Lords Sitting of 13 December 1962

Preamble
The House met at three of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Worcester

NOTTINGHAM JUVENILE COURT ORDER
3.5 p.m.
LORD WALSTON: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether the decision of the Nottingham Children's magistrates, as reported in The Times of December 6, to refuse an English couple the custody of their child unless they move away from their present home in a coloured district is in accordance with Government policy.]
THE LORD CHANCELLOR (LORD DILHORNE): My Lords, from the information at present available it would appear that the two children concerned in this case had been brought before the court by the local authority as being in need of care or protection. The court committed them to the care of the local authority under a "fit person" order. The chairman of the court, when making the order, encouraged the parents to apply for revocation of the order when they had secured accommodation more suitable for a family. As the noble Lord will no doubt appreciate on reflection, it was a matter for the court, and the court alone, to decide what order, if any, to make. The Government have no authority to intervene in a decision of a juvenile court and no question of Government policy arises.
LORD WALSTON: My Lords, I thank the noble and learned Lord for his Answer, but would draw his attention to the actual words, as quoted in The Times, of the chairman of the court, who is reported as having said:
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"We do not really favour the sort of accommodation where there is a coloured population."
Might I ask the noble and learned Lord whether he could exert his authority, which is undoubted, over the Judiciary to make it known to all concerned with the administration of law that in this country there is no question of any man not being equal before the law because of his race or colour, and that in the eyes of the law there is no such thing as colour or race?
THE LORD CHANCELLOR: My Lords, I have found from experience that it is often misleading to seek to draw a conclusion from a report in the Press when the report is necessarily abbreviated. I am making inquiries as to what, in fact, occurred. I have not as yet received a reply to these inquiries. Of course, there is no question of inequality before the law.
LORD WALSTON: My Lords, I am grateful to the noble and learned Lord, especially for his last remark, which I hope will be very widely read by magistrates and others, especially as I take it—and perhaps he will confirm this—it has special regard to questions of colour and race.

GREEN WEEK AGRICULTURAL EXHIBITION
3.8 p.m.
LORD WALSTON: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether it is proposed that there will be a United Kingdom stand at the Green Week Agricultural Exhibition in Berlin in January, 1963.]
EARL FERRERS: My Lords, as the noble Lord was informed in February, it is the policy of the Government to leave it to the initiative of British industry to decide for themselves, as a matter of commercial judgment, whether or not to take part in overseas trade affairs. If a reasonable number of firms were prepared to take part in the forthcoming Exhibition, the Board of Trade would have been prepared to consider helping them to organise a suitable display, but no such application has been received.

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In the absence of participation by industry, it would not be in accordance with the policy of the Board of Trade to organise an official display.
LORD WALSTON: My Lords, I am grateful to the noble Earl for his Answer, and, if I may, I should like to congratulate him on what I believe is his first Answer to a Question.
SEVERAL NOBLE LORDS: Hear, hear!
LORD WALSTON: I realise, as the noble Earl has reminded me, that I was given information on an earlier occasion concerning Board of Trade policy, but is the noble Earl not aware that this fair is of very considerable prestige, rather than trade, value; that there are official stands from many countries not only throughout Europe, but other parts of the world, including Israel. Morocco, Lebanon, Portugal and the United States? And, since this fair takes place in the British sector of Berlin, does he not consider that our national prestige demands that there should be at least some stand, if not a large one, representing this country at this great international agricultural fair?
EARL FERRERS: My Lords, I should like, first, to thank the noble Lord for his kind remarks. I am perfectly aware that there are a number of countries represented at this fair, but I am sure the noble Lord will appreciate that it is impossible for Her Majesty's Government to help in all cases of fairs as a matter of prestige. I would remind the noble Lord that the main British prestige display in Berlin is at the Berlin Industries Fair, and also that there was a British Week in Berlin in May of this year. Therefore, I hope that the noble Lord will feel that the interests of Britain in Berlin have not been completely forgotten.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, may I join in congratulating the noble Earl on his new appointment? I am rather disappointed with the contents of the Answer. You have a regular Board of Trade council for the trade, and you have sub-contacts by that means as well. I should be more satisfied with the Answer if I knew that the trade had been consulted
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about this by the Board of Trade, because the Board of Trade would have had long notice as to the coming of this fair.
EARL FERRERS: In fact, the members of the industries concerned have been, and are always, informed of these forthcoming fairs. Rather than there having been any intimation of a wish to be represented, the only intimation has been that they specifically do not wish to be represented. That intimation was made by a fairly large association of manufacturers.

UNITED NATIONS AND KATANGA
3.12 p.m.
LORD COLYTON: My Lords, I beg leave to ask the Question of which I have given Private Notice, namely—To ask Her Majesty's Government whether they can make a statement on the present intentions of the United Nations in regard to Katanga.
THE MINISTER OF STATE FOR FOREIGN AFFAIRS (THE EARL OF DUNDEE): My Lords, in a letter to Mr. Tshombe published in New York on December 10, Mr. Gardiner, the Chief United Nations Representative in the Congo, has informed him that it is now the intention of the Secretary-General to bring about national reconciliation through the Courses of Action. These Courses of Action were outlined at the same time as the United Nations Plan for National Reconciliation was drawn up. They comprise a number of measures designed to bring about the application of the Plan if the latter cannot be carried out as a result of negotiations. In his letter Mr. Gardiner also called upon Mr. Tshombe to cooperate in the application and execution of United Nations Resolutions, and said that the United Nations forces in the Congo may be expected to intensify their efforts to eliminate mercenaries, to prevent or put a halt to civil war, and to assist in maintaining law and order. The United Kingdom Permanent Representative in New York has been assured by the United Nations Secretariat that they will not take any military

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initiative in the Congo. This has been reiterated by Mr. Gardiner in his letter to Mr. Tshombe.
LORD COLYTON: My Lords, I am grateful to my noble friend for his reply, which relieves my mind, because I had intended to ask him for corroboration of an ominous rumour which I have heard from a very reliable source, that the United Nations forces are preparing to move into Jadotville and Kolwezi possibly on Saturday next. I am greatly relieved to hear his reply that there will be no fresh military action. But I should like to ask my noble friend whether Her Majesty's Government would now take an immediate initiative with the United Nations Security Council to forestall any action which is likely to lead at a later stage to further hostilities and the loss of civilian life which we saw just a year ago, and at the same time to promote a fair and just settlement of this matter.
THE EARL OF DUNDEE: My Lords, in reply to the first part of my noble friend's supplementary, the news agency report to which he refers was officially denied by the United Nations Secretariat in New York on December 7, nearly a week ago. In reply to my noble friend's second supplementary, we are, of course, only too anxious to do anything to promote any agreement or any move for conciliation which might avert what we believe would perhaps be an irreparable disaster. We will certainly not relax any effort which we are capable of making towards that end.
LORD COLYTON: My Lords, I thank my noble friend again, and may I ask him this? Would this be a matter which the Prime Minister could take an opportunity of discussing with President Kennedy when he meets him in Nassau next week?
THE EARL OF DUNDEE: My Lords, I do not see any bar to the Prime Minister's discussing anything he likes with President Kennedy.

SKYBOLT
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I should like to ask whether the statement which is being made in reply to a Private Notice Question in the other place with regard to Skybolt, will be repeated to us here.
THE LORD PRESIDENT OF THE COUNCIL AND MINISTER FOR SCIENCE (VISCOUNT HAILSHAM): My Lords, I am trying to arrange that my noble friend Lord Carrington will reply to the noble Viscount in due course.

BUSINESS OF THE HOUSE
EARL ST. ALDWYN: My Lords, on behalf of my noble friend Lord Hail-sham, I beg to move the Motion standing in his name.
Moved, That Standing Order No. 35 (Arrangement of the Order Paper) and Standing Order No. 41 (No two stages of a Bill to be taken on one day) be suspended until the House adjourns for the Recess.—(Earl St. Aldwyn.)
On Question, Motion agreed to.

POLICE PENSIONS REGULATIONS, 1962
3.16 p.m.
THE MINISTER OF STATE, HOME OFFICE (EARL JELLICOE): My Lords, I beg to move that the draft Police Pensions Regulations, 1962, be approved. Your Lordships may recall that when the Police Pensions (Amendment) Regulations, 1961, were passing through this House there was criticism by the Special Orders Committee of the complexity of the police pensions regulations. The Government spokesman at that time, however, could only advise that the consolidation of the existing Regulations—which was the only way in which the complex Regulations could be made more intelligible—was not possible without legislation. This was due to the way in which the Police Pensions Act of 1948 had been drafted.
The Government, accordingly, decided to introduce a simple Bill designed to give the necessary powers to consolidate the existing sets of Regulations into a single instrument. The purpose of that resulting Act, the Police Pensions Act, 1961, was solely to enable consolidation to take place; it gave no power to affect the position of existing pensioners. This, then, is the general position as regards the consolidated Regulations for which seek your Lordships' approval this afternoon. They consolidate the existing codes, and there is no need for any

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serving member of a police force or for any pensioners (and I include widows and dependants in that term), to fear that their rights will in any way be affected.
I should perhaps mention that the new consolidated Regulations are unique in one respect. Hitherto there have been two sets of Regulations, one for England and the other for Scotland. The two sets were identical except on minor points. It seemed to all concerned with the police pension code—the local authority and police associations in the two countries as well as the central Departments—that there should be a single code applying to England, Wales and Scotland as a whole, and this further consolidation is embodied in the code which is before your Lordships' House now.
The main purpose of the draft consolidated Regulations is, as I have said, merely to restate existing entitlements; but a number of minor amendments have also been made to the Regulations, mainly for the purpose of clarification or to deal with minor questions relating to the National Insurance schemes, including the graduated scheme. In addition we have made several amendments of rather more substance. We have provided that, as from the coming into force of the Regulations, an officer to whom the Overseas Service Act, 1958, applies will be able to count his service under that Act as pensionable service. Hitherto officers have been sent abroad as part of police units under the Police (Overseas Service) Act, 1945; but special and rather complicated arrangements had to be made if an individual officer had to be sent abroad. But it will now be possible, under the Act of 1958, for an officer to reckon his service overseas as pensionable service. I have no hesitation in commending this change to your Lordships. The opportunity has also been taken to provide, in draft Regulation 53, a procedure for appeal tribunals set up to hear appeals by overseas policemen aggrieved by a refusal to grant, or by the amount of, a pension.
There are only two other changes of any real substance to which I should like very briefly to draw attention. Both have been introduced as a result of agreed recommendations made by the Police Council for Great Britain. The
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first is that provision has been made, in Regulation 80, to secure from forfeiture, otherwise than for one of the serious offences for which a pension actually in payment must be forfeited, the pension rights of regular policemen who decide to stay on in the service after having completed 25 years' service. This followed a review set on foot by a recommendation of the Royal Commission on the Police in their Interim Report.
The second change, which has been made on the agreed recommendation of the Police Council for Great Britain, is that consent to transfer will no longer be required except in the case of chief officers of police and probationer constables transferring from one home police force to another, and officers transferring overseas. At present, such consents are necessary if pension rights are automatically to be preserved. It is, I think, generally agreed that transfers between police forces should be encouraged in the interests of the efficiency of the service as a whole, and this amendment will make a contribution to that end.
My Lords, I should, perhaps, in conclusion, raise one small red flag of warning. I am afraid that it is too much to hope that this consolidated code will remain unamended. As changes in the pension code are agreed, it will, I fear, still be necessary for us to seek your Lordships' approval from time to time for fresh amending Regulations. But now that the powers of the Police Pensions Act, 1961, are available, it will be possible for us at the appropriate time to repeat the process of consolidation, and your Lordships can be assured that, while the police pension code will never, perhaps, be easily comprehensible, it will never be as complex as it has been in recent years.
I am sorry to add that, since a last-minute typographical error was discovered in the 6th Schedule of the draft originally laid, it was necessary to put this right, and the corrected draft is, of course, the one now before your Lordships' House. I regret that this error was made, but I can commend the present draft to the House with confidence. My Lords, I beg to move.
Moved, That the Police Pensions Regulations 1962, be approved.—(Earl Jellicoe.)
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, we are obliged for the clarity of the statement which the noble Earl has made, and we understand the necessity for a consolidation of the Regulations. I observe that there are, nevertheless, quite a number of changes, and that in two or three cases the noble Earl said, "in agreement with the Police Council", which I take it includes the agreement, in that Council, of the union representing the police. But may I take it that there is no viewpoint covered by these consolidated Regulations which has not been fully agreed with the Police Union?
EARL JELLICOE: My Lords, I think I can assure the noble Viscount the Leader of the Opposition that in all the places where changes have been made that has been done with the unanimous approval of the Police Councils for England and Wales and Scotland, on which, of course, all the police and local authority associations concerned are represented.
LORD MORRISON OF LAMBETH: My Lords, it is good that this consolidation should take place. I understand that some further consolidations may have to be made later, but it is good that they should be brought up from time to time. I would merely express the hope that the consolidated instrument is not, in the aggregate, more lengthy than the separate instruments that may have been made before, as once happened in regard to Fireguards Orders. As the noble Earl has said, it is mainly consolidation, with some minor amendments, plus the more substantial amendments which he mentioned. There is one of those amendments on which I should like information. He said that the situation concerning police officers serving abroad in the interests of the country would be put right and that such service would be eligible for pension. May we take it that that will be not merely for the future but will be retrospective as to past police service abroad at the request of the Government?
EARL JELLICOE: My Lords, it is my understanding that as from the coming
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into force of these Regulations the new provision will apply to any officer to whom the Overseas Service Act, 1958, applies. I am not certain Whether that clearly meets the point which the noble Lord, Lord Morrison of Lambeth, has put to me, but that is my understanding of the legal position.
LORD MORRISON OF LAMBETH: I am much obliged. If the House will forgive me for pursuing the point, while it may be all right, like the noble Earl I am uncertain about it. I am sure that there were police officers who went to Cyprus, and I think some who went to Malaya, which would have been, if my memory is right, before 1958. They did pretty dangerous service of very great value to the country, and to Malaya and Cyprus. It would be a very grave thing if they did not come within the meaning of this provision; and, if there is real doubt about it, I would suggest to the noble Earl that we might postpone consideration of these Regulations. If, on the other hand, he can assure me there is no doubt, then we will let them go. But I think there ought to be no doubt, certainly about those two cases, that they are within the meaning of this instrument.
EARL JELLICOE: My Lords, I am naturally in the hands of the House at this stage. I should not wish to mislead the House on this matter—and I entirely agree with the noble Lord that this is an important matter. Because I have not immediately to hand the precise information about which he has asked me, I should prefer, if may, to fall in with his wish and to check on this point before I ask your Lordships to give final approval to these draft Regulations.
LORD MORRISON OF LAMBETH: I am very much obliged to the noble Earl. If it is in order and desirable, I will move that consideration of the Regulations be postponed.
Moved, That consideration of the Regulations be postponed.—(Lord Morrison of Lambeth.)
On Question, Motion agreed to.

AIR CORPORATIONS BILL
3.28 p.m.
Order of the Day for the Second Reading read.
THE PARLIAMENTARY SECRETARY, MINISTRY OF TRANSPORT (LORD CHESHAM): My Lords, there are two main objects in this Bill which I am now asking your Lordships to read a second time. The first one is that it provides for increases in the sums which British European Airways and British Overseas Airways Corporation may borrow, chiefly for buying new aircraft. The new limits are £125 million for B.E.A. and £300 million for B.O.A.C., which are increase's of £30 million and £120 million respectively. The second thing the Bill does is to enable both Corporations to borrow limited sums for a limited period to finance their deficits, if any, on revenue account.
My Lords, the present limits of borrowing, which are £95 million for B.E.A. and £180 million for B.O.A.C., were fixed by the Air Corporations Act, 1960, and were expected to cover, in general, payments for the aircraft then on order, together with spares, plant, equipment and building work. These limits we have reached rather sooner than was expected because of changes in the Corporations' investment programmes, notably the revision of B.O.A.C.'s VC.10 order and their purchase of three additional Boeings, and B.E.A.'s order for four more Comets and for three Argosy freighters. These changes are intended and will give the Corporations a more flexible fleet and improve their ability to compete in an increasingly competitive market.
The new limit will cover the balance due on B.E.A.'s 24 Tridents together with the twelve Tridents on which they have an option. In B.O.A.C.'s case, the limit will cover all outstanding expenditure on their order for VC.10s, the total value of which is approximately £150 million and also initial progress payments that they may make in respect of orders for supersonic aircraft. The decision to go ahead on the supersonic aircraft has been taken since this Bill was considered in another place and I am going to come back to that in a minute.
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In addition to the sums borrowed from the Exchequer, the Corporations will, of course, be using their own resources. These new limits also take into account proposed building work and further purchases as may be necessary of plant, equipment and spares. Noble Lords will note that the Bill provides a new provision for further reference to Parliament before the Corporations are authorised to borrow to the full extent of the limits. That is to be found in Clause 2 and is, in effect, a limit within a limit requiring an Affirmative Order in another place. This is intended to give Parliament further control and an opportunity for discussing them if the sums mount to the high level which they nowadays reach. As things now are the Corporations can borrow, other than temporarily, only for capital purposes but it seems, in view of the poor trading results in 1961–62, and the possibility of further losses in the current year, at least prudent and desirable to provide powers for the Corporations to borrow for the purpose of financing deficits on current accounts. The Bill defines the limit of B.O.A.C.'s borrowing for deficit purposes as £100 million. That includes the existing accumulated deficit of £67·3 million and means that they can borrow another £32·7 million of new money for the purpose of such deficits occurring up to the end of March, 1964.
British European Airways' accounts at the end of 1961–62 were virtually in balance with no accumulated surpluses or deficits and the same limit of March, 1964, applies. The total amount in their case is set at £10 million. The limits of these deficit borrowings are also within the ceilings for the total borrowings which I have already mentioned. As I said, the deficit financing powers are asked for only up to March 31, 1964. The fact that we are making provision for deficits is not necessarily to assume that they are, quite inevitable; but it seems a realistic and prudent precaution to take in the light of current trends in traffic and in revenue.
This Bill provides also a convenient opportunity for making two other provisions which are, in fact, unrelated to the question of borrowing. They are the sort of matters which are seen to need attention from time to time and then await a suitable Parliamentary bandwagon on which to jump—and this is it.

