§ 3.58 p.m.
§ Committee stage resumed.
§ Clause 7 agreed to.
§ Clauses 8 to 11 agreed to.
§ Clause 12 [Notice of increase in company distributions]:
§ On Question, Whether Clause 12 shall stand part of the Bill?
§ LORD REAY
I beg to move that Clause 12 be deleted. I approach this clause with a certain sense of mystification. What I wonder is why this clause is necessary. Given that Part II of the Bill is brought into operation, it appears to require that dividend increases would have to be notified. It seems to me that generally this is information that would be available to the Government in the Press; these facts are published. I should not have thought this clause necessary as a practical step. On the other hand, if it is not necessary as a practical step, is it economically necessary? If it is practically necessary to help the policy of a dividend freeze, given the context of deflation and run down of reserves, et cetera, when we cannot expect firms to be expansive and cannot expect dividends to be offered at a higher rate, it is unlikely that dividends will be increased. Therefore, is the clause for economic reasons not unnecessary? If it is unnecessary for either reason, it seems to me there is a prima facie case for omitting the clause from the Bill.
But if it is necessary, for either practical or economic reasons, then I should like to ask, what is the purpose of the policy that this clause is designed to assist? Certainly, the dividend freeze looks to us like a domestic political concession to those who, quite rightly, wish to have fairness over the field of incomes. But, with great respect, I have suggested in this House before that this objective should be phrased differently, and that the method of imposing a freeze on unearned income (which would be a political concession here) should be by raising the rate of assessment for surtax in the following year, in order that it should measure off equally with any rise in wages that had occurred during the 1833 course of that year. This would have the same effect, from the point of view of social justice, without involving the Government in a further economic act of interference, in this case with the decisions of directors of companies.
I should like to know whether there is or is not an economic policy that is responsible for this, or is it simply a piece of political tactics? There could certainly be an economic policy behind it. Is it this: to keep up the confidence of foreign holders of sterling by showing that there is a further factor of determination on the part of the Government, in which case the reason would be a sort of politico-economic one? Or is it—and this seems to be perfectly respectable—that the Government are motivated by the belief that companies have in the past tended to concentrate too much on dividends and too little on earnings, and that too high a percentage generally of their profits has been distributed? If this is the case—and it would appear to be the most respectable reason of all for their imposition of a dividend freeze—and if it is, or might be at any given time, of any assistance towards the implementation of this policy, it is the only good reason for including this clause in the Bill.
What one is worried about, to some extent, is that although at the moment one may question whether there are firms capable of expansion, or that it would be correct for firms to raise the amount of dividend, surely it is possible that a freeze on the dividend might remove from them the possibility of attracting further capital for investment. If this were the case, then it would seem to me that there would be a danger of penalising the expanding and efficient firm.
In passing, I wish to draw attention also to another paragraph in the clause, in subsection (6), where it seems that if a firm refuses to comply by supplying this information then it shall be liable on summary conviction to a fine not exceeding £50. It does not seem to me that £50 would be a sufficient deterrent for a firm which is intent on increasing its dividends by some disguised means or other. Personally, I suspect that the policy that this clause purports to support is politically moti- 1834 vated. Economically, it might be harmless at the present time, but it could become harmful, because one never knows when this Bill may be brought into force. For these reasons, it may be argued that it would be better to leave the clause out of the Bill. I should like to know what are the economic views of the Government on this subject. I am absolutely open to persuasion that their policy is correct, if they can persuade me that it is.
§ 4.4 p.m.
§ LORD CONESFORD
As there is no intention of dividing against this clause, I propose to be brief. I am confident that both the clause and the reason behind it are complete and absolute nonsense. They are based on a quite simple fallacy which I have exposed nearly once every year since I have been a Member of your Lordships' House. I have given the reasons for my view; I have never been answered, and I do not suppose I ever shall be, and I suppose that this idiocy will continue. The idiocy is a perfectly simple one. It is the belief that somebody derives some benefit if a company which does not need to retain profits available to shareholders does not distribute those profits to the shareholders. That is a complete illusion. The economic nonsense behind it has been exposed by the Royal Commission on the Taxation of Profits and Incomes.
This was in a paragraph on which I think the minority on the Royal Commission did not differ from the majority. It was more or less a unanimous view, and I shall quote the passage once again. This has, as will be observed, nothing to do with the profits of companies. The profits of companies are not here mentioned. What is mentioned is their distribution. I have always been in favour, through the abolition of inflation, of making profits much more difficult to win. But I have also been clearly of the opinion that when the profits have been won, then, though there may be many good reasons for the company retaining those profits, because it is right to add to their reserves or because it is right to plough them back and for many other reasons, the one reason on which it is always wrong to retain the profits is that it is desirable to be beastly to the shareholders.
