proposed subsection shall be there inserted?
§ Their Lordships divided: Contents, 59; Not-Contents, 19.613
|Aberdeen and Temair, M.||Falmouth, V.||Kenilworth, L.|
|Cholmondeley, M.||FitzAlan of Derwent, V.||Layton, L.|
|Reading, M.||Hailsham, V.||Llewellin, L.|
|Salisbury, M.||Long, V.||Lyle of Westbourne, L.|
|Monsell, V.||Middleton, L.|
|Buckinghamshire, E.||Portman, V.||Moyne, L.|
|De La Warr, E.||Swinton, V.||Moynihan, L.|
|Dudley, E.||O'Hagan, L.|
|Fortescue, E. [Teller.]||Ashton of Hyde, L.||Polwarth, L.|
|Howe, E.||Balfour of Inchrye, L.||Remnant, L.|
|Iddesleigh, E.||Belstead, L.||Rennell, L.|
|Munster, E.||Brand, L.||Ritchie of Dundee, L.|
|Onslow, E.||Carrington, L.||Rochdale, L.|
|Radnor, E.||Cherwell, L.||Saltoun, L.|
|Selborne, E.||Clanwilliam, L. (E. Clanwilliam.)||Sandhurst, L.|
|Allenby, V.||Clydesmuir, L.||Stamp, L.|
|Bridgeman, V.||De L'Isle and Dudley, L.||Strathcarron, L.|
|Buckmaster, V.||Gifford, L.||Teynham, L.|
|Chaplin, V.||Hailey, L.||Waleran, L.|
|Elibank, V.||Hindlip, L.||Wolverton, L.|
|Jowitt, V. (L. Chancellor)||Ammon, L. [Teller.]||Lucas of Chilworth, L.|
|Chorley, L. [Teller.]||Macdonald of Gwaenysgor, L.|
|Addison, V. (L. Privy Seal)||Crook, L.||Marley, L.|
|Darwen, L.||Morrison, L.|
|Huntingdon, E.||Hare, L. (E. Listowel.)||Pakenham, L.|
|Henderson, L.||Pethick-Lawrence, L.|
|Stansgate, V.||Holden, L.||Williams, L.|
§ owing to the way the Amendments are drafted, but I take it that it will be understood that the Amendments which are really consequential will be dealt with without debate to-morrow.