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They are found in Clause 4 which ensures that when an employee of one Corporation joins the board of the other he retains his right as a member of the airlines' joint pensions scheme. This has not happened yet but it could; it therefore seems reasonable to cover the possibility and to round off the intentions of the 1953 Act at this moment when it is convenient to do so. Clause 5 provides that where a member of a Corporation retires in special circumstances before the expiration of his normal term, the Minister can instruct the Corporation to make an ex-gratia payment. These payments will be subject to tax in the normal manner. The clause deals with only members because special powers are not needed for the Corporations to give this payment to employees under any written agreements which may be negotiated by their unions.
As I have said, the Corporations' results for the last financial year are relevant to this Bill. Both the Corporations have had difficulty and I want to say a little about the performances of each. Your Lordships would all join with me in agreeing that B.E.A.'s seven-year run of profits is very greatly to their credit and they did very well to confine their losses to such small proportions last year. They will, as I understand it, unfortunately make another loss this year; but I feel that the setbacks will prove to be only a temporary reverse. If it had not been for the combination in the same year of a fall in load factor combining with the heavy expenses of introducing a new aircraft they would not have made a loss at all, because neither of these alone would have caused it.
B.E.A. have asked for a subsidy to cover their loss on social service routes to the Highlands and the Islands. The Government recognise the importance of this problem, and my right honourable friend is giving it his immediate and active attention. I am sorry I cannot say more than that at the present time, but I can certainly assure the House that that is the kind of attention he is giving it. B.O.A.C.'s troubles have become a matter of public debate and the air is still reverberating with explanation and counter-explanation. Here and there it reverberates with expletive, too, but, so far, without counter-expletive. This discussion and public interest must not be
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allowed to obscure the extremely serious situation which is postulated by the accumulated deficit of £67½ million at the end of last year. My right honourable friend dealt very fully in another place with the reasons which have lead up to this state of affairs.
I do not want to take up a lot of your Lordships' time by a repetition in lengthy detail of all the factors involved, but I think I must emphasise the salient points. The loss of £11 million on B.O.A.C.'s own operations can largely be accounted for by the coincidence of a substantial increase in capacity building up over the years with a severe tailing off in the rate of traffic growth, including the very important trans-Atlantic route. I understand they reckon that the nine-day strike at the height of the summer season lost them £3 million. Some of their subsidiary and associated companies helped to add to the deficit, too, and I should make it plain that, with one exception, these were commercial arrangements freely entered into. The accounts in that respect tend to emphasise the losses because they are plain for everyone to see. The incidental benefits of these associations are rather harder to measure as by their rather indirect nature they are more difficult to discern. The additional depreciation charged on the aircraft fleet is, of course, the biggest single item in that deficit.
There is always a large element of forward judgement in fixing depreciation rates, since estimates have to be made of future factors, such as the continued life of the aircraft and its ultimate sale value. Now that we are in the enviable position of being able to exercise some hindsight, we might say that perhaps some earlier adjustment ought to have been made. In saying that, we have to remember that the jet revolution (if I may call it such) is not something which has affected B.O.A.C. alone. Other large users of propeller aircraft have been hit in the same way.
I should like now to turn to the future. Particularly for B.O.A.C, there is need of a positive plan for improving trading results. It is with that in mind that my right honourable friend has commissioned a distinguished accountant. Mr. John Corbett, to investigate their affairs. His inquiry will be wide-ranging in scope and will have the benefit of specialist

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advice when he comes to deal with particular aspects, such as engineering and maintenance. Its object will be to show what action is needed to make B.O.A.C. financially sound, while at the same time making sure of preserving the enviable reputation it has for safety and excellence of service.
The B.O.A.C. Report refers to the implications of the White Paper on The Financial and Economic Obligations of the Nationalised Industries. Contrary to what some people have said, the doctrine that the air corporations should pay their way is not by any means a new one, because the 1945 White Paper, issued by the Government of the Party of the noble Lords opposite, said:
"It is the view of His Majesty's Government that air services should be made self-supporting as soon as possible."
The 1961 White Paper is a re-statement of the obligation on nationalised industries to pay their way, but it recognises that the industries may be expected to carry obligations of a national and noncommercial character. The declaration of policy in that White Paper does not fundamentally alter B.O.A.C.'s role. It re-defines the obligations of the industries to pay their way in terms of a reasonable return on capital consistent with the social responsibilities they are expected to carry. As with other forms of transport, I think it is necessary to be clear where the division between these two lies.
My Lords, I should now like to come back for a moment to supersonic aircraft and the Anglo-French project. For its commercial success it is essential, on the one hand, that B.O.A.C. should be closely associated with it from the outset, to ensure that full weight is given to operators' requirements and to provide the assurance of production orders at the appropriate time. The Government have recognised that B.O.A.C.'s requirement is for an aircraft confirming with the I.A.T.A. design objectives as regards safety, compatibility, operating economics and so on. On the other hand, if B.O.A.C. are to operate along commercial lines they should not be expected to enter into premature com-
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mitments for production aircraft in advance, before they can know more precise specifications and see satisfactory solutions of the various problems which are involved, particularly with this aircraft.
There is, therefore, a dilemma, and to overcome this dilemma an arrangement has been made under which the Government will underwrite B.O.A.C.'s commitments in the early years up to the point when it would be reasonable to expect the Corporation to exercise their commercial judgment in deciding whether to place a firm order. During the initial stage of the project, therefore, any preliminary production order placed by B.O.A.C. would be underwritten by the Government. When development is sufficiently advanced—that is, after the flight of the prototypes in about 1966—B.O.A.C. would be called up to make a commercial judgment.
As the final decision on the Anglo-French project was made only after the passage of this Bill through another place, the £300 million limit on B.O.A.C.'s borrowings contains no specific estimate in respect of progress payments on the supersonic aircraft. The point is that any payments which B.O.A.C. might have to make between 1964 and the latter part of 1966, about which time the £300 million will probably be exhausted, are likely to be small and there would be no point in extending the borrowing limit by a marginal amount. As the limit is not tied to any specific date, the effect will merely be that if B.O.A.C. do enter into commitments of this kind in 1964 the £300 million will become exhausted only a little earlier than otherwise would have been the case, and legislation to sanction a further extension of borrowing powers would be needed just that much sooner.
I think that I have dealt with the main points that I should draw to your Lordships' attention in connection with the Bill. I can perhaps be more clear, if I have not been clear, when I come to wind up, because I shall know then more of what is in your Lordships' minds. I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read 2a.—(Lord Chesham.)

SKYBOLT AND PARIS TALKS
3.48 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I think perhaps that it would be convenient if at this stage we were to interrupt this debate to hear the statement that the noble Lord, Lord Carrington, is going to make, which has already been made in the House of Commons.
THE FIRST LORD OF THE ADMIRALTY (LORD CARRINGTON): My Lords, in point of fact, I think that the noble Viscount was to ask a Private Notice Question in these terms:
To ask Her Majesty's Government whether they would make a statement on the recent talks between the Minister of Defence and Mr. McNamara.
My right honourable friend the Prime Minister has made the following answer in another place:
"As the House knows, the Minister of Defence is at present in Paris for a meeting of the NATO Council. The Government will take an early opportunity of making a statement to the House about his talks with Mr. McNamara, when he returns to this country."
That statement, of course, will be made in your Lordships' House as well.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I am much obliged to the noble Lord. We are very anxious that information should be available to Members before the Christmas Recess. I take it that the words used by the Prime Minister in his statement mean that we shall have a full statement before the House adjourns for the Recess.
LORD CARRINGTON: Yes, my Lords. I do not quite know what the Minister of Defence's movements are, but he will be hack some time in the middle of next week and will make a statement then.
LORD BOOTHBY: My Lords, may I ask whether it is a fact—it has been stated in the Press—that no final decision will be taken on this matter until after the Prime Minister has met President Kennedy in the Bahamas?
LORD CARRINGTON: Yes, my Lords, that is perfectly right.
LORD SHACKLETON: My Lords, in view of the great public interest, cannot the Government give us some information? We are threatened literally with disaster to our defence policy. Has the First Lord no information? Is this the independent deterrent, which is so independent that we have to go to America to be told whether we can continue it? And would the Government consider, and perhaps give us some indication, what the consequences will be on the aircraft industry? That might be another disastrous aspect.
LORD CARRINGTON: My Lords, I think that it would be better if the noble Lord were to argue all these points when he hears the statement of the Minister of Defence in the House next week.
LORD MERRIVALE: My Lords, may I ask two questions of my noble friend? Would he not agree that there may be grounds here for supporting France in her desire to become an independent nuclear Power on a quid pro quo basis if she were willing to support our claim for the continuance of the American Skybolt programme? May I also ask whether conversations are taking place in Paris on that aspect? Finally, would my noble friend not agree that the Government should insist on receiving a weapon which could be effectively dispatched from around the immediate periphery of the U.S.S.R.?
LORD CARRINGTON: My Lords, I do not think my noble friend should ask me this afternoon to agree to anything. If he can wait until next week, we may perhaps discuss these matters then.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, before that happens next week, I hope that we shall be very careful about putting questions of that kind at this stage. That question went very far indeed on the matter of our going into a sort of agreement with France as to whether she should become an independent nuclear Power.
LORD CARRINGTON: My Lords, my noble friend's question may have gone very far indeed, but my answer did not.
LORD BOOTHBY: My Lords, in view of the fact that the question has been put, will the noble Lord bear in mind that neither General de Gaulle nor Her Majesty's Government would ever contemplate so disreputable a deal as the one which was suggested?

AIR CORPORATIONS BILL
3.52 p.m.
Debate resumed.
LORD SHEPHERD: My Lords, the House is grateful to the noble Lord, Lord Chesham, for his careful introduction of this Bill this afternoon. The noble Lord is quite right in saying that the Bill falls into two main parts; that is to say, the provision of new money for the new aircraft which the corporations are buying, and which we hope will be in service on due date, and also the provision of new money to cover the anticipated deficits of both corporations. The noble Lord was quite right to say that during 1961 and 1962 both B.O.A.C. and B.E.A. went through a difficult trading year, but I think it is true to say that that was the experience of practically every major airline throughout the country. In fact, the words "excess capacity" appear in all the reports of airline operations that one sees. International airlines, according to my information, lost on operating account last year, approximately £40 million. But I believe that the overall deficit must have been considerably larger, because this was a deficit mainly on operating account and took no account of depreciation. The depreciation figure for international airlines will, I think, be astronomical when one looks at the fact that operating to-day, apart from all the new jets, are 3,600 piston-engined aircraft seeking trade.
The Government have felt it necessary to bring this Bill forward. It certainly is necessary in regard to B.O.A.C. Before I deal with their accounts, however, I should like to say a word or two about B.E.A. The noble Lord was quite correct that it is for the first time in seven years that B.E.A. have run into a deficit, and I think it is right to point out that they had an operating profit of £852,000 after (and I think this is significant) depreciating their aircraft and their facilities by a figure of approxi-
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mately £7 million. That, I think, is a remarkable course, considering trade throughout Europe. But it has still left them with a deficit of approximately £1½ million. I understand—and I am very pleased that this is so—that B.E.A. do not now anticipate having to use the new monies provided in this Bill for the current or possible new future deficits. They believe that, the way things are going, what deficit there may be on this year's accounts will be covered by their own reserves. This is very good news indeed.
I think that B.E.A. provide in Europe one of the finest services, and we should pay a great tribute to my noble friend Lord Douglas of Kirtleside, his board and the staff of B.E.A., who, through bad weather and in difficult trading conditions, have produced such a good result My only fear in regard to the accounts—and I am speaking only of my own view—is whether the 1959 Viscounts on the books of B.E.A. have been depreciated sufficiently. My feeling, looking at the overall position throughout the world, is that we are rapidly reaching the stage when there are too many aircraft either on the ground or in the skies. In fact, the position in the air is not, I think, dissimilar to that which has arisen at sea, and also on the rails. There may be some difficulty in finding a realistic figure for these Viscounts, but I hope that we have depreciated them sufficiently.
I come now to B.O.A.C. The noble Lord is quite correct that the Corporation, during 1961 and 1962, have sustained a financial disaster. But, in fairness, I think we should look at both sides of the coin. Certainly B.O.A.C. sustained an operating deficit of £11 million; and taking into account depreciation and previous deficits we have a figure of £67 million. But it is, I think, a case of irony that B.O.A.C., who have consistently over the years improved their efficiency, have improved their performance and output, and have radically reduced their operating costs, should at the end find themselves with this deficit. There are many significant figures that your Lordships can find if you look at the Report; and I would commend to the House the Reports of both B.E.A. and B.O.A.C. They are well worth reading, being full of fascinating information.

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It is quite clear that on the operational side B.O.A.C. have made great strides. I suppose the real crux of B.O.A.C.'s position is the decision of the board (and for this I think the Government must accept equal responsibility) after the Comet disasters rapidly to expand the airline. They expanded it on the basis of firm figures which indicated a rapid increase of passengers and freight, particularly on the Atlantic service. The B.O.A.C. board made the decision, and they have increased their capacity considerably. But, unfortunately, during 1961 and 1962, as the noble Lord, Lord Chesham, has said, the traffic increase declined, which has meant that B.O.A.C. were faced with the position that their load factor came quite considerably below what is called the "break even" load factor. I understand that even in August, when we were hoping that the position would be better, the load factor of B.O.A.C. was still well below this break-even figure. The figure I have is that the B.O.A.C. break-even factor is 52·4, and at present they are running at 45·7. Therefore, it would appear that B.O.A.C. are still in some difficulties in spite of all the major improvements they have made in their service.
With their new aircraft B.O.A.C. have had to increase their capital. I see that in 1957 and 1958 they were using capital in the region of £58 million. But in 1961–62 this had risen to £112 million. I believe that this is the heart of the problem; that this rapid expansion, both of aircraft and of capital, has resulted in the Corporation having insufficient revenue to cover, not only the operating costs but the interest charges. I believe the Chairman has complained about the rate of interest charged and the structure of B.O.A.C. capital. But I believe it is a fact that 4½ per cent, is about the average interest charged on the monies loaned to B.O.A.C. That is not a very high figure, but I understand that, in spite of a number of very good years of profit-making, they were still short by £1½ million of the interest to be paid to the Government. Therefore, I think the Government must look very seriously at the capital structure of both the Corporations, perhaps especially at B.O.A.C.'s, in much the same way as they looked at the capital structure of
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the railways. I do not expect that at this stage the Government are ready to say they are preparing to take action, but there has been some rumour that the Government may well be changing the board of B.O.A.C. If that is the case, then is the time to effect a change in the capital structure.
With regard to the writing down of the aircraft of B.O.A.C., both the Comets and the Britannias, hard words have been said as this may well affect the selling of Comets by de Havillands. I think it is right that the Comets now in production, and being bought by B.E.A., are giving remarkable service and are quite a considerable advance on the Comets now flown by B.O.A.C. The Comet—and I am sure that most noble Lords have flown in one at some time or another—is a first-class aircraft. The only difficulty with it is that it came too late to make a major impact on airline business, and its size compares unfavourably with the Boeing 707s. I cannot help but feel that the Comet still has many years of useful service to give, particularly on the Far East routes. I hope that there will be no question of putting the Comet out of service. I believe it has a very big part to play yet.
With regard to the Britannias, again this was an aircraft which was delivered very late to B.O.A.C. They have these aircraft, but at the moment they appear to be not in use or, if they are doing anything, it is some part-lime charter. These aircraft are remaining on the books, and I wonder whether the noble Lord would consider passing these aircraft over to Transport Command. They may not be competitive with the modern jet aircraft which are required for commercial purposes, but I think they would be very useful indeed to Transport Command, who are in fact operating Britannias to-day.
I want to say something with regard to the Air Licensing Board. The Government had the Act of 1960, an Act to which we on this side of the House gave support, particularly to those items which provided closer control over aircraft that are flown and airlines that are to operate. But we were very concerned, as the noble Lord, Lord Chesham, will remember, about Section 2, which was the section which made it possible for this Board to authorise

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independent airlines to operate on routes that were already provided by our two Corporations. I am afraid that the fears we expressed then have turned out to be justified. Ministers, both in this House and in another place, have repeatedly said that the purpose of the Act was not to create competition for competition's sake. In fact, I think that was the spirit in which this House passed the Bill.
However, immediately the Bill was passed, the independent airlines put in a considerable number of applications. I believe at one stage 50 applications were made for independent airlines to operate on the most profitable routes of B.E.A. There was, of course, the application made by Cunard-Eagle for routes to the United States. This application was considered by the Board, who granted a licence. But B.O.A.C., as it had the right to do, appealed to the Minister. A Commissioner considered the case on the instructions of the Minister and upset the decision, or gave contrary advice to the Minister, that the Cunard-Eagle application should be rejected. In that case the Minister accepted that advice, and the appeal was upheld. But I think it is right to point out that in the meantime Cunard-Eagle had committed themselves to two Boeing 707s.
In the case of the applications to operate on B.E.A. routes, approximately half the 50 applications were granted by the Licensing Board, and I understand the new Minister has rejected the appeal of B.E.A. In other words, so far as B.E.A. are concerned, we now find that independent airlines will be operating on some of their most profitable routes. I think we must take into account the fact that you cannot look at routes in isolation, and the fact that, because a particular route could bear perhaps another aircraft in the week, that does not in itself justify another line operating on that route. When Cunard-Eagle made their application, B.O.A.C. were facing 18 different international lines on the American route, of which 8 came from Europe, through London. It is a fact that at that time the B.O.A.C. load factor was falling seriously, and there is no doubt of the view of B.O.A.C. that a further airline to dilute the trade
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would have most serious effects upon the B.O.A.C. accounts.
I think the story is perhaps much the same in regard to B.E.A., who are facing very considerable competition in Europe; competition that is growing stronger, particularly through amalgamations and unions. It is equally a fact that their own load factor has fallen and that they are certainly not in a position, unless they are to run into deficit, for any dilution or any material diversion of trade from their line.
I fully accept that it is the Government's case that it is not their intention to have competition for competition's sake, but I would ask the Minister whether he would look at the Report of the Air Transport Licensing Board. They say in paragraph 6 on page 6:
"As we noted in our first Report, the Act does not provide any positive guidance on policy for the Board to follow in deciding whether or not to grant an application, and it appears to have been the intention of the Legislature to leave the Board unfettered as regards the general policies they should pursue."
The absence of a general policy is criticised from time to time. It is quite clear from the Board that they believe that they have been permitted to act within the Act, but that there is no clear policy laid down. Their previous Report shows that they would have liked some guidance, but then one reads in paragraph (d) on page 7:
"We must interpret the Act as it stands and not by reference to statements made by Ministers regarding its intention or probable effect. We shall continue to rely upon our own interpretation of the Act unless we are overruled by a court of law."
I have looked at this Act again and I find it extremely difficult to see how any Corporation would be able to take a case to a court of law on a decision made by the Board. I do not think there is any doubt that there is uncertainty in the minds of the Corporations and also the independent companies as to what the future policy will be in the granting of licences either by the Board or by the Minister, and I would suggest in the present circumstances that it would be well for us to consider a new Act laying down specifically what Parliament really intend on how these licences are to be judged and how they are to be granted.

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I spoke of the position of B.O.A.C. and Cunard Eagle. It was quite clear that the routes on which Cunard were seeking permission to fly were routes on which B.O.A.C. could not afford a competitor, particularly with the British flag. It says in this Report that, stemming from the uncertainty, both B.O.A.C. and Cunard felt it was necessary to come to a pooling arrangement; which in the end turned out to be the creation of a new company to be known as B.O.A.C.-Cunard. I do not think there is any doubt that both B.O.A.C. and Cunard, particularly B.O.A.C., went into this agreement merely to protect themselves against the possible granting of licences by the Transport Board and because of the uncertainty under which they could not continue to plan and to operate.
We have this new company and there is a series of questions I should like to ask the Minister about it. First of all, the capital of this company is to be £30 million, of which B.O.A.C. are to have 70 per cent. and Cunard 30 per cent. Can the Minister tell me whether all the capital has now been paid by both parties, either by aircraft, facilities or cash? I am still not sure how Cunard-Eagle or Cunard were able to obtain 30 per cent. of this share capital, because, if these had been two private enterprise companies, on the facts and figures available this division would never have come about. Because of the figures I gave in the middle of this year, that B.O.A.C. were operating 27 flights to America per week, 5 flights to the Caribbean, and 5 to South America, and Cunard were operating only 3 flights a week, I cannot believe, if these had been two strong private enterprise companies, that such a division would have been entered into or even contemplated when an agreement or an amalgamation was being made.
However, it has been made, so I should like first of all to know whether this capital has been paid up. And I want to know how this capital rates. Does it rate like some ordinary equity, sharing in the profits and losses that may arise, with no interest or dividend paid unless there is a proper profit at the end after taking depreciation and the like into account? Is it similar to the B.O.A.C. investment in Cathay-Pacific-Malayan Airways? Or is it
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rated in the same way as B.O.A.C. capital in which there is interest to be charged, and which arises and must be paid for out of the operating account, even if it means at the end of the year that the company will show a deficit or a loss? Because the noble Lord will appreciate that B.O.A.C. capital bears interest whether the Corporation makes a profit or not. I want to know whether the capital of B.O.A.C.-Cunard is comparable to that of B.O.A.C.
The other matter of concern to me is future operations. At the present moment the B.O.A.C.-Cunard Company are operating Boeing 707s and they have been able to do so within the capital structure of the company. But what is going to be the case—and this is where it is very close to the Bill which is under discussion this afternoon—when we have VC.10s at approximately £4 million each? How are the B.O.A.C. Cunard Company to purchase these new aircraft? is this new company going to raise money from the Government by loan? Perhaps B.O.A.C. will be able to out of this Bill. But are Cunard, with their 30 per cent. responsibility for finding new money, going to be able to borrow the funds raised by this Bill? Or is it going to be the case that once the Boeing 707s, the initial contribution to the creation of this company, are depreciated and taken out of service and the VC.10s come in, the B.O.A.C.-Cunard Company to operate the Atlantic service will charter or lease these aircraft from B.O.A.C.; because, if so, it means we are to-day providing public money of which the Cunard Company will have the use because of their participation with B.O.A.C. in this company. I think this question should be made very clear to us.
I have one further point. This is the question of the subsidiaries of B.O.A.C. Last year they lost £3,394,000, taking into account depreciation of aircraft and their accumulated deficits of nearly £14 million. I question whether B.O.A.C. should continue this association with the subsidiaries. The case has been made that they act as feeder services to B.O.A.C. It may be that that is a case. I wonder whether the Government or the Corporation have any details as to how many passengers who fly on these feeder services eventually fly on B.O.A.C.

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When you book with Malayan Airways or Cathay Pacific, the feeder service is for you to fly B.O.A.C., but you can fly on any other airline; there is no advantage in fare or anything else. I wonder whether it is necessary for us to sustain these yearly losses, because they are yearly losses, by the subsidiary companies.
I have one last point, and this is one which must give everyone considerable concern; that is, the position of the British aircraft industry. The Government some years ago endeavoured to rationalise, to make more efficient, the British aircraft industry. Certain aircraft have sold exceedingly well, the Viscount in particular, and I think here one might well say that perhaps one of the greatest successes in the sale of the Viscount has been its operational use by B.E.A. The success of B.E.A. in using these aircraft has played a very big part in their continued sale overseas. But other aircraft have not done so well. One is disturbed to see that the Australian Airlines, instead of buying the Trident, are now going to buy from the United States. I think a great deal more has to be done to improve the efficiency and capability of the aircraft industry.
Of course this is not the time to consider the question of Skybolt, but if we do not get Skybolt (and I must say this to the Minister) it will not only be important from its having a disastrous effect on our defence policy; it may well be a disastrous point for the aircraft industry, because if bombers and fighters are no longer required, the main Government support for the industry, which has been very considerable over the years, will undoubtedly go. This may well result in considerable chaos and considerable unemployment. I think the Government should look very carefully again at the aircraft industry. If it is to be reduced in size to make it efficient, if there is to be redundancy, then obviously it should be done in a planned phase to reduce all possible hardship. I do not think this is a matter from which the Government can stand apart. I believe they must look and take action before hardship and perhaps financial disaster overtakes a major part of our industry. I hope the Government will do this.
4.25 p.m.
VISCOUNT MASSEREENE AND FERRARD: My Lords, in rising to support this Bill, which is, of course, a purely borrowing measure, I do so in the hope that Her Majesty's Government will not have to return to Parliament every three or four years to ask for further borrowing powers, further finance for the Air Corporations. I believe that the inquiry which is being inaugurated by the Minister for Air will put the finances and management of B.O.A.C. on a sound basis. We must hope so. They cannot come back every three or four years asking for £150 million or £200 million, because it becomes far too great a drain on the economy. In the B.O.A.C. Report for 1961–62 the Chairman is reported as having said that "an airline can be no better than its aircraft". I should personally prefer to change that to "an airline can be no better than its management".
LORD SHACKLETON: My Lords, could the noble Viscount give the reference?
VISCOUNT MASSEREENE AND FERRARD: It is in the Report of the Chairman for 1961–62. I am afraid I cannot give the exact page. I quite agree that airlines have had a bad year, but some have made profits. I understand that the Australian Airline Qantas has made a 5 per cent. increase in its net profit; Aer Lingus has had £250,000 profit; Trans-World Airlines on their international operations had a £3 million profit. But I quite agree that their balance sheets may hide certain things, and perhaps it is not quite a fair estimate. I have heard it said that our Corporations have had unsuitable aircraft imposed on them. I do not think there is any evidence to support that view at all. I would fully support, and I am sure everybody in your Lordships' House does, the Corporations' desire to buy British aircraft. It is obvious that it must be a great advantage to the Corporations to have the first use of aircraft that are designed to their requirements. I really cannot agree with some of these people who write in the newspapers. To read their accounts one would really think that they were working on behalf of the American aircraft industry. I think that that is deplorable.

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On this subject of our aircraft, may I say that, as we have heard, B.E.A. have been eminently successful primarily with British aircraft, and particularly the Viscount. It is true that they have incurred a marginal loss this last year, but that is, I think, chiefly due to extraneous circumstances. We are also told that they are going to have a small deficit next year; but I am told that that is owing to the fact that they are going to have to prove the new Trident. So I do not think we can really blame B.E.A. at all. Same people say that it is easier to make a profit on a short haul rather than on a long haul; but I personally should think that it is harder to make a profit on a short haul, because surely there is far more handling of the aircraft on the ground in refuelling and servicing.
I should like here to pay a tribute, as did the noble Lord, Lord Shepherd, to the noble Lord, Lord Douglas of Kirtleside, for his chairmanship of B.E.A. We all know of his fine war record; but he has also done an extremely good job, over the last ten years or so, with B.E.A. We can only hope, as I am sure will happen, that the advent of the Trident will change the whole picture as regards B.E.A. I should also like to pay tribute to the extremely high safety standards of both Corporations. Often I hear Americans say that they would rather fly with B.O.A.C. across the Atlantic than with any other airline. That is a great tribute to the safety of our Corporations. But perhaps the fact that we take such safety precautions may affect the profit margin. I have not checked that at all; but perhaps it is so.
The Corporations have this extremely large loss of £67 million, and it is a serious matter. They have their stories of bad luck. It was extremely unfortunate that the Comet I had a particular disaster which put B.O.A.C. behind by about four years. But I think we must have had some bad planning also. I understand that the aircraft originally ordered for B.O.A.C.—the Britannia, the D.C. 7C's and the long-range Comet—were supposed to last for seven years. Now apparently they are being written off after five years. That is one reason for these bad accounts. I cannot understand why this depreciation has only just came to light in the accounts of B.O.A.C.
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The Corporation must have known about it, for two years at any rate. Surely it is not possible—it is, of course, laughable—that they can have been issuing "cooked" accounts. It seems odd that this depreciation has only just come to light. I cannot understand it. While I can forgive B.O.A.C. for making a loss, if it was owing to helping our aircraft industry, I cannot forgive the Chairman for saying that it is "bloody crazy" for the Corporation to have to pay interest on its capital.
LORD SHACKLETON: My Lords, would the noble Viscount allow me to ask on what authority he says that the Chairman said that? Would he quote exactly what the Chairman of B.O.A.C. said?
VISCOUNT MASSEREENE AND FERRARD: I saw reported in the Press that he said that he thought it was "bloody crazy" that the Corporation had to pay interest on the money it borrowed. That is what I have read in the Press.
LORD SHACKLETON: If the noble Viscount is going to make statements about public servants who cannot answer for themselves, I think he ought not just to rely on Press reports, but should go back and find out exactly what was said. I will do so later, and I will tell the noble Viscount that he is wrong and unfair in what he has said.
VISCOUNT MASSEREENE AND FERRARD: My Lords, I am sorry if that is not so, but I certainly read it in, I think, three papers. The point is that I cannot agree that nationalised industries should not have to pay interest on their capital. Neither can I agree that their capital should be written off, as has happened with the £400 million in British Railways. After all, how does private industry feel about that? We have to pay our interest and make a profit to pay taxes in order to support the nationalised industries. So I do not think there can be any question of the Corporations getting out of paying interest. I think it is iniquitous. The point that I am anxious to make concerns the question of waiving the interest and writing off the capital. Looking at the figures, I would say that even if B.O.A.C. had not paid any interest, they would still have a deficit of £32 million; so whether they have paid interest or not, they are still "in the red".

811
I have also heard it suggested that the Corporations ought to merge. Since so many aircraft flying from America to Europe land in Paris or in other European capitals, there is probably something to be said for this proposal, because if they were merged some of the short-haul routes now operated by B.E.A. would become merged with the long-distance routes. That suggestion, however, requires a good deal of investigation by experts, and perhaps the time is not ripe at the moment. The 1958–59 Select Committee on the Nationalised Industries came to the conclusion that it was preferable to concentrate on coordination; but I personally think that by far the most important thing at the moment is to concentrate on finding out what is wrong with B.O.A.C. There must be something wrong, otherwise they would not lose some £60 million.
My Lords, I feel that I have spoken long enough, because the House has a good deal of other work to do. I should just like to point out again, on the question of the waiving of interest, that if I were to go to my bank manager and say to him, "I do not think I need pay any interest on my overdraft", he would think that I was "bloody crazy." In my view, Her Majesty's Government will have to stand firm on this question of nationalised corporations getting these huge sums of money from the public and being able to write them off and forgo paying interest. It is the thin end of the wedge, and if this habit increases it can end only in a general depression of the standard of living throughout the whole country—something that I should deplore. My Lords, I support the Bill, it is an extremely simple Bill, a borrowing Bill, and I sincerely hope that the efforts—which I think are the right efforts—of Her Majesty's Government to solve this problem of B.O.A.C. will have the desired effect.
4.45 p.m.
LORD OGMORE: My Lords, I should like to say a few words on this Bill, as one who takes a considerable interest in both Corporations and who, this year as in previous years, has had the pleasure of being a customer of theirs in travelling about the world. Let me say here and now that, whenever I can, I always travel with one of the two
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Corporations, as I believe that they are the finest airlines in the world. Speaking for myself, I do not mind about the quality of the champagne. What I am concerned about when I fly in aircraft is getting to the other end in one piece; and there are no airlines in the world that will do that better for you than our two great Corporations, B.O.A.C. and B.E.A. I should like here and now to congratulate the noble Lord who sits on my left, Lord Douglas of Kirtleside, and his staff of B.E.A., and also the Chairman and staff of B.O.A.C., for keeping the British flag flying in the air in most difficult times during the past year.
The Minister said to-day that we must try to improve the results of the two Corporations. The noble Viscount who has just spoken (and he spoke, I thought, in a rather depressing way) asked: What is wrong? The airlines of course, fly their aircraft in the air, but they must have a great deal of help, both international and national. They cannot determine the circumstances in which they fly; nor can they determine the climate of opinion in the world. They are under the most severe competition the whole time: often they have to face highly subsidised competition. We must, therefore, give them all the support we can—and I am not sure that we always do.
Let us take some tests. The Minister to-day referred to the question of the Highlands and Islands services. I have not asked Lord Douglas of Kirtleside about this matter, but I am quite sure that, if one were to ask him, he would say that having regard to the cost of modern aircraft, and the expenses of running an airline, no airline in its senses would try to operate services to the Highlands and Islands on a commercial basis. I think it is a fact that no one would do it. But B.E.A. have done it—not, of course, as a commercial enterprise, but as a social service. And for years past, B.E.A. should have been given a grant—not a subsidy—for that social service: that ought to have been done years ago. I was very pleased to hear the Minister say that the Government are now reviewing that situation, and I hope that we shall soon have a belated decision from them on this score—because it is a belated decision.

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I am all for this service; it is an essential sort of service which the community ought to provide for those who live in the Highlands and Islands. I only wish that we could do far more of this in the Highlands of Scotland, in mid-Wales and in other places. I do not want it to be said that I am against such a service, because I am all for it. But, as I say, it is we, the community, the richer part of the country, which should bear the cost of that service, and not B.E.A.
The second point, upon which the noble Lord, Lord Shepherd, touched, is the question of licences to private airlines. As the noble Lord quite rightly said on the Licensing Bill, he and I—and, I expect, others—raised doubts about this. We pointed out that if there were airlines, like B.O.A.C. and B.E.A., which had to provide a regular and scheduled service it was a very dangerous thing to allow competitors to come in and scoop the cream off the market. And that is what very often happens. I am all for competition; I like it, and I think it is a good thing. But it must be fair competition. Moreover, these two Corporations already face plenty of competition. One must not expect the main contractor to run a service all the year round if a competitor comes in and runs a service only on bank holidays and in the summer, when there is great competition for the service.
What happened? I quote here from what the noble Lord, Lord Douglas of Kirtleside, said in his own publication; and apparently what happened was this. After decisions had been given by the Licensing Board, B.E.A. appealed to the Minister, but the Minister confirmed all the Licensing Board's decisions except two. He revoked the licences given to B.U.A. on the London-Zurich route, and to Cunard-Eagle in respect of the London-Geneva route. The noble Lord, Lord Douglas of Kirtleside, ended up by saying that
"Time will show whether our warnings about the effects of the diversion on this country's air transport effort were well founded. Now that the decisions have gone against us, it is up to us to meet this additional challenge, and to try to mitigate the effect on B.E.A.'s economy of the diversion of revenue which the award of these licences is bound to involve."
The noble Viscount, Lord Massereene and Ferrard, was talking about what is
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going wrong. Here is one case in which revenue is being lost. It is no fault of B.E.A. If you put a lot of competitors on their routes, you must expect that they are going to lose revenue. You cannot have it both ways. I am not saying that the Licensing Board were wrong, and I am not saying that the Minister was wrong. All I am saying is that the natural result of the decisions is that B.E.A. are bound to lose revenue; and the same will apply to B.O.A.C.
Take a third test. Year after year the Government have pressed the Corporations, particularly B.O.A.C., to buy British. We have heard the warning given to-day by the noble Lord, Lord Shepherd, on what is going to happen to the aircraft industry if Skybolt is dropped. I can quite appreciate his anxiety; and it must be a terrible anxiety to the aircraft industry. But it is that sort of anxiety which the various Ministers at the Ministry of Transport have always tried to press upon the aircraft Corporations. They have said, "You must, if possible, buy British". The Corporations being British, they want to buy British if they can; but it does not often give them the right choice. It has happened that the best aircraft for a particular service has been a foreign aircraft, maybe an American aircraft. I think that from time to time the British Corporations have had to pay quite heavily for their decision to fly British aircraft. Here, again, they were not free in the way that an ordinary commercial operator would have been free.
Again, they have often had to test these aircraft and bring them into service after an enormous expenditure. I remember, for instance, the amount of trouble they had bringing the Britannia into service, because the engines were cutting out due to icing. Eventually, in order to find out what the trouble was, they had to put television sets into the engines to test them. They finally found that the trouble was dry ice. But all this took a long time; and of the expenditure involved, a considerable proportion was borne by the company. We had the first Comet, which has been referred to by the noble Viscount. That first Comet involved an enormous amount of expense, not only in money, but in time spent by B.O.A.C. and by Sir Miles Thomas himself. It failed but, as we know, through

815
no fault of B.O.A.C. and no fault of the makers. It was a new phenomenon at those heights; but all of that was lost.
Now we come to the supersonic airliner, and this is where international affairs affect aircraft. If we are going into the supersonic field, it means that a great number of the present aircraft will have to be written off long before their real life has expired. In answer to the noble Viscount, Lord Massereene and Ferrard, that is one reason why there are these great losses—because aircraft in the modern competitive field, especially across the Atlantic, are never allowed to live out their economic lives. They are always succeeded by something bigger and faster, before they can live out their lives. As regards the second-hand market for aircraft, I think it has improved a little recently, though it has not been good. This, again, is no fault of the Corporations; this is an international factor. The international airlines have never been able to agree on it. But here again the Corporations have had to suffer, and will suffer still more, of course, if these supersonic airliners come in and cause many of the present aircraft to be thrown out.
As a matter of fact, I think I am right in saying that although B.E.A. made a loss last year, this loss has been made good, as it were, from their reserves; so no part of that loss falls on the taxpayer: they recouped it. And they still have £4½ million in reserve. There are very few companies, either private enterprise companies or State Corporations, which can go year after year without ever making a loss in such a highly competitive field. In my view, B.E.A. should be praised for the way in which they have made a profit year after year, and I do not think we should jump on them in the one year In which, owing to the climate of the industry, they have made a small loss which they have recouped from their reserves.
The noble Lord, Lord Shepherd, was not quite right in criticising these associated companies. Some of them may make a loss, but some of them at least make a profit. I should like to refer here to the East African Airways, because it is a corporation with which I have myself flown this year, both in East Africa and from London to Entebbe. The East African Airways, with which B.O.A.C.
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is associated, had a record year this year, increasing their revenue by more than 13 per cent. over 1960, which was itself a record year, to £4,925,785, and for the eighth successive year the corporation made a profit. This time it was £263,927. The assets exceed liabilities by some £1,355,000. We all say that that is a very profitable airline, and I should like to except it from the wholesale condemnation given to airlines of this sort by the noble Lord, Lord Shepherd. They run not only in East Africa, but also, as I have said, from London to East Africa by arrangement with B.O.A.C.
There are one or two other points which I should like to make. First I should like to congratulate our Welsh airline, Cambrian. I think B.E.A. has a 30 per cent. interest in Cambrian, and they are a first-class little airline. They have gone through tremendous difficulties over the years, and have had very little help from anybody. I think the turning point came when B.E.A. took a 30 per cent. interest. They now operate to a large number of places, not only in this country but overseas. Last year they made a profit of £35,558, and a total dividend of 8 per cent. is being recommended. I should like to congratulate Cambrian Airways and also B.E.A., on what is a first-class result for this small but enterprising airway. I am particularly pleased, because only a few years ago it seemed that Cambrian would have to close down and that we should not have the Red Dragon, the symbol of Wales, flying in the sky, either physically or on an aircraft.
My Lords, may I say in conclusion, on behalf of my noble friends on these Benches, that we wish both the Corporations the best of success in the coming year and throughout the years to come. They may be assured that in all reasonable and proper ways we will give them every support we can.
5.0 p.m.
LORD SHACKLETON: My Lords, so many encouraging, friendly and admiring remarks have been made about B.E.A. and my noble friend Lord Douglas of Kirtleside that I do not think I need talk about them beyond saying that, having been a staff officer on his staff during the war—and I correct the noble Viscount, Lord Massereene and Ferrard: he was in both wars, and he

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had a very distinguished war record in the first war—it has been no surprise to those of us who knew him that he should have achieved the success that he and his Corporation have. Perhaps I might even reassure my noble friend Lord Shepherd on the question of writing down the value of Viscount aircraft. I am told that the noble Lord, Lord Douglas of Kirtleside, has in fact succeeded in selling some of his Viscounts for a sum considerably mare than the written down value. These seem to me to be very successful commercial operations.
My remarks will be mainly devoted to the position of B.O.A.C., the problems that confront it and the way in which I think we ought to think about it. I must say that I regretted the speech of the noble Viscount, Lord Massereene and Ferrard, which seemed to me to show a certain hostility based on an inadequate appreciation of the facts and, in particular, on one misquotation or misinterpretation which had also previously been uttered by the Minister of Aviation in another place—but I will come to that. I should like just to set a little of the background in which B.O.A.C. and B.E.A. have to operate. Under the various Acts under which they operate, the object of these Corporations has never really been properly stated. It is not quite clear whether they are to make money, although in the context it is clearly intended that they are not meant to make losses. B.O.A.C., in its modern form, was set up, and its capital construction was established, against a background of cheap money and monopoly—and that position has certainly altered. But the real difficulty is; what do we expect our public Corporations to do? Do we expect them merely to operate commercially, in which case we should not have a civil aircraft manufacturing industry? Do we expect them to serve British interests overseas, in which case we must expect to have losses? Are they in fact expected to help foster underdeveloped areas? These, are clearly the sort of matters which the members of the board of B.O.A.C.—and this is where they have to take the decisions—must take into account.
Certain consequences flow from this, and I should like to suggest that B.O.A.C. and B.E.A. do have a responsibility and
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a definite obligation—and the noble Lord, Lord Ogmore, who has been actively concerned with civil aviation, has already indicated this, and I am sure will support me in it—to buy British aircraft even if their sheerest commercial instincts would lead them to buy another kind of aircraft. They have, of course, borne the cost of the development and the introduction of new aircraft, and it is interesting, looking at the Report of B.O.A.C., to find among the figures certain costs which any line not responsible for developing these new aircraft would not have to encounter. There is a figure given of about £5 million as the extra cost for the Comet, and there are other figures—another £2 million, I think the total figure is—in relation to the Britannia. These are things which are done in the British interest and in the national interest, and it must be recognised that the Board of B.O.A.C. have consciously taken this course.
Furthermore—and here I am sure the noble Lord, Lord Douglas of Kirtleside, would agree—in addition to their success and their efficiency B.E.A. have been more fortunate with their aircraft. The Viscount has been a success from the beginning; whereas the B.O.A.C. has had a long line of difficulties with their aircraft—the Tudor, the Hermes. I remember a deputation of shop stewards waiting on me when I was a Member of another place demanding that pressure be brought on the nationalised airline to buy Tudor aircraft. I remember there was a telegram from Sir Roy Dobson, also. This was fine co-operation within the industry—although the Tudor did in fact belong to what was then, I believe, British South American Airways. But there have been very heavy expenses, and not all the aircraft have been successful. There was the particularly tragic outcome of the Comet; then we had the Britannia, for which no engine was available when the time came; and, admittedly, there was a miscalculation on the economics and profitability of jets. This is the one major error which has been made, not only by B.O.A.C. but by Her Majesty's Government and by other airlines: that the life of the turbo-prop aircraft, the Britannia, would be very much longer—something, like eight years rather than four. Then, B.O.A.C. have lost their sabotage routes. There have

819
been those emerging, independent countries, each insisting, largely because of prestige, on having their airlines. And the result of all this is a loss of £64 million.
I should now like to deal with some of what I think is the grossly unfair criticism for which the Government are responsible. I really consider that in this matter—and I do not often take quite such a strong view of these matters—the Government have done a disservice, and I hope that when the Minister comes to reply he will set the record straight. The first point is this statement which the noble Viscount, Lord Massereene and Ferrard, also made—but I excuse him here, because the Minister had said it previously. The Minister said [OFFICIAL REPORT, Commons, Vol. 666 (No. 6) col. 814]:
"What I cannot accept so easily is that the depreciation in the value of the Corporation's aircraft fleet has only been fully revealed this year. This is not a situation which has come up upon us in the night. It has been building up for two or three years past; and in any business efficient management must call for a clear understanding and a clear presentation of the balance sheet".
If I may say so, that is an admirable statement but is absolute rubbish when made by the Minister, in view of the interference of his Ministry in this matter.
I should like to give the House the facts. In 1951 B.O.A.C. proposed to amortise at a very much faster rate. There was criticism of this: it was suggested that they must just be watchful; and realistic figures were put in. In their 1958–59 Report, they attempted to write down the values of their DC.7Cs, but they were stopped from doing so by Mr. Watkinson. The auditor appointed by the Minister recommended this, as was perfectly proper, just as would the auditor to any business recommend what are the proper figures. Then in came the Ministry accountant and prevented it (perhaps for a political reason of some kind; life was not very easy for Mr. Watkinson at the time), and they were told by the Minister of Transport. I suspect illegally, that they should not do so. In 1961, they put a note in saying that they expected these aircraft would have to be written down. Now how could the Corporation have "come clean" except in the accounts? What is
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the point of publishing accounts and then having a statement saying, "We ourselves do not believe them, but the Minister has prevented us from doing the right thing"? I hope that this investigation by the special investigator, the accountant appointed by the Government, will reveal these facts, because it really is doing no good to the public interest if we are misled in these matters. I should like to hear from the Minister whether he wishes, in fact, to deny or confirm them. I can only conclude that the Minister of Aviation, for whom I have a very strong personal regard, has been misled, but he must take the responsibility for these statements.
The next thing is that the suggestion was also made by the Minister of Aviation that no pressure has been brought to bear. Here he said:
"It is sometimes suggested that B.O.A.C.'s participation"—
and this is apropos the subsidiaries on which they have lost money—
"has been inspired by the Government for reasons of foreign or Commonwealth policy and I have done my best to look into these allegations. Frankly, I believe they are unfounded."
Here is the Select Committee Report of 1959 on Nationalised Industries. It says:
"Although the Minister has no express statutory control over the Corporation's capital expenditure they always seek his approval and that of the Treasury for orders of aircraft, and these amount to 80 per cent. of their total capital. They have agreed not to open new routes without the Minister's consent. They fly on various routes, domestic or international, because he asked them to, and they lose money on it. They seek his approval for all fares and rates on non-international routes. They refrain at his wish from keeping aircraft specifically available for charter work; they come to him for permission before creating or investing in subsidiary companies."
My Lords, the Committee has a number of remarks to make on this.
LORD CHESHAM: I hope the noble Lord will forgive me, but he has gone into such a rash of quotations and reports that he has confused me for the moment. I was not with him in the last report from which he quoted about what the Minister calls to be done. Would he just re-check?
LORD SHACKLETON: I am sorry. I have, of course, been quoting mainly from the Minister of Aviation's speech in another place. The particular quotation I have just made—and I am sorry

821
I was not clearer—is from the Report from the Select Committee on Nationalised Industries, Reports and Accounts, May 14, 1959, and it is made perfectly clear there that the airlines do in fact take orders and indeed have pressure brought on them. I am quite sure that if the noble Lord, or any other noble Lord, were to ask Mr. Watkinson, who was then Minister of Transport and who is an honest man, he would be the first to admit that pressures of this sort have been brought to bear.
This brings us back to the statement Sir Matthew Slattery is alleged to have made. The Minister of Aviation said in another place:
"It seems to me the Corporations have been concerned first and foremost with arriving at a sound commercial judgment. I have been able to find only one instance on record where B.O.A.C. were persuaded to act against its commercial judgment on grounds of national policy. This was in respect of Kuwait Airlines".
If you are trying to run a public Corporation in the public interest it really is not reasonable always to expect a certificate in writing from the Minister that what you are doing is against the commercial interest. Very properly, nationalised Corporations—and there will also be private industries—will occasionally undertake things not in their commercial interest and they do not expect a certificate and nor necessarily is this the certificate they would have to produce to Lord Massereene and Ferrard's bank manager. If he were asked to do the sort of things by his bank manager that we are asking the Corporation to do, these results would happen, and he of course would be forced to refuse or to ask to be underwritten. This is what, in fact, Sir Matthew Slattery said. I have read these Reports and I have in fact got a verbatim report of the Press conference. I am sorry to take the time of the House, but I want to put the picture perfectly clearly. What he said was:
"I think it is quite right the Corporation should try to buy British aircraft. It was right that they went in to help industry to develop new types and paid the penalty. I am not criticising the fact this was done, but stating it is a fact and pointing out that it cost the Corporation a lot of money. What was and is completely wrong at the present time is that when the Corporation is required or expected to do something not wholly commercial, it gets nothing for it; there is no balancing item on its account. Worse that that,
822
when it has lost a loss of a considerable sum of money as a result of doing this, at present it is expected to go on paying interest on this until Kingdom come. This is crazy finance."
He then went on to describe another nationalised airline where the losses were calmly written off annually by a grant in aid, and he said on this point:
"This has not happened to the Corporations and the day of reckoning has got to come. If you go on piling up deficits of this sort as a result of non-commercial activities and pay interest on them, there must come a time when the books do not balance."
I am sure that any noble Lord in business will realise that if you do things which are commercially unsound, in the end your books do not balance. He also said:
"I have taken the opportunity at the end of my first full year as Chairman of the Corporation of pointing out that I think the financial structure of the Corporation, and the way it is expected to operate is just bloody crazy".
And this seems to be a fair comment—and a very unfair comment by the Minister of Aviation when he said:
"Sir Matthew has asked that past losses should be written off. I cannot see any good reason why the Corporation should be specially exempted from the servicing of its borrowed capital."
He said, again,
"What I tried to indicate was that to dismiss as 'bloody crazy' the idea that one should pay interest charges on borrowed capital was not something which commended itself to me."
My Lords, I think an apology is owed to the Chairman of B.O.A.C. The facts are there; they were available. The Press may not always gat things right, and clearly they choose the juicier bits, but it was a statement made in a Press Conference, very properly, in my opinion, which related to the special activities of the Board. One thinks of the Board of B.E.A. in regard to the Highlands and Islands Airline, to which the noble Lord, Lord Ogmore, referred. And when they are landed with this position not only noble Lords but also the Minister in another place get up and criticise the action of the Corporation in these respects. I think we ought to try to be a little fairer.
This is not good for morale in the Corporation. They are still handicapped from undertaking certain operations that they would like to do. They are not allowed to go in for charter work. Troops

823
have to be flown out to the Far East. There are vacant spaces in aeroplanes, on British B.O.A.C. lines, and it would be perfectly possible to get a price as cheap as is obtained from chartering independent aircraft. I understand why the Government do this. I do not regard this as purely private enterprise prejudice on their part. They are again in favour of providing this steady work. But you cannot expect a nationalised airline when it is in fact prevented from operating commercially and is compelled to do uncommercial things, to end up without possibly making a loss.
I think we also ought to look at the gain that comes from these particular activities. The noble Viscount, Lord Massereene and Ferrard, said that this is too great a drain on our economy. If we look at the economy as a whole and at the value of the nationalised airlines, I should have said that we cannot afford not to do this. It is essential that we should do it, first of all because of the British aircraft industry. At the end of the war, there were 2 million people in the aircraft industry. That number has now shrunk to about 200,000. Some of the industry works on defence, but there is this very important civil work, and in the last ten years the value of exports of British aircraft—which, of course, include a large amount of military aircraft—has come to £592 million. This is one of the indirect gains we get from fostering an industry.
Over these years, B.O.A.C. have lost £65 million, but they earn in a year £65 million in foreign exchange, which, even when balanced with overseas expenditure, which is pretty heavy, means £30 million of foreign exchange to this country. In addition, somewhere around 78 per cent. of passenger tickets are bought abroad with foreign exchange. This is an important strength to an economy which, as we know, is plainly bedevilled by the balance-of-payments situation. Against this background, I think that we ought to be grateful that the results have not been worse, especially in the light, I would have said, of the improper action of the Minister in putting his views to the boards of a nationalised industry.
Noble Lords, including my noble friend Lord Shepherd, have referred to the Air
824
Licensing Act. We were given solemn assurances by the noble Viscount, Lord Mills—and we took him at his word—that he did not calculate that it would harm the British flag carriers, the two great Corporations. And I still believe that the noble Lord was perfectly sincere in what he said. But there is evidence here to show that, though it has not gone too far, the granting of licences, especially on the more profitable routes, is bound to affect the profitability of the Corporations. We ought to realise, however, that while important criticisms of the B.O.A.C. can be made in regard to certain aspects of management and engineering (I do not know the details and I am not competent to criticise) there are few firms of which one could not make serious criticisms. However that may be, these Corporations are a great national asset. Their Reports are read by every airline and are regarded by foreign airline operators as textbooks, not only on how to give information and in honesty of reporting, but also on how to think about modern airline operation. I hope that we shall find a more sympathetic attitude from the Minister of Aviation than his speech would suggest. I hope that we shall not indulge in these boring private versus public enterprise battles over the Corporations, which are an established part of our national wealth. I hope very much that when the noble Lord, Lord Chesham, comes to reply he will set right the record which was so grievously miswritten by the Minister of Aviation in another place.
5.25 p.m.
LORD CHESHAM: My Lords, this definitely is the opportunity for me to do just that, but, if the noble Lord does not mind, perhaps he will allow me to come to it in the logical arrangement of events. Your Lordships have landed me with a fairly formidable task to perform, and if I spend a little time in replying, I hope that your Lordships will forgive me in the interests of trying to cover the majority of the important points that have been raised. I wonder whether it might help the noble Lord, Lord Shackleton, if I say that the quotation for which he was searching, about an airline being as good as its aircraft, he will find in the B.O.A.C. Report, 1961–62, Chapter 3, page 24.

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I was glad to hear the tributes which have been paid to B.E.A. Their performance has been very good, as most noble Lords have agreed. The noble Lord, Lord Shepherd, said he understood that the loss they would make in the ensuing year would be met from reserves. That may be so, but I cannot say at the moment exactly how their accounts will be presented for the next year. On the question of whether depreciation is adequate or not, may I say that I have no reason to think that it is otherwise than adequate. The noble Lord, Lord Shackleton, mentioned the fact that the Corporation had sold a number of Viscount 700.s and made a profit on their written-down value. I think that that must indicate that they are fairly well on the right lines in regard to the level of charging depreciation.
The noble Lord, Lord Shepherd, referred to difficulties that B.O.A.C. were in because of too rapid expansion. Had it not been for unforeseen factors, such as the tragic disaster which overtook the Comet—and the decision to go ahead with it was a sound and right decision at the time and would have put the B.O.A.C. in the forefront of modern operators—and the remedial action of buying D.C.7's to fill the gap, these difficulties would have been overcome.
I want to turn to what the noble Lord, Lord Shepherd, said about the capital structure of B.O.A.C. I would leave aside any consideration of the other quotation which has been under discussion—I would prefer to leave it to the noble Lord, Lord Shackleton, and my noble friend Lord Massereene and Ferrard to work that out between them.
LORD SHACKLETON: My Lords, before the noble Lord leaves that completely, may I ask whether he realises that it was the Minister of Aviation whom I was quoting and not the noble Viscount, Lord Massereene and Ferrard? I am suggesting that he should correct the record on behalf of the Government.
LORD CHESHAM: Could the noble Lord say that again? I do not think I followed him.
LORD SHACKLETON: I do not know whether we are on the same point. Is it in regard to Sir Matthew Slattery's statement about the writing off—the "bloody crazy" statement?
LORD CHESHAM: Yes.
LORD SHACKLETON: It was the Minister of Aviation in another place who in fact misinterpreted Sir Matthew Slattery and suggested that what he was referring to was the service of the interest on the money borrowed generally, whereas Sir Matthew was relating only to these special operations.
LORD CHESHAM: Very well: if the noble Lord would like it, we will deal with that point. I am sorry that I found difficulty in following exactly what the noble Lord wanted in that connection. We know what was said and where it was said; at least those two things are established. I think that his words as they were used, or as they were reported, were open to misinterpretation. At any rate, let me say this. Sir Matthew certainly tried to make it clear that what he regarded as crazy was that B.O.A.C. should pay interest year after year on losses that he claimed to have been forced upon them. I think that has become abundantly clear. It is difficult to say categorically that B.O.A.C. have been required or forced to do anything against their commercial judgment, except possibly in their association with the Kuwait Airways. So if this is what the Chiarman meant by that, it would not seem to be a very large matter and seems to be one to have merited rather less attention than it has in fact had, perhaps because of his forceful choice of expletives.
That leads logically to the question of capital reconstruction. The noble Lord asked me about what might be done, he alleged, on a possible change of Board, about which I know nothing, but I can certainly take his point just the same. By that he means, I take it, to write off some portion of the accumulated deficit. What would be the effect of it? It would certainly relieve B.O.A.C. of interest payments on the capital that has been lost. That is an obvious matter. As the noble Lord, Lord Shackleton, pointed out, it is certainly a factor that when you have a better chance of success it improves morale. That it would be likely to do, and I would not say that in due course it is not a point that might well have to be actively considered. It depends how things go. But I do not think it would of itself cure B.O.A.C.'s fundamental problems. My right honourable

827
friend in another place referred to it as tinkering with the thermometer—if you alter the scale on the thermometer it reduces the temperature reading, but it does not cure the patient.
I do not think that this is a matter to be decided until we know more from the result of Mr. Corbett's investigations into B.O.A.C., and until we know or feel more certain of what steps should be taken to put B.O.A.C. on a sound financial course. I think that is how we should view this matter at the present time.
LORD SHEPHERD: My Lords, may I say, just to get the record straight, that when I was talking about capital structure I was thinking not only of the question of deficit but the initial capital on which B.O.A.C. are operating? At the moment, all their capital and borrowings sustain interest from the beginning. Considering what B.O.A.C. can reasonably earn and what they are now paying in interest, I think it might be better if the initial capital or the capital that is set aside for the Corporation were treated, as is done in the majority of airlines, as equity, sharing in the profits as and when they arise.
LORD CHESHAM: I am glad the noble Lord has said that, because I should not want there to be any lack of clarity about the matter. All I would say is that he has brought in (which I did not understand him to do before) this question of equity, which raises a rather different aspect. Certainly one can see how it would be advantageous to B.O.A.C., in that they would not have to pay interest or dividend or whatever you like to call it in bad times. But where I think it is difficult is that I do not believe B.O.A.C. in their present state would attract equity capital from the market.
LORD SHEPHERD: My Lords, I said using Government money as equity.
LORD CHESHAM: In other words, that the Government should take the equity.
LORD SHEPHERD: Yes.
LORD CHESHAM: In that case, it seems to me that if the Government
828
take the equity it amounts to nothing more nor less than a concealed subsidy from the Government. If one were to contemplate that sort of thing, I think consideration should certainly be given to whether it should not be an open subsidy rather than to adopt a move of that kind. While the noble Lord has made himself quite clear, I still feel that what I said was right and that this is not the time—apart from advancing opinions as to what should be done, which we all have—to come to a decision until we know just what it is we are talking about.
While I am mentioning Mr. Corbett and his investigation, I may say that at some time a point arose that he might find effects of policy or Government action or something of that kind. If there is something of that kind to find, then he must find it; and if there is something wrong with B.O.A.C.—I do not for one moment admit that there is—that is due to some kind of policy or alleged enforced action of some kind (I shall come back to that later on), then he must find it: because the object of the inquiry, as I have said, is to get B.O.A.C. on a sound financial course. So it must be.
The noble Lord, again talking of aircraft, mentioned the Comet, and he put in a plea for the Comet. I am sure that B.O.A.C. will go on operating their Comet fleet as long as they possibly can. But I want to remind the noble Lord that the Comets which B.O.A.C. are now writing down more rapidly are not the same as the 4C, which is still being manufactured and finding quite a lively market around the world. So we are not pushing a good aeroplane out of the sphere of the industry. The noble Lord then made a suggestion about passing the Britannias to Transport Command. I have no doubt that he will not expect me to accept them on behalf of Transport Command this afternoon; but I am sure, as he said, that they are aware of the situation. The Britannia 312s are still in service; it is the 102s that have been removed.
Now we come to the matters raised on the Air Licensing Board, and in particular to the plea put in by the noble Lord that there should be a fresh Ball upon the matter in order to produce a policy. By the way noble Lords opposite

829
have gone for the matter, it sounds almost trite for me to repeat the argument about not competition for competition's sake. I think that is well enough known for me not to have to do so. Instead, I am going to point out that this Board of distinguished men was set up in order to encourage the operation of the British civil air business. If you have an industry which is dynamic in a world where flexibility is of some value, because it is a dynamic industry it seemed that an independent quasi-judicial Board of this kind was the right way to decide on applications for routes which were made by operators of aircraft, whether they be nationalised or private operators.
I would ask this. If such an independent tribunal is going to operate and function as it should, how can it use its judgment and its independence of thought if it is completely hedged round with legal requirements as to what it shall do? It is already hedged round to a certain extent, because the Act lays down what they are trying to achieve, and, indeed, some of the criteria that they should take into consideration in coming to their decisions. I do not think there is any question of people being able to come along and, I think the expression used was, "scooping off the cream", because rather in the way that the Licensing Board of Road Transport operates, they must have regard to such matters as what will be the diversion from other airlines, what is the need, what are the existing facilities, and so on. I should have thought that that would have safeguarded the position sufficiently to enable the Board to carry out their operations properly, without the necessity for a further Bill to indicate to them exactly the brackets within which they should work.
LORD SHEPHERD: My Lords, may I draw the noble Lord's attention to the paragraph I read? It is to the effect that the Board will interpret the Act as it stands, and not by reference to statements made by Ministers regarding its intentions or probable effect. In other words, the Board are carrying out what they interpret the Act to be. They are making decisions which are obviously not to the public interest. I think it is a question of putting the Board straight.
LORD CHESHAM: I do not think that that statement is a very wrong one for a Board of this character, because I would stress again that it is an independent quasi-judicial Board. It is not the tool of the Minister, if you like it to put it that way, or something of that kind.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I must point out that the Government introduced the whole business of setting up this Board. We prophesied at the time that it would be inimical to the interests of this great series of nationally-owned capital and equipment, and yet the noble Lord seems to persist now in defending the action as if it does no harm to the traffic of the nationalised fleets.
LORD CHESHAM: Of course, this is no surprise, because I knew the view that the noble Viscount and his colleagues took at the time. It is inevitably one that they would have taken. But I still make the point that I know it was the Government who set this thing up. But they did not set it up as a creature of their own; they set it up as an independent Board to adjudicate upon these matters. I do not think that the view that, in the circumstances, it is up to the Board to interpret the Act, is an improper view for a tribunal of this kind to take. Moreover, there is a right of appeal.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, may I point out that, if that is so, what it means is that they may repudiate, in fact, by their method of examining the matter—they may be quite right from a legal point of view—the kind of promise made during the passage of the Bill through this House, which was made quite honestly by the noble Viscount, Lord Mills, that it was not calculated to interfere with the interests of the nationally-owned fleets.
LORD CHESHAM: Neither is it calculated to interfere with their interests. I imagine it must be a matter of opinion. I was just coming at that moment to say that there remains the right of appeal, which has already been exercised. In some cases the Minister has allowed the appeal, and in other cases he has rejected it. Therefore, I should have thought that where there is an influence of policy, and if, as the noble Viscount says, the Board is inimical to

831
the interests of the nationalised airlines, the place where that matter is put right is on appeal. But I do not accept that the Board, as such, is inimical.
I should like to pass on to the questions which the noble Lord put to me on the subject of B.O.A.C.-Cunard, because there are a number of them and they are quite interesting. The first question I noted down—they may not have come in this order—was, had the capital all been paid up? Approximately speaking, at the moment B.O.A.C. have put in eight Boeings, and Cunard have put in the two that they own. The answer really is, No, the capital is not fully paid up, but the rest can be called up when wanted.
LORD SHEPHERD: My Lords, are we to assume from that that if there were to be a profit this year and it was distributed on the basis of shareholding, 70 per cent. would go to B.O.A.C. and 30 per cent. to Cunard? In fact, B.O.A.C. will have put in eight-tenths and Cunard two-tenths. I should have thought there was considerable discrepancy on capital invested and raised.
LORD CHESHAM: That could be my understanding of the matter. Until such time as the capital is fully paid up any distribution such as the noble Lord foresees for the year—and I hope, rightly—would be, as I understand it, in the proportion of the amount actually put in by the two parties. I do not think that what certainly strikes me at first instance as a somewhat unfair situation would arise in the way that he said.
LORD SHEPHERD: If there were a dividend, it would be paid on the shares issued. I presume the shares have been issued 70–30.
LORD CHESHAM: As I say, my understanding was—I am repeating myself, I know—that until such time as it was fully in operation, the division, if any, would be in relation to what had been put in. There is nothing I can add to that, I think.
The noble Lord was also interested in the division of capital between them, and wanted to know how it was that Cunard took up 30 per cent. of the capital, or why it was divided in that way between them. There are two reasons
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for that. One of them is that it is desirable that Cunard, if they are going to be a partner, should be a proper one, because they have a good deal to offer in the way of facilities on the ground, booking offices and so on. If they were going to have an interest, which I should imagine, in the circumstances the noble Lord said, would work out as an interest of 2 per cent., they would be hardly likely to be very active partners, and would be more in the nature of sleeping partners.
The other point is, as has been said already, that I do not think anyone can deny that by putting in 30 per cent. of the capital in this matter they are benefiting B.O.A.C. and, more indirectly, the taxpayer.
LORD SHACKLETON: My Lords, the noble Lord is being extremely patient, and I do not quite share my noble friend Lord Shepherd's suspicion of this arrangement for the interest of B.O.A.C.; but I should like to know how the 30 per cent. was arrived at. The noble Lord is talking rather as if the Government fixed it. Was this another case of direction behind the scenes by the Minister? If the noble Lord cannot answer, could he ask for this also to be investigated?
LORD CHESHAM: Fortunately I can answer it. This was no question of sinister interference by the Government, of which the noble Lord is so suspicious, because this agreement is one which is perfectly properly open to B.O.A.C. to make, and which they and Cunard freely entered into between themselves. The Minister supported it because, to be brief, it seemed a good thing to do and to be in the interests of both parties and of British civil aviation in general.
LORD SHEPHERD: Would the noble Lord accept a "shotgun marriage" as being perhaps the best description?
LORD CHESHAM: No, I would not. I would not accept that at all. I know that the noble Lord takes that view, but I do not agree with it. I think they got together and produced this thing. If the noble Lord insists on referring to it as a "shotgun marriage" I can assure him that the Government certainly were not doing anything like holding the shotgun. The two companies may have been

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pointing a gun at each other, but it was nothing to do with the Government. I would not accept that.
The noble Lord's next question, I think, was on the subject of supplementing their operations by the use of VC.10s and how that operation could be financed out of their very limited capital. He pointed out to us that that could not happen, and asked: were they, therefore, going to charter them, or what was the intention. One solution—and quite a possible one—would be that B.O.A.C wall continue to own the VC.10s, and will, as it were, sell flying hours to B.O.A.C.-Cunard; so they will operate them and, if you like, hire the services. The noble Lord went on to say that if they did that, then Gurnard would be obtaining the use of the borrowings under the powers that we are discussing to-day. You cam argue it that way, my Lords, but you can also argue it the other way round; that it is a source of income for B.O.A.C., who will presumably, charge a realistic price for making available to Cunard use of the equipment obtained with the aid of the loan. I should have preferred to look at it that way.
LORD SHEPHERD: Surely what the noble Lord is now saying is that Cunard, having obtained 30 per cent. of these very profitable routes, will perhaps be making an arrangement by which they will use public aircraft on charter, yet all depreciation and loss, and so on, has to be borne by the Corporation. I think that is a very raw deal for the Corporation.
LORD CHESHAM: If the Corporation were providing the aircraft free, that would certainly be so. But I should have thought that, if they are providing the aircraft on a chargeable basis, the charge they made would reflect the depreciation and other charges the noble Lord mentioned. They would have to do that, or the situation would be very much like the noble Lord said; but I am sure that will not be the case.
LORD SHEPHERD: My Lords, before the noble Lord leaves B.O.A.C.-Cunard, may I remind him that I have not had an answer to my question about the standing position of the capital of B.O.A.C.-Cunard; whether it is straightforward equity, or whether it is similar
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to B.O.A.C., where the interest charge is borne against the operating account.
LORD CHESHAM: I apologise to the noble Lord for not mentioning that point—I think I went straight over it in my note. From what I gather, the noble Lord wants to draw, or perhaps find, a contrast between the situation (this is what I really take it to mean) of B.O.A.C., who have to pay interest to the Government, whether or not they are able to earn it out of profits on their capital, and, on the other hand, Cunard, who, regardless of profits, do not have to pay interest and pay only whatever dividend they can. It does not, as I see it, affect the position one way or another. B.O.A.C., in financing this arrangement, will continue to pay interest on the capital which they have borrowed from the Government, some of which they are putting into this enterprise. This is where we must be very careful and differentiate between interest and dividend. I do not know from where Cunard have obtained their share of the capital, but I presume that in some shape or form they are paying interest on it. If they have borrowed it from the bank, they are certainly paying interest on it. If they had the money in cash they are paying interest on it, in the sense that they are forgoing interest which they would otherwise earn in order to invest it in this enterprise, in the hope, no doubt, of making some profit. That is what I mean when I say that I do not see that it affects the position. I hope that the noble Lord feels a little more satisfied.
LORD SHEPHERD: The noble Lord is most kind; he has put up with a great deal of interruption, but he will appreciate that this is a matter in which we have got a lot of interest. The question I really want answered is this: does the capital of B.O.A.C.-Cunard bear interest which is attributed to its operating account? Does it pay interest, as B.O.A.C. pays interest ion its own capital, to the Government? This is quite straightforward. Does the capital of B.O.A.C.-Cunard pay interest?
LORD CHESHAM: To the Government?
LORD SHEPHERD: To the B.O.A.C. or to the Government.
LORD CHESHAM: No. The interest paid to the Government is on that element of capital which B.O.A.C. have put into the enterprise; on that they pay interest to the Government at the rate at which they borrowed it. It is just the same as if the noble Lord and I go into partnership with £500 apiece and both of His have borrowed it; he may have borrowed it at 4½ per cent. and I may have borrowed it at 5 per cent. I continue to pay 5 per cent. and he continues to pay 4½ per cent. The position is very similar in regard to B.O.A.C. and Cunard in this matter. They doubtless pay interest in some manner or other on their share of the capital, as B.O.A.C. do on theirs.
LORD SHACKLETON: I think we are perhaps getting into deep water. The capital here is all equity. You cannot pay different rates, unless they are different shares, and I understand that the arrangement is that there will always be a minimum dividend on the equity, equivalent to the service of the money that B.O.A.C. borrow from the Government, and presumably this will be at the same rate, whatever it is—4½ per cent., whatever B.O.A.C. has to pay, as part of service charges.
LORD HAWKE: May I ask how on earth it can be equity capital if it has a guaranteed return on it?
LORD CHESHAM: As I understand it, Lord Shackleton's understanding of the position is wrong.
LORD SHACKLETON: Is it equity or not?
LORD CHESHAM: This involves me, as usual, in the realms of doing something that a dictionary ought to do. May I, without answering that question, just repeat what my right honourable friend said in another place about this matter, because I knew that there was some misunderstanding about the fixed minimum dividends and that sort of thing. He said [OFFICIAL REPORT, Commons, Vol. 666 (No. 6), col. 895]:
"… there is no guaranteed dividend to anybody, and the profit would first have to be earned. In the light of recent results, a profit would be welcome and would indicate that the agreement had improved the situation."
It was the first part that I wanted to make clear. I do not want to get at
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cross-purposes, and I do not want to mislead anybody; but I do think that I am right about this and that what I have said is correct. In one way, technically, I suppose it could be described as equity, but I am hesitant to say it can at the moment, because I think the situation is rather a complicated one by virtue of definition.
If the noble Lord is a little clearer, if not quite clear, perhaps I may now go on to the subsidiaries that he mentioned, as did the noble Lord, Lord Ogmore. I agree with him that some of them are most useful. It is very difficult to assess exactly what benefits arise indirectly as the result of feeder services and so on; but clearly there are some where any possible advantage they have is outweighed considerably by the disadvantages of the great losses they make, and they have either been got rid of or are in the process of being got rid of just as quickly as various agreements will permit. What I want to say must now become brief.
The noble Lord, Lord Shackleton, brought up the question of trooping, and I would say to him briefly only this. He mentioned, in particular, aircraft flying about on scheduled flights with empty seats. He may like to know that that is a matter which is under consideration and discussion at the present time. With regard to trooping on charter, and the Corporations' coming in on that, the reason they have not done so in the past is because it was a sort of quid pro quo for their monopoly position, which is now, at any rate formally, ended. That may come, but it is a bit more difficult, because if they have that as their quid pro quo for having now lost their monopoly position at least they must be seen not to have it; it is a matter of whether other airlines will be able to take up the so-called advantage they have obtained from it. Certainly the noble Lord's point is under discussion at the present time.
I will try to end briefly, and I hope to Lord Shackleton's partial satisfaction, at any rate. He made quite a detailed intervention, backed up with quotations on the subject of ministerial control and interference. I am not going to take him on at great length at this time, because there are a great many other things to do. In particular, he

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made the point of ministerial interference with depreciation. That certainly is quite different from any understanding of the matter that I had. I agree that the Minister is in a position to prescribe the form of the accounts, but not, as I understand it, the content. I simply cannot accept from the noble Lord that the position we have been discussing is wholly and solely the fault of the Government, unless he wishes me to regard it—and I certainly did not so regard anything he said—as a rather lighthearted political matter; and I am sure he did not say it in that sense.
LORD SHACKLETON: What I was really asking for was an apology from the Government for the criticism (and the noble Viscount, Lord Massereene and Ferrard, fell into it as a result) that B.O.A.C. had been given these facts before. My point was that the Government auditors did know what B.O.A.C. wanted to do, and they were prevented, through the interference of the Minister of Transport, through the action of the Government's accountants in this matter. This is something that can be settled, and I would ask the noble Lord whether he would undertake to inquire of the auditors appointed by the Government in regard to this particular matter. We might then know whether the Minister would see fit to withdraw his statement.
LORD CHESHAM: If the noble Lord is saying things like that, then inquire I will. What I shall find or what I shall say about it I just do not know, and I am not prepared to commit myself. I am certainly not thinking of the matter in terms of apology at the moment. I will read very carefully to-morrow what the noble Lord said, and read again the words about which he complains. I would rather do it coldly in the office than in the pleasant temperature of this debate. I will do that. But certainly my understanding was that the criticism was devoted not to the mechanics of the thing but to the thought lying behind it: that it ought to have been thought of before; not that there had been delay in putting it into the accounts. Finally, may I suggest to the noble Lord that if he will do me the kindness of reading fairly carefully through what I said, and really thinking out some of the points I made in my opening speech, he will find that
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in fact I covered a certain amount of the ground about which he spoke.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, in support of my noble friend I only wish to say that I thought that, by the quoted evidence he put before the House from the Select Committee on Nationalised Industries, he had proved his case, and I have heard no real answer from the noble Lord, Lord Chesham, on that case to-night. I am happy that he is going to look into it further, but I want him to go away knowing that we feel that that point was proved conclusively in the actual Minutes of the Select Committee on Nationalised Industries.
LORD CHESHAM: As I said, I do not want to get involved in a lengthy discussion on that point now. If noble Lords opposite and their noble Leader feel convinced, convinced they must feel. I am sure that if I were to go on until Domesday they would remain equally convinced. We have had a most interesting debate. It has made my brain buzz like anything from trying to deal with the variety of extremely interesting points raised by noble Lords who have taken part. Even if I have been given some wet towel work, I thank noble Lords for having produced their points in the way that they have, and I hope that your Lordships will now give this Bill a Second Reading.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