1835 This is a perfectly simple proposition. The country suffers economic loss if profits not needed by the company for any commercial purpose are not distributed to the shareholders entitled to them. Nobody benefits. How the unfortunate working man, who ought to have an increase in his pay, is likely to benefit because the shareholders in a particular company which is in a position to distribute a higher dividend do not receive one, nobody has yet explained. Nor is it in the least true that the shareholders are a particular class of the community, or even consist exclusively of individuals. Of course they do not. Among the shareholders are trade unions, friendly societies, widows and orphans who are interested in monies looked after by the Law Courts, the Church of England, and all the pension funds. All these people and institutions hold ordinary shares. I wonder why it is thought sensible that money not needed by the company should not be distributed to the shareholders. As I say, I have so often made this case and I have never been vouchsafed any answer saying why it is considered useful. If, as I believe, the Leader of the House is preparing to reply, I am sure he will say that this insanity is social justice. I may have deterred him from making that remark now.
§ THE EARL OF LONGFORD
My Lords, I am only surprised that the noble Lord, Lord Conesford, did not interrupt the noble Lord, Lord Reay, when he used that particular expression just now.
§ LORD CONESFORD
I never interrupt. It does not mean, though, that I agreed with him. I must not be diverted from pointing out that this clause is nonsense by the fact that the noble Lord, Lord Reay, says he is willing to be convinced that it is sense. I always honour a young man who keeps an open mind, but I hope he will also keep a critical mind. I do not wish to delay the Committee, and this Amendment is not going to be the subject of a Division; but every time the idea is put forward that it is useful to stop the payment of a dividend to the shareholders when the company does not need the money, the economic fallacy should be pointed out.
I should now like to read the relevant passage from the Report of the Royal 1836 Commission on Taxation which, incidentally, I first read in my maiden speech in this House some eleven years ago. The Royal Commission and I, and many others, have always been hoping that one day we should get an answer, but I do not suppose for one moment we ever shall. What the Royal Commission said, in paragraph 536 of their Report, was this:The mere retention of profits cannot be rated as an economic advantage: on the contrary it would better serve the public interest that a company should be encouraged to distribute those profits which it cannot put to fruitful use, in order that there may be a chance that they may be invested effectively elsewhere. Nor is it advantageous for the economy that the level of dividends should be kept down. Whatever other considerations bear upon the problem, the market value of shares in industrial and commercial enterprises is artificially depressed and an obstacle placed in the way of raising, new capital.That is what the Royal Commission said, and it is what every economist knows to be true.
Nevertheless, we go on persistently year after year suggesting that it is a most terrible thing if any company is in a position to increase its dividend and does so. Of course, in the present state of affairs it is extraordinarily unlikely that many companies will be in a position to increase their dividend; they will be very lucky if they are able to maintain it. But if there is a company in that fortunate position, then I say it is in the public interest, for the reasons given by the Royal Commission, that it should distribute monies which it does not itself need, and which it is therefore wasting, in order that it may be profitably used elsewhere. Although this has very little practical importance in the coming year it remains a fact that this sort of fallacy discourages investment. Whatever else may be needed at present, what we do not need is to discourage investment in British industry. I do not suppose I shall live either to hear my arguments answered or to see the day when this persistent fallacy is not further insisted on; but as long as I live I shall, at intervals of about two years, point this out to the House.
§ LORD SINCLAIR OF CLEEVE
May I say, very briefly, a word in strong support of what the noble Lord, Lord Cones-ford, has said, particularly in the latter 1837 part of his remarks. There is a reference to limitation of dividend. I am not in any way seeking to oppose, or to be seen to oppose, the standstill, but I maintain that the question of limitation of dividend means literally no increase of dividends. In the period into which we are entering no increase of dividends will mean a very substantial decrease in the total amount distributed. Therefore, limitation of dividends is not a match for limitation of prices or limitation of wages. This point is not quite so fully realised as it might be.
§ LORD BOOTHBY
The noble Lord will agree that it also means a considerable limitation in the amount invested, because the productive investment in industry is entirely related to the anticipation of profits. If there is to be no increase of dividends, investment is bound to fall.
§ LORD NATHAN
I wonder whether the Government could deal with a small but important point. Among the companies here are a substantial number which are wholly owned by important American concerns. Some of these are private companies some are close companies under the Finance Act, and some are not. I see that the word "distributions" is used in this clause, and not the word "dividends", and that the word "distributions" is defined as in the Finance Act 1965, which, of course, includes interest payable to certain "participators" in the company concerned. When exchange control consent is granted to the issue of securities by an English company to an overseas non-resident concern, permission is almost invariably granted in the case of a trading company to the remittance of dividends declared by that company for transmission in the foreign currency as well as repatriation capital. It would be most helpful if the Government could give an assurance that the clause will not be applied so as to negative the consent given by the exchange control authorities on the basis of which the original investment was made.
