HL Deb 17 May 1949 vol 162 cc785-98

5.52 p.m.

Order of the Day for the Second Reading read.

THE MINISTER OF CIVIL AVIATION (LORD PAKENHAM)

My Lords, I beg to move the Second Reading of the War Damage (Public Utility Undertakings, etc.) Bill. As your Lordships will have observed, this is a Bill of thirty-seven clauses and five Schedules, which it has taken rather more than six years to prepare. It goes without saying that it is not uncomplicated, and it would be an affectation to claim that I am a complete master of every detail. It would be an affectation readily pierced, I have no doubt, by noble Lords who are to follow me. At the same time I have had, as always, the best possible advice open to me, and I hope to be able, if not necessarily to-day, to reply to any points which your Lordships may think it right to raise. I will say at once that I have considerable hope that the Bill will commend itself to your Lordships in its present form, a form which I think we should find it difficult to alter without loss.

In its application to public utility undertakings—that is the main part of the Bill—it represents not only the result of long discussions between the Treasury and other Government Departments, on, the one side, and the interests affected, on the other, but also substantial agreement. As regards other interests affected, these are being put back within the ordinary War Damage legislation of the country, with suitable modifications where necessary; and this we understand has general acceptance. In another place there was full discussion, but no Amendments were moved from the Opposition Benches, and any that were brought forward from the Government side were agreed Amendments. I think, therefore, that following our usual classification in this House this can fairly and confidently be described as a non-controversial measure.

The need for this piece of legislation arises from the exclusion of public utilities and certain other undertakings from the War Damage Acts, 1941 and 1943. The operative sections, your Lordships will recollect, were Section 40 of the earlier Act of 1941, and Section 70 of the Act of 1943. As the law now stands, Section 70 of the 1943 Act excludes from its purview public utility undertakings and certain other undertakings—for example, mines, brickworks, quarries—rated by reference to accounts, receipts, profits or output as the only means of calculating the rent that a hypothetical tenant would pay. I shall refer to these undertakings as "excluded undertakings." As a consequence of this exclusion, these undertakings are neither liable to contribute towards, nor entitled to compensation for, war damage. There was, therefore, a gap left in the legislation hitherto existing, and the Bill before your Lordships' House fills the gap so left. It provides, in short, for payments in respect of the war damage which the undertakings have suffered, and it provides for the collection of contributions and premiums in respect of their land and goods.

It will perhaps serve as a helpful background if I now refresh your Lordships' memories (very briefly, I promise) as to why the public utility undertakings were excluded from war damage cover in 1941 and 1943. The reasons were practical ones, and they arose out of the peculiar features of the entities concerned. The difficulties and problems are set out fully in paragraph 7 of the White Paper, Command No. 6403, which was presented to Parliament in 1942. To-day I would take only two illustrations of the difficulties which prevailed. First, in the case of public utility undertakings, Schedule "A" Assessments were either not generally available, or were unsuitable, because they were not fully comprehensive. The net Schedule "A" Assessment is the principal basis for arriving at the contributory value under the War Damage Act, so for Schedule "A" Assessments the difficulty in these cases was obvious. Secondly, public utility undertakings (railways, for example) cannot, without immense labour, value separately their land and goods—as, for example, the permanent way and the rolling stock. As your Lordships will remember, there are separate schemes for land and goods under Parts I and II respectively of the War Damage Act. In differing degree, similar difficulties were also thought to prevent the wholesale application of the War Damage Acts to the remaining excluded undertakings of non-statutory character. Those, I repeat, were some of the difficulties which were found to be overwhelming at that time.

The result of the long discussions and preparations which have taken place since 1942 is the Bill now before us. I would like first to ask how it sets about dealing with the difficulties created by the special characteristics of the excluded undertakings. Briefly, I would point out that it divides these bodies into three categories, for each of which separate treatment is provided. First—I speak broadly, but I hope not inaccurately—we have the main statutory excluded undertakings: railways, canals, harbours, gas, electricity, water, sewage and lighthouses, and so on. Precise definition of these is given in the First Schedule to the Bill. I shall refer to these as Part I undertakings, and they are most important for our purpose to-day. Secondly, there are the remaining excluded undertakings carrying on activities similar to those that I have just mentioned, together with the tramways, trolley vehicles and ropeways, the mineral undertakings, mines, quarries, brickworks, and certain specially licensed communication systems. These are defined in the Fifth Schedule, and I shall call them Part II undertakings. Thirdly, and lastly, there are all the refuse disposal undertakings, and those of the drainage authorities, together with undertakings occupying land for purposes such as I have mentioned in the second category, but not mainly or exclusively for such purposes.

