HL Deb 16 February 1954 vol 185 cc933-61

5.14 p.m.

Order of the Day for the Third Reading read.

LORD MANCROFT

My Lords, since there have been placed on the Order Paper several Amendments by the noble, Lord. Lord Lucas in much the same terms as those which he placed on the Order Paper at the time when we had this Bill on the Committee stage, I will, with your Lordships' approval, confine myself at this juncture merely to moving formally that the Bill be now read a third time.

Moved, That the Bill be now read 3ª. —(Lord Mancroft.)

On Question, Big read 3ª.

Clause 2:

Power to enter into arrangements with respect to certain loans

2.—(1) If at any time the Corporation are satisfied with respect to any loan made by them which has fallen due for repayment that, except with harmful consequences to the production of films, the amount of the loan cannot be recovered in accordance with the terms thereof or by means of the remedies available, the Corporation may with the approval of the Board of Trade enter into any financial arrangements with respect to that loan which, in tie judgment of the Corporation, are calculated to lead to the eventual recovery without such harmful consequences as aforesaid of the whole or part of the amount of the loan; and any such arrangements may in particular provide for the waiving by the Corporation of payment of interest or for the acceptance by the Corporation of shares or debentures in any company in or towards repayment of the amount of the loan.

LORD LUCAS OF CHILWORTH moved, in subsection (1) after "them" to insert "or the interest thereon". The noble Lord said: My Lords, I followed the example set by the noble Lord, Lord Mancroft, and did not offer any observations upon the Motion that the Bill be now read a third time, because on this side of the House we are in agreement with the principle of this Bill. The only reason why we have put down these Amendments on the Third Reading is because the noble Lord on behalf of Her Majesty's Government, could not see his way to accept them on the Committee stage; and as no Amendment was made there could not be a separate Report stage. These Amendments are put down upon the Order Paper in a sincere attempt by noble Lords on this side of your Lordships' House to allow your Lordships to exercise that, function which, it has been claimed, is the special position of your Lordships' House, that of a Revising Chamber. When, in the Business preceding this, the noble Lord, Lord Mancroft, was speaking in eulogistic terms about the electronic brain, I could not help wondering whether at some time the noble Earl, Lord Halsbury, and his colleagues would turn that invention to the service of Her Majesty's Opposition, in order that they might be clever enough to concoct an Amendment to a Bill which would receive the approbation of Her Majesty's Government.

These are really trivial matters. They are not matters of principle, and we on this side of your Lordships' House could allow opposition to go by default. We do not consider that to be our duty. We consider it our duty to try our utmost to offer Amendments which, in our opinion, will improve the Bill without altering the principle. That is the reason, in simple language, why we have put down these Amendments—to ask your Lordships to express your opinion. I hope to prove to your Lordships that the Amendments do not alter the principle of the Bill at all, but do what was the expressed intention, of the right honourable gentleman the President of the Board of Trade, when he stated in another place (OFFICIAL REPORT, Commons, Vol. 520 (No. 14), col. 2032): The object of Clause 2 "— which these Amendments seek to amend— is to … make it possible, either by reorganisation of the capital or something of that kind, to deal with the matter in a realistic way and to see what measures could best be taken to safeguard that public money in the future. That is our sole desire, and we do not claim to be alone in this. We think that the Amendments which we have put down, and which I hope to prove are centred solely on making this a slightly better Bill, carry the desire of the President of the Board of Trade into better effect. Perhaps I should here offer one word of explanation. With your Lordships' permission, and in order to save your Lordships' time, I should like to deal with the first, second, fourth and sixth Amendments together. They all hang together. I withdrew these Amendments on the Committee stage, but after consultation with my colleagues, and after having read carefully what the noble Lord, Lord Mancroft said, as reported in the OFFICIAL REPORT on the Committee stage. I have put them down again on Third Reading.

This is a simple point. The noble Lord, Lord Mancroft, argued that it is not necessary to safeguard the interest as well as the loan: that the greater includes the lesser—that was his argument. When he was asked by my noble friend Lord Silkin whether it was the invariable practice (I am not going to waste your Lordships' time by quoting all this from the OFFICIAL REPORT) to include the interest with the principal, Lord Mancroft said, "not invariable, but usual." He rested his case of not having to safeguard, in the words that I have put down, "interest as well as loan"; that Her Majesty's Government had received from the Film Finance Corporation an assurance that in future they would make it a rule to include the interest and principal together in any debenture loan agreement, or whatever instrument they exercised to safeguard any loan they might make. We on this side do not think it is right for Parliament to accept an assurance from what is, after all, a commercial house. If there is the slightest doubt —and there is a genuine doubt—it is clearly better to make provision in the Bill. I remember that argument being raised by noble Lords opposite when they were on this side of the House. It was always impressed upon me: "If there is any doubt whatsoever, put it in the Bill." There is a genuine doubt here.

I have with me the principal Act. Section 2 of that Act deals with loans and interest made by the Film Finance Corporation, and these words appear in subsection (1): Loans by the Corporation shall be for such period not exceeding five years from the date of the making thereof, and shall carry such interest as the Corporation may determine, and the Corporation may require any such security to be given for the repayment thereof,"— that means the loan— together with any sums due in the respect of interest, as may be available. It was thought insufficient to assume that the recovery of the loan meant at the same time the recovery of interest. Subsection (1) puts the matter into the same words as those which I propose in this and my subsequent Amendments.

There is a genuine doubt in the Department itself, and so I have put down this Amendment to make the matter clear. I hope that noble Lords will agree that there is, as I say, a genuine doubt, and that it would be far better and would be a great safeguard for the taxpayer to have these words in. They would not inconvenience anyone, and would not alter the principle of the Bill. I hope that the noble Lord, Lord Mancroft, will agree with me that these words are necessary, and that he will not argue otherwise. Certainly we on this side regard them as necessary. Therefore I am hoping that on this occasion he will accept my Amendment.

Amendment moved— Page 2, line 8, after ("them") insert ("or in the interest thereon").—(Lord Lucas of Chilworth.)