§ 4.16 p.m.
§ THE EARL. OF LONGFORD
The noble Lord, Lord Conesford, felt certain that he would not live long enough to have his argument answered. Well, 1838 unless one of us is, so to speak, stricken down in the next few moments I hope that he will find himself contradicted by what I say. He is undoubtedly one of the most delightful speakers in the House and just as undoubtedly the most self-confident about his economics. I wish I felt as confident about any economic proposition as he does about all of them—anybody who does not agree with him is talking arrant nonsense, total folly. This is what adds to his charm. I do not know what his unique qualifications are for laying down the law in this way, but he makes a very good speech.
§ LORD CONESFORD
One of the reasons for my conviction is that I have never heard any answer by any economist. None of the economists who sat on the Royal Commission differed from the view I put forward.
§ THE EARL OF LONGFORD
I should think that that is extremely doubtful, but in interrupting the noble Lord has broken his rule of a lifetime. Perhaps I might begin by answering the noble Lord, Lord Reay. He submitted me to a rather crafty dialectical questionnaire. He asked what was the motive here: was it political, economic, psychological and so on? I could submit the noble Lord to the same questionnaire. Was his speech this afternoon political? Had it anything to do with his political Party? Was it based on his experience as an economist, or was it a debating speech? The truth is that one cannot split up proposals or speeches and subject them to that sort of dissection.
Some Members of the House are not so well-informed about this clause as those who have spoken. May I make it absolutely plain that there is no attempt in this Bill to impose a statutory standstill on dividends. It has nothing to do with this statutory restraint, as seems to have been implied. Therefore, I hope noble Lords who are worried by these speeches will be aware of that. The object of this very mild clause is notification. I have more sympathy with the noble Lord, Lord Reay, who argues that it is unnecessary, than with those who fear that there will be horrible results. The real point which Lord Reay raises, quite legitimately, is whether there is much point in it. These increased dividends have to be notified if an order is made affecting a certain class 1839 of dividends or a certain class of company and that comes into operation only under Part II. We do not know whether that will be enforced or not. If the noble Lord asks me the point of it, then I think there are two broad answers, and he may apply the epithets economic, psychological or political as he chooses. The two points I think are these.
In the first place, we are well aware that if Part II is operated it is going to deal with prices, and if the authorities concerned are going to deal adequately with prices one of the factors which it is important they should be very well informed about is the level of dividends. So the first and obvious reason—the noble Lord may say it is quite a small reason but it is on the face of it a valid and irresistible reason—is that if you have to deal with prices you must have full information for that purpose, including information about dividends. But I repeat—and I say it for the benefit, not of those who have spoken, but of the others—there is no question here of interfering with anybody's dividends by this Order.
The other point is, if you like, psychological. I put it to the Committee seriously that this is not something to be ignored in an age when you are calling for widespread restraint. If you are asking the wage-earners and salary earners and everybody else to exercise great restraint, is it seriously suggested that you ought to pay no attention to dividends at all, and that if dividends were to go up and up you should still just smile and be happy and argue with the noble Lord, Lord Conesford, that if they want to use the money that way why should they not? I seriously suggest to the House, following up the point raised by the noble Lord, that on psychological grounds one must hope that there will be considerable restraint on dividends in the times ahead.
On economic grounds we certainly hope that in an age when Britain needs all the modernisation she can get businesses will put as much by as possible, rather than spend it on what might be spectacular consumption. But, when all is said and done, I ask the Committee seriously to look at this clause carefully, realising that it does not interfere by limiting dividends by Statute but simply plays a part in what is surely the obvious policy of 1840 trying to persuade men of property or companies to exercise some restraint in those directions when we are calling for such big sacrifices from the workers.
§ LORD REAY
May I answer the noble Earl, Lord Longford? He seems to have misunderstood me to some extent. He places great emphasis of this psychological aspect of getting collaboration in this sort of thing. I suggested an alternative way in which this might be done without the danger of any economic interference. Presumably the point is not dividends as such, but really the unearned incomes of people derived from dividends. Will he deny this; and if he will not, cannot he look at the alternative, which is to raise surtax on unearned incomes if it is necessary in order to maintain a freeze?
§ THE EARL OF LONGFORD
I am afraid I cannot be bound by the precise formulation of every issue by the noble Lord, but I will point out that of course dividends are dealt with, in the sense that they are unearned incomes, but through the system of taxation which for many people has fallen quite strictly on dividends as it is. At any rate, there is this system of taxation to restrain dividends; but in addition we hope there will be an exhibition of restraint by those who control the distribution of dividends.