There we have three categories, and I would say at once that the undertakings in the third category are to have the War Damage Act of 1943 applied to them without modification. This is done by Clauses 9 and 10 of the Bill, and this embraces all our discussions of them—at any rate during my remarks. We come now to category 1, the most important, including, as it does, public utilities as defined for the purpose of this Bill. The main lines of the treatment proposed for undertakings in this first category are laid down in the first three clauses of the Bill. These clauses, in conjunction with the First Schedule, give the Treasury power to determine the amount of war damage payments and contributions to be made in respect of each undertaking in the first category. The Treasury determinations will be made in accordance with arrangements that I will now venture to describe to your Lordships.

Take first the question of payment; I will come later to the question of contributions. The undertakings concerned, for this purpose of payments and, I may add, for that of contributions also, were sorted out into eight groups mentioned in Clause 2 of the Bill. I have already read out these groups to your Lordships. The groups can be regarded as being of manageable size and relatively homogeneous membership. That was the aim in drawing them up. The next step was the presentation of claims by individual undertakings. Each individual undertaking, in compiling its claim, followed the instructions issued by the appropriate Government Department. I would emphasise, however—let there be no mistake about this—that these instructions were drawn up in each case by the Government Department and the Treasury, on the one side, in agreement with committees representing the whole group, on the other. It was not a case of the bureaucrat coming along and dictating to the group.

For example, a railway undertaking in compiling its claim followed instructions issued by the Ministry of Transport, but these instructions were drawn up by the Ministry of Transport and the Treasury, on the one hand, in agreement with the railway group as a whole. The claims of the individual undertaking so drawn up were "vetted" and approved by the appropriate Departments. So we have the individual claims "vetted" and approved. The claims so arrived at were added together, and the Government Departments concerned, with the approval of the Treasury, were thus able to settle the total of the war damage payments which should be made to each group in respect of land and goods. So much for payments arrived at by the method of consultation. In the case of these payments, the group total is built up from the individual claims.

In the case of contributions, to which I now turn, the group total is arrived at first and then broken down into contributions in respect of individual undertakings. It works the other way round in the case of contributions. The Government decided that, with one exception, each group should contribute an amount equal to 27½ per cent. of the gross payments due to it. The exception was the harbours group, whose percentage was 10 per cent., owing to the exceptionally heavy damage it suffered. The figures of 27½ per cent. and 10 per cent. respectively were agreed with the negotiating committees representative of each group, after examining the relationship of total contributions, plus premiums, to war damage claims under the principal Act. Suppose, therefore, that £1,000,000 was due to a particular group in payments. In that case £275,000 would be exacted in contributions from the group. In the case of the harbours group, of course, the amount would be only £100,000 in that hypothetical case.

Finally, we come to the allocation of this group contribution between individual undertakings within the group. This was worked out by the negotiating committees of each group, in order to secure an allocation that seemed to them just between their members, and approved by the Government Departments concerned and the Treasury. In the imaginary example I have given, supposing that the group contained ten undertakings whose proper contribution was reckoned to be equal in each case, then each undertaking would pay £27,500, whatever the amount of damage suffered, for that would be irrelevant in fixing the contribution.

The Treasury's determinations as regards payments and contributions are in accordance with arrangements made with the negotiating committees. With possible rare exceptions they will represent amounts which have been individually accepted by the undertakings concerned as just. I need not, perhaps, justify these arrangements by referring to the various statements that have been made in the past concerning them. I would just say that we have followed in many respects the White Paper plan of 1942. And in February, 1946, the then Chancellor of the Exchequer announced in another place that he hoped to settle in advance of legislation the total amount of war damage payment to, and contribution from, each group of public utility undertakings. I would say, in passing, that in round figures the financial effect of the Bill will be as follows. Gross payments in respect of the grouped undertakings will be £91,000,000. From this sum will fall to be deducted payments for damage already made by the War Damage Commission. There will be deducted also the net contributions to be made by the undertakings, making allowance for such contributions and premiums as they may already have paid. The net charge on the Consolidated Fund is at present expected to be about £62,000,000.

Your Lordships will recall that we disposed earlier of category 3, and we are left now only with category 2. This category consists of Part II. undertakings, whose purposes of occupation are listed in the Fifth Schedule to the Bill, and whose character is not that of a public utility undertaking as defined by the First Schedule. These are the undertakings to which the War Damage Act can now be applied, with certain modifications of its contribution structure. What is involved is that we put back these undertakings under the provisions of the principal Acts as if they had always applied to them. In other words, and subject to the modifications that I will touch upon in a moment, Part II undertakings are to be deemed to have incurred the obligations and acquired the rights that would have rested with them had Sections 40 and 70 never been written into the 1941 and 1943 Acts respectively. The modifications found to be required in the application of the War Damage Act to the remitted Part II undertakings are made in Clauses 11 to 16 of the Bill. These are all adjustments of the contribution structure of the principal Act; the provisions as to payments are not affected.

I would just add, briefly, that the rating valuation, to the exclusion of Schedule A, is to be adopted for purposes of determining the contributory unit. Direct liability for contribution is to fall on the body carrying on the undertaking, rather than on the owner of the proprietary interest. The ultimate incidence of contributions upon landlords, tenants and mortgagees is to be modified in accordance with the Fourth Schedule. These are alterations which flow directly or consequentially from the extensive nature of the undertakings and from the absence or unsuitability of Schedule A in their case.

I have confined myself to giving your Lordships a very rough sketch of the circumstances which have caused the introduction of the Bill, and to tracing in broad outline the treatment which is to be accorded to the excluded undertakings. This has taken us over the First and Second Parts of the Bill. I would only indicate that there are Third and Fourth Parts. They contain a miscellaneous collection of provisions, amendments, adaptations and definitions of financial and taxation provisions of one kind and another. Although required for the proper and equitable working out of the main scheme, they are not, I suggest, essential to a grasp of its bare outline. This is certainly a complex Bill. It is inevitable that it should be, because the problem was most intricate and most awkward. I hope that noble Lords who are going to speak, and who are infinitely more profound in their mastery of complicated legislation than I can ever hope to be, will agree that in all the circumstances this is the right answer, and that it is an answer in which all concerned, men from different Parties, can take a considerable pride. I hope that the House will feel that it is high time that this measure was sped on its way, and will be good enough to give it a Second Reading this evening. I beg to move.

Moved, that the Bill be now read 2a.—(Lord Pakenham.)

6.11 p.m.

VISCOUNT SIMON

My Lords, I feel sure we are grateful to the noble Lord who has just sat down for a most careful and accurate summary of this extremely complicated piece of legislation. I regard the Bill as a very remarkable Bill indeed—remarkable because of the skill with which the draftsman has dealt with a most complicated topic, and remarkable, too, because the Bill represents the bringing together at last in the form of a connected structure of the great many efforts that have been made by many skilled people to fill what the noble Lord has rightly called the "gap" in the War Damage legislation. I have sometimes wondered whether it is more difficult to solve a really difficult cross-word puzzle than to construct it. At any rate, this is one of the most complicated pieces of construction that could possibly be imagined, and, so far as I have been able to follow it and study it, I must say frankly that I think it is most admirably done.

When I was Lord Chancellor, I had the honour of presenting to this House—and, what is more, of endeavouring to explain to this House—the War Damage Act of the war period, and, although I do not to-day retain as accurate a memory of that legislation as I had at the time, I follow completely the exposition that has just been given. As your Lordships will remember, the War Damage Act was a bold effort to secure that the physical damage suffered as a result of enemy attacks upon this Island should be borne by the community, partly by contributions which would be made by all persons who might be exposed—whether they lived in the North of Scotland or in the East of London, it made no difference—and partly by an equivalent contribution from public funds. A great deal of trouble was taken to construct that scheme. It was carefully examined in both Houses, and I think I can claim now that, as a scheme, it worked very well and gave an amount of relief which was absolutely necessary if the particular owners of property upon which the bomb happened to fall were not to be left to endure the whole of their misfortunes themselves without any contributions from others whose possessions the bomb happened not to strike.

But, as the noble Lord has said, in that legislation we had to make an exception of public utility undertakings. The reason for that has been briefly indicated by the noble Lord. Perhaps from my own memory I may add one further reason which will appeal to everybody. The scheme of war damage compensation which was then devised made a distinction between cases in which it would be proper to pay what was called a "cost of works" payment, and cases in which it would not be economically advantageous to restore the property destroyed to its former state. We only paid what was called a "cost of works" payment if, when making good the damage by reconstruction, the cost of the work carried out would not exceed the difference between the value of the hereditament when repaired and its value as it was when damaged. It is no good spending money for repairs if, when you have done so, you will merely have lost the money paid as compensation. That was essential to the scheme. But that principle cannot be applied to a public undertaking. You cannot say: "I will leave it to be decided in each case whether the public undertaking shall be repaired or not," because it must be plain that, if a railway is smashed up or a dock is seriously damaged, it is no good spending time in making calculations as to which of two things you shall do. The only thing to do is to restore it. That is quite inconsistent with the fundamental scheme of the main War Damage legislation. Therefore, these public utilities were for the time being left out.

I must say it is remarkable that, they having of necessity been left out during the war, it should be only now, at this late date and in this Year of Grace, that Parliament should be providing what was to be done with them. It is a most remarkable circumstance. If I may for a moment illustrate it in simple language which does not require an accurate knowledge of the War Damage Act, what is really happening is this. It has usually been supposed that, if you were going to be compensated by an insurance company for a fire on your premises, it was necessary to insure first and wait for the fire to happen afterwards—to pay the premium which was arranged before you knew whether or not there was going to be a big fire or no fire at all. I am not criticising this Bill, for I think it is essen- tial, but it is a sort of "Through the Looking Glass" Bill; in other words, what happens here is that you say: "Oh, there has been a war, in the course of which terrible damage has been done to the property of various public undertakings. That being so, they ought to recover something under our system of general insurance. So what we will do is this. Now that we know who has suffered damage, we will produce what is necessary to compensate them. Nobody has hitherto fixed what the premiums for this, valuable cover should be, but now that it is all over we, for the first time, will decide what premium they ought to pay."

That is a most admirable arrangement which unfortunately cannot be carried into the realm of business. In the case of business, it is necessary to insure first and have your fire afterwards. If I may take a perhaps more simple metaphor, it is usually thought not to be good, according to the rules, that you should lay your bet on the race after you know which horse has won. But war damage for public utilities has to be dealt with in this way, and I must say that I am glad that the time has now come for it to be done. I have been told that no fewer than sixteen different drafts were prepared to try to deal with this most complicated question. I may at times from this Box have said things which sounded a little critical of draftsmen, but in this case I cannot imagine anything more spendidly done than the drafting of this Bill.

There is another thing which to me is a little odd, but of course we shall all accept it. The noble Lord has explained to us how it is decided in the case of railways, canals, gas undertakings and so on, that the premium ex post facto is to be 27½ per cent. of the damage; they will be paid 20s., and as a premium for that will pay approximately 5s.

LORD PAKENHAM

That is for the group.

VISCOUNT SIMON

Yes, but that is the principle. But he says that in the case of the harbours the charge is to be only 10 per cent. From the point of view of insurance, it is rather amazing to consider that the reason for that—and it is the reason—is the exceptionally heavy damage which harbours have had to bear. In the world of insurance, if you are exceptionally exposed to danger the premium is not on that account reduced; it is more usual to increase it. Still, I quite understand why this is done, and I think it is right. The truth is that the analogy of insurance is not altogether suitable here. We are really dealing with the best and most just way in which the community as a whole can meet the terrible calamities which have been indiscriminately inflicted, hitting one enterprise but sparing another. My own view is that the Bill, so far as I have been able to study it (I have spent a little time on it with the assistance of expert help, for which I am most grateful), is in every respect justified.

A good deal was said in another place of the particular provisions which deal with compensation in respect of coal undertakings. Your Lordships will observe that there is no coal group, and coal undertakings do not come in the table on page 5, which adds up to something like £91,000,000 gross. The noble Lord has told us that after the necessary deductions, including the deductions for the contribution, that will mean a burden of some £62,000,000 on the Consolidated Fund. Coal does not appear there; it appears later, in Clause 15. It is interesting for us all to see how this works out in reference to undertakings which have become nationalised since the war, largely under the present Government. It is worth while looking for a moment at Clause 15, subsection (3), which says this: The National Coal Board as successors of the Coal Commission in the ownership of the fee simple in coal in Great Britain shall contribute in respect of coal-mining properties therein the sum of one hundred and twenty-five thousand pounds.… and the sum so provided shall be treated for all purposes as an outgoing of a capital nature. I may say in passing, that it is perfectly right to provide that this contribution shall be treated as an outgoing of a capital nature. In fact that was the general provision in the War Damage legislation. No doubt, in course of time, these capital burdens will be worked off, but the interesting thing is that the National Coal Board, receiving whatever compensation they do receive because of damage done to undertakings by enemy action during the war, are to have deducted as their contribution £125,000.

In glancing through the debates in another place, I noticed that two criticisms were made of this provision. One was that it seemed very little; the other was that it seemed too much. There was a certain amount of good sense, I think, in the argument of the Government, that if opposite views are taken about things like that, perhaps the figure is right. I think the explanation of the figure may be as follows, and as I have made some inquiries perhaps I may just put on record what I think. The £125,000, which is the contribution to be paid by the National Coal Board as successors of the Coal Commission, represents the contribution which would have been paid by the owners of the royalties in coal. Of course, the royalties in coal were acquired some time ago by the State and they were held by what at that time was called the Coal Commission. It is obviously right that the complete scheme should cover, amongst other things, damage which would hit the proprietors, whoever they are, public or private, of that interest. Then when the transfer took place from the Coal Commission to the National Coal Board, the contribution was taken into account in settling the terms of the transfer and, consequently, quite properly, the National Coal Board should now bear that same contribution.

I think I am right in saying that the figure is arrived at by applying the formula that was in the original War Damage Act, by which agricultural land made a contribution of only one-quarter of the contribution that was made by other properties. Other properties paid 2s. in the £ of Schedule "A" assessments; agricultural properties paid 6d. I think that in this case it is the 6d. that is relevant, and as agricultural land contributed at the rate of 6d. in the £ of the contributory value, then that would be right in this case also. Of course, it was plainly correct that the contribution to be paid by agricultural land should be much less than that to be paid by built-up properties, because the damage that could be done by a bomb dropping in the middle of a field bore no relation at all to the damage that could be caused by a bomb dropping in the middle of a hotel. That was right, but I rather think that the contribution should be in two elements—one, for what I may call the royalty element, and the other for the minerals themselves, which have since been nationalised under the present Government. This £125,000 really represents the former of those two elements. I believe that it is a penny out of the sixpence because the other part of it has already, by agreement, been worked off and disposed of. Therefore, I do not share in the criticism that this clause has anything wrong with it.

We are all bound to realise the care and impartiality with which the Treasury have dealt with the matter. I do not believe for a moment that the Treasury would show themselves either too indulgent or unduly harsh when dealing with a nationalised undertaking as against any other. Therefore, my own conclusion is that this Bill should be regarded, as the noble Lord claimed, as an uncontroversial measure. Whether it is the sort of three-volume novel you want to take with you when you go to bed, the sort of thing you can read in bed before going to sleep, is quite another matter. I should have thought it was a very odd taste which really enjoyed going into this performance.

At the same time I feel bound to say at the end, with some little experience of trying to understand, expound, and sometimes to criticise, legislation, that I do not think I have ever seen a very elaborate Bill which has been so well put together for the purpose intended as is the present Bill. I am sure that a great debt of gratitude is owed to the officials of the Treasury who, I know, have worked so hard at it, and also to the draftsmen. Unquestionably, in these respects, this Bill is a perfect model. It is an elaborate model but a working model, and, if I may respectfully say so, I advise your Lordships to let it work.

6.34 p.m.

LORD PAKENHAM

My Lords, I would like to thank the noble and learned Viscount warmly for those generous and most authoritative words. I am afraid that most of us when We get into difficulties in the presentation of a Bill are rather apt to blame the draftsmen, just as when we miss a shot at tennis or at golf, we often say it is the fault of our racket or of our club—

VISCOUNT SIMON

Or of the caddie.

LORD PAKENHAM

Or of the caddie. Here, I feel that I have been fortunate in being able to present a measure which has won such high and carefully-worded praise from the noble and learned Viscount. I will make sure that his words are conveyed to all those concerned. I have no doubt that they will be particularly grateful, and will value such words coming from him as perhaps they would value praise from no other source.

On Question, Bill read 2a, and committed to a Committee of the Whole House.