LORD MANCROFT

My Lords, this seems to me to be the smallest of differences. I have listened to the noble Lord with care. I thought I had convinced him last time but now he is back to where he was on the Committee stage. In his closing words in a speech on that occasion he said (OFFICIAL REPORT, Vol. 185 (No. 29), col. 605): It is a simple legal point. If your Lordships are satisfied to leave the matter where it is. I am and, therefore I beg leave to withdraw my Amendment. Noble Lords were satisfied. Certainly we agreed to the withdrawal of the Amendment. I hope that I have convinced your Lordships that that point was met—but I have apparently failed to convince Lord Lucas, and must now start all over again and try to assure him that the words he wants added to the Bill are quite unnecessary. Any agreement for a loan invariably provides that on failure to pay any sum of interest on the due date the amount due on the loan becomes payable forthwith, and therefore it follows that any new arrangements made could deal equally with both loan and interest. The National Film Finance Corporation have confirmed to me that all their loan agreements have contained this actual safeguard. I assure the noble Lord that, although I could not give the noble Lord, Lord Silkin, the assurance he wanted, every commercial agreement invariably carried this safeguard.

I have been looking up this point in the Library, and I have not found any precedent which did not carry that provision. I have brought with me a copy of the National Film Finance Corporation's standard form, and I should like to read what their charge says. It says: The security hereby created shall become enforceable at any time after the happening of any of the following events, namely,

  1. (a) if the company makes default for 14 days in payment of any money which may have become due hereunder or under the loan agreement, or
  2. (b) in payment of any instalment of interest payable hereunder."
That is the form of charge used by the Corporation. From this it will be seen that the effect of the non-payment of any instalment of interest due is not only to render the principal sum due but also to make the security realisable if necessary. I hope that what I have said will convince the noble Lord that the words he proposes are superfluous and are not required in the Bill.

LORD SILKIN

I have listened to the noble Lord with care, as I did on the previous stage of the Bill. The noble Lord has satisfied me as he did then that it is the invariable practice to include such a provision in agreements. I do not remember asking whether it was the invariable practice in all commercial contracts. I think I asked whether it was the invariable practice in these agreements.

LORD MANCROFT

That is so.

LORD SILKIN

Then I do not understand why you should not include the failure to pay interest in the terms of this Bill as a failure which gives rise to the repayment of the principal. I do not know whether in any other single case money is advanced on a charge of this kind. I will accept, for the sake of argument, that where a charge is given the charge is given in this form. But it may be that the National Film Finance Corporation may wish to make an advance without taking a charge in this form. In that case these words will be necessary.

I hope noble Lords will appreciate that this point does assume an importance which is perhaps greater than that attaching to these mere words. We on this side of the House feel that we have a duty to examine measures of this kind with a sincere view lo improving them. My noble friend Lord Lucas of Chilworth has given a great deal of time to this measure and has put forward a number of Amendments. He speaks with some experience. He has been a Minister who has had responsibility in matters of this kind in the past. It is most disconcerting and discouraging to Members on this side of the House to feel that none of our efforts is ever rewarded. I am not suggesting that we ought to be thrown a crumb; I am not suggesting that Her Majesty's Government should ever accept an Amendment which they do not believe to be right. Where, however, an Amendment is put down which admittedly can do no harm—the noble Lord does not suggest that the Amendment is wrong; the best he ran say is that it is unnecessary because of the practice, the invariable practice, if you like, of the Corporation—and which could be accepted with, at the worst, an abundance of caution, feel that there would be a justification for the acceptance by Her Majesty's Government of such an Amendment.

I do snot think the world will come to an end if these words are omitted—I must say that frankly—but I think it would be a better Bill if they were included. There may be one possibility in a hundred or one in a thousand where the inclusion of the words would be of public value. It is for those reasons that we feel that we ought to press this Amendment. We hope that even at this late stage Her Majesty's Government may be willing to reconsider the matter. It is the latest, possible stage but, even so, I think it is a matter which merits further consideration.

VISCOUNT BRIDGEMAN

My Lords, this discussion is so legal and technical that I doubt very much whether anybody who, like myself, is not legally qualified, ought to intervene at all. As I see it, however, the position is as follows. First of all, everybody is agreed that we want the Corporation to be secured as to repayment of principal and payment of interest. There is no dispute about that. Secondly, we want to be certain that the Bill as it finishes in this House makes it certain that both are secured. This is the point, if I am not mistaken, where my noble friend in front of me and the noble Lord, Lord Lucas of Chilworth, are not yet agreed. But my noble friend has said, I am sure with the best advice, that he has no doubt that this matter is taken care of. As to the possibility which the noble Lord, Lord Silkin, raised that one contract in a million might go wrong—

LORD SILKIN

I said, "one in a thousand."

VISCOUNT BRIDGEMAN

I stand corrected. Surely, there is not much likelihood that any one contract will go wrong if all the contracts are on the standard contract form which is issued by the Corporation and which is, apparently, legally watertight. Like the noble Lord, Lord Lucas of Chilworth, I have not forgotten how important we found it in earlier days to see things put in a Bill; but another principle which comes into play, and which was enunciated at the time by the noble Lord who was then on these Benches, was that one must not overload a Bill with unnecessary wording. If I thought that there was any doubt that my noble friend was right in regard to seeing that the interest is properly secured to the Corporation, then I should agree with the noble Lord, Lord Lucas of Chilworth; but, in view of what my noble friend has said, on the legal advice which I have no doubt he had, I feel sure that he is right and that the Bill meets the views of noble Lords opposite without the necessity for the Amendment which is proposed.

5.34 p.m.

LORD LUCAS OF CHILWORTH

My Lords, I can speak again only by leave of the House. May I ask the noble Lord, Lord Mancroft, this question? Will he give us an undertaking that the standard contract form will be used by the National Film Finance Corporation in respect of all loans issued by the Corporation under this Bill?

LORD MANCROFT

No. of course I cannot give the noble Lord that undertaking. I cannot stand at this Dispatch Box and give an undertaking without consultation with the National Film Finance Corporation, who are in many respects a wholly independent body. But what I can assure him is this: that the National Film Finance Corporation have more than once confirmed to me that it is their invariable practice so to act. I can do no more than that.