I hope the Government will not listen to this new policy of the Liberal Party, because it is based on an entire misconception. A very large proportion of dividends do not come anywhere near an individual direct; they go to the insurance companies and so increase the value of the individuals with-profits policy, or they go to pension funds and help to secure his pension. A substantial portion of the rather meagre salary of Church of England clergymen is derived from the equity dividends received on the London Stock Exchange, and so on. The noble Lord, Lord Reay, with all due respect, is talking complete nonsense in saying that you could in any way deal with the increase in dividends by an increase in surtax. Most of the recipients do not pay surtax at all.
§ THE EARL OF LONGFORD
The accusations of nonsense seem now to be flowing rather freely, but I am not going to accuse anybody here of talking non- 1841 sense—not at all. I was very glad to try to enlighten the noble Lord, Lord Reay. I am not going to be swayed by him, but I am at least ready to listen to him, and I think it is the least we owe to one of the most promising of the younger Members of the House.
§ LORD CONESFORD
I am very grateful to the noble Earl the Leader of the House, but I still regret that I remain completely unanswered once more. On the statement that there is nothing in the clause before us that limits dividends, I entirely agree with the noble Earl. There was quite a lot in the speech of the principal Minister commending it in another place. He dealt with what he himself described, I think, as restraint or limitation of dividends, and of course it is in Paragraph 31 of the White Paper. I thought Paragraph 31 of the White Paper probably had some connection with the clause we are now discussing. But when he says that companies in a position to raise a dividend and not needing the money for any commercial purpose of their own should exercise restraint, meaning by that that they should not pay the money to the shareholders, I can tell him that that is something that every bad company is most willing to do.
The only companies that are really hit by this policy are the growing, efficient companies on whom the survival of this country may depend. The real case against what I still believe to be nonsense is that this is a very great discouragement of investment. What the Government are saying in this clause in effect is: "If you have any money, the only safe thing to do is to spend it; if you save it it will depreciate; if you invest it in British industry and the company fails you will lose it; if you invest it in British industry and the company succeeds it will not be allowed to pay a greater dividend". A greater discouragement of investment, a greater discouragement of the means of survival. can scarcely be imagined.
§ THE EARL OF LONGFORD
I am sorry, but the noble Lord has worked himself up about something that is not here. He says they will not be allowed to distribute dividends. That is absolutely false. And now perhaps I may be allowed to use the word "nonsense" which was used by other noble Lords. It is non- 1842 sense, and if I may make it plain, it is absolute nonsense. The noble Lord, Lord Conesford, who is extremely intelligent, knows that he has just been talking nonsense.
§ VISCOUNT ECCLES
I wonder whether I may ask the noble Earl the Leader of the House a simple question on subsection (9)(b). I do not understand what this means:any reasonable assumption may be made as to the length of the current financial year.How does a man do that? Are we supposed to guess how many Budgets are going to be introduced within the next twelve months? I cannot see the point of that subsection at all.
§ LORD COOPER OF STOCKTON HEATH
May I refer to the discussion that has taken place in regard to the obligation to make notifications of dividends, about the purpose of which there appears to be some apprehension? We went through a period in 1948 and 1949 similar to the present one, but on that occasion the appeal was for voluntary restraint. In fairness to companies, they followed that out in relation to dividends pretty well. But it is an experience that trade union people do not forget, because in the two years the rate of increase in wages was cut by about 50 per cent. It was not absolute, but it was a great endeavour from the point of view of voluntary effort. But most trade unionists say that what they lost in those two years they never recovered. On the other hand, in the case of dividends forgone, the money was just stowed away and immediately there was a political change there was a very substantial distribution of those dividends that had been put away.
So the situation to-day is this, if you are to have a measure of co-operation from trade unions. We know the legislation will not work unless it appears to be fair. I know there is a lot of argument about this, but I will concede that workers regard dividends as part of the distribution of the proceeds of industry. Some workers—and this is a very interesting argument—go so far as to say that whereas they invest their labour, other people just invest capital and, nevertheless, receive rewards. If you are going to ask work people to exercise 1843 restraint and even to freeze wages for six months, then in all equity—and I agree that this might be psychological—you must equally demonstrate a willingness on the part of those who distribute the fruits of industry to restrain, also.
§ LORD BARNBY
As the question of close companies has been referred to, which I did not expect to be brought up, perhaps I might draw attention to page 6 of the White Paper. As is well-known, the circumstances of close companies are very difficult, and the high rate of money changes conventional practice with regard to the manner in which the funds of the individual members of the companies, who may also be lenders to the company, are effective.