COAL INDUSTRY BILL
6.12 p.m.
Order of the Day for the Second Reading read.
LORD DENHAM: My Lords, this Bill is a simple and straightforward measure, which I hope your Lordships will find uncontroversial. It has two main purposes: first, to enable the Minister of Power as well as the banks to make temporary advances to the National Coal Board and also to allow the Treasury to guarantee temporary borrowings by the Board from sources other than the Minister; secondly, to alter the Coal Board's financial year. Perhaps your

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Lordships will allow me to explain the background.
The Coal Board's main borrowing power is contained in Section 26 of the Coal Industry Nationalisation Act, 1946, which enables the Board to borrow from the Exchequer for capital purposes, including the provision of working capital up to £700 million. The Board also has power under Section 27 of the 1946 Act to borrow temporarily "by way of overdraft or otherwise"—which in practice means from the banks—up to a limit of £20 million. It is with this temporary borrowing power under Section 27 that the Bill is concerned. The original purpose of Section 27 was to give the Board the ordinary commercial overdraft facilities which any large organisation would expect to need in the course of its day-to-day business. It has always been accepted that it was right for the Board to have these facilities to meet any contingency, including a possible temporary deficit.
The National Coal Board has power under the existing Section 27 to seek temporary credit from the banks up to £20 million, with the approval of the Minister of Power. But when credit is restricted the Board may not always be able to borrow from them. This in fact happened at the end of 1960. The Board sought temporary accommodation to cover an end-year deficit, but the banks were unable to help because of the credit squeeze then in force. Some time or other this might happen again.
The Government have therefore thought it prudent to provide in the Bill for the amendment of Section 27 so that the Board can be sure of this kind of accommodation if they want it. The Bill provides that, for the purpose of meeting a temporary deficit only, the Board may apply to the Minister, as well as to the banks, for a temporary loan. It also enables the Treasury to guarantee temporary borrowings by the Board from the banks: this is a support already available to other nationalised industries, and it is purely an historical accident that the Board has not already got it. These amendments to Section 27 of the 1946 Act are designed to ensure that that section works in the way originally intended. That is their sole object. There is no change in the purposes for
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which the Board may borrow temporarily: nor is there any alteration in the limit of £20 million on all such borrowing, whether the Board borrows from the banks or (by virtue of the present Bill) from the Minister. There is no change in the Board's capital borrowing powers under Section 26 of the 1946 Act, and the limit of £700 million still stands.
I have dealt with the most important object of the Bill, but before turning to the other provision I should like to say a word about the National Coal Board's financial position in general. As your Lordships will be aware, the Board's financial prospects a year ago were giving some cause for concern. The Board's accumulated deficit had been mounting steadily, and there was the possibility of a further deficit in 1962. At the end of 1961 it was clear that the Board's internal funds were no longer adequate to finance the deficit, and Parliament accordingly gave the Minister of Power special authority in the Coal Industry Act, 1961, to lend the Board up to £50 million towards financing its accumulated deficit until the end of 1962. At the end of 1961 the Board's accumulated deficit had reached £93 million. Since the Board had internal funds available for deficit cover amounting to £63 million, it was necessary for the Minister to advance £30 million to cover the gap.
In the current year there has been a welcome improvement in the Board's financial prospects. It may even be possible at the end of the year for the Board to make some modest repayment of its deficit borrowings under the 1961 Act. The circumstances which made the 1961 Act necessary no longer apply, and it follows that no similar provision will be necessary when the 1961 Act expires at the end of this year. It will be evident to your Lordships that the provisions of the Bill now under consideration are of a very different nature from those of the 1961 Act, and are appropriate to the more encouraging prospectus we now have for the coal industry.
Finally, the remaining purpose of the Bill. This is to alter the existing provisions governing the Coal Board's financial year and is a purely technical change. Thus the Bill will change the dates of the Board's financial year to run from April to March, instead of

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from January to December as at present. There are several advantages in this. It will bring the National Coal Board's year more into line with the Government's fiscal year: it will bring it more into line with the financial years of the other nationalised power industries and so make the comparison and collation of figures easier; it will bring the financial year more into line with the "coal year", which is the period which ends when the winter, and therefore the consumption of coal, end. I think your Lordships will agree that this change is reasonable and indeed helpful. My Lords, I have sought to outline the purposes of this Bill. I hope that it will commend itself to all sections of the House, and I ask your Lordships to give it a Second Reading.
Moved, That the Bill be now read 2a.—(Lord Denham.)
6.20 p.m.
LORD CHAMPION: My Lords, I am sure that the noble Lord will be happy to know that I shall be neither as critical nor ask as many questions as did my noble friends on the Bill we have just been discussing. This is the sort of Bill which in the normal way, I think, would have provoked a whole day's discussion on the state of the mining industry. The Opposition are conscious of the fact that the Government desire to complete the Committee stage of the Water Resources Bill before Christmas, and we, the Opposition, have no desire to hold it up. It is true that there has been some slight hold-up this afternoon, judging by the fact that we are starting this discussion at twenty minutes past six, instead of, as was hoped, at about five o'clock. But we feel that the Government ought not to have this Second Reading "on the nod". There are quite a few things that must be said about the coal industry.
As the noble Lord, Lord Denham, said, this is a simple Bill, and I can say at the outset that it is one which is welcomed by the Opposition and, also, I think, by the Coal Board. I am sure we are all delighted with the statement he has made that the out-turn for this year will be very much more favourable than had been feared. I understand that in the first six months of this year the Board made a profit, after interest pay
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ments had been allowed for, of some £9½ million—a reasonably satisfactory stale of affairs. This has been achieved partly as a result of a dramatic increase in productivity: output per man-shift has averaged 31·1 cwt., an increase of 2·3 cwt. over the same period of last year. I find the increase even more dramatic when I think back to the immediate post-war period, when the output per man-shift was somewhere in the nature of between 21 and 22 cwt. This increase is largely attributable to the Board's heavy capital expenditure, but it is also partly due to the closing of the less profitable pits.
I am sure that the decision by the Board to close those pits must have been one of the most difficult that they have had to take: to close that little hole in the ground, around which whole communities have been built up, has brought disaster to all too many of our towns and mining villages. I saw so much of this in the inter-war years in South Wales that it is impossible for me to watch unmoved what is happening now in Scotland and Durham. What is happening in Durham must, I am sure, be a great sorrow to my noble friend Lord Lawson, who is so much a Durham man, and who wrote so strikingly about the men and people of that county in his splendid book A Man's Life. I cannot imagine that even the Government can be wholly unmoved by the sight of whole areas becoming desolate.
But, my Lords, to feel sorry is not enough, if there is something you can do to prevent it. I assert that the Government can do something to ameliorate the conditions in these communities. The noble Lord, Lord Eccles, in what I thought was a remarkable and weighty speech in our debate on Industry, Population and Town Planning, said [OFFICIAL REPORT, Vol. 244 (No. 14) col. 1238]:
"I should like the Government, first of all, to decide how much capital investment they are prepared to allocate over the next few years for the purpose of simultaneous development in a few areas selected for economic expansion. If they could put aside, out of the whole of the public investment programme, let us say £200 million a year for ten years, we could break the back of this problem once and for all".

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Later on in his speech, the noble Lord said as to his proposal (col. 1239):
"That change of policy, my Lords, is absolutely essential if we wish to deal with the worst problems of local unemployment. If we do wish that, we must discriminate now in favour of the North."
My Lords, those were not the words of some half-baked sentimentalist, but of a man who has spent by far the greater part of the last eleven years in ministerial posts of the highest responsibility; a man who has now had time to reflect, to consider the whole problem anew—which is something not easy for a Minister when he is weighed down by the problems of a great Government Department. His proposal seems to me to be particularly valuable in the light of the problems created by mine closures made inevitable by the change of circumstances in the coal industry.
It so happens that I live at the foot of the Rhondda Valley, and I shudder to think what would be the position there to-day had it not been for the positive steps taken by the Government immediately before and after the last war to diversify industry in that area. Government action which was taken then in an area which would otherwise have suffered after the war, with the further pit closures that came along, a reversal to the wholesale poverty and misery of the 'twenties and 'thirties, has turned that area into a prosperous and thriving community. This is true of the area in which I live and of the valleys of which I am now speaking. I am not saying that all is well in Wales, for we still have an unemployment figure which is above the national average: 3·6 per cent. as against the national average of 2·4. But there is prosperity in this area as a result of direct Government intervention and action. What was done for Wales we must now do at once for Durham and Scotland.
Turning back to the coal industry, I say of the mining industry, as I have said of the railway industry, that we cannot preserve intact the pattern of the nineteenth century. Uneconomic pits must close, as must uneconomic branch lines; for we dare not become a static economy, Common Market or no Common Market. We shall not be able to exist in this world if we try to preserve old and out-dated patterns.
844
But, my Lords, there are some things we could do. We could have a fuel policy which would make us less dependent on imports of oil for fuel purposes. I think, too, that we could build coal-fired power stations in Scotland and Durham to export power to other parts of the country. I am advised that a power station of 2,000 M.W. capacity would consume 5 million tons of coal per year, and that that would guarantee the jobs of 10,000 miners, as well as provide employment in the building and running of those stations. In turn, of course, this would provide employment in the subsidiary trades and services. Indeed, it is estimated that one such new coal-fired station would support, directly or indirectly, some 50,000 people. One does not need, I think, in this Chamber to stress the boon that this would be at this time to Scotland and Durham. I do not think, either, that we ought to be shy of giving some protection to our coal industry. In this country most of our industries have some form of protection, and coal, like our land, is one of our few basic raw materials, so we ought to use and exploit this raw material to the full.
In this connection I have to praise the Government for their fairly recent decision not to license coal imports for the time being. I hope they will think a lot before they alter this "time being". I hope it will be a long time before they begin to license imports of coal into this country in the sort of circumstances that are existing in the coal industry now. But I am bound to say that I am not satisfied or happy about the continued imports of residual fuel oil from refineries abroad. It is an unnecessary drain on our balance of payments, and is, indeed, a blow to the mining industry at this time. Neither am I very happy about the reported interest shown by the Gas Authority in the import of natural gas from Holland and elsewhere. In our consideration of this question we must not forget coke, the by-product of coal gas, which is vital to our steel and iron industry; nor the solid fuel required in our smokeless zones. These things are essential to our economy.
I think that the future success of the coal industry must depend upon its ability to hold its markets. In this connection I feel bound to praise the sales

845
policy of the Coal Board, and of our colleague the noble Lord, Lord Robens of Woldingham, in particular. To watch his vigorous leadership of this great industry is a joy. I believe that the greatness of any trade union, or of any industry of the country, depends on the quality of its leaders, and I am confident that in Lord Robens of Woldingham the coal industry has found such a leader. I have been brief about this Bill for fairly obvious reasons. I close by saying that we welcome this little Bill, and, in doing so, wish success to this industry and all those who are employed in it.
6.33 p.m.
LORD HAWKE: My Lords, this Bill gives this House the opportunity of saying a few words about coal, possibly at the expense of water. But, nevertheless, the opportunities are only rare in the year, and I think it would be entirely wrong if this Bill went through without some words on the subject from the Back Benches on this side. First of all, there can be no argument about the real reason for the Bill. It is necessary. I slightly regret that in this case the changing of the National Coal Board's year will, in fact, entail waiting a still further three months for the up-to-date figures. As it is, of course, the Reports always come out very late, like those of all the nationalised industries.
Coal has been a contracting industry. At the moment it is a concentrating industry, but we just do not know whether or not it is still contracting. Under those circumstances high morale is very difficult. I think the whole industry owes a great deal to the noble Lord, Lord Robens of Woldingham, the Chairman of the Coal Board, who exudes a robust confidence which is a great morale boaster in the difficult situation of a strategic retreat. His policy, a mixture of realism and compassion, is what one really requires in the best type of big industrialist.
There has been a run down of manpower in two years from just over 600,000 to 540,000, with only a 3 per cent. contraction in output. These figures, of course, are not the latest. To-day we hope that the industry is breaking even, though we cannot know for certain. The industry has not accomplished all this without hardship,
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but hardship has been mitigated by the National Coal Board's playing the role of a good employer. There has been this concentration of mines, the closing of mines. I wonder whether they paid equal attention to their administrative staff. I know that more than one of the giants of industry have, in the last year or two, surveyed their administrative machine and found to their surprise how much duplication was going on and how much economy they were able to achieve. From the last figures available in the 1961 Accounts, it looked to me as if the administration and general expenses had not decreased in proportion to the fall in wages, and so on.
The future is difficult to predict, because the factors are varying and contradictory. We have the increasing discoveries of oil going on all over the world; we have the Soviet dumping in Europe in order to gain foreign exchange, we believe; we have the increasing greed of the owners of many of the oil lands; we have the increasing desire for better and warmer housing in this and other countries; we have the normal industrial progress; and we have the normal progress in fuel economy. All these are conflicting factors, and on balance one does not know the outcome. But one thing that is quite clear is that there is great competition for the market going on with oil. Coal is protected to an extent, both by Government policy and by a fiscal duty. I am one of the people who once advocated that duty and I support it, though I believe almost every industrialist and economist in the country would be against me in that matter.
There is great competition, particularly in the space heating and water heating market. Coke is probably the cheapest fuel, but it requires manual stoking, and it is particularly inconvenient for the busy, the elderly, the women, and for people who want to be away from their homes. The National Coal Board is sponsoring alternatives and trying to develop automatic stoking. But they cannot get away from the fact that it cannot help but require labour to replenish hoppers, remove ash and clinker, and so on. Moreover, if there is going to be a small quantity of ash or clinker, the coal must be of a very high quality. Do we have that particular quality, such as anthracite, in large

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enough quantities to be able to boost the sales ad lib.? It is not really competitive with oil, taking convenience cum cost.
Electricity, which is the means of carrying piped coal into every home, is superior to oil in convenience, though of course it is inferior in cost. In addition, electricity of course is an all-purpose method of using coal. I therefore suggest that the National Coal Board concentrate on selling coal through coal-produced electricity, in the markets where convenience tends to outweigh cost. They are already having a selling campaign for off-peak heaters, which in many cases are suitable for schools, shops and some homes. The extent of the sales has surprised them, and it is rather a pity that the people who make the time-switches have not been sufficiently advised, with the result, I understand, that there is a shortage of time-switches. Modern flats are being built more and more with under-floor heating by electricity, and this is a typical market where convenience outweighs cost to quite an appreciable extent.
Moreover, electricity is the principal form of power which is made cheaper over the years by inflation, because of the large proportion of the capital cost involved in the production of the energy. There should be a great liaison between the coal and electricity industries through the Minister, because the electricity industry wants a balanced load. A great spread of night storage heating would probably do much to produce this balanced load, and there must be the most careful examination as to how far this night storage scheme can go and how cheap the electricity can become, so as? to enable us to balance our loads from the great new power stations which should be erected on the coalfields. The noble Lord, Lord Champion, has referred to Durham and Scotland. A policy of diversification has been earnestly advocated in those areas as the cure of unemployment. From the coal angle, I do not know how far those coals are most suitable for the purpose.
But all this will not prevent the concentration going on: in fact, it might increase it. The life of pits in our country has been so long that people tend
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to forget that mining is a transitory life. If one goes abroad to a mining town, it is not known as a city or a town: it is called a mining camp. That emphasises the transitory nature of a miner's life. Then again, mines all over the world—not so much coal mines but mines for base metal, gold and so on—have to adapt themselves to the market prices of their products; and one frequently finds a mine where ore of a certain grade is extracted when the price is high and ore of a different grade is extracted when the price is low. So it should come as no surprise to real miners to find a coal-pit in this country no longer able to keep open. Many miners have recognised this and have moved, and they have received great help from the National Coal Board in housing and so on. But these men can be only a minority—and, of course, they tend to be the youngest and the most enterprising in the community. There remain many, and among these there will be many elderly, and others who are not 100 per cent. fit. I hope that when a pit is definitely exhausted all steps possible will be taken to try to restore the condition of the land to that which it was before the pit was ever opened—and, of course, there is employment in this activity.
In some cases, mining villages which are very much out of the way may have to be abandoned. It is better that a village should be abandoned than that it should be only half inhabited; and the people who are left should be rehoused nearer the industrial sites in the same part of the country. But with modern transport the range within which people can move to their daily work has been considerably increased, and there cannot be many mining villages in England which are completely out of distance of industrial estates, and so on. But the problem of bringing more work to those industrial areas is not at all easy. Even if it can be proved that for transport reasons the costs of industry will not rise, it is very difficult indeed to induce the bosses to move. As noble Lords who read articles in The Times will realise, people who run businesses in the South do not like the idea of moving to the North.
I am sure that we shall have to come to definite discrimination in favour of the North. Government contracts might

849
well be placed in certain districts, giving them a favourable percentage. Only this morning somebody advocated to me the suggestion that there should be differential income tax. That I should regard as rather impracticable; but, inasmuch as the Chancellor of the Exchequer has power to impose a pay-roll tax, I wonder whether he would not have equal power to impose a pay-roll discount—in other words, if you run a business where he wants you to run it he will pay you 2½ per cent. of your pay-roll. That is the sort of thing which has got to be done.
There is also the question of retraining. Many of our older industries decline, but we have many new needs. By and large, housing is short of plumbers, carpenters, bricklayers, slaters and similar workpeople. The service industries need more people, and the repair industries. Electrical apparatus is pouring out into our homes; motor cars are pouring out on to the roads. All these are going to break down, and somebody has to repair them. I do not believe that there are nearly enough skilled repair workers being trained in this country to do it.
So we really come back to the great problem of the depressed industrial areas in the North and the prosperous South. We have debated it from the angle of the population of the South; we mention it from the angle of coal today; and we are going to debate it from the Scottish angle at some future date. I suggest that in the New Year we should have a debate on the subject as a whole, and try to treat it as a scientfic problem and not as a Party political shuttlecock. We urgently need a better way of dealing with the problems of population and employment caused by the decline of old industries and the rise of new ones, and this House may have something to offer the Government from its collective wisdom if we have such a debate. I support the Bill.
6.49 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH: May I say that I have listened to the noble Lord, Lord Hawke, with very great interest. He has been rather less controversial than he is sometimes, and, although I may not agree with every word he said, I have appreciated his speech. Incidentally, it prompts me to refer to what my noble friend said
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about the use of coal as an appropriate fuel for getting reasonably-priced electricity. I was informed the other day that the Coal Board are anxious to do the very thing that my noble friend mentioned this evening, and to get enough confidence in coal for the production of electricity to avoid the closing of a couple of pits. I was informed that negotiations were going on with the Electricity Authority and that there seemed to be some haggling over price as between the cost of coal and the cost of oil fuel. I understood the difference in the particular circumstances to be of the degree of 0·002 pence per unit. That is 1/500th of a penny per unit. I heard the noble Lord, Lord Hawke, tell of the enormous number of things we might have to turn to to deal with the situation, and the cost of them. It would cost far more to put right the disaster of closing a couple more pits than would be entailed in the use of coal for electricity instead of oil in these particular circumstances. I would ask the Minister whether he could make a note of this particular point to put to his right honourable friend to see what can be done about it.
LORD DENHAM: My Lords, I should like to thank the three noble Lords who have spoken for the general support they have given to this Bill. With your Lordships' permission, I do not intend in my reply to go quite so far in giving such a comprehensive summary of the coal industry as the noble Lord, Lord Hawke, has done. But I should like to answer one or two points that have arisen during the debate. May I deal with two points raised by my noble friend? First, I would set his mind at rest with regard to what is really the least important part of this Bill, the change of the financial year. I understand that the Board publish half-yearly results, and so there will be some information coming out before the end of the new financial year. I do not think that the noble Lord will be able to see the results quite so soon as he would have done if the financial year was not changed. Secondly, my noble friend, seemed rather worried lest the reduction in administrative staffs was not keeping pace with other economies. I am advised that that is not quite so. The Board is fully alive to the need to reduce costs by

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keeping non-industrial staff to a minimum. Despite increases in mechanisation and other technical developments, which call for a higher proportion of technical staff, the number of non-industrial staff has fallen by 12 per cent. over the past five years and further reductions are expected. The cost of salaries per ton of coal produced fell from 1s. 9d. in 1957 to 1s. 7d. in 1961, although the tonnage produced was some 13½ per cent. lower in that year and rates of pay had increased. I am sorry if it appears complicated but the noble Lord will be able to work that out better tomorrow when he sees Hansard.
The Board are constantly seeking opportunities to streamline the organisation, and since 1957 have reduced the number of administrative areas from 48 to 43. Further reductions are planned. All of your Lordships were very worried about hardship—possible future hardship, and hardship already caused—and what Her Majesty's Government are doing to alleviate it. Of course Her Majesty's Government are not unmoved by any hardship that exists. The noble Lord, Lord Champion suggested that one of the ways to improve the situation would be building additional power stations in Durham and in Scotland to pipe power, in the form of electricity, to areas where it is needed. So far as Scotland is concerned, I am advised that we cannot assume there is sufficient coal in Scotland that can be mined and delivered at prices to compete with coal obtainable from the low-cost coalfields of Yorkshire and the Midlands. In its Report the McKenzie Committee limited its estimates of availability to one coal-fired station of from 2,000 to 2,400 megawatts, and it is such a station that the South of Scotland Electricity Board now have under consideration for meeting Scotland's own needs.
So far as Durham is concerned, my right honourable friend is at present considering representations received from a number of sources that there should be a new coal-fired power station in Durham to export electricity to other parts of the country; and he is shortly to meet representatives of county interests to discuss the proposal. During the review of this matter, my right honourable friend will naturally take
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into account the points made by your Lordships. I will bring particularly to the notice of my right honourable friend the remarks made by the noble Viscount who leads the Opposition. Steps are being taken to see what can be done to alleviate hardship.
There are three points. The Board make every endeavour to find jobs in collieries within easy reach of their homes for men displaced by pit closures. So far they have been highly successful in doing so. For men for whom jobs are not available nearby the Board have a well-developed transfer scheme under which most of them can be offered jobs in other collieries further afield, often in the prosperous coalfields of Yorkshire and the Midlands. For those for whom transfer is impossible or unattractive the Board have a system of redundancy payments. I know that ray right honourable friend will read with great interest and attention all the remarks your Lordships have made in the debate this afternoon. I am very glad that the general principle of the Bill appeals to your Lordships and I hope that you will now give it a Second Reading.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

FOREIGN COMPENSATION BILL
Brought from the Commons, endorsed with the Certificate from the Speaker that the Bill is a Money Bill, within the meaning of the Parliament Act, 1911; read 1a, and to be printed.
TOWYN TREWEN COMMON BILL
Brought from the Commons; read 1a, and referred to the Examiners.
ELECTRICITY (BORROWING POWERS) (SCOTLAND) BILL
Brought from the Commons; read 1a and to be printed.

POLICE PENSIONS REGULATIONS 1962
Debate resumed on the Motion that the Regulations be approved.
EARL JELLICOE: I understand that this would be a convenient moment to reply to a question about the precise

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effect of these Regulations which the noble Lord, Lord Morrison of Lambeth, put to me earlier this afternoon. Before doing so, may I say how grateful I am to have the opportunity of doing so now as I gather that it is desirable that we should if possible approve these Regulations to-day. I regret that I was not able to give the noble Lord earlier the precise information which he requested. He asked me whether these new Regulations would apply to police officers who in the past had been seat abroad and who had, indeed, rendered very valuable service abroad—for instance in Malaya and in Cyprus. I have since looked at the position. If noble Lords wish me to explain it in detail, I will try to do so but, in any event, I can assure noble Lords that all officers who are sent abroad who are members of formed police units have been covered by the police pension code in the past and will remain so covered in future. These new Regulations do not affect their pension entitlement in any way.
However, there is another category, to which I referred in my earlier statement—officers who have gone, or will go, abroad on individual assignments. Up till now, they have remained for pension purposes on the strength of their home police forces. This has been a somewhat anomalous and artificial arrangement. The new Regulations put them in precisely the same position as members of the formed police unit sent, ox to be sent, abroad. I hope that noble Lords will feel, as we do, that these new arrangements safeguard the interests of all concerned.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I am obliged to the noble Earl for giving the House so clear an explanation. I have only one point to make. I should like to know whether the last but one of the noble Earl's statements covers the general body of police who were sent abroad before the 1958 Act was passed. The noble Earl will remember that this was a point put by my noble friend. If it does cover them all, even prior to 1958, there is no further objection.
EARL JELLICOE: Yes, my Lords, I can give the noble Viscount the Leader of the Opposition that assurance.
On Question, Motion agreed to.

WATER RESOURCES BILL [H.L.]
7.3 p.m.
Order of the Day for the House to be again in Committee read.
Moved, That the House do now resolve itself into Committee.—(Earl Jellicoe.)
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL OF BUCKINGHAMSHIRE in the Chair.]
Clause 29 [Determination by river authority of application for licence]:
VISCOUNT COLVILLE OF CULROSS VISCOUNT COLVILLE OF CULROSS moved to add to the clause:
"(9) Where by virtue of the foregoing subsection a river authority grants a licence imposing any provisions limiting or controlling the abstraction of water thereunder, or refuse to grant a licence they shall at the time of granting or refusing such licence give to the applicant their reasons in writing for the imposition of such provisions or the refusal to grant the licence as the case may be".
The noble Viscount said: When an applicant applies for a licence to abstract water, the local authority may grant it unconditionally or grant it subject to various limitations or refuse it. If it is granted subject to limitations or refused, the applicant may appeal against the authority's conditional grant or refusal to the Minister. These are exactly the same circumstances as apply, of course, in the case of planning applications, and even in the early days of this type of procedure, in 1948, the conditions or refusal had to be explained in a document by the inclusion of the authority's reasons.
Since then, there have been the Franks Committee and the Tribunals and Inquiries Act and the statutory instruments made under them, of which there are to be more, and it seems to me that the atmosphere is now ripe for the requirement for written reasons for a conditional grant or refusal to go into the Bill itself rather than to be left for subordinate legislation made thereafter. It is important that the applicant should know exactly the grounds on which the river authority acted and prepare his case accordingly, if he wants to appeal. I hope, therefore, that my noble friend may be prepared to accept this Amendment in this place, rather

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than leave it to some statutory instrument to be made hereafter, though I have no doubt that it would be included in such an instrument.
Amendment moved—
Page 26, line 39, at end insert the said subsection.—(Viscount Colville of Culross.)
LORD HASTINGS: The noble Viscount is quite right. This is a perfectly reasonable thing to ask and there is no objection in principle to it. It will, however, be only one of many provisions which will need to be prescribed in connection with the licensing system, such as the form of applications, the particulars to be included, the procedure for handling applications under Clause 40, and the period within which the river authority must deal with these applications. These are all examples. All these matters will be dealt with in regulations made by the Minister of Housing and Local Government under Clause 52. Those regulations will be subject to annulment by either House of Parliament, for which provision is made in Clause 116.
This is the procedure followed now under the Town and Country Planning Acts, and provision for the very point covered by this Amendment is made in paragraph 5 (9) of the Town and Country Planning General Development Order, 1950. The noble Viscount can rest assured that similar provision will be included in the regulation under Clause 52, which refers to the general regulations relating to licences. I hope that he will be satisfied with that.
VISCOUNT COLVILLE OF CULROSS: I thank my noble friend Lord Hastings for that reply. I am well aware of the contents of paragraph 5 (9) of the General Development Order, but I think that the assurance that this particular provision will go in the regulations is satisfactory, and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 29 agreed to.
Clause 30. [Matters to be specified in licences.]:
LORD HASTINGS: This Amendment follows Amendment No. 72 which I moved yesterday, and I beg to move formally.
Amendment moved—
Page 27, line 2 at end insert "or on behalf of".—(Lord Hastings.)
On Question, Amendment agreed to.
Clause 30, as amended, agreed to.
Clause 31 agreed to.
Clause 32. [Succession to licences to abstract water.]
VISCOUNT COLVILLE OF CULROSS VISCOUNT COLVILLE OF CULROSS moved, in subsection (3), after "shall be" to insert:
"apportioned by negotiation between the occupiers of the parts of the land or in default of such agreements shall be".
The noble Viscount said: What I am chiefly concerned with in this Amendment and also in the next is the word "rateably" on page 28, line 45. It seems to me that where there is a situation envisaged by this subsection, where land for which a previous owner held a licence is split up into two separate ownerships, there may be some difficulty in dividing the licence water (as it were) between the two parts of the land according to any strict mathematical formula. In one part of the land there might be a factory, and in the other part a garden, and if the licence was applied for and granted clearly for the purpose of the factory and not for the purpose of the garden, were this licence to be split up it would be far from sensible to allow each to have half of the supply of water under the licence.
I am not sure what "rateably" means, and I think it would be better to put in some such words as I have incorporated in my Amendment, so that the two new owners could agree between themselves what was a sensible division of the water under the licence. Only if they could not do so, should it be apportioned in some other way; and then, as my second Amendment says, rather "proportionately" than "rateably", because I do not think my noble friend means according to rateable value, and that is rather what this particular word looks like. I beg to move.
Amendment moved—
Page 28, line 45, after "be" insert the said words.—(Viscount Colville of Culross.)
EARL JELLICOE: I am grateful to my noble friend for his explanation of the purpose of his Amendment, which is rather different from what I anticipated. Perhaps, therefore, I should

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explain briefly the considerations which have moved us to draft this part of the Bill and then come to my noble friend's Amendment. Then I think we might perhaps deal with the "proportionately" point on the next Amendment. Land can change hands in many different circumstances and we clearly need to make some provision in the Bill for such changes. We could have provided in the Bill that where a change takes place a licence for abstraction should automatically elapse. This would have meant that the new occupier would have to seek a new licence should he wish to continue the abstraction. It was clear that making a licence personal to the holder in this way would have had awkward repercussions: for example, it could seriously affect the value of the land. That is why we made provision in the Bill for Clause 32 making it possible on a change in ownership or occupation for the new owner or occupier to remain entitled to continue the abstraction.
My noble friend's Amendment would provide that the quantity of water should be apportioned between the new occupancies by negotiation, and that the apportionment as proposed in the Bill would take place only in default of agreement. I think the introduction of the possibility of apportioning by negotiation might well make for convenience, but it would have a possibly rather serious consequence in the longer term. I will try to explain why. In considering applications for abstraction licences the river authority is required under the Bill to have regard to the requirements of the applicant in so far as they appear to be reasonable requirements. This provision is, we say, essential to enable the river authority satisfactorily to manage the water resources at its disposal, and in particular
"to secure the proper use of water resources".
It would enable the river authority to keep some check on wasteful use of water and on the preempting of excessive quantities against future growth of demand.
We have heard a good deal in this Committee, and quite rightly so, on the close relationship between conservation and economy. If we were to accept my noble friend's Amendment it would be possible for an abstractor by negotiation
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to put himself in a position to abstract far more water for his land than the river authority would have allocated to that acreage under any reasonable scheme of management. For example, if a licence had been arranged in respect of, say, 500 acres and that were split into two equal halves of 250, it might well be possible for the owner of one 250 to get the whole of the water which had originally been made available for the 500. Thereby the whole system under which the river authority should have regard for the actual requirements of a given applicant might, we feel, in the course of time, progressively be undermined.
On the face of it, I grant that my noble friend's Amendment appears fair and reasonable and, indeed, convenient. But land changes hands fairly rapidly, and I hope your Lordships will not feel that I am exaggerating in saying that to accept the Amendment, certainly as it is now worded, might in certain areas and quite soon lead to the erosion of the balance which river authorities will be trying to establish between supply and reasonable demand. Therefore, I would hope that my noble friend, in the light of this explanation, might feel inclined not to press the Amendment, and we can then turn to discuss the next Amendment on "rateably".
VISCOUNT COLVILLE OF CULROSS: I think that is probably a convenient course. The only difficulty is this. While I appreciate what my noble friend has said, that it would perhaps prove inconvenient to leave it to negotiation in the first instance, I thank it would also be difficult to leave it purely to mathematical formula, whether or not he likes my word "proportionately" or whether he still prefers "rateably". And there seems to be a third possibility: that somebody else should hold the balance and have a discretion as to how much to allow to each of the two halves of land. It does not seem to me, if negotiation is not to be allowed, that we can leave it to some automatic formula. I wonder whether my noble friend would consider whether the river authorities themselves are the correct people to do this.
EARL JELLICOE: I am grateful to my noble friend, and I apologise for not covering that point. It is something that I noted as I went along. At first sight,

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it seems that he may have put his finger on what could be a difficulty, and I should like to consider it.
VISCOUNT COLVILLE OF CULROSS: In that case, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
VISCOUNT COLVILLE OF CULROSS: This is really the same point, but "rateably" does, to my mind, envisage some rather hard and fast division simply of the area or the value of the land in the two different halves without any account being taken of the need of each half for the waiter. As I explained, it may well be that one half needs it all and the other half does not need any, and to proportion it rateably would not be the way to do it. It might be that proportionately would not be the way to do it either. But I do believe that "rateably" is the wrong word to go in here. I hope that my noble friend might also consider this when he is dealing with the whole problem. I beg to move.
Amendment moved—
Page 28, line 45, leave out ("rateably") and insert ("proportionately").—(Viscount Colville of Culross.)
EARL JELLICOE: I thought that we were only going to deal with the semantic problem, but there may be two problems here. One is whether "rateably" means "proportionately", the semantic problem, and the second is whether we should have "proportionately" or another word. As I have said, the larger problem of whether proportionately is right is one which I should like to consider. The smaller problem, the semantic one, I hope I can? resolve straight away. I cam inform my noble friend on the authority of the Shorter Oxford English Dictionary that the adverb "rateably" is still current (I must say that I am rather surprised to hear it) and that it means "proportionately". The draftsman in his infinite wisdom has preferred "rateably" and my noble friend prefers "proportionately". I think I may be letting myself an for the most appalling rocket, and I do not like to think what the repercussions will be, but I must confess that I prefer my noble friend's word and I am prepared to accept his Amendment.
On Question, Amendment agreed to.
Clause 32, as amended, agreed to.
Clause 33:
Entitlement to licence of right
33.—(1) Where a person—
(b) has, otherwise than by virtue of a statutory provision, abstracted water from such a source of supply at any time within the period of five years ending with the second appointed day,
he shall, on application made to the river authority under this section before the end of the initial period, be entitled to the grant of a licence under this Act.
LORD AMHERST OF HACKNEY LORD AMHERST OF HACKNEY moved, in subsection (1) (b), after "has" to insert "in pursuance of a right vested in him". The noble Lord said: This Amendment raises rather a difficult point. As your Lordships know, Clause 33 gives licences as of right to anybody who can show that during the last five years he has been extracting water. The object of this Amendment is to try to ensure that somebody who has been extracting water illegally does not through the obtaining of a licence as of right under this clause get his illegal act made legal for the future and at the expense of other people who have all the way through acted legally. It is a difficult problem, because one has to read this clause with Clause 54 (5), which gives certain remedies to people aggrieved by the grant of a licence.
May I put a specific case to the noble Earl to see whether he thinks it is covered? Take the example of somebody who abstracts a large amount of water out of a river and causes damage, say, to somebody down the river. The riparian owner down the river threatens the abstracter with an injunction. On receipt of that threat the abstracter ceases his abstraction and the other person does not then go ahead with the injunction, and the abstraction ceases. Now we come to this Bill. The abstracter proves that he abstracted that water and gets a licence as of right to abstract that water. Having got that licence to abstract water, he does nothing for the next three years, which is the time limit of Clause 54 (5). He is doing nothing, and he has his licence. There is nothing at that time to encourage anybody down the river to take action against him. Provided he does nothing for three years, all the other people, so far as I can gather, lose their right to object and he gets a licence as of right in perpetuity. He can then recom-

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mence his abstractions of water and, as I understand the Bill, nobody can do anything about it. I may be quite wrong in my interpretation of the clause, but I should like an assurance from the noble Earl that these two clauses, when read together, are watertight to stop the illegal abstracter. Probably my Amendment may not be the way to do it, but I should like the noble Earl to consider this point. I beg to move.
Amendment moved—
Page 30, line 19, afer ("has") insert ("in pursuance of a right vested in him").—(Lord Amherst of Hackney.)
7.23 p.m.
EARL JELLICOE: My noble friend said that this was a somewhat complicated and difficult matter, and on that I find myself in agreement with him. I should try, first of all, to explain the background to this clause. Clause 33 (1) provides that licences of right are to be granted to two categories of abstracters, First, there are those persons with a statutory entitlement to abstract water at the date when river authorities start to perform their functions—namely, the second appointed day—and, secondly, there are those persons who have been abstracting water at any time during the five years preceding that date.
I think I can assure my noble friend that, so far as abstracters are concerned, we are at one. I would go on to suggest to him that his Amendment may not be either desirable or, indeed, necessary. If I am not able to persuade my noble friend on the score of desirability, I hope that I may be able to persuade him on the score of necessity. I suggest that the Amendment is undesirable because where a person has applied for a licence under paragraph (b), the river authority would be placed by this Amendment under a statutory obligation to satisfy itself, by itself, as to the lawfulness of the applicant's abstraction. I cannot myself see how we can place that responsibility upon the river authority. It is essentially a matter which only the courts could properly decide.
I should like now to turn to Clause 54 (5), to which my noble friend rightly directed my attention. I suggest that the Amendment is unnecessary because the effect of Clause 54 (5), as he said, is to withhold for a period of three years from the second appointed day the immunity
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against action which would otherwise be conferred upon a person by his licence of right. As my noble friend made quite clear, during this three-year period any person wishing to challenge the licence holder's right to abstract will be able to do so and will be able to have the question determined by the only body competent to determine it—namely, the courts. That, of course, is precisely what happens now under Common Law rights. There the central position, as I see it, would remain quite unchanged.
The difference between the approach which the noble Lord is suggesting and the approach we are suggesting is this. He is saying, by his Amendment, that what we should do is to get a procedure by which only the honest man can apply. The difficulty about that, as I see it, is over who is going to test the honesty of the applicant. I would suggest that in the nature of the case it cannot be the river authority and must be the courts. We are rather suggesting that anyone who says he is honest can apply, and we are providing in Clause 54 (5) an opportunity for his honesty (I mean honesty in the largest sense) to be tested by his peers, as it were.
On the specific question—and it was rather a poser which my noble friend asked me—I think I should like to be rather guarded in my reply, and have an opportunity of assuring myself on this particular point. I feel that he was advancing rather a hypothetical case, and one which I thought was extremely unlikely to arise, because I doubt whether people would go to the trouble of obtaining a licence and paying the abstraction charges, and then not exercise that licence. But I will grant that there is a possibility, albeit perhaps rather remote, and it is one into which I think we should look. I grant, however, that there is this remote possibility, and I should like to see whether we are as effectively safeguarded as I think we are. Perhaps if I give my noble friend an undertaking that I will consider the specific hypothetical difficulty which he has put, he will agree not to press his Amendment at this stage.
LORD AMHERST OF HACKNEY: I am very grateful to the noble Earl for the way he has dealt with this Amendment. I see the difficulties of accepting it as it stands, and that it would place

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an unwanted and impossible duty on the river authority. I am very grateful to him also, for saying that he will look into this matter, and I beg leave to withdraw this Amendment.
Amendment, by leave, withdrawn.
7.32 p.m.
LORD LINDGREN LORD LINDGREN moved, in subsection (1) (b), to leave out "second appointed day" and to insert "7th November, 1962". The noble Lord said: With this Amendment we can take the consequential ones, Nos. 98 and 99 in regard to Clause 35. We have been discussing on the previous Amendment the question of the period of five years, and that is what Clause 33 provides. The second appointed day is likely to be one or two years hence, and, as the clause stands, it is, to my mind, an open invitation to all-comers to abstract such water as they possibly can between now and the second appointed day. This, of course, is because the clause offers them a licence of right for any water that they can possibly take between now and the second appointed day.
This is not a hypothetical point because a specific instance has been brought to my notice in a letter from a general water board in the West Midlands—and if the noble Earl would like the name of it privately I shall be only too pleased to give it to him. The letter says:
"Last week I had a call from a land agent, representing a riparian owner of land someway upstream from the Board's main intake. He is proposing to install plant to take water from the river in quite large quantities for the purpose of spray irrigation, and was quite frank that the only reason for the proposal was that his client would be automatically entitled to the grant of a licence to abstract, in accordance with section 25 of the recent White Paper on Water Conservation. He told me that within the last few weeks he had been concerned with upwards of three dozen such proposals, all intending to stake a claim as 'existing abstracters' and so automatically qualify for the grant of a licence".
The letter concludes:
"If the proposal of automatically granting a licence to all existing abstracters becomes law, then the purpose of the proposed legislation, at least as far as the drier parts of the country are concerned, will have been defeated in advance by the very White Paper which introduced it."
The Amendment proposes to cure the defect in the Bill by substituting for the second appointed day the date of the
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introduction of the Bill. I do not think that is unreasonable. When a Bill is introduced its provisions are known and those who take action even to the point of incurring expenditure after the Bill is produced do so with their eyes open and have to take the necessary precautions. I think that, as a protection for the water supply, we ought to accede to have the date of the Bill as the date of the right of abstraction. I beg to move.
Amendment moved—
Page 30, line 22, leave out ("second appointed day") and insert ("7th November 1962").—(Lord Lindgren.)
LORD FRASER OF LONSDALE: I should be very interested to hear the Government's answer to Lord Lindgren's Amendment, but before they give it may I just venture this observation? Parliament may wish to prevent people from jumping the gun, and it may be right to do so, but there may also be people who have a legitimate reason for installing machinery or for seeing an extended use of water, and that they should be barred entirely from doing it without any consideration whatever would seem to be going too far in the other direction. May I take the case of a firm—and here, I suppose, I must declare an interest, although I am not talking for the firm but for the principle—which owns land on the North bank of the Humber and which bought that land thirty years ago for the express purpose of establishing a plant there. It spent more than a million pounds upon it, and it chose that particular land because it had a good water supply in the subsoil. That firm, for all I know, may be contemplating an extension. It is always extending its plant and it is continually using more water. Is it to be prevented from taking more water after November 7th or from establishing plants for the purpose of taking more water in six months' time when its new plant is erected and requires the water?
I am not wholly out of sympathy with Lord Lindgren's desire to stop people from jumping the gun, but I think the Government should be careful to allow that legitimate development which is already contemplated or already in hand, or which naturally arises out of developments but is not already contemplated. There we come to a difference between

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Lord Lindgren's fixing of a date and my proposal that reasonableness should be the key to this matter. Perhaps this firm or another cannot say at this moment, "We are contemplating using more water", or "On November 6th we were using more". But it may be that the plant they are putting down now will call for more in six months' time. Why should they not use it and then make their claim on the basis of what they can prove? Therefore I just ask the Government to be warned, if they are going to deal with the noble Lord's Amendment, not to go too far in it and stultify or limit proper and reasonable developments.
EARL JELLICOE: These Amendments touch on a practical matter of some real difficulty and I should like to say straight away that I am grateful to the noble Lords who have put their names to this Amendment for the chance which they have given me of explaining what has been in the Government's mind here. I think we are all agreed that the main factor to be considered in judging the entitlement of abstracters to a licence of right must be past performance. That, at any rate, was the conclusion of the Proudman Committee, and their view is clearly set out in paragraph 67 of their Report. I wonder, since it is relevant, if I could quote it to your Lordships. This is what Proudman said:
"Priority should be given to established abstractions, since they may be vital to the economies they support, and they should as far as possible be licensed to the full extent to which they have hitherto been made.… Establishing, uncontrolled abstractions is likely to present difficulties and we think it will be necessary to place the initiative on the abstracters to show that the quantities applied for represent usage over a given period…".
The problem here is to choose the right qualifying period. We need, of course, to allow for a span of years, since the amount which many abstracters draw from rivers varies widely over a period of years according to the weather. On the whole, we have thought that five years was a reasonable period, and I gather from the wording of the noble Lords' Amendment that they would also agree that five years is in itself a reasonable period.
should now like to turn to the specific problem which exercises the movers of this Amendment. Clearly, the possession
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of a licence of right carries with it real and obvious advantages. I can therefore appreciate the argument that the qualifying date should be that on which the terms of this Bill were published. That is the moment when the potential advantages of qualifying for a licence of right are there for all to see who can read the extraordinary language of Parliamentary draftsmen. As the noble Lord has mentioned, there are precedents for making a date of this sort coincide with the date of publication of a Bill. I would say straight away that the proposition advanced by the noble Lord, Lord Lindgren, is an attractive one, but I think it may have more attractions in theory than in practice; because the more we have looked at it the greater seem to be the practical difficulties that this remedy would entail.
The first difficulty which we see is that the provision which the Amendment would change will cover a huge variety of abstractions, and in the past no general obligation to obtain records of abstraction has existed. The management of a vast chemical plant, for example, may well have kept accurate records; and I suspect that they probably will have done. But in all probability many smaller abstracters will not have kept even the most rudimentary records in the past and before the introduction of this Bill. For example, I doubt very much whether a farmer in a fairly small way in the Eastern Counties, if there is such a farmer—
VISCOUNT ALEXANDER OF HILLSBOROUGH: Yes; there is one here.
EARL JELLICOE: —who goes in for spray irrigation is likely to have kept very accurate records before the introduction of this Bill as to the water he has been abstracting for spray irrigation.
Perhaps I could make the additional point here that the river boards themselves have had no duty to maintain records of the type of abstraction which we are discussing, and their knowledge of them, I know, varies very considerably; some river boards know a great deal of what has been going on in their area and others have much less knowledge. I would suggest, therefore, that in many cases it might be quite impossible to obtain really reliable information on which to base the licence of

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right if it were to rest on the experience of a qualifying period from 1957 to 1962, which this Amendment would provide.
I would also suggest that it might well provoke a great deal of fruitless argument between the abstracter and the future river authority. I should have thought, too, that this sort of situation might open the door to sharp practice—not the form of sharp practice which the noble Lord suggested might ensue under the procedure suggested in the Bill, but nevertheless sharp practice—and that there would be a great number of resulting appeals to the Minister. In any event, the suggested procedure would also have the disadvantage of delaying matters, and I think that would be extremely disadvantageous, because claims for licences of right must be largely disposed of before the river authority can safely proceed to the licensing of any major new abstractions.
There is also the consideration to which my noble friend Lord Fraser of Lonsdale alluded. We have felt that the adoption of the Amendment might well unfairly handicap someone who had started to abstract in reliance on Common Law rights in the period between the introduction of this Bill and the second appointed day, and this would be a period of, I suppose, not less than two and a half years. The person concerned would have no idea whether he would be able to obtain a licence when that eventually became necessary. His investment would be made in complete uncertainty about how long it might be allowed to last; and, of course, as my noble friend mentioned, in the case of an abstraction from underground that sort of investment can be very heavy indeed. I think we therefore have to pay regard, too, to what my noble friend called legitimate development.
It was with these snags in mind that the Government decided to opt for a qualifying period extending right up to the second appointed day. Nevertheless, I would say straight away that we recognise that there are obvious dangers here. There are the precise dangers to which the noble Lord, Lord Lindgren, has drawn our attention; and I gratefully
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accept his offer of any knowledge of this matter which he may be able to pass over to me. I agree that the wilier ones may try to jump the gun by staking out exorbitant claims, through, as it were, artificially inflating their abstractions. It is just this sort of case which the noble Lord had in mind. I shall be very glad to look further at this particular difficulty, or possible difficulty, but it seems to me that there is one safeguard against the bogus abstraction: if the river authority find that a licence to abstract has been granted to somebody who does not intend to abstract, they can, of course, vary it or revoke it.
It was with that sort of danger in mind that we spelt out, in subsection (3) of Clause 34, the factors to which the river authority must have regard in considering the terms of any licence of right in the case of a non-statutory abstraction; and those factors specifically include the purposes for which the abstraction has been made and for which it is intended to be made. I should have thought that that language might well catch the bogus applicant. In any event, the river authority would be able to discriminate, where such discrimination is justified, against the jumpers on the water wagon. Although the river authority cannot refuse a licence of right—and I must make it clear that they would not have the right to refuse a licence of right—to a person qualified according to the period in the Bill, they can closely circumscribe the terms of that person's licence.
I am afraid that I have detained your Lordships too long in answering this Amendment, but this is a difficult matter, and I wished to put before you the considerations we have had in mind in drafting this clause in the way it has been drafted. In conclusion, I readily admit that we are faced here with a balance of disadvantages. I have been at some pains to try to point out the disadvantages we see in the method proposed by the noble Lord who has moved this Amendment. I would readily concede that there may be disadvantages, too, in the method proposed in the Bill, despite the safeguards which I have endeavoured to point out. But on the whole we think that the risks involved in waiting are to be preferred to the interruption of the old system before

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the new begins, with the consequent injury which might well result to individuals going about perfectly legitimate business. This is not an easy matter. I would only hope that, having listened to my explanation, the noble Lord may feel that we have gauged this balance of admitted disadvantage aright.
7.50 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH: I have listened with great interest to that explanation of what is obviously going to be a difficulty in some rural areas, including to small farms in the Eastern Counties. I suppose that a suitable explanation of the Act, when it is on the Statute Book, may help in this direction. But, of course, there is a constant pressure upon farmers, for instance, to increase their efficiency, and of not the least importance is the question of using irrigation in those parts of our territory which have low rainfall. The place in which I live is an island connected by an old Roman causeway, with a road put upon it across a seaway. I live upon an island where we have had rainfall at as low a rate as between 13 and 14 inches in a whole season. We are, therefore, under two handicaps. One is to get enough water for the stock, without having to pay for all of them all the time at high rates from the general water supply in the troughs. In this connection, some have regard to sinking their own wells. I have a well, and my house is called "Wellhouse Farm", so that I am particularly interested in this problem.
There is not only the question of watering stock in a dry season but also, quite apart from special irrigation—such as you find, for example, in the Evesham Valley, in the centre of the country, or in other places where they grow different kinds of fruits and other crops and where they use river water—there is the question of trying to maintain a sufficient grass supply in dry seasons. I should have thought that there ought to be reasonable appeals, and so on, that if one part of a farm begins to dry up and another is promising for a well, they ought to be able to sink it as of right.
I listened carefully to the repetition by the noble Earl of those words "as of right". I can see no inherent difficulty for myself, and I have declared my
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interest as the owner of a farm called "Wellhouse Farm" in the Eastern Counties, but nevertheless I might want to change over. May I understand this: if the water emanating from an existing well proved to be no longer suitable for stock, would I be precluded from, as of right, sinking a well in another part of the farm, or is that going to be under regulation and control by a river authority? We have no rivers. A little information on this point would he most helpful to me. I am not arguing in any sense against the general implication of my noble friend's Amendment, but the noble Earl tempted me with his reference to the farmer in dry Eastern Counties.
LORD FRASER OF LONSDALE: May I beg leave to add one consideration to the mind of the Government? The Minister spoke, I thought most fairly, but he said "a balance of disadvantage" as if it was all disadvantage. Do you not think we ought to look a little fundamentally at this clause? This is the nationalisation of private property. I make no objection to that because the public good is to be served by the nationalisation of water under the ground. But at this moment, or before this Bill was introduced, the water that I was referring to under the ground on the north bank of the River Humber, and in a thousand other places, belonged to the companies that had bought the land and, with it, the water and rights, and the Common Law right to uphold it. It was their private property. The State is taking it away. In doing so, surely it is not a disadvantage that they should give these people every possible chance of making and proving a proper claim to go on getting the water Which they need and which used to belong to them but is now to be taken away from them.
The private business or public company is going to be asked to get a licence, as of right, of course; to pay for the licence, and to pay gallonage for water which belongs to them already. This is an unusual step on the part of Government, and it is not unreasonable that Government should treat these people reasonably; and since this whole Bill is based upon the view that the water authority, this new authority, will treat all users reasonably, then it seems to me that this two years, or two and a

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half years, during which proper and reasonable development may take place should be allowed to stand. I greatly hope that, with this consideration in mind, Lord Lindgren may perhaps not press his Amendment, which seems to me to be a most arbitrary way of dealing with private property that is being taken away. Let me repeat that I am not objecting to the taking away or to the tax now to be put upon the private property, but I think that consideration should be given to that fact.
LORD LINDGREN: May I first of all say that there is no need for the noble Earl to apologise for giving the detailed replies that he has given to these Amendments, nor for his handling of the Bill so far? It is of tremendous advantage, if I may say so from this side of the House, and we have tried to show our appreciation of it by not pressing Amendments too far. Certainly my intention is really to put probing Amendments in order that we can have on the Record what is the general view of the Government, why they have taken the line that they have, and what probably is the course that is likely to be taken in the future.
I do not think that the noble Lord, Lord Fraser of Lonsdale, need have any worry, although it is not for me to answer his points; it is for the Minister in charge of the Bill. All that we are trying to do by this Amendment is to stop those who are "jumping the gun", as the noble Lord, Lord Fraser of Lonsdale, put it, and who are trying to take advantage of a situation which has arisen. In view of the noble Lord's statement, we are prepared to withdraw the Amendment.
EARL JELLICOE: Before the Amendment is withdrawn I should like to express my gratitude to the noble Lord for his kind words, which I and my colleagues handling this Bill greatly appreciate. I should like, before the noble Lord withdraws the Amendment, to try to answer the noble Viscount's
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question to me. As he may recall, we discussed or touched on this point tangentially yesterday and, as I understand it, the position is that abstraction could affect a domestic supply and must be licensed, as of course it now is in conservation areas under the 1945 Act. I think that the noble Viscount in fact lives in a conservation area. So far as underground abstraction is concerned, there will be no charge except for spray irrigation; that is made clear in Clause 58 (4). Wells for domestic use are exempted from the licensing system, but if he were drawing water from a well for agricultural purposes that would require a licence. There would, of course, be no charge, except for spray irrigation. But if he wished to change his well and to sink it in another place, I think—and I say this subject to correction, though I think I am right—that would require a new licence. I think that is the position under the Bill.
VISCOUNT ALEXANDER OF HILLSBOROUGH: Although at the present time I have tapped water inside my house from my well, I also have a connection from that tap leading to a small trough of my own in the next field where poultry are kept, and to which we can attach a sprayer for producing tomatoes and other things in the back garden. Would that be subject to a licence?
EARL JELLICOE: I think I must turn off the tap at this stage because I might get this wrong. If I may, I should like to consider the rather detailed and complicated question which the noble Viscount has asked me. I should again like to express my gratitude to the noble Lord for not pressing this Amendment.
Amendment, by leave, withdrawn.
EARL JELLICOE: I feel that we have, as it were, reached the appointed time. In view of this, if noble Lords agree, I move that the House do now resume.
Moved, That the House do now resume.—(Earl Jellicoe.)
On Question, Motion agreed to, and House resumed accordingly.