LORD ARCHIBALD

May I ask the noble Lord a further question, arising out of that statement? I quite accept that the National Film Finance Corporation do use their standard form on every occasion, and it is unlikely that they would depart from it. It is common knowledge, however, that the particular reason for this clause is not to deal with ordinary, everyday loans, but to deal with the particular case of British Lion. The form of charge in respect of the British Lion loan must have been entered into before the National Film Finance Corporation had been formed, because the loan was made before the Film Finance Company, which preceded the Corporation, was formed. Can we, therefore, have the assurance that the same form of charge was used in that case? If not, I think the words in the Amendment may become very necessary.

LORD GIFFORD

My Lords, is there not one other danger in this matter? If the wording which the noble Lord, Lord Lucas of Chilworth, wishes inserted is put into the Bill, may there not be other Acts where the words are omitted and where the fact that they are omitted may cause some misinterpretation?

LORD MANCROFT

Quite true.

On Question, Amendment negatived.

5.38 p.m.

LORD LUCAS OF CHILWORTH moved, in subsection (1), to leave out "except with harmful consequences to the production of films." The noble Lord said: My Lords, this is another Amendment which we argued at some length in Committee, but, having given the matter careful consideration, I really cannot understand the argument of the noble Lord, Lord Mancroft. He said (I am quoting from the OFFICIAL REPORT of your Lordships' House for February 2, column 608) that the Amendment that I put down, the Amendment now under discussion: would have the effect of completely reversing the intention of the clause as it is at present drafted. Then he went on to say that there were three classes of case—I quote again from the same column: The first, obviously, is in the case of a debtor who is able to repay his loan, albeit, perhaps, reluctantly. That would certainly not have harmful consequences on his ability to produce films. The second and obviously more difficult set of circumstances, from the point of view of the Corpora ion, as well as, of course, from the point of view of the debtor, is that where a debtor could repay all or part of his loan but only by disposing of all, or most, of his assets and thus ceasing to engage in film production. The noble Lord then said, further on, in column 609: Let us now turn to the third sort of case with which the Corporation may have to deal, the case of the debtor who cannot repay his loan even if the Corporation put him into liquidation. The noble Lord went on to say: The clause as amended by the Amendment of the noble Lord, Lord Lucas of Chilworth, would empower the courts to make special arrangements only in such cases"—

LORD MANCROFT

If I may interrupt the noble Lord, that is a misprint; the word should be "Corporation," not "courts." It is obviously a misprint, and it has been corrected.

LORD LUCAS OF CHILWORTH

Not in the copy that I have. I was going to question how the courts came into this matter. This has given me a most disturbing week-end, and I was really worried about it. I cannot see now that this Amendment reverses the intention of the clause, I cannot see that the omission of these words makes any difference whatsoever. If any of these classes of debtor cannot pay, if they cannot meet the obligations of principal or interest, they go to the Film Finance Corporation and say, "We are very sorry; can we make a better arrangement with you? We are driven too hard." By the deletion of these words the National Film Finance Corporation have a perfectly free hand; they can deal with any case. Surely the noble Lord, Lord Mancroft, was wrong I in saying: The clause as amended by the Amendment of the noble Lord, Lord Lucas of Chilworth, would empower the company to make special arrangements only in such cases. I say that if the principal and interest cannot be paid or cannot be met under any of the existing arrangements, the National Film Finance Corporation may, subject to the consent of the Board of Trade, make such other arrangements as will ultimately ensure the payment of both the principal and the interest.

The Film Filance Corporation was set up to help, not to hinder, and as a reasonable Minister, surely the President of the Board of Trade would not give his consent to any burdensome arrangement, unless he was quite convinced that, on balance of argument, it was more in the interests of the taxpayer to save what he could from the wreck, whether or not it damaged the production of films. But with these words left in, I submit that the President of the Board of Trade has no discretion. Surely the noble Lord is not right in saying that my Amendment would completely reverse the intention of the clause. The words which I seek now to remove are just as redundant or superfluous as the noble Lord said mine were last time. Not many of your Lordships, probably, will have with you a copy of the Bill, but if my Amendment to leave out these words is agreed, the Bill will read as follows: If at any time the Corporation are satisfied with respect to any loan made by them which has fallen due for repayment that the amount of the loan cannot be recovered in accordance with the terms thereof or by means of the remedies available, the Corporation may with the approval of the Board, of Trade enter into any financial arrangements with respect to that loan, which, in the judgment of the Corpora, lion, are calculated to lead to the eventual recovery … I am coming to the other part in a moment. That does not limit the discretion of the President, of the Board of Trade, to saying, "No, you cannot do that; it is too Irksome." If you have a responsible Minister, why fetter or limit him?

Then there conies the second limiting factor—the other one they cannot fulfil—that no new arrangement can be made which is harmful to the production of films. Again, you are tying the hands of the President of the Board of Trade. I do not know whether there is such a thing as an unscrupulous film company, but here there may be a let-out. The debtor may say, "You cannot do that. You cannot press me here; you cannot impose that restriction on me because it is harmful to the production of films. I shall not produce one of these films if you do that. You cannot do it because there is an Act of Parliament which says that you cannot." I have tried very hard to see the noble Lord's argument. When I saw the word "courts" I thought that perhaps the noble Lord had stumbled across something that I had missed. I am much relieved to hear that he had not. This is a clean-cut issue. This Amendment gives the Board of Trade the power that they should have. They are answerable to Parliament, and if they do anything that is damaging to the film industry, or to any concern in the film industry, then they can be called upon to answer to Parliament. But, as I read this clause, the President of the Board of Trade is going to Parliament with his hands tied. I am dealing only with the Amendment relating to the first part of subsection (1), and I hope the noble Lord will accept it. I beg to move.

Amendment moved— Page 2, line 9, after ("that") leave out ("except with harmful consequences to the production of films.")—(Lord Lucas of Chilworth.)