This has caused a great deal of disquiet in the past, and in many cases a belief of harsh treatment. After saying that the companies would have to act on their own and give justification later the White Paper goes on:In important cases the Government will refer the matter to the National Board for Prices and Incomes for examination.Is it to be understood from this that, unless they are "important cases", there will be a purely arbitrary decision by some other body? Having on occasions had representations made to me about the difficulties of close companies, I think it would be helpful to get some elucidation on that point.
§ THE EARL OF LONGFORD
Perhaps the noble Lord would let me communicate with him on that precise point in due course. But I must repeat yet again, in case somebody was not present when I said it before, that nobody's dividend is going to be limited by this Statute. There is no statutory interference with dividends. I am sorry to keep saying that, but some of the questions suggest that people still think there may be some interference with dividends through this Bill.
May I deal with the point raised by the noble Viscount, Lord Eccles, which is a technical one, and I will read rather carefully what has been supplied to me on that point. I think it is easy to understand, and certainly the noble Viscount, Lord Eccles, will understand it well enough. The need for this subsection arises because the decision to make a distribution may be taken during the 1844 course of a financial year, when the directors do not know what the length of the financial year will be. Therefore, some assumption has to be made. Should the length of the year prove to be different from that of the year which is taken as a basis, then the necessary adjustments required by subsection (7)would have to be made, to see whether in fact there was a distribution which represented an increase on that made in the basic year. So one has to make an assumption, because the year in which one finds oneself may not be of the same length as the year taken as the basis.
§ Clause 12 agreed to.
§ Clauses 13 to 15 agreed to.
§ Clause 16 [Terms and conditions of employment: enforcement]:
§ On Question, Whether Clause 16 shall stand part of the Bill?
§ LORD CONESFORD
I should like, if I may, to put a question to the noble and learned Lord the Lord Chancellor, on which I have written to him. A similar point also arises under Clause 28. It concerns the penalty subsections of this clause. It will be seen that subsection (4) provides for fines, and then subsection(5) continues:This section shall not give rise to any criminal or tortious liability for conspiracy or any other liability in tort.I think I see the purpose behind that subsection: to keep the administration of this clause as simple as possible and to avoid the complexities of the law of conspiracy. What I am anxious to be certain about is that Her Majesty's Government are confident that they have not, in making what I quite see is a legitimate attempt at simplification, deprived themselves of powers which in certain eventualities they might need.
May I mention a theoretical possibility, without of course suggesting that it is likely; but it is a matter about which every Government, quite rightly, consider their powers. Let us assume a general strike. In the event of a general strike, the specific Act dealing with the legality of a general strike being no longer on the Statute Book, Her Majesty's Government would probably, I suppose, make use of the Emergency Powers Act 1920 and the subsequent amending Act, 1845 and Emergency Regulations would be made under those Acts. But whether or not such use were made of the Emergency Powers Acts, it seems to me possible that there might be circumstances in which Her Majesty's Government would wish to use the law of criminal conspiracy.
It may well be—I do not know—that the noble and learned Lord the Lord Chancellor is confident that the subsection we are now considering would not cause the Government any difficulty in the case that I have envisaged. But he will know, from his legal knowledge, of the very difficult questions of law which were discussed at the time of the General Strike, and of the view of, I suppose, our greatest jurist at that time, Sir Frederick Pollock, that it did constitute a criminal conspiracy. That matter was never tested in the courts, but what I want to be happy about is that the Government have satisfied themselves that they are not, by the reference in this subsection to the law of criminal conspiracy, parting with powers which they might in certain circumstances wish to use. In order to show the sort of difficulty that could arise, the ostensible object of the strike which I am imagining for the purposes of my question might seem to fall within the description of subsection (4). I hope that what I have said, together with my letter, may make the point sufficiently clear to the noble and learned Lord the Lord Chancellor. I am raising this matter in no spirit of hostility, but because I think it is of some importance, and because I should like to know that Her Majesty's Government are happy that they are not, by the subsection to which I am referring, endangering their own position in certain possible circumstances.
§ 4.40 p.m.
§ THE LORD CHANCELLOR
I am grateful to the noble Lord, Lord Conesford, for raising this point; but, having considered it, I am quite satisfied that this clause does not deprive the Government of any powers which they ought to have. The fact is that the area to which this clause applies is a very narrow one. As your Lordships see, it applies only if an employer who has been forbidden to implement an award does so, or if a trade union or other person strikes, 1846 or persuades others to strike, with a view to compelling an employer to pay that which he ought not to pay. The clause says that, if that happens, the punishment for it is to be a fine of so much—that and nothing else.
Subsection (5) simply says:This section shall not give rise to any criminal or tortious liability for conspiracy or any other liability in tort".That, again, is dealing only with those things which are the subject matter of this clause; and all this clause has said is, "This is what is to be the punishment if there is a strike, an incitement to strike or anything of that kind. The people concerned will not be liable for criminal conspiracy; they will not commit a tort; this fine will be the answer." But this is in no way laying down, or in any way affecting, what the law would be if there were a general strike, or in any circumstances other than those which are referred to in the clause. Subsection (5) means what it says:This section shall not give rise to any criminal or tortious liability for conspiracy or any other liability in tort".That does not protect anybody except those who do one of the acts comprised in the very limited class of acts referred to in the clause. Therefore, the powers of the Government to deal with a general strike would remain exactly as they are. I think I had better not say what they are, because I think eminent lawyers—including Lord Simon, I remember—have long differed as to whether a general strike was a criminal conspiracy. But, whatever the law is, it will remain unaffected by this clause.
§ Clause 16 agreed to.
§ Clauses 17 to 20 agreed to.
§ Clause 21 [Regulations about notices to Ministers]:
§ On Question, Whether Clause 21 shall stand part of the Bill?
§ LORD DRUMALBYN
May I raise a small point on Clause 21? It may help us to envisage a little more clearly, by a side wind, how the Government propose to act. Clause 21 and Clause 22 1847 are referred to in Clause 25(6), which says:Sections 21 and 22 of this Act shall apply as if references in those sections to Part II of this Act included references to this Part of this Act,…This is a purely technical question, but it may have repercussions on our understanding of what the Government propose to do. My question is simply this: can Clauses 21 and 22 be invoked and applied in Clause 25 even though they have not been brought into force by Clause 6? I hope that question is clear. Is it possible to apply Clauses 21 and 22 in Clause 25 if Clauses 21 and 22 have not been brought into force by an Order in Council under Clause 6? In other words, must Part II be brought into effect before Part IV can be brought into effect?
§ LORD SHEPHERD
No. Part IV can be brought into effect without Part II having been brought into effect. I think that is quite clear. The noble Lord has bowled a rather fast one—and I do not mean that in any way as a criticism. According to a note I have just had handed to me, the answer is, "Yes"—but I cannot read the rest of the note. Perhaps I may say to the noble Lord that I cannot answer him straight away, but I will find out the reply for him, and will give it to him when we reach the Report stage. Would that be convenient to the noble Lord?
§ LORD DRUMALBYN
The answer that the noble Lord has already given me is quite clear. I am much obliged.
§ Clause 21 agreed to.
§ Clause 22 [Offences under Part II]:
§ On Question, Whether Clause 22 shall stand part of the Bill?
§ 4.47 p.m.
§ LORD CONESFORD
I have two questions on Clause 22. As they raise legal points, I am sorry that the noble and learned Lord the Lord Chancellor is not here.
§ LORD CONESFORD
I dare say the noble Lord will be able to answer them, 1848 but, should he require the help of his noble and learned friend, and if it is inconvenient to give the answers now, perhaps it could be arranged for them to be given at a later stage. There are two legal matters, which I think are of some importance and interest, that arise under Clause 22. Subsection (2) says:Where an offence is alleged to have been committed under this Part of this Act by a trade union…being an unincorporated body…proceedings…shall be brought in the name of that body…and…any fine imposed on conviction shall be payable out of the funds of that body".This is a provision of great importance and, it seems to me, of considerable novelty. I am particularly interested because it happens that 21 years ago I wrote a little book on the law of trade unions, and when I was writing that book I was helped by another little book on the law relating to unincorporated associations that had been written by the lawyer who is now the noble Lord, Lord Lloyd of Hampstead.
I am very glad to see that the noble and learned Lord the Lord Chancellor is now back. I am sorry that I did not warn him of this point at the time I warned him of the other matter, but I had not at that time studied this clause. I was saying that subsection (2) of Clause 22 provides that proceedings can be brought against a trade union as though it were a corporate body, and that I believe that to be a very important and novel provision, though possibly a very useful one. What I should like to know, if the noble and learned Lord the Lord Chancellor could inform me, is whether there are precedents for this treatment of a trade union, enabling criminal proceedings to be brought against it in its own name.
The other matter that I should like to ask him about arises on subsection (5). Having, in subsection (2), treated the trade union as if it were a corporate body, the clause goes on, in subsection (5), to say that, where the defendant really is a corporate body, then, in addition to the corporation, various directors, managers, secretaries or other similar officers may also be personally liable. In the case of a trade union, there is nothing similar making any trade union officer liable. This, again, may be quite deliberate and there may be a good explanation for it. But the two matters 1849 on which I should be most grateful for the answer of the noble and learned Lord are whether there are precedents for subsection (2) and whether, after making the trade union liable as though it were a corporation, the Government are satisfied that there are good reasons for not following the corporation precedent by going on to place personal liability on the trade union officers.