LORD MANCROFT

My Lords, I must begin by apologising to the noble Lord, Lord Lucas of Chilworth, if an accidental misprint in the speech I made at the Committee stage has spoiled his week-end. If it is any compensation to him, all I can tell him is that even without misprints his speech equally spoiled mine. I am very sorry indeed that I am not able to accept this Amendment. It is a matter of some considerable substance, as I tried to explain to your Lordships when we were considering the Bill in Committee. In my opinion, and in the opinion of those advising me, adoption of the Amendment would have the effect of completely reversing the intention of the clause as it is at present drafted. Having given full consideration over the week-end to all that the noble Lord, Lord Lucas of Chilworth, said on the last occasion, and having listened most carefully to what he has said this afternoon, I cannot for the life of me see that he has provided any convincing arguments to persuade the Government to change their minds on this particular point.

As I have said more than once before, the purpose of this clause is to enable the Corporation to come to some arrangement with a debtor who could repay all, or part, of the loan if the Corporation were to put him into liquidation. If such a debtor were to dispose of all or most of his assets, he could repay all or some of the Corporation's loan, but only at the price of ceasing to engage in film production. It is envisaged that in certain circumstances it might be harmful to British film production as a whole for the Corporation to enforce their rights against such a debtor in this way. At the same time, the principal Act gives no indication as to what action the Corporation could, or should, take in such circumstances, and it is in order to put their powers beyond doubt that this clause, as it stands, has been drafted. If I may say so, with respect, the noble Lord does not appear to have grasped the fact that the clause is designed to deal not only with the debtor who cannot pay, even if he is put into liquidation, but also with the debtor who could repay, but whose liquidation may have disastrous consequences for film production. And the noble Lord's Amendment, if I were to ask your Lordships to accept it, would limit the powers of the Corporation to dealing only with the debtor who cannot repay in any circumstances. I do not think I can add any more by way of explanation of this clause. I hope that the noble Lord opposite will read the clause yet again very carefully, with the care that he has given to the whole of this Bill—for which we thank him—and I hope that he will be satisfied that the wishes which he has expressed in relation to the powers of the Corporation are in fact met by the clause as drafted.

On Question, Amendment negatived.

LORD LUCAS OF CHILWORTH moved in subsection (1) to leave out the words "without such harmful consequences as aforesaid." The noble Lord said: My Lords, I can shorten the discussion on this matter. My contention is that these words are restrictive. I do not dissent 100 per cent. from the noble Lord, Lord Mancroft, in his first argument. We have the safeguard here that of course the first part of this clause is permissive; the Corporation "may" enter into other arrangements. It is, however, mandatory that if they do enter into other arrangements those arrangements must not be harmful to the production of films. My argument in essence is that those words weaken the security of the debenture holder. Suppose that the Corporation did enter into fresh arrangements. They would enter into those arrangements in good faith and would hold a debenture as security for the loan. But the terms of the debenture must not be harmful to the production of films. It is difficult for me to visualise that kind of debenture. Surely the whole essence of a debenture is that it gives prior security to the holder before the ordinary creditors. The only value, surely, that any debenture has is the security that it gives to the holder in that he can foreclose. Under this subsection as it stands he cannot foreclose, because the clause reads now as follows: …may with the approval of the Board of Trade enter into any financial arrangements with respect to that loan which, in the judgment of the Corporation, are calculated to lead to the eventual recovery without such harmful consequences as aforesaid. The "harmful consequences as aforesaid" are harmful consequences to the production of films. Am I right?

THE SECRETARY OF STATE FOR COMMONWEALTH RELATIONS (VISCOUNT SWINTON)

Does the noble Lord—I am trying to follow him—want the debentures to be recovered, even if their recovery would be harmful to the production of films?

LORD LUCAS OF CHILWORTH

That is helpful, and I am grateful to the noble Viscount for his intervention. He has a long experience as President of the Board of Trade. Suppose one starts off with the debenture. It is quite correct that one would not foreclose. But then suppose that things go from bad to worse, and that eventually the President of the Board of Trade has to make this decision: "Am I going to get from the wreck as much as I can of the taxpayers' money, by putting the company into liquidation and getting what I can from the sale of its assets, or am I going to lose the taxpayers' money, as I assuredly will if I do not foreclose?" But he cannot do that, because there is no action that he can take under the second arrange- ment that may be harmful to the production of films. He has voluntarily entered into this second arrangement and forgone all the other arrangements because of it. Naturally, the only object of the second arrangement is that it is more advantageous to the debtor.

VISCOUNT SWINTON

If the noble Lord will forgive me, as I read this it is really consequential upon the first. There are two propositions here. One is that you recover your money at all costs. If the Act stood without amendment that would, as I understand it, be the position, and it would be quite easy to put the company into liquidation and recover a certain amount. But then, equally certainly, no films would be produced. I think there was, general agreement in the House that we ought to pass this Bill, about which, I understand, there is in principle no dispute. The whole object of this clause is as follows. If you are looking upon yourself merely as a debenture holder who has to recover the taxpayers' money at all costs, if it is recoverable (which would be the position of an ordinary trustee for the taxpayer), you have by this clause a limitation put upon you that you shall do so only provided that in so doing you do not prejudice the production of films. That is a very portant point of substance which we debated on the noble Lord's first Amendment. Surely, all that this clause does is to say that when you come to make that arrangement it must not contain any terms for the recovery which would prejudice production. It is tautology if you like, but in all these things I have greater faith in the Parliamentary draftsman than in myself; when I know what I want to do, then I take his word for the right way of doing it. In one sense these words are consequential, but the Parliamentary draftsman has presumably included them in order to ensure that when the terms are made under which the loan is to be recovered the major promise that you shall not prejudice the production of films shall be carried out. I think that is the position.

LORD LUCAS OF CHILWORTH

My Lords, I hope I am not wearying the House, because this is rather getting down to Committee level, but I am grateful for the noble Viscount's intervention because, if I interpret it aright, he argues that the limitation is a correct one. He argues that the President of the Board of Trade should be limited and that he should not make any arrangement to recover the taxpayers' money if the arrangement is harmful to the production of films. I hold the other view, that there might come a time when the President of the Board of Trade, as the responsible Minister, should be in a position himself to judge, without any limitation, which on balance is the greater interest—that of the company producing the films or that of the taxpayer. The President of the Board of Trade should be the one to decide. But the noble Viscount, Lord Swinton, says, "No; this envisages quite clearly a limitation."

I hope, my Lords, that I am not going outside the realms of propriety, but the noble Lord, Lord Archibald, mentioned on a previous Amendment—and I frankly agree with him—that this clause concerns British Lion. There is £3 million at stake; £1 million has been put to reserve because in the opinion of the National Film Finance Corporation the assets of British Lion are worth only £2 million. I would hesitate to say that Parliament really intends to say, "You have power to enter into a new arrangement with British Lion, and the British Lion interest is to come before that of the taxpayer, and if it is a question of the production of films by British Lion or the loss of the taxpayers' money the taxpayers must lose their money." I do not think I have exaggerated it, but that, as I see it, is what the noble Lord has said is the limiting factor. He may be right. I do not think so. And I do not think we should put any Minister in the position of having to say: "I am not a free agent, and if they want a fresh arrangement and the National Film Finance Corporation voluntarily enter into this fresh arrangement, that is the principle under which they shall do it." I cannot say more on this point. I find myself in total disagreement with the noble Lord on the principle. My Lords, I beg to move the Amendment.

Amendment moved— Page 2, line 15, leave out ("without such harmful consequences as aforesaid").—(Lord Lucas of Chilworth.)

6.0 p.m.

EARL WINTERTON

My Lords, I rise only for one moment. I do not do so in order to express agreement with what the noble Lord, Lord Lucas of Chilworth, has said, but I do support him in one point which he made. We have rather been talking this afternoon—indeed, I thought I detected a slight tendency in that direction on the part of my noble friend Lord Swinton—as if we were here dealing with a theoretical case. Of course, we are not dealing with anything of the sort. We are dealing with a fact. I apologise for having to mention it again to the noble Lord, Lord Lucas (he did not seem to like my reference to it last time), but the late Government were in power when the loan was made by this Corporation to British Lion, which now, to say the least of it, seems to be, if I may use the expression without offence, in a very "wonky" position. I think that in justice to the film industry as a whole that should be made clear. We are concerned this afternoon with British Lion. I cannot help thinking that perhaps the proper title of the Bill should be "A Bill to salvage British Lion and help it to get out of its difficulties."

VISCOUNT BRIDGEMAN

My Lords, what my noble friend has just said is, of course, true. You might even say that this Bill would not be here if it were not for the state of British Lion. At the same time, this Bill is not entitled a Bill to do this or that for British Lion: it is a Bill to deal with any situation—whether it be the situation concerning British Lion or any other situation—as it comes up. Therefore, while I agree that we should bear British Lion in mind, I do not think that we ought to bear it so much in mind that we frame this clause so that it applies only to British Lion and not to any other general case.

If I understood Lord Lucas's argument aright, it seems to me that there is one point about which he is not satisfied—and it is this. You have certain cases where you cannot foreclose on a debenture without doing damage to the film industry. The Bill is now drafted so that, in such cases, the Corporation will be entitled to say: "No, it is better to keep this loan outstanding; it is better for the film industry in general to do that, than to use harsh measures in calling it in." You might get another case which I think perhaps the Minister had in mind. Suppose that the Corporation wish to call in a loan, and suppose that the company which has the loan says: "You must not do this because it will do real damage to the film industry." Now suppose that company is composed of men of straw, and that what they say is not true—that it is, in fact, nonsense. I think that what Lord Lucas wanted to do was to make cetrain that in that event the Corporation had power to say: "We do not agree that this would be harmful to the industry. In our opinion, the industry would not be any worse off if this company went into liquidation, and we believe that it is better to put it into liquidation and safeguard the taxpayers' money." If that is the noble Lord's argument, then I feel certain that my noble friends in front can tell him that that position is already safeguarded, and that there is no obligation on the Corporation to accept a plea that their action would damage the future of the film industry, unless they are genuinely convinced that it would do so. If that is really so, I feel that the Bill as it stands meets the noble Lord's case.

LORD ARCHIBALD

My Lords, I suggest that there is a very important difference between this Amendment to leave out these words, and the former Amendment which sought to leave out a similar form of words at an earlier stage of the clause. Here we are dealing, in the first place, with a situation in which a company is unable to repay its loan, and the liquidation of that company is not of material consequence to the British film industry. It is then the duty of the National Film Finance Corporation only to have regard to the taxpayers' money and to put the company into liquidation. If, however, it is a company with large-scale and important production, and it would be harmful to insist on repayment, in that case the Corporation, with the approval of the Board of Trade, enter into such arrangement as in the opinion of the Corporation will lead to the eventual recovery of the money. I suggest that that is where that point should stop. I maintain that the Bill should not bring in again this consideration of the effect on production. It is brought in at that first stage when these new arrangements are made. That is done because to do otherwise would have "harmful consequences "; a new arrangement is made—which may be for debentures, shares, representation on the board, or a new policy by the company. After a period of years, a situation may become apparent in which there is only one thing to do—namely, to close down the company and get the taxpayers' money back. At that second stage, I do not think the Corporation or the President of the Board of Trade should again have to take into consideration this question of the effect on production of closing down the company. I suggest that this is not a case of consequential repetition of the words, but it is a repetition of the words which completely alters the intention which I think both sides of the House have in this matter.

VISCOUNT SWINTON

My Lords, it surely is all one transaction. If yon cut out these words, "without such harmful consequences as aforesaid" at the end, you really would be negativing what you have said at the beginning. I think that is clear. This is not a matter in respect of which recourse should be had to a court of law to find out what is the effect. The people to be the judges are to be the Corporation, with the approval of the Board of Trade. That, I think, is important. They have to judge two things. First they have to decide that the money is in jeopardy. I understand that there is no doubt about that in the sort of case of which we have been speaking. Whether it is the fault of this Government or the last Government, or a succession of Governments, a lot of very doubtful debts seem to have been contracted, and the whole issue before us now is: Are we to go forward and recover the money at all costs? These are very odd types of transactions for Governments to enter into. We set up this Corporation, and we lent it some Government money in order to get films—

EARL WINTERTON

If the noble Viscount will forgive my interrupting him, may I say that he must not do an injustice to Her Majesty's present Government. The fault—if it was one—was purely the fault of the late Government.

VISCOUNT SWINTON

Well, I will say it was what our predecessors did. Here is this Corporation which has made some pretty poor debts. What is it to do? It has either to recover what it can, which, of course, in the ordinary way, means putting debtors into liquidation, to get 5s. in the £, or whatever it:an get. But that is not thought wise in this case. Here, having embarked on this adventure, what we want to do is to try to get back as much money as we can, and to do that without stopping the purpose for which the money was given—namely, the production of British films, the matter being always within the judgment of the Corporation and the Board of Trade. Therefore, where it is a case of recovering the money, the Corporation and the Board of Trade have got to decide whether, first, they have a duty to try to recover the money. Secondly, they have to see whether that can be done without harmful consequences to film production. Then they have, to the best of their ability, to enter into such accommodation or such arrangements as are best calculated to effect their purpose. I think that is correct. First, they will get back as much money as they can, and, secondly, they will not stop this particular body, or any other body, from going on with film production. It is one single transaction in which we are coming to a new arrangement—an accommodation, I think, would be the right expression. If we do not repeat

the words at the end of subsection (1), that would mean that the Corporation could recover their money, either in whole or in substantial part, without considering whether that would prejudice film production. It would mean that in giving an order to the Corporation and the Board of Trade to do these things, we said that, in carrying out that order, they would have to consider only one thing—namely, the recovery of the money. I do not know whether I have made it clear to your Lordships, but at any rate I have made it clear to myself. Assuming that we are right, in the first place, in saying that the Corporation and the Board of Trade have to combine two things—the recovery of the cash and the continuation of film production—then in the last part of this clause which is putting that into operation, there must equally be the words which tell them to do both these things. That being the purpose of the Bill, I think it is rightly drafted for that end.

On Question, Whether the Amendment shall be agreed to?

Their Lordships divided: Contents, 6: Not-Contents, 52.

CONTENTS
Alexander of Hillsborough, V. Burden, L. [Teller.] Lucas of Chilworth, L.
Lawson, L. Silkin, L.
Bingham, L.(E. Lucan.) [Teller.]
NOT-CONTENTS
Simonds, L. (L. Chancellor.) Bridgeman, V. Hawke, L.
Caldecote, V. Hylton, L.
Salisbury, M. (L. President.) Falmouth, V. Layton, L.
Goschen, V. Lloyd, L.
Cholmondeley, M. Swinton, V. Mancroft, L.
Reading, M Waverley, V. Merrivale, L.
Woolton, V. Merthyr, L.
Alexander of Tunis, E. Rochdale, L.
Bessborough, E. Brassey of Apethorpe, L. Rockley, L.
Birkenhead, E. Burnham, L. Saltoun, L.
Buckinghamshire, E. Carrington, L. Sandhurst, L.
De La Warr, E. Derwent, L. Strathcona and Mount Royal, L.
Fortescue, E. [Teller.] Digby, L.
Lindsay, E. Ebbisham, L. Teviot, L.
Munster, E. Fairfax of Cameron, L. Teynham, L.
Onslow, E. [Teller.] Freyberg, L. Turnour, L. (E. Winterton.)
Rothes, E. Gage, L. (V. Gage) Tweedsmuir, L.
St Aldwyn, E. Gifford, L. Waleran, L.
Selkirk, E. Glyn, L. Wolverton, L.

Resolved in the negative, and Amendment disagreed to accordingly.

6.21 p.m.

LORD LUCAS OF CHILWORTH moved to add to subsection (1) : and may also provide for the appointment of directors to the boards of those companies. The noble Lord said: My Lords, this is an Amendment which the noble Lord, Lord Mancroft, undertook to look at again. I will go over the argument briefly. Clause 2 of the Bill says: and any such arrangement may in particular provide for the waiving by the Corporation of payment of interest or for the acceptance by the Corporation of shares or debentures in any company. … That, surely, envisages that the National Film Finance Corporation may, in a new arrangement, take the equity in any company; it may take up ordinary shares and thereby invest the taxpayers' money in risk capital, That may be the right thing to do. But I do say emphatically that if the Corporation do that, then the taxpayers should be represented upon the hoard of directors. Would any noble Lord in your Lordships' House subscribe £3 million of his own money and then say: "Of course, I am not particular about being on the board; I do not even mind not being represented on the board"? This is a vital principle.

VISCOUNT SWINTON

Did the noble Lord include this provision in the Bill he introduced when his Party were in office?

LORD LUCAS OF CHILWORTH

I do not know. Repentance may come late; but if it is right, let it be done now. In the discussion that took place on this matter at the Committee stage, the noble Lord, Lord Mancroft, said (OFFICIAL REPORT, Vol. 185 (No. 29), col. 621): I do not think we can count the appointment of directors to the board of a company as a financial arrangement. I do not know what else it could possibly be. In col. 624, I said: …you appoint them to the board to watch financial interests. The noble Lord, Lord Mancroft, then interjected: To protect the taxpayers' money. Precisely! Is not that a financial interest? My noble friend Lord Silkin agreed that in any financial arrangement where the National Film Finance Corporation held a majority of the ordinary shares they could, perhaps, insist on representation on the board. But the position might be that they had a minority—and a minority interest can represent a substantial sum of money. There is a further provision under this clause: that the Corporation should have power to waive the interest. Again, I have no quarrel with that, if it is prudent so to do. But in all these financial arrangements the taxpayers' money is at stake. As the noble Lord knows, there are plenty of cases where the taxpayers' money has been put into organisations like the National Film Finance Corporation, but the Government have always reserved the right to appoint directors.

I feel sure the noble Lord, Lord Mancroft, will answer me by saying that the Government have power to do so. But there is a genuine doubt. Noble Lords on this side of the House would rather have the power put in the Bill. Surely, there can be no quarrel on the principle that when the taxpayers' money is invested in risk capital the taxpayers should have representatives on the board of the company to see that so far as possible their interests are safeguarded. I have sought to overcome the difficulty of the noble Lord by segregating my Amendment this time from financial arrangements, by inserting a colon, and then adding the words: and may also provide for the appointment of directors to the boards of those companies. This is a simple matter, and I hope the noble Lord will agree with me that, on balance, it is advisable that these words should go into the Bill. Clause 2 of the Bill has been brought into existence for one purpose—namely, to clarify the position and to clear up some doubts that arose in the interpretation of the original Act. I have read the original Act, and I cannot see that there could be any misinterpretation, except on one thing. I do not think that under the original Act there was power to waive the interest on any loan. We on this side of the House feel it is vital that the taxpayers' money should not go into risk capital unless the taxpayer has representation on the board. I beg to move.

Amendment moved— Page 2, line 20, at end, insert the said words.—(Lord Lucas of Chilworth.)

EARL WINTERTON

My Lords, as this is the last Amendment of the Bill, and as the noble Lord, Lord Lucas of Chilworth, and I have taken part—I from my humble position here, and he in his much more important position—in some controversy, I think it would not be inappropriate if I said a few words. The noble Lord has taken great trouble in this matter, but I do not agree with his Amendment. I rise because an important principle is involved, and I am entirely in support of the Government's attitude in resisting this Amendment. The principle which is involved is important, for two reasons. First, with regard to the general reason, so far as I know, the whole of the film industry on the producing side—and the same would apply to the distributing and exhibiting side—is opposed to State interference in production: that is to say, they are strongly opposed to anything which would look like the State production of ordinary films as opposed to special films. To give power to the Corporation to put directors on a film producing company might look like a step in that direction.

The second reason is an even stronger one. As we have all, I think, agreed on both sides of your Lordships' House in the course of the discussion, this Bill is concerned largely with the difficulties which have arisen over British Lion, and I think the noble Lord who moved the Amendment would not disagree with me when I say that there is a very close tie-up at the moment between the National Film Finance Corporation and British Lion in the shape of the money which has been lent to that company. As I understand it—and I took part in the discussions in another place when this Bill was originally brought forward, when no Party issue arose—the Bill aims as much as anything at encouraging the small producers. It is quite true that a large organisation such as that with which I am connected made use of the facilities: and, of course, British Lion, with which I have no connection, did so to a great extent. But the idea was to encourage the small producers.

I should like to put this point to the noble Lord, Lord Lucas of Chilworth. He will see that if power were given under this Bill to appoint two directors to British Lion—and it is obvious that if any directors are going to be appointed in the circumstances envisaged by the Bill it would be to British Lion—it would cause perturbation among some of the producers, who would suppose that the National Film Finance Corporation would be biased in favour of British Lion and would wish British Lion to be the distributor of the films. I do not think I am giving away any secrets of the trade when I say that the British Film Producers' Association—I think that is the correct term for the trade body, but Lord Archibald will correct me if I am wrong—has had a private talk with the National Film Finance Corporation to endeavour to get the impression removed from the minds of some members of the British Film Producers' Association that there is, in fact, any bias by the National Film Finance Corporation in favour of British Lion in the matter of distribution. For those two reasons, I hope that my noble friend Lord Mancroft will persist in his refusal to accept the Amendment which, on the face of it, has specious arguments for it, but which, for the reasons I have mentioned, I think is dangerous.

6.33 p.m.

LORD MANCROFT

My Lords, I did, indeed, promise the noble Lord, Lord Lucas of Chilworth, that I would look at his Amendment again. I looked at it again, and the more I looked at it the less I liked it. I discovered something which I had not noticed at the time, and I would have mentioned it to him if I had noticed it—namely, that by his then. Amendment we should have been in trouble with the point of excluding certain provisions of the Companies Act—Section 184, for example. That is now an academic worry on my part, because the noble Lord has re-drafted his Amendment, and it now appears, if I may say so with respect, to be even less necessary than it was in its original form. The new words which the noble Lord has put in make it clear that it is not the intention of the noble Lord to give the Corporation the power in all circumstances to demand representation on the boards of companies to whom they lend money. In other words, the noble Lord, Lord Lucas, appears to be content with the Government's intention that representation on the boards shall be a matter of arrangement between the Corporation and the borrowers.

The intention is that the Corporation shall have the rights which flow from the holding of any shares which they acquire in a company, or any other rights which they acquire by negotiation as part of any new financial arrangement. In making those arrangements, the Corporation can always stipulate that they shall have representation on the board of a company, even though their stake in the company does not give them a majority voting power. The question of representation on boards of companies has really nothing to do with Clause 2 of the Bill, except in so far as the right to representation may flow from any shares which the Corporation acquire as a result of the clause. Surely, it has always been within the power of the Corporation to arrange that they should be represented on the board of a borrowing company, and they have had that right at all times since the principal Act established the Corporation. It is, in fact, always the right of any lender to stipulate that he shall have a place on the board, if his position as a lender is strong enough for him to "get away with it." This clause does not affect the Corporation's position in that connection in any way at all, except in so far as it may become a shareholder. I can promise the noble Lord, Lord Lucas, that I have looked at this matter very carefully. I can assure him, that the addition of these words will not achieve any advantage whatever; that the fears which he has, or I think he has, are amply safeguarded against; and that the situation which he wants to bring about can perfectly welt be brought about by the Bill as it stands.

LORD SILKIN

My Lords, I take it from the reply of the noble Lord that he does not really associate himself with the arguments of the noble Earl, Lord Winterton, who spoke a moment ago. I assume that the noble Lord, Lord Mancroft, is saying, "We have the power to put directors on the hoard, and we will not refuse to exercise it in proper cases where we think it desirable."

LORD MANCROFT

Whom does the noble Lord mean by "we"?

LORD SILKIN

The National Film Finance Corporation.

LORD MANCROFT

Not the Government?

LORD SILKIN

No—that they will not refuse, on such grounds as were mentioned by the noble Earl, Lord Winterton, to appoint representatives to the board if they think that that is desirable in. the taxpayers' interest.

EARL WINTERTON

I must, in justice to myself, say that I was dealing with a special case. Perhaps I did not make that quite plain.

LORD SILKIN

The noble Earl made-it quite clear; but this Bill is a general one, and one must assume that there-may be other cases. One cannot rest this Bill on a special case, and if one did, it would have to be differently worded. I think we must treat this Bill as a general measure which will apply to cases in the future. I wanted to bring out quite clearly that Her-Majesty's Government are not associating themselves with the quite understapdable point of view of the noble Earl. I am not quarrelling wilt the point of view he puts forward—I disagree with it, but. I understand the reluctance of any organisation to have strange members on the hoard. I understand that, in particular, in the case of a film-producing company. I take it, however, that the Government do not accept that point of view. If they think it is desirable on financial grounds that the Corporation should have members on the board, they would not refuse, on ideological grounds, to put them on the board.

The only question which remains, therefore, is: Are the words in the clause as it stands sufficient to enable them to do so? This is not an argument as to policy: it is an argument as to whether the Bill, as it stands, does what all of us wish. I hope, however, that in proper cases the Finance Corporation would be able to put members on the board. Teat is what we want to achieve. I am satisfied that they could do so when they had a majority interest. I am not quite certain that they could, do so where they had not a majority interest in the producing company.

LORD MANCROFT

They would not lend the money.

LORD SILKIN

It is not a matter of lending the money. The noble Lord must not get confused about where this clause operates. It does not operate at the point of lending the money. It operates at the point where the, borrower is in default, where he cannot pay and where new arrangements are being made—not under the original arrangement. The question as to whether there will be harmful consequences to film production also comes in. By insisting on retaining the words "harmful consequences to film production" Her Majesty's Government have given a weapon to the borrower to negotiate terms. Supposing, that, in fact, harmful consequences will ensue, then the company are entitled, where the Government have a minority interest, to say that they are not going to have a director on the board. But harmful consequences will ensue if the Government, in spite of that, endeavour to recover their money. I think that in such a case it would be helpful to protect the Government where they have a minority interest. If these words were included, it would make it clear that they are entitled to have directors on the board. Putting it, again, at its worst, is there any objection to saving that they shall get what the noble Lord has already suggested they get? These are not redundant words. There is a genuine doubt.

LORD MANCROFT

There is no doubt, and has never been any doubt since the principal Act was passed.

LORD SILKIN

I think that there is a genuine element of doubt: and I cannot see why the noble Lord and Her Majesty's Government should be so stubborn about making certain that they are really achieving what every section wants them to achieve. I hope now that it may be possible for the noble Lord to have another look at this—I do not know at what stage: I can only suggest between now and the Division—and see whether he can accept this Amendment.

LORD LUCAS OF CHILWORTH

My Lords, as the mover of the Amendment I presume that I may have just another, last word on this matter. I am grateful to the noble Earl, Lord Winterton, for his courtesy. I fully appreciate his argument, but it is an argument with which I cannot agree. My reply to it would be that whilst some of the members of the film industry do not want interference from the taxpayer, they do not mind taking the taxpayer's money. Lord Mancroft does not really appreciate the altered circumstances. This is the first time that the National Film Finance Corporation have been authorised to put up risk capital. The original Act did not let them put up risk capital, but an entirely different set of circumstances has arisen. The original Act gives them the right to lend money, and sets out the terms on which they may lend it. Now they can take risks that no ordinary sensible lender of money would take: they can waive the interest. Does the noble Lord mean to tell me that the Corporation have always had the power to appoint directors? Have they always had the power to take risk capital? On the Second Reading the noble Lord, in his winding-up speech, drew my attention to two proverbs. One was something about "wringing the neck of the bird that laid the golden eggs." May I in turn quote or adapt a proverb?—"The man who pays the piper has some right to call the tune."

On Question, Whether the said Amendment shall be agreed to?

Their Lordships divided:—

Contents. 8: Not-Contents, 41.

CONTENTS
Alexander of Hillsborough, V. Bingham, L. (E. Lucan.) [Teller.] Lawson, L.
Stansgate, V. Lucas of Chilworth, L.
Burden, L. [Teller.] Silkin, L.
Archibald, L.
NOT-CONTENTS
Simonds, L. (L. Chancellor.) Lindsay, E. Brassey of Apethorpe, L.
Munster, E. Carrington, L.
Salisbury, M. (L. President.) Onslow, E. [Teller.] Derwent, L.
Rothes, E. Digby, L.
Cholmondeley, M. St. Aldwyn, E. Ebbisham, L.
Cholmondeley, M. Selkirk, E. Fairfax of Cameron, L.
Freyberg, L.
Alexander of Tunis, E. Gage, L. (V. Gage.)
Buckinghamshire, E. Goschen, V. Gifford, L.
De La Warr, E. Swinton, V. Glyn, L.
Fortescue, E. [Teller.] Woolton, V. Hawke, L.
Hylton, L. Rockley, L. Turnour, L. (E. Winterton.)
Lloyd, L. Saltoun, L. Tweedsmuir, L.
Mancroft, L. Sandhurst, L. Waleran, L.
Merthyr, L. Teviot, L. Wolverton, L.
Rochdale, L. Teynham, L.

Resolved in the negative, and Amendment disagreed to accordingly.

LORD MANCROFT

My Lords, before I ask your Lordships to agree to the passage of this Bill, I wonder whether noble Lords opposite will allow me to tell them that we on this side of the House are most grateful to them for the trouble they have taken over this Bill. We should not like them to go home tonight under the impression that we have not considered all their Amendments most carefully on their merits. It is solely upon the merits of the Amendments that we have been forced to ask the House to reject them. I want to make certain that the noble Lord, Lord Lucas, in particular, is under no illusion upon that particular subject. With those words I beg to move that this Bill do now pass.

Moved, That the Bill do now pass.—(Lord Mancroft.)

On Question, Bill passed.