§ THE LORD CHANCELLOR
I think the point here is this. First, we are dealing here with procedural matters and the provisions in question are included chiefly for the removal of doubts. Doubts might arise because unincorporated bodies, unlike corporate ones, are not legal entities, as the noble Lord knows. Such bodies consist of the possibly varied or indeterminate number of people belonging to them, and it is therefore not entirely satisfactory to rely on them as being persons for the purposes of criminal proceedings under Part II of the Bill. Further uncertainty arises on this point under the Interpretation Act which also deals with a person. It has, accordingly, never been quite clear whether a trade union, as such, was a person. It is usual to sue them in their ordinary name; but it was thought better to clarify that and make it plain that it would be so.
So far as subsection (5) is concerned, it applies only in relation to ordinary corporate bodies. Trade unions and employers' associations being normally unincorporated, rather than corporate, bodies, subsection (4) would not generally apply to the manager, the secretary or other responsible persons who operate them; although they could be liable under the general law for aiding and abetting, counselling or procuring offences by an unincorporated body. The object of the subsections to which the noble Lord has referred are simply to clarify the law, to make it clear so far as the trade unions are concerned in a sphere in which it is not always as clear as one would like it to be.
§ LORD BROCKWAY
I think it would be honest for me to say that I am very doubtful indeed about the consequences of this clause; I think they may be exceedingly grave. I do not want to 1850 make a speech, but at least I should put that on record.
§ Clause 22 agreed to.
§ Clauses 23 and 24 agreed to.
§ 4.54 p.m.
§ LORD BYERS moved, after Clause 24, to insert the following new clause:
§ Saving for employees' co-ownership etc. schemes
§ " . Nothing in this Act shall prejudice the operation of any scheme of employees' co-ownership, co-partnership or profit-sharing in a particular company or firm:
§ Provided that such a scheme shall have been in operation at least six months before the passing of this Act; and all provisions in this Act relating to terms and conditions of employment, incomes and earnings shall be deemed to disregard payments to be made to employees in accordance with the terms of such schemes as aforesaid."
§ The noble Lord said: I rise on behalf of my noble friends to move Amendment No. 10. We are doing this because we on these Benches are concerned that the Bill, as at present drafted, could have an adverse effect on existing co-ownership and profit-sharing schemes by making it illegal to pay members the increased share of profits which may have been earned during the period. If the Bill is not amended it will certainly discourage companies from introducing such schemes. We believe that far too little attention is paid by British industry to the potential benefits which can arise where intelligent schemes of profit-sharing are introduced. There has been a great deal of lip-service paid to this particular matter but, unfortunately, not nearly enough progress has been made along the right road.
§ If I am challenged on what is meant by co-partnership, I would say that it is defined in the Labour Gazette of May 1966, which says that it is a system which ensures that there shall be a sharing of profits with employees supplemented by arrangements for the employees to acquire some share in the control of the undertaking by owning share capital and in other ways.
§ Although there are still far too few of these schemes, it has never been seriously doubted that most of them contribute to higher productivity and higher efficiency. In our view it is essential that the proposed negative income policy contained in this Bill should not be allowed to damage schemes such as the one I 1851 have mentioned. This Amendment, we believe, would safeguard the position and once again would help to contribute to the growth of the economy that we sorely need. I understand that an Amendment much in these terms was moved in another place by the official Opposition, and I would hope that if we do not get a satisfactory answer from the Government on this matter we should be joined in the Division Lobby by Her Majesty's official Opposition in this House. I beg to move.
§ Amendment moved—
§ After Clause 24, insert the said new clause.—(Lord Byers.)
§ LORD CONESFORD
As I gather from the speech of the noble Lord, Lord Byers, that there may be a Division on this Amendment, I wonder whether it will be convenient for me to make my speech on the clause now, although it is on a totally different point. I think Members in all quarters of the Committee will think it of the highest importance that I should raise this matter on this clause, because this is the clause which deals with the possibility of bringing Part VI of the Bill into effect.
§ LORD SHEPHERD
We are discussing the new clause proposed by the noble Lord. Lord Byers. Is the noble Lord referring to Clause 25?
§ LORD SHEPHERD
The noble Lord, Lord Byers, has drawn our attention to one field in industry which I think has a great deal of sympathy from many quarters of the House. But in this particular Amendment we are, in fact, considering about 500,000 employees. This is the figure I have been given of those who participate in the type of partnership described in the Amendment. I think I should say to the noble Lord that Part II of this Bill could in no way prejudice the operation of any scheme so long as it is within the general understanding and agreement of Schedule 2. I think we should also be clear in our minds that the increased income the 1852 employees might receive—I say "might" because on occasions the company loses money and the value of their shares is reduced—will not always result entirely from increased productivity, which is the basis of Schedule 2, but from the increased profits of the company. This increase may be due to increased efficiency, but it may also be that the commodity is in short supply and the market price is a good deal higher than would otherwise be the case. I do not think there is anything in Part II of the Bill which would be detrimental to this type of scheme.
Again, in regard to Part IV, there would be nothing detrimental to the scheme, unless, of course, the authorities running the scheme decide to increase the shareholding above what was, to use the phrase "the norm" of July 20. Then it would come within recognition as an increased income. I should have thought that the operation of Part IV, which is for twelve months—again on the basis that the profit sharing was at the same rate as before July 20—would not be detrimental to these schemes.
I think the noble Lord, Lord Byers, should appreciate that from the way the Amendment is drafted, it may well be that he would be providing a loophole for directors and senior executives, because they are employees. The Amendment does not refer to such schemes as though they should embrace the entire company and the employees within the company. The noble Lord will be aware that there are a number of existing schemes—co-ownerships, co-partnerships and schemes on a profit-sharing basis—which are restricted to the senior executives and directors. I do not believe—I repeat this—I do not believe that Part II in itself will be prejudicial to the schemes which the noble Lord, Lord Byers, has in mind. Nor do I believe that Part IV would be, unless those operating the scheme intended, within the next six or twelve months, to use the basis of the scheme for increasing salaries which I think the Committee now accept need this restraint.
§ LORD BYERS
I do not accept the view expressed by the noble Lord, Lord Shepherd, that because this affects only 500,000 people it is not worthy of very important consideration. This argument that "It is only a little one, and there- 1853 fore it does not matter" will not, I think, appeal to the Committee. But I hope I am right in thinking that I detect more sympathy in the Minister's answer than we have had since we started this long debate at eleven o'clock this morning. The purpose of putting down this Amendment was to draw the attention of the Government once more to the fact that any of the schemes which assist in getting increased efficiency and increased growth in the economy must be watched very carefully to see that we do not do damage to them. We on these Benches will be watching the operation both of Part II and, if it is ever used, of Part IV, to make sure that schemes of this sort are not caught, and, if they are, we shall raise the matter again with the Government.
§ LORD DRUMALBYN
May I ask the noble Lord—this seems quite a straightforward matter—whether the schemes have to be notified to the Government? That is my first question. Are they affected by the notification provision?
§ LORD DRUMALBYN
In Part II. Secondly, if they are, and the Government do not intend that they should be caught, the Government could quite easily say, here and now, that they will give their consent, and the schemes will not be referred to the Prices and Incomes Commission. It seems to me to be perfectly straightforward, if it is not the intention of the Government to do this. It is an administrative matter within their own hands. Thirdly, the Prices and Incomes Standstill White Paper says clearly in paragraph 18—I know that this refers to the standstill and we are now dealing with Part II, but, a fortiori, if it refers to the standstill it should refer to Part II—It is not intended that the standstill should be regarded as applying to…profit-shareholding schemes et cetera.This seems clear, and I did not doubt that the Government's intention was that they should be excepted, but it seems to me, if I may say so with respect, that the noble Lord, Lord Shepherd, could have given a little clearer assurance than he has, and I am wondering whether he can do that now.
§ LORD SHEPHERD
In view of what the noble Lord, Lord Byers, has said, I suspect that I may have departed a little from the brief which was given to me, and I therefore assure the noble Lord, Lord Drumalbyn, that I do not intend to go any further than what I have said. I said I do not believe that Part II will be prejudicial to these schemes. Certainly, they could be reviewed they could be referred. Again, in respect of Part IV, I do not think it would be prejudicial so long as the schemes operate during the next twelve months as I think the nation would expect—a general freeze on rises in incomes during the first six months and a very severe restraint for the following six. I think the noble Lord is correct and that Part IV will disappear at the end of twelve months, and therefore the main worry of the noble Lord. Lord Byers, must lie within Part II. I think it clear that the schemes could be referred to the Prices and Incomes Board if such an order were made, but I do not believe that that would be prejudicial in itself, because the Board would look into all the aspects arising from this type of scheme.
§ LORD DRUMALBYN
Perhaps the noble Lord would admit that at the end of the day they would be able to do what they like under Part II.
§ On Question, Amendment negatived.
§ Clause 25: