Lords Sitting of 12 December 1966

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Derby
The Viscount Mountgarret—Sat first in Parliament after the death of his father.

SLAUGHTER OF GREY SEAL PUPS
2.36 p.m.
VISCOUNT MASSEREENE AND FERRARD: My Lord, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they are satisfied that the recent slaughter of Atlantic grey seal pups carried out in Orkney with the sanction of the Secretary of State for Scotland is under efficient control, and, furthermore, whether Her Majesty's Government consider the slaughter of seal pups is the most desirable method of control.]
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES): Yes, my Lords. The cull was the fifth in a series recommended originally by a committee of the Nature Conservancy in order to control the numbers in the Orkney seal colony. Its successor, the Seals Sub-Committee of the Natural Environment Research Council, after reviewing the damage done by seals to salmon, to nets and to other fisheries, endorsed the earlier recommendation by proposing a cull of 750 grey seal pups this year. To ensure humane culling, permits were issued to experienced seal hunters only, and strict conditions were imposed as to the numbers each might take, the area and duration of the cull and the method to be used. In the event, 750 pups were taken in the cull. Officers of my Department visited the area both before and during the cull, and two of our fishery cruisers
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undertook patrols in the vicinity, visiting a number of the islands concerned. The local police and the representative of the Scottish Society for the Prevention of Cruelty to Animals were kept closely in touch with the detailed arrangements throughout and were conveyed by fishery cruiser on visits to the islands.
As to the second part of the Question, having accepted the distasteful necessity for culling, we also accept that it should be done as recommended in the report of the Nature Conservancy's committee, which discussed other methods of culling and explained the objections, of both practicality and humanity, to the killing of adult seals.
VISCOUNT MASSEREENE AND FERRARD: My Lords, while thanking the Minister for that very long reply may I ask him whether he is aware that during the first week of the cull no official set foot in the Orkneys? This is rather disturbing. For, taking the 1963 cull as a precedent, is the Minister aware that the Department then said that nearly a thousand seal pups were killed—that is, two or three hundred in excess of the number allowed by the licence?
While also thanking the Minister for his answer to the second part of my Question, might I suggest—
SEVERAL NOBLE LORDS: No.
VISCOUNT MASSEREENE AND FERRARD: My Lords, may I ask the Minister whether he does not agree that it would be far more humane to kill the cow seals when they come to the islands to have their pups? May I ask the Minister, further, whether he does not agree that killing the seal pups at four weeks old is really very cruel, because the cow seals still have a strong maternal instinct at that stage?
LORD HUGHES: My Lords, it is perfectly true, as the noble Viscount has stated, that in 1963 an excessive number of seal pups was culled; that is to say, it was excessive in relation to the numbers intended. But since then the cull has taken place under much more close and careful supervision, so that at no time during the years 1964, 1965 or the present year have the numbers killed exceeded the numbers intended.
With regard to the suggestion that it would be more humane to kill the female

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adult seals, this point was considered and, as I stated in my somewhat lengthy reply—deliberately lengthy, because I thought that it might cut down the number of supplementary questions; but perhaps that was a pious hope the advice which we received was that it would be the reverse of kindness to attempt to kill the adult seals. The adult seal is extremely mobile, and the colony would have made its way into the water in circumstances which would have made it extremely difficult to ensure that the adult female seals were killed outright. Furthermore, in any dispersal into the water they would possibly have killed by crushing quite a number of the pups, which are far from mobile. Also, of course, there would have been the resulting deaths of the pups because of their abandonment by the females.
In all these circumstances, my Department is satisfied that the advice received from this completely impartial body is the best way of dealing with this regrettable necessity.

DANGEROUS TOYS
2.41 p.m.
LORD AUCKLAND: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they are aware of the concern felt at the dangers inherent in certain toys imported into this country; and what steps they propose to take towards strengthening the powers of inspection of toys to ensure a high standard of safety.]
LORD BOWLES: My Lords, my right honourable friend the Home Secretary shares the concern which has been expressed about such toys and is taking steps to deal at once with particular dangers brought to his notice. Regulations under the Consumer Protection Act 1961, specifying a number of general safety requirements for children's toys, will shortly be ready and will apply to all toys offered for sale, regardless of their country of origin. These Regulations will be enforced by the local authorities, who will have adequate powers of inspection for this purpose.
LORD AUCKLAND: My Lords, may ! preface my supplementary by expressing the hope that the noble Lord, Lord Stonham, is making satisfactory progress. May I ask two supplementaries, in thanking the noble Lord for that very full reply. May I first ask him whether steps will be taken for toys which are imported to be compulsorily inspected at the manufacturing source? Secondly, may I ask him whether the Consumer Council's idea of a Toy Council has been further considered by the Home Office to get safety standards improved all round?
LORD BOWLES: My Lords, as regards the first question there is no power to prohibit the importation of these toys. The existing power to control imports of goods is used only for economic or commercial purposes.
As regards the second supplementary question, I might point out that the regulations will prohibit the sale of toys manufactured from celluloid, require electrical toys to be operated only by low voltage and prescribe safety requirements for transformers for use with such toys. The amount of lead and other toxic substances which may be present in paint on toys will also be controlled. As regards the further part of the noble Lord's supplementary, we are guided in this matter by the report of the Molony Committee on Consumer Protection. which recommended that there should be regulations giving statutory support to some only of the requirements set out in the British Standard Code of Safety Regulations for children's toys. These recommendations are being implemented. The Committee doubted the need for regulations dealing with the other requirements in the Code either because they thought that Regulations would be impracticable or because they regarded the risk as small.
With regard to the noble Lord's preface about my noble friend Lord Stonham, I am glad to say he is a little better to-day although I understand he is still rather seriously ill.
LORD HAWKE: My Lords, the Minister has mentioned that we are entitled to stop imports for economic and commercial reasons. Could he say in what circumstances?
LORD BOWLES: For instance, when we find a very serious balance-of-payments problem the Government have power to impose import controls, and that is the sort of commercial or economic purpose for which this power exists. It does not exist for the purpose of prohibiting the import of toys which might be considered by some people to be dangerous.
LORD AUCKLAND: My Lords, may I clear up one misunderstanding? I was not proposing the banning of the import of toys; I was proposing more rigorous inspection. May I further ask whether the Minister is aware that the toy industry generally are a very responsible body; and may I further thank him for his assurances?
LORD BOWLES: I am very grateful to the noble Lord.

HIGHLAND HILL FARMERS
2.47 p.m.
THE EARL OF DUNDONALD: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether, in view of the acute economic conditions which the Highland farmers are facing now and which will worsen during the winter, they will consider making an ex gratia payment before Christmas to farmers who are endeavoring to winter their weaned calves.]
LORD HUGHES: My Lords, my right honourable friend is aware that hill farmers, particularly in the Highlands, are having a difficult year, and it was for this reason that he recently announced that an advance payment of hill sheep subsidy of 15s. per ewe would be made. The position of hill farmers will be most carefully considered at the coming Annual Review, taking account of all the information available, including the results of the special survey which my right honourable friend is undertaking in conjunction with the National Farmers' Union of Scotland.
THE EARL OF DUNDONALD: My Lords, I thank the Minister for his
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reply, which basically concerns sheep. I should like to ask the Minister whether he is aware that at the Highland sales this year prices offered for weaning calves were about £15 lower than normal, which means that the farmer rearing store cattle received, if he sold, about 50 per cent. of the value he would have received in the normal year for an average calf. Further, may I ask the Minister whether he would not agree that, because of these appalling prices, a large number of farmers decided not to sell and are now faced with higher feeding costs, aggravated by the selective employment tax and also the inability of the banks to extend to them the credit which they need to buy winter feed this year, and that the position at the moment is critical?
LORD HUGHES: My Lords, in the first instance I cannot accept the reference to selective employment tax as having other than the most marginal effect on this position. In so far as the hill farmers with cattle rather than sheep are concerned, I would agree that they have not, of course, benefited in the same way as those who are concerned with sheep. But I would remind the noble Earl that hill farmers with cattle have now in the main received payment of the hill cattle subsidy and will also be receiving payment of the calf subsidy.
THE EARL OF DUNDONALD: I thank the noble Lord for his answer to my supplementary question. With great respect, I would ask him whether it is not the fact that selective employment tax adds to the cost of every service in the country, and when one is sending cattle to the market in Scotland and having to ship them back to the islands would he not agree that selective employment tax is adding to these costs?
LORD HUGHES: My Lords, I think it would be inappropriate in reply to this question to enter into a detailed answer in connection with selective employment tax other than to reiterate what I have already said, that it has only a marginal effect on this particular problem.
THE EARL OF DUNDEE: My Lords, when the noble Lord mentions advance payment of 15s. per ewe, does that mean 15s. in addition to the ordinary ewe subsidy which a short time ago was agreed

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on for three years, or does it mean part of this normal subsidy being paid a little sooner?
LORD HUGHES: My Lords, an advance payment is entirely what it is stated to be. It is an advance payment.
THE EARL OF DUNDEE: My Lords, the noble Lord is aware, surely, that two years ago the payment of 18s. per ewe was fixed for three years? If I am wrong about that I am sure he will correct me. Is this part of the 18s. which is being paid a little sooner, or is it in addition to the 18s.?
LORD HUGHES: This is an advance payment on account of the sum which will be payable in the light of what is determined at the next Price Review.

COST OF BRITISH FORCES IN GERMANY
2.51 p.m.
LORD SHEPHERD: My Lords, at a suitable moment after 3.30 my noble friend Lord Walston will be making a Statement on the cost of British troops in Germany.

TORBAY ORDER 1966
2.52 p.m.
THE PARLIAMENTARY SECRETARY, MINISTRY OF HOUSING AND LOCAL GOVERNMENT (LORD KENNET): My Lords, this Order results from proposals made by the Local Government Commission in their Report on the South Western General Review Area. Its purpose is to set up a new pattern of local government, as recommended by the Commission, for the three towns around Torbay. It creates a new county borough for the area by amalgamating almost the whole of the Borough of Torquay and the Urban District of Paignton, together with the built-up part of Brixham Urban District, and some small adjoining areas in the Rural Districts of Newton Abbot and Totnes. By this means, the present arrangements under which the area is administered by several authorities will be replaced by a single administration, and local government for Torbay will thereby be strengthened and simplified.
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The Order is the culmination of a long process of review by the Local Government Commission, which is an independent body set up under the Local Government Act 1958, and of further inquiry by the Minister under the provisions of the 1958 Act.
The Local Government Commission began their review of the South-West in the autumn of 1959 they consulted and held discussions with the local authorities they published their draft proposals for the South-West in July, 1961, and held statutory conferences with the authorities in November, 1961. Their final report and proposals were published in February, 1963. A public inquiry into objections to the Torbay proposal was held at Torquay by an inspector appointed by the Minister in October, 1963. After he had considered the arguments for and against the Commission's proposal, the Minister decided to accept it—subject to some relatively small boundary modifications—and issued a decision letter in June, 1965. It is thus seven years since this lengthy process began and it will be another eighteen months before the new county borough would be in full operation.
The Local Government Commission were impressed by the initiative of the local authorities of Torquay, Paignton and Brixham, who were ready to combine and form a single county borough. Although it is true that the Commission were not at first convinced of the case for a new county borough, they came to the conclusion, after discussions with the authorities locally, and taking into account the increase in population revealed by the 1961 Census, that this change, which was desired by so many local organisations, could have beneficial effects on local government services and on the future prosperity of Torbay as a whole. Torbay is a growing urban area unified by the bay itself and by the attraction of the whole neighbourhood as a residential and tourist centre of national and even international importance. The population of the area which will make up the new county borough has increased by almost 12 per cent. in the last six years or so. By 1968, the population will be about 102,000, and there is no reason to believe that it will stop there. Visitors increase the population by about 60 per cent. each summer.

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The growth of population, and the special requirements and potentialities of the area, called in question the present administrative structure of local government. Administration is at present divided among several authorities, and there is every reason to think that there will be a real gain tothe community by introducing a structure appropriate to the growing unity of Torbay so as to encourage the future planning and development of the area as a single centre. In fact, the creation of a single county borough, under which the administrative, social, environmental and commercial services of the existing authorities can be brought together under the control of one council, is, I believe a condition of the full development of this area. It would be something of a setback locally if this Order did not go through. The Order recognises the local initiative for the idea of a unified Torbay it creates the conditions in which the three towns can work together and devote the whole of their resources to the greater benefit not only of those who live in the area but also of the many thousands who visit it each year.
The House will note that the Order does not put into the new county borough all the fringe areas proposed by the Corn-mission. The residents of Marldon and Kingskerswell, on the outskirts, expressed a strong desire to remain as part of the county. Both areas have links with Torbay, but there were no factors which made it necessary to consider going against their wishes. After consultation with the authorities locally, including the County Council, the boundary has therefore been drawn so as to exclude Kingskerswell and the village of Marldon from the new county borough. The boundary line does not entirely meet all local preferences—that would have been impossible, as it always is in these cases—but it reflects local wishes as far as it reasonably can. Some of the residents of Galmpton and Churston Ferrers would also have preferred to remain out of the county borough. But Galmpton and Churston Ferrers are in a rather different situation from the other two places. This part of the parish lies between Paignton and Brixharn, and recent development has been rapid. It has become continuous with Paignton, and because of its location it ought to become part of the county borough. The parish council of Churston
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Ferrers, I may say, were in favour of inclusion in the new county borough.
I come to the essence of what I think will be our discussion this afternoon. Devon County Council have argued strongly against the proposal because it reduces the county. This is understandable: the county will lose its largest urban area. We must also remember that Exeter County Borough was extended in April, 1966, and that Plymouth County Borough will, if the present intention is fulfilled, be extended in April of next year. So we must consider these objections here rather fully, just as they have been considered on so many earlier occasions.
What will be the effects of all this on the county? In terms of population Devon will be about the middle of the table of English counties, and in rate-able resources it will not compare unfavourably with other counties of a similar character. It will have a population of 419,000. It is true that its rate-able value per head will drop from about £35 to £31, but this reduction will in no way prevent it from continuing its present effective administration, or making such adjustments in its services as will be called for by the change in its boundaries.
The House will be aware that the County Council petitioned against this Order on two main grounds—first, that its effects on the county might be substantially altered by the introduction of the new system of grants to local authorities proposed by the Local Government Bill; and, secondly, that a final decision should be deferred until after the Royal Commission for Local Government had reported. The House will also be aware that after hearing the Petitioners our Special Orders Committee decided that their case was not such as to call for an inquiry by a Select Committee.
What are the county's fears about changes in the grant system, and are they such that this House ought to throw out the Order? The County Council say that they had assumed all the way through that they would suffer no financial loss because of the Torbay proposals. At the public local inquiry their witnesses agreed that under the present grant system the reorganisation at Torbay would cause no increase in the county precept. But because the precise effects of the changes in grants under the Local

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Government Bill cannot yet be ascertained, they are no longer confident that this will be so, and this is their case. The Council principally fear, first, a reduction, caused by the change of system, in the amount of the supplementary payment for low density, which is at present part of the general grant and will become part of the needs element of the rate support grant; and, secondly, they fear a reduction in the cash value of the weighting given in the calculation of the present rate-deficiency grant for sparsity of population, when that weighting passes to the new resources element.
As to the first, with the concurrence of the associations of local authorities, my right honourable friend the Minister proposes to prescribe a weighting which will give the new county the same percentage low-density payment under the needs element as it would have had under the present general grant. And this is not all: the percentage will be applied to a higher basic grant than it would have been under the general grant. As to the second, the Local Government Bill now in its final staves increases the weighting for sparsity. Moreover, there is another change taking place at the same time: current road mileages and populations will be used for these purposes, instead of those of 1958. This will partly offset the new county's gains from these changes. But the use of 1958 figures was always recognised as a temporary expedient and, although the 1968–69 population and road mileage figures are obviously not yet ascertainable, it seems reasonably clear that the county in its new form will on balance gain in these respects as a result of the changes.
It will be seen from what I have said that there is nothing in the changes in grant system which would justify postponing approval of this Order. And beyond this, we ought to remember that finance is not the only consideration which should govern our thoughts. Article 7 of the Local Government Commission Regulations 1958, which sets out these matters, refers to "Financial resources in relation to financial need" as only one of nine factors which ought to determine decisions on boundary changes. Among the other eight are physical features, community of interest, economic and industrial characteristics, and size and shape
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of areas of local government. It is rarely that any one of these can be decisive by itself; all must be weighed, one with another, and I am sure this House will be doing precisely that this afternoon.
Another objection which has been advanced against the Order is that it creates a new and not very large county borough at a time when the Royal Commission are carrying out a much more comprehensive review of the whole structure of local government, and that it would be better to await the findings of the Royal Commission. But when the decision to set up the Royal Commission was announced on February 10 this year the then Minister, Mr. Crossman, said about the old Local Government Commission, whose recommendation we are considering today:
"Most of the work it has completed will be carried through. Where decisions have already been announced on proposals by the Commission, the necessary orders will be brought before Parliament as soon as possible…".
This is precisely what is happening here. The decision to accept the Local Government Commission's proposals for Torbay was one of those that had been announced several months earlier; in fact, it was announced in June last year.
As to the size of the new county borough, there is no doubt as to its financial viability, and Section 34 of the Local Government Act 1958 states that if the constitution of a new county borough is affected by considerations of population, the Local Government Commission and the Minister shall presume that 100,000 is sufficient to discharge the functions of a county borough. Torbay will have a population of around 102,000 when it is set up, and there is every reason to believe, as I have said, that it will grow rapidly.
Nobody knows what the new Royal Commission will recommend. If it be the case that they come out in favour of far-reaching changes in the structure of local government, it is as likely to affect county council government as it is county borough government. Thus there is no reason for concluding that the setting up of a new county borough at Torbay will cause difficulties for the Royal Commission any more than leaving things as they are. And even after the Royal Commission have reported, it is bound to be some years before their recommendations

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could be considered, before legislation can be enacted and before consequent changes in local government structure can come into effect. Meanwhile, it seems to the Government that there is no reason for not going ahead with those proposals of the Local Government Commission which will strengthen and simplify local government over the next few years, as we are confident this proposal will.
The House might find it convenient at this point to have an outline of the main points of the Order. The new county borough will come into full operation on the day appointed by the Order—April 1, 1968. There has been a postponement from 1967 at the request of the local authorities who are to constitute the new county borough, in order to give them more time to make their own arrangements. Article 5 makes the changes in local authority areas. In addition to specifying the areas which will make up the county borough, it provides for the transfer of areas which are consequential and incidental to the main purpose of the Order. For example, the rural part of Brixham Urban District is transferred to Totnes Rural District. Articles 6, 8 and 9 make the electoral arrangements. The new wards described in the borough's charter in Schedule 2 reflect the Home Secretary's acceptance of proposals by the existing authorities for twelve wards, and a council of 36 councillors and 12 aldermen. Elections for the new county borough council are to be held on the basis of those wards in May, 1967. The new council will have almost a full year in which to complete their final arrangements for the assumption of full responsibility on April 1, 1968, when the Councils of Torquay, Brixham and Paignton and the Parish Council of Churston Ferrers will be dissolved.
Article 9 cancels the elections that would otherwise have been held in May, 1967, for one-third of the Torquay Borough Council and the Councils of Brixham and Paignton. The 1967 election of county councillors for the county electoral divisions which will be abolished in 1968 are also cancelled. These arrangements have been agreed with the local authorities. Articles 11 to 14 make the consequential changes in the administration of justice to bring the arrangements into line with the revised local government areas. Other parts of the Order facilitate
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the transfer of functions—for example, education, health and welfare, planning and housing—and make provision for the transfer of property, assets and liabilities. Staff affected by this reorganisation are given protection by Article 66 which follows well-precedented provisions. Superannuation rights are safeguarded in the normal way.
The House will appreciate that this is not a case where smaller authorities are being swallowed against their will. It is, in effect, a voluntary amalgamation under which the local authorities in the Torbay area are prepared to sink their separate identities in a desire to re-shape local government to fit the new needs of the area. The new authority will be a viable county borough, and Devon County will not be seriously weakened. The Torbay authorities have already done a considerable amount of work in preparation for the creation of the new county borough, and we ought now to bring the long period of uncertainty to an end. I commend the Order to the House so that the long expressed desire of the Torbay authorities to amalgamate in a single county borough can at last be satisfied.
I know that certain noble Lords will have present in their minds the objections by Devon County Council, which suffered a reduction in population owing to this Order, but I would reaffirm to them the considerations which have already been taken into account in so many different forums before this Order came to us and which lead the Government to conclude, without any doubt, that this change will, on balance, be a change which is advantageous to the people of that part of the country. I beg to move.
Moved, That the Torbay Order 1966 be approved.—(Lord Kennet.)
3.10 p.m.
LORD AMULREE LORD AMULREE rose to move, as an Amendment, to leave out all the words after "That," and insert "This House declines to approve an Order by which a major change will be made in the structure of local government in the Torbay area, having regard to the probability that the change will take effect only a short time before the Local Government Commission may be expected to make its report." The noble Lord said: My Lords, as your Lordships know, the noble Earl, Lord Iddesleigh, was to have moved

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the Amendment whose terms appear on the Order Paper. Unfortunately, he is at present confined to his bed with a bad cold. He telephoned me this morning to ask whether it would be possible for me to move the Amendment in his place. This is what I propose to do. But I should like to say how extremely sorry I am that the noble Earl cannot be here himself to move the Amendment, because he knows this part of the world extremely well whereas my knowledge of it is nowhere near so profound as his.
I should like to make one or two comments about why I think the Order is rather mistimed. The first point, to which the noble Lord has already referred, is that the Order making a new County Borough of Torbay is due to come into force in the spring of 1968, which is about the time when the Royal Commission on Local Government are expected to make their report. The second point, which again has been mentioned by the noble Lord, and which I think has some validity, is that so far as one can tell, the Boundary Commission were rather doubtful at first whether the Torbay area was big enough to be a county borough. It was only when they made their final Report that the Commission decided that the population which would be there in 1968—namely, 102,000—was big enough to justify the creation of this new county borough. That seems to be running it a trifle fine, because although 100,000 was taken as the minimum size for a new county borough, I think a great many people who have seen the way in which county boroughs of that size work vis-à-vis the counties which they were part of before, feel that that figure is on the small side.
We do not know at all what figure, if any, the Royal Commission are going to suggest, but it seems to me that it would have been more sensible and preferable to wait until we see their report, because I do not think—and I believe one is justified in saying this—that the dismemberment of big local government structures is very satisfactory, although, as I say, I do not want to prejudice at all what the Royal Commission may be going to report. The noble Lord has already referred to the money and the population which are going to be taken from the County of
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Devon. Therefore, I do not want to go into this point at great length again. But I think the figures he quoted are sufficiently serious to make one wonder whether to remove these parts from the county council is the right course.
There is another point which I should like to mention, and that is that the new county borough is going to be a very difficult and peculiar shape. It is going to be a built-up area going all around Torbay. At present, I gather that the County Council is hoping to keep the urban districts of Paignton and Brixham separate by keeping a band of undeveloped land between them. I should have thought it was not a bad thing to prevent a piece of coastline like that around Torbay from becoming—which it is very inclined to do if it is under one great authority one great built-up area. That is something which we have been trying to stop in various parts of the world. It seems to be one of the problems which arise, and I feel that the Order ought to be postponed.
There are just one or two points which I should like to make about the effects of the Order. It says that the county council is going to retain operative control of the ambulance service, and yet the new county borough is going to retain the administrative control. I am not really sure whether that would work very well for the benefit of the patients who want to use the ambulance service. Perhaps the noble Lord, when he replies, could explain this point a little further. Then I think there may be difficulty from the education point of view because, although the new county borough is going to be of the minimum size accepted for a county borough—namely, 100,000 people—a very large proportion of the population are elderly people who have gone there to retire, because it has a nice, pleasant climate to which to retire when one grows old. So I think one can assume—and I believe I have seen it said—that the number of young children who will come into the county borough will not be as big as if there were 100,000 people of a more typical cross-section of the population.
The scheme has one or two good ideas, and one would be very sorry if they were to be dropped because the Order did not pass. If your Lordships will forgive me, I should just like to mention two of

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them. One is that the health department and the social service department will be joined into one functioning department. That will take shape in the new county borough if it comes along, and it seems to me a very good thing. For a long time, so far as I can, I have encouraged people to combine these two services. The second good point is that the social workers in the new county borough are to be grouped together in one department, which is to include a representative of the housing department.
These factors seem to me to make the proposed new county borough full of bright and excellent ideas, as indeed it is, but one wonders whether these developments could not have been put into force in that part of the world without the need of making this big change in the local government structure. When the Royal Commission were first appointed, I think it was said that there were certain cases where the Boundary Commission might have had difficulty in reaching a decision, or that possibly there might have been conflicts among some members of the Commission. It seems as if that might have been the case in this part of the world, as the members did not agree on their first report but only on their final report. If that is so, I feel that it might be advisable to await the Report of the Royal Commission. Torbay might very well be one of those difficult cases. I beg to move the Amendment standing in the name of the noble Earl, Lord Iddesleigh.
Amendment moved—
Leave out all words after ("That,") and insert—
("This House declines to approve an Order by which a major change will be made in the structure of local government in the Torbay area, having regard to the probability that the change will take effect only a short time before the Local Government Commission may be expected to make its report.").—(Lord Amulree.)
3.19 p.m.
VISCOUNT AMORY: My Lords, I support strongly the Amendment which the noble Lord, Lord Amulree, has proposed, and in doing so I should like to join your Lordships in expressing our regret at the absence through ill-health
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of my friend and neighbour, Lord Iddesleigh, who was to propose the Amendment. I have an interest to declare, because in past days, when my faculties were rather more alert than they are at present, I was a member of the Devon County Council, while I have the honour now to be President of the County Councils Association. Having declared that interest, I do not want to offer an apology for taking part in this debate, because I am sure your Lordships will agree that it is right that anyone who has the welfare of local government at heart should express an opinion on a matter like this. I know that other noble Lords who have had wide experience of local government will be taking part in this debate, and I am glad to see that among them will be the noble Lord, Lord Pargiter, who has had a long and distinguished association with a county council.
The first thing I want to say is that this Order represents a major change, and the Special Orders Committee presided over by the noble Earl, Lord Listowel, have said:
"That in their opinion the provisions of the Order raise important questions of policy and principle."
It is clearly a major change in local government in that part of the country, because if effect is given to this Order the administrative county of Devon will lose one-fifth of its population and a quarter of its rate able value. What is more, as I think the noble Lord, Lord Kennet, mentioned, this is not the only loss the administrative county will suffer. It recently suffered a loss of about 10,000 to Exeter; and if an Order to be laid later, I think, takes effect, it will lose something like 35,000 to the City of Plymouth.
I want to put before your Lordships this afternoon two main reasons why this Amendment should be supported and why the decision involved in this Order should be postponed. The first, and I think the one of dominating importance, is that it seems to me that it must be wrong, in a matter which involves a principle, to reach a decision that will take effect probably only a few months before the Royal Commission are expected to report. We do not, of course, know what will be in the Royal Commission's Report, but it is widely expected that, inter alia, they

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will recommend larger administrative units. Therefore, this change is quite likely at least to be out of line with their recommendations, and might well be directly contrary to them. That is the primary objection that I see to passing this Order now.
The second reason is that the wisdom of this decision seem to me to be at least dubious: indeed, I would go so far as to say that, on balance, it is a mistake. Let me say here, however, that as an old county council man I may be biased. But I do claim that at any rate it is at least dubious. So far as I know, it has never been claimed that this change will result in better services to the area concerned. There has been no complaint, I understand, of the services already provided to these local authorities by the county council. Devon, as the noble Lord, Lord Amulree, has already said, is a large and sparsely inhabited county. The noble Lord, Lord Kennet, said, I think, that after this change it would fall into about the middle of the list of counties in terms of population size. But, though large in area, it is by no means excessively large in population, and I should think that after this amputation it would be too small for present needs and might be very much too small in the light of the eventual Report of the Royal Commission.
I understand it is envisaged that if this area is formed into a county borough now, a number of quite important services will be shared. In that situation that may be the best solution for them, but personally I am not much in love with shared services if one can avoid them, because I think sharing blurs responsibility. The possibility of lower rates has been held out as one of the advantages, and that is always a nice thing to have, but I think it is our task to look at this rather in a judicial way. If lower rates do result, I understand it will be due to the beneficence of the taxpayer, who will be making an additional grant, at which Lord Kennet hinted and which I think has been computed at about half a million pounds. One other point is the question whether there has been a feverish demand for working together on the part of these local authorities, and in favour of "marriage", as it were. I do not think there has been. In the past
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there has not been any noticeably warm or close community spirit between the authorities concerned, or any very strongly expressed wish to join together.
In brief, in view of the very cogent statement in the Report of the Special Orders Committee, I think that, short of the most urgent and pressing reasons, this action at this time cannot be justified—and, so far as I know, no urgent or pressing reasons have been advanced at all. What those who think like me are pressing for is not a reversal of the decision that the Torbay area should be a county borough, but a suspension of the decision whether it should be or not until the Royal Commission has had a chance of expressing a view on the optimum size for future administrative areas. That is so reasonable a view, I should have thought, that I am amazed that the Minister, who I think generally tries to be fair-minded in these things and who certainly has a mind of his own, has decided to press ahead. I want to suggest to your Lordships that we should do our best to save the Minister from a misjudgment at which he has arrived, I think, rather hastily, and which he may well, in his heart of hearts, regret by now.
I would remind your Lordships of what the Prime Minister said when he announced the setting up of the Royal Commission, if I am in order quoting his words, as I think I am. The Prime Minister said:
"My right honourable friend"—
that is the Minister concerned, of course—
"will be free to go on with any appropriate cases, but when it comes to the broader issues and those which involve matters of deep principle on which the Boundary Commissions have sometimes reached conflicting views we would do well to await the Report of the Royal Commission."
I should have thought that this case fell exactly into that description. As Lord Amulree has mentioned, we have the fact that the Local Government Commission, in their first Report, decided against, or did not find in favour of, setting up this county borough. In a final Report they did, but, as Lord Amulree has said, only on the ground that the population in the Torbay area was increasing rather faster than had been expected and was going to reach the minimum size which is at present regarded as appropriate for a county borough rather earlier than it was expected.

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It might well be that, so far as the size of these areas is concerned, that reason would not stand up, and so I suggest to your Lordships that a matter of principle is here involved. That principle is: what is the right size for these local government areas? I could not quite follow Lord Kennet when he seemed to imply that by taking no action we might be making the matter as difficult for the Royal Commission as if we did take action. I do not quite follow that argument. I should have thought that no difficulties would be involved for the Royal Commission if things were left as they are until they reported. I hope very much that the House will support the Amendment. It does not seem to me to be a matter involving Party principles or Party controversy in any way, and therefore I should personally have thought it essentially a matter of procedure on which your Lordships would be justified in expressing an opinion; and I hope you will.
3.30 p.m.
LORD LEATHERLAND: My Lords, since my noble friend Lord Kennet took over responsibility for local government affairs in this House I have grown to admire very much his versatility and knowledge in tackling a good many complicated questions. I shall do nothing and say nothing to embarrass him to-day either during the course of our speeches or afterwards; but I want to represent to him that I think that here probably the Government have made a very grave mistake, especially in the light of the proposals for future drastic local government reorganisation that are being considered by the Royal Commission.
I should like to ask the noble Lord this question. If the scheme were now being considered de novo, would the Ministry come before us and ask us to approve it? If the answer be, No, then what justification is there for asking us to pass it at all, when we know that by the time it comes into operation (in about 18 months' time) it may be out of date and the new county borough may have to be scrapped after it has been in existence for no more than a few months? If the answer be, Yes, what justification is there for wasting all the time of the Royal Commission when the Government have charged them to work out a scheme for a fundamental system of reform in
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local government? I believe that this proposal runs counter to the future pattern of local government with which the Royal Commission were intended to charge themselves. It certainly is diametrically opposed to the remarks made by the Ministers of the Government at the time that the Royal Commission was set up.
Unlike the noble Viscount, Lord Amory, I have never lived in Devon, but I have been approached by various organisations, various individuals and various local government bodies asking me either to support or to oppose this Order. I have told them all that I will try to acquaint myself fully with the facts and I will then make up my mind independently as to what I shall do. I have refused to bind myself one way or the other; I have been eager to speak, as it were, as a virgin. I want to look first at the Torbay scheme itself and then to see how it would fit into the framework of the future local government system that is envisaged for this country and into which the Royal Commission are inquiring. It appears to me that the scheme itself has little to commend it. It has been surrounded by confusion, uncertainty, inaccuracy and contradiction through all its stages. Its genesis was not a happy one. This was not a case of having a tightly knit homogeneous community with the ability to provide all the services it needs for itself. It was nothing of the kind; it had not even the requisite population.
This was rather a question of the promoters scampering out into the highways and byways, dragging in half a village here, half a town there, putting out one of them, putting in another, in a frantic effort to make up the criterion of 100,000 population. Originally Teignmouth was in the scheme; then it was out. Originally Paignton was out of the scheme; then it was in. One village after another was brought in, then pushed out, or cut in two so that half was in one place and half in another; and all this was done, as I have said, in a frantic effort to ensure that the necessary 100,000 population could be obtained. Then when the Commission started their inquiries they found there was a very big gap between two of the towns. The promoters got over that by saying, "Oh we shall be building new houses." That may be so, but it rather

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grieves me to think that large-scale building is going on along the beautiful coastline of Devon.
My Lords, I do not know whether it is generally appreciated that there have been three separate schemes put forward by the promoters of this plan. There was what they called the First Scheme; there was what they called the "A" Scheme; and there was what they called the "B" Scheme. The final picture as presented to us is not like the homogeneous built-up community which we would naturally expect from an area seeking to convert itself into a county borough. This is how it is described in the printed Order which some noble Lords may have before them.
Page 4 of the Order says:
"The new county borough … shall comprise—

(a) the area of the borough of Torquay, other than those parts thereof which are shown hatched green on the map;

(b) the area of the urban district of Paignton, other than that part thereof which is shown hatched green on the map;

(c) that part of the urban district of Brixham which is shown hatched red on the map; "—

and, of course, half of Brixham is staving out of the scheme—
"(d) those parts of the parishes of Coffinswell and Kerswells … which are shown hatched red on the map;
(e) those parts of the parishes of Churston Ferrers and Marldon in the rural district of Totnes which are shown hatched red on the map…".
That shows, as I have said, that they have gone round the highways and byways snatching part of a town here, part of a town there, in an effort to make the 100,000 population. Geographically it is nothing like the kind of big town that we associate with county borough status. It is a strip of coastline 14 miles long with a very narrow strip of hinterland.
As has been suggested, a bait was held out by the promoters of the scheme in the first place. That bait was a big reduction in rates. Originally it was to be a reduction of 3s. 3d. for the inhabitants of Torquay; then it came down to 1s. The latest statement is that probably there will not be any reduction of rates at all. We all know that public services
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organised on a small scale cost more than those organised on a large scale, the scale we associate with county councils. I do not know what other increased expenditure the county borough inhabitants will find necessary. They will most decidedly have to expand the town hall or provide additional municipal offices of some kind. I wonder whether the people who fell for this idea when it was first put forward by the promoters would be quite so keen on it if they knew that the bait of the 3s. 3d. reduction in rates was no longer in existence. I suppose the inhabitants of Paignton and Brixham realise that their two towns will be in a permanent minority in the seats of the new Torbay County Borough Council.
I ask myself whether this would turn out to be a real county borough or merely a sham county borough. One of the criteria applied is whether the council can provide its own services. Can Torbay provide its own police service? No. But I will not press that because we know that the idea of police amalgamation is in the air throughout the whole country. Can it provide its own fire brigade? No. There is to be a joint arrangement with the county council with some members of the county borough council sitting on the county council committee. Can it provide its own ambulance service? No. The control station is to be operated by the County Council. It is true that the South Devon Technical College and School of Art in Torquay is to be taken over, but it will be administered by a joint committee, partly of the County Council and partly of the new county borough council.
My Lords, a county borough council is supposed to be able to do its own work without having to call upon the county council as partner. It looks as though the education and children's services will also need to make some use of the County Council's high-grade specialist officers; because although Torbay will have a population approaching the 100,000, it is populated largely by old people and its school population is appropriate to a population of only 60,000. It looks as though there will be shared services for the junior training centre, for sheltered workshops and for the school meals training centre. I suggest that the County Borough of Torbay would fail to fulfil the criterion of being

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able to provide all its own services. Apart from these cases where it says that it will not be able to render this, that or the other service, it is taking a step in the opposite direction. It is going to set up its own motor licensing department, as any county borough naturally would, when we all know that in a few years' time motor licensing is going to be centralised in London and county and county borough licensing departments will become merely post offices for transmitting documents to Whitehall.
I think that noble Lords are all aware that the standard minimum population for a county borough is 100,000. But I think that your Lordships are also aware that that criterion is now regarded as being out of date by practically everybody engaged in local government and by a good many people in Central Government as well. It is regarded as far too small, and figures of 150,000 and 200,000 have been suggested. When the Greater London Council was originally suggested, 200,000 was to be the average population for its new boroughs, and they were most-purpose boroughs and not all-purpose boroughs, as this county borough is to be. Yet in some cases this figure was raised by the Government to nearly 400,000. We must have a big community that will be able to engage officials and technical experts of the calibre required and to provide the wide range and high standard of services that are needed in local government to-day, and some of these services must of necessity be spread over a wide geographical area.
How does Torbay measure up even to this out-of-date standard of 100,000 inhabitants? It does not measure up to it at all. No matter how they tried, the Commission could not force the population up to the required number, with all the jigsaw juggling with places on the map—a village brought in here, half a town turned out there. So the Commission rejected the idea of a county borough. They did so for three reasons: first, because the population was inadequate; secondly, because there was a discontinuous area and not a real town area, as your Lordships will see by glancing at the map; and, thirdly, because if there was to be any merger—and I can see some reason for some kind of merger or association between these three towns—it should be on the basis, not of
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a county borough, but of an ordinary municipal borough.
When the Commission had turned down their proposal, the promoters began to get worried over the failure to reach the population required. They thought that if they could push up their population, then they might have a chance of getting their case reconsidered. They sat down, scratched their heads and thought of another number. They had the bright idea of including in the population figure the holidaymakers who happened to be staying in the town at the time.(I saw a signal from the noble Lord the Leader of the Opposition. Does the Minister want to make a Statement? Tell me when he does and I will stop; I am always chivalrous.) They did that by taking the Census figures, which included everybody who happened to be staying in every house at the time, instead of taking the Registrar General's figures, which are the regulation figures for a transaction of this kind. Then they projected themselves forward into the population of future years and counted the babies who had not yet been conceived, let alone the babies not yet born. Then they realised that the district would consist largely of old people and that deaths would exceed the births so that there was a natural decrease in the population year by year. So they got over that by talking about the immigrants, the people coming into the district, and claimed that they had a lot of houses built and a lot more being built.
LORD KENNET: My Lords, we know that the noble Lord has championed the interests of expanding counties. Could he tell us whether, in reckoning how much they are going to expand, they take into account the unborn babies and immigrants?
LORD LEATHERLAND: I am not associated with an expanding county; but, as I pointed out in this House last week, in the case of a county which has been diminished and hopes to expand, we have had half of our county cut off. We will leave the maternity side of this. They said that they have a lot of new houses built and building, but omitted to say that many would be occupied by existing residents—shopkeepers who were retiring and people who had got on in the world and could afford a bigger house, and so on. And they omitted to

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mention that many of these immigrants were retired people of advanced age, so that their contribution to the increased population would be to raise the death rate and not the birth rate.
However, the promoters ultimately arrived at what they said was the figure of 100,000, plus 810, and claimed that this would rise to 110,000 by 1965. That forecast is on record. I should like to test the validity of that forecast. If we look at the Order, on the inside back page we find that the population in June, 1965, is given as 97,800. Fortunately, the Commission were not taken in by this figure put forward by the promoters. They decided that the population at that time was only 97,000 and that it would reach 100,000 by 1966. As 1966 is not over, we do not yet know whether that figure will be reached or not. But we do know that the official Order, which was made on August 1 of this year, said then:
"The population of about 97,800 as of June, 1965, is expected to increase to about 102,000 by 1968."
They foreshadowed an increase of just over 4,000 in three years; that is, of just over 1,300 a year. So, if we add 1½years'increase in population to the June, 1965, figure to bring it forward to the end of December of this year, we still find that the population is below the 100,000 mark. If the Commission's first figures were wrong, what real confidence can we have in the second set of figures?
However, the Commission went on to persuade themselves that the first draft of their recommendations, against the county borough, was wrong and that they could now feel comfortable in recommending the county borough. This was after several alterations on the map, two different attempts to determine the population, three versions about what the rates would be, and with two diametrically opposed decisions by the Commission themselves. I am sure that noble Lords who preside on benches of magistrates, as I do, would look with some suspicion upon a case which was put forward by any prosecutor in the manner in which this case has been put forward through its various stages by the Commission. Certainly there is no proof to-day that the population has reached 100;000. This is apart from all
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the other shortcomings of the case: apart from the fact that Torbay is unable to provide all its services, and apart from the underlying fact that 100,000 is not now regarded as being a high enough figure for county borough status. I believe, as the Commission thought in the first place, that there is something to be said for some kind of merger, but that this should be with the three towns combining as a municipal borough to perform as many services as they can and relying on the County Council for the remainder.
What will be the effect of this scheme on the Devon County Council? The noble Viscount has already given us some idea of that. But county councils have to plan for an extensive range of services; and services often scattered over a wide area. And they need to draw their revenue from the built-up areas, as well as the sparsely populated areas, which have little rate able value. Moreover, the provision of these widely based services requires a large-scale overhead structure. If you have set up an organisational machine which is appropriate to a population of 500,000, and if you take away 100,000 of the inhabitants it means that the overheads will have a disproportionate effect on the economic operation of the organisation with its reduced population.
The Commission admit that Devon is going to suffer. But the bait was held out that Devon would get a £500,000 donation from the Exchequer by way of consolation. That may be so, and it may be most acceptable. It is coming from the taxpayers. We all pay our taxes willingly, and we know that the Government can spend the money better than we can; but what I think the people of Devon must be thinking is this. They know that the whole question of Exchequer grants to local authorities is shortly going into the melting-pot, and they may be content to say: "Yes; this £500,000 a year is very welcome to-day. It will solve most of our financial problems. But what guarantee have we that it will continue in the future?" I say nothing more about Devon, because that has already been covered by the noble Viscount.
However, I want to say a word or two about the general question of local government reorganisation. We know

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that this is coming in a few years' time. The Report of the Royal Commission will come a few months after Torbay comes into existence. So there is every chance that the new county borough of Torbay, having been born, will have to be slaughtered without any delay. Nobody knows what the Commission will recommend. But most of the evidence has been in favour of much larger local government units; and even before the Royal Commission began to consider these claims for larger local government units there was a vigorous agitation throughout the greater part of the local government world that county boroughs should either be abolished or be increased from their 100,000 minimum to the 200,000 mark. Even the onetime champion of county boroughs, the Association of Municipal Corporations, has changed its outlook. In its evidence to the Commission it said that "reorganisation is not a matter of extending or enlarging existing authorities; it is a matter of creating a brand new system of local authorities." That is the body which used to champion county boroughs kicking away the stool on which they stood; and, incidentally, it kicks away the stool on which the whole case for the Torbay County Borough stands.
I should like to sum up and say that I have not much confidence in the scheme as put forward. I say this, first, because the Boundary Commission changed their figures; they changed their areas; they have changed their "No" into "Yes", and that does not inspire very much confidence. Secondly, Torbay cannot provide all its services. Thirdly, although originally a big rate reduction was suggested, that promise seems now to have disappeared into thin air, and one cannot have much confidence in that. Fourthly, there is the effect on the Devon County Council; and I think this must be to the disadvantage of local government in that part of the country. Fifthly, the date for the introduction of the new borough has already been altered from April 1, 1967, to April 1, 1968, the only factor that remains constant being April 1; and the present 1968 date, when Torbay County Borough will be flying its flag for the first time, is just about the time when the Royal Commission will be compiling or presenting their Report.
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I do not want to say much more. I will not quote the references that were made by the present Minister, and by his predecessor, at the time the Royal Commission were appointed and at the time when the old Local Government Commission was killed off. But I will just say this. This scheme comes to us out of the grave of a Commission that was killed because it was not effective enough to do the job for which it was established. I would plead with my noble friend to urge the Minister to think once again.

COST OF BRITISH FORCES IN GERMANY
3.55 p.m.
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR FOREIGN AFFAIRS (LORD WALSTON): My Lords, with your Lordships' permission I should like to repeat a Statement which is being made in another place by my right honourable friend the Chancellor of the Duchy of Lancaster on the cost of British Forces in Germany.
"Her Majesty's Goverment agreed in October to take part in Tripartite Talks with the United States and the Federal Republic of Germany, to consider, in the light of the present strategic situation, questions of common concern to the three Governments arising out of the stationing of American and British Forces in Germany and the foreign exchange cost of those forces. At that time Her Majesty's Government expressed the hope that the results of the Tripartite Talks could be ready for consideration at the Ministerial Meeting of the North Atlantic Treaty Organisation starting on the 14th of December. It has not in the event proved possible for the three Governments to adhere to this timetable.
"Her Majesty's Government have agreed to continue the Tripartite Talks in the hope of reaching the earliest possible agreement on the financial and military questions at issue. They have agreed to make no changes in their troop and supply dispositions in Germany meanwhile, apart from the normal rotation of troops or savings in their personal expenditure and other administrative economies not affecting their combat capability.

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"If, by the end of June, 1967, agreement has not been reached in the Tripartite Talks, Her Majesty's Government would have to regard themselves as free to take whatever decisions seem necessary to them to cover the foreign exchange costs of their Forces in Germany in 1967–68. As they have always said, they would of course act in concert with their allies and follow the prescribed North Atlantic Treaty Organisation and Western European Union procedures.
"The United States Government, recognising the urgency of Her Majesty's Government's need to deal with the foreign exchange cost of their Forces in Germany, have offered to make further purchases in the defence field in the United Kingdom to the amount of 35 million dollars during 1967. These purchases would represent expenditures additional to those to which the United States is already committed under existing arrangements and understandings. Her Majesty's Government have accepted this offer.
"The next meeting of the Tripartite Talks is expected to he held in January 1967."
LORD CARRINGTON: My Lords, your Lordships will be obliged to the noble Lord for repeating this Statement. I think I am right in saying that, contrary to what the Government expected, the Tripartite Talks which have just ended were regarded by the United States more in the nature of exploratory talks, and that no agreement was possible. I very much hope that there will be the possibility of a fairly speedy conclusion at the next talks, because I cannot help thinking that this uncertainty is a bad thing: it is bad for the British Army of the Rhine; I should have thought that it was bad for NATO, which is facing great difficulties in any event, and it is bad for creating the right conditions for our entry into Europe.
May I ask the noble Lord this question? At the close of the Statement he said that the United States Government had offered to make further purchases, over and above the commitments they had already, to the tune of 35 million dollars. As I understand it, the United
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States Government are not really committed to anything at the present time. I may be quite wrong, but I thought that all the United States Government had said was that they would allow British firms to compete without restriction for 300 million dollars' worth of export of armaments. Therefore they are not committed to anything. Does this mean that the 35 million dollars is in exactly the same category as this, or is it a firm agreement to purchase 35 million dollars' worth of equipment?
LORD WALSTON: My Lords, I certainly share the hopes that the noble Lord has expressed about the speedy solution of this problem. I can assure him that we are doing all we can, and I think successfully, to maintain the morale in our own Forces and to make it quite clear to our NATO allies that whatever action we take will be in full conformity with our NATO obligations. With regard to the second part of his question, as I understand it this is a firm commitment—I speak subject to correction—to spend this amount of money during the ensuing period.
LORD CARRINGTON: My Lords, under whose correction does the noble Lord stand? Is it, or is it not?
LORD WALSTON: My Lords, as I understand it, it is, but I do not want to be too categorical on that. I will write to the noble Lord and tell him if it is so. My understanding is that this is a firm commitment.
LORD OGMORE: My Lords, may I ask the noble Lord, Lord Walston, whether, as this is a matter of urgency, the British Government would consider bringing back the headquarters of the Rhine Army to this country, leaving the Corps headquarters in Germany, as is the practice adopted by Belgium? Secondly, as there can be no great amelioration of our financial problems on this score until June, 1967, would the Government expedite the homecoming of some of our Forces East of Suez?
LORD WALSTON: My Lords, the question of our Forces East of Suez, I think the noble Lord will agree, is an entirely different matter. With regard to the headquarters movement, all these matters are under discussion in the Tripartite Talks. As I have already said, anything we do will be in co-operation and

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in full discussion previously with our NATO allies, and also with the agreement of the NATO Commanders, so that there is no undue weakening of our own effective contribution to the NATO Forces.

TORBAY ORDER 1966
4.3 p.m.
Debate resumed.
VISCOUNT GAGE: My Lords, I rise to express in a very few sentences my support of the three previous speeches on the question of Torbay. The fact is that between the date this Order was made by the Minister and its presentation to Parliament there has been a revolution in thinking in the Ministry. If any proof of that is needed, I would cite my own district of South-East England, where we had our own plans and had spent a great deal of time and energy on conceiving and drafting those plans, but were not able to present them because the Boundary Commission was abolished before they came to us. We have had to wait, and if Torbay had been in South-Eastern England instead of South-Western England, it would have had to wait, too.
The reasons for this change have been expressed in Ministerial speeches. Generally the theory is that this cold war between county boroughs and county councils must be superseded by something better. The case we are considering to-day is an example of a cold war. I do not know anything about Devonshire or Torbay, but I do know something about local government. If there is a big shake-out or redeployment, it is always a matter of great difficulty and, very often, some pain. This is found in other areas of political life. To have two shake-outs, two redeployments, in a matter of three years seems to me too painful, too unnecessary, and I therefore support what my noble friends Lord Amory and Lord Amulree have suggested.
4.5 p.m.
LORD PARGITER: My Lords, so much has already been said on the demerits of this Order that I do not wish to repeat and go to the length my noble friend Lord Leather land has done in the detailed way in which he has destroyed the validity of this Order. I would rather rely on the Special Orders
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Committee, who said, in effect: "Do not pass this Order". They say that it is in order—they were bound to say that. The Committee were bound to say that the people who ought to consider it are your Lordships, which again I would consider to be quite proper. But when the Report says that, having regard to the fact that the Royal Commission are expected to report at about the time this Order will become effective, and therefore should receive the careful consideration of your Lordships, it seems to me that that is tantamount to saying that it really ought not to go through.
I should like to deal with one or two points that have been made, and I will do so very briefly. The apology of the Minister for bringing this Order to us is that the Minister announced in June, 1965, that he was proposing to accept the proposals of the Local Government Commission, subject to some minor amendments. This is an argument put forward now as being a reason why this Order must go through. But I would submit that we are not governed by Ministers. Ministers have their job to do, but if the Minister's word is to he the final word on this matter, why has the procedure been arrived at of presenting the Orders to the House for approval?
I strongly resent the idea that because a Minister has said something it must necessarily be accepted in this House, or in another place, as being a necessary reason for something going through. We are not concerned with which side Ministers come from: I am referring to Ministers in general. We know that on both sides Ministers change their minds, and do so quite frequently. Therefore, the final decision must be what your Lordships decide, or what is decided in another place. In these circumstances, the appropriate date for considering this matter in relation to the time scale is now and not June, 1965. In June, 1965, it was not proposed to abolish the Boundary Commission. It might have been in mind, because of the difficulties which the Boundary Commission faced and which everybody recognised. But certainly there was no public pronouncement on this matter until the following year.
Therefore, had we been considering the Torbay Order in June, 1965, although

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I think the Order itself is not a good one, we should have considered it in a different light. I should probably have accepted it as not being very good but, in the general light of what was being done by the Boundary Commission, as perhaps not too appropriate but nevertheless as something that might be permitted. But having regard to the fact that the Boundary Commission was wound up, not because it was inefficient, but because so much water had flowed under the bridge since it was appointed, or since the Act which permitted its appointment was passed, the facts that it had to consider for the purposes of local government reorganisation were no longer valid. If they were no longer valid, obviously they can be no longer valid for things which were in the pipeline. This is the basis of my case.
I need not go over the ground, but it is already accepted generally that 100,000 population is not necessarily the appropriate minimum figure for county borough status. Do not let us run away with this magic figure of 100,000. It is only one of the factors to be taken into consideration in considering whether a county borough should be created. There are all sorts of other factors which come into this matter, and here it would seem to me that the bulk of the case is against the Torbay Order.
Some reference has been made by the Minister to the question of the relief which will be available to the Devon County Council as a result of this massive transfer of rate able values from the county to the proposed new county borough. I think he might have told us the whole of the story, because by the time this transfer becomes effective we shall be under the new grant system, which provides for a total ceiling of Government grants—not with anything added to it, but a total ceiling. Below the ceiling the amounts to be paid to the varying types of authority, individually or collectively, may be varied, but the transfer of any sum of money to a particular authority, or type of authority, will need a reduction to another type of authority.
The Government are glibly talking about £500,000 being available. I would respectfully say to your Lordships that this is another £500,000 of the taxpayers' money which will be provided in a par-
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ticular area because of the action taken by the Government in reducing the rate able value of the County of Devon. This seems to me to be a good reason why most local authorities will not look at it in quite that way when they realise that if Devon gets another £500,000 some of them will get less.
Nor should we be led away by the idea that there will be vast new sums of money available. We know that £30 million will be made available, but this is for the relief of the domestic ratepayers and there will not be any more than £30 million. We do not even know that there will be any addition to the figures of last year. It may well be that there will not be sufficient monies available to deal with normal increases, and therefore we should be rather circumspect in suggesting that if Devon gets another £500,000 that will ease the way and we need not worry very much.
Apart from the financial aspects there is another question I wish to discuss. I was concerned in the negotiations between various associations from the early 1950's up to the time of the setting up of the Boundary Commission. The figure of 100,000 even then was never a sacrosanct figure. It was reached by a bit of Dutch auctioning as to the minimum which would be acceptable to the County Councils Association, upon which agreement could he reached between ourselves, the rural district councils and the urban district councils associations. So that figure was never very firmly based. It was accepted as a compromise. This has proved itself to be ineffective and quite out of reason in the light of present-day developments, which, my noble friend has already said, is referred to in the evidence submitted to the Royal Commission.
If it is argued that the Royal Commission are not going to report in two years, I, for one, would want to know what the Government are doing, because the Minister said that we were setting up a relatively small, high-powered Commission in order that they could report in approximately two years. The speed with which the Royal Commission have been working to get in the written evidence convinces me that they will endeavour to live up to the proposed timetable. If the Minister says that the Government will be so dilatory in dealing with the

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report that it will take years to frame legislation, I am sorry, but that will be no reason for not dealing with this Order, because it is fairly obvious that Torbay will not remain as a county borough. Therefore what is now being done will merely have the effect of changing the position, and by the time it becomes effective it will need to be superseded.
What shall we have done? We shall have created a new set of officers. What will be done as a result of the creation of the county borough will be that quite a number of officers in small districts will become redundant and will need to be compensated. This is happening in London at the present time. And if, within a relatively short time, it is found necessary to change the status again to fit in with a different pattern of local government over the country as a whole, there will be more redundancy. Everything that has been said by the Government on this matter convinces me that, had it not been for the fact that this proposal was in the pipe-line, it would not have been proceeded with; the fact that it is in the pipe-line ought not to preclude your Lordships from turning it down.
4.15 p.m.
LORD HYLTON: My Lords, I regret I did not hear the noble Lord, Lord Kennet, make his opening remarks, but having listened to the last four noble Lords who have spoken in opposition I cannot believe that the case put forward by the noble Lord, Lord Kennet, has not been completely demolished. The last four speakers all have great knowledge of local government and local government reorganisation. They have spoken as one against the proposal of the Torbay Order. The effect of this Order, even if it were carried out—which I very much hope it will not be—would be to create what perhaps is one of the weakest forms of local government; that is to say, a weak county borough. A weak county borough has so many disadvantages. It cannot afford to do what a county borough ought to do—namely, to provide the services for which it is set up. I know myself, after thirty years as a member of a county council, that a weak county borough is never able to bear the financial burden of its duties, and the
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result of that is that the so-called county boroughs often have to borrow and to be subsidised in order to carry out their duties.
Surely this is the last moment at which to set up this rather ramshackle new county borough which has been described by my noble friend Lord Amory and by the two noble Lords opposite. From what we have heard to-day it will not be a viable unit, and if the Government, in their wisdom, set up a Royal Commission to iron out the non-viable units what on earth is the use, at this moment, of setting up what is bound to be a non-viable unit, a few months before the Royal Commission report? I cannot believe that it makes sense at all.
I should like to refer to a most important point that was made by the noble Lord, Lord Pargiter, when he referred to the half a million pounds subsidy that might be found for the County of Devon by the Exchequer. No doubt that would he agreeable for the county concerned, but the noble Lord demolished that case because he pointed out that this half a million pounds will only come from other local authorities, county councils or county boroughs, which will he receiving subsidies from the central Exchequer. The other counties will be short of this half a million pounds, which is to go to Devon for the only object of relieving it from what it loses by setting up this weak, non-viable county borough of Torbay. I cannot believe your Lordships would be right in passing this Order to-day and I support as strongly as possible the Amendment that has been moved.
4.20 p.m.
LORD MILVERTON: My Lords, I feel on this occasion more than usually like a voice crying in the wilderness. None the less, it leaves me no less convinced that I am right, and I may perhaps be able to convince your Lordships that there is another side to this picture. It has been painted all black and one-sided to-day. I rise to support this Order and to express the hope that your Lordships will give it approval. Perhaps I ought first to say that the noble Lord, Lord Ilford, whose knowledge of local government and experience in it is respected on all sides of this House, very much regrets that he was unable to be present here to-day owing to important pre-engagements, and the views that I

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am going to try to express to you are those that he would have expressed very much better had he been able to be here.
To begin with, may I deal with one point from a previous speaker which rather shocked me. The noble Lord claimed that the Special Orders Committee had more or less recommended the rejection of this Order. They did nothing of the sort. As I understand it, the Special Orders Committee merely stated that as a question of policy and principle was involved it would be proper for your Lordships, in making a decision whether to approve or disapprove, to be cognisant of a view which was held by many people. The debate to-day seems to me, if I may say so, to have rather swamped the main question in a mass of detail, no doubt based on knowledge. I know that a little knowledge is a dangerous thing but I feel to-day that a lot of knowledge is often more dangerous, because it is liable to emerge and to swamp the point at issue.
The question is whether a major change should be made in the structure of local government in the Torbay area having regard to the probability that the change will take effect only a short time before the Royal Commission maybe expected to make its Report. The noble Lord, Lord Amulree, and other speakers have elaborated the reasons why in their view your Lordships should deny your approval. On the other side of this question, I would ask your Lordships to consider to what extent a general principle such as has been stated to apply should be applied so destructively in the overriding circumstances of the particular area which, after all, we are supposed to be considering. In view of some of the very derogatory remarks which have been made by one speaker about the Local Government Commission, I would say that surely their words merit some attention. In their Report they said:
"We feel that the proposed county borough of Torquay is an imaginative proposal which, with the assured goodwill of so many who arc concerned, could have far reaching effects on both the standard of services and on the future prosperity of the area as a whole whilst still leaving the County of Devon a strong and effective instrument of local government."
You cannot just sweep that aside.
The Local Government Commission has been attacked by another speaker, but that again is distorting the truth.
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When the announcement was made of the winding-up of the Local Government Commission and the setting-up of the Royal Commission on Local Government there was no suggestion that the reason was the incompetence of the former Commission, and the work they had done was expressly preserved. In short, the standstill pending recommendations by the Royal Commission was not back-dated; it is not to be assumed, in other words, that all the work of the former Commission was so bad that their knitting will now be unravelled. I think one should bear that in mind, too, especially as none of us knows, what the Royal Commission will report.
The noble Viscount, Lord Amory, I think, referred to the danger, which apparently will be caused by approval of this Order, of the coast of Devon being tremendously over-built. I am unable to understand how that can be deduced, how there can be any greater danger, because the local people, who will be most affected by what is done, are in charge. Would not the danger be equally great when the control was far away from that particular area? That, at any rate, is the way I personally should look at it.
After the Minister of Housing and Local Government announced his decision to approve the formation of a county borough in Torquay, the councils of Torquay, Paignton and Brixham established a joint co-ordinating committee, as I think the noble Lord introducing this Order stated—but apparently it has been disregarded by speakers—to assist in the implementation of the Minister's decision, and for this purpose it was given delegated powers. I do not want to waste the time of this House by going into details, but I must mention a few, in view of the completely false picture which I think many speakers have left of the issues here. Various sub-committees were appointed to consider all the aspects of integration—departmental structure, establishment matters, schemes for the various departments and services of the new county borough. Nothing has been neglected, from the equalisation of water rate differentials to trade union staffing, setting up of a manual workers' joint consultative council, from accounting to engineering—in fact, every question relating to the amalgamation of the

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services at present separately administered by the towns of Torquay, Paignton, Brixham and the parish of Churston Ferrers.
I am surprised at the noble Lord, Lord Amulree, proposing the denial of this Order, because special attention has been given to the organisation of health and social services. Administrative plans have been drafted in which an attempt has been made to break down the traditional watertight divisions so often found in the local authority health and social services and to try to provide a really integrated service reorientated to the individual or family whom it is sought to benefit, rather than on the administrative echelons of professional workers. For several years there has been enthusiastic co-operation and a real spirit of local pride which has produced a very unusual unanimity of effort. Can one seriously contemplate killing the enthusiasm of those who have worked so successfully to achieve agreement?
It may be suggested by those opposing the Order that a county borough of 100,000 population is likely to be condemned. But this is pure speculation. Indeed, it is probably more likely that the existing county council structure will be affected, and so an area such as the proposed Torquay County Borough, possibly enlarged, could be envisaged as a unit to perform the functions which, of necessity, must be administered by an authority which is local.
I have been noticing a paper, to which I have not the reference at the moment, but I can do without it. It is far more likely that the Royal Commission, when they Report, will deal with county councils as regions, and will possibly leave outside a county borough such as Torquay, because it can be left efficiently to function beneath whatever the region may be, and be left outside, as was done in the original reorientation of local government. But I would only say, with respect, that to suggest that at this stage the Order should be abandoned because of the impending Report of the Royal Commission on Local Government is not a realistic position to take up when one remembers the years that must pass before the Commission's recommendations, whatever they happen to be, are implemented.
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One material point which I feel sure should be emphasised is that in the formation of a county borough for Torbay there is the opportunity of gaining experience of the administration of a larger local government unit of the type and nature likely to evolve from the finding of the Royal Commission. Surely the real advantage of the unification of this area rests upon the fact that, to be a really efficient and enterprising international resort, which it is likely to become, much to the profit of this country, Torbay should be administered as one unit, with all the benefits that would derive from this sensible arrangement.
May I emphasise, too, that the coordinating committee charged with the task of the formation of the proposed county borough have worked hard, and most successfully, and I am sure that many of the aspersions cast upon them this afternoon were quite unjustified. In the minds of any listener who was not acquainted with the facts, what has been said would leave the impression of complete muddle and disorder, though any such impression would have not a vestige of truth in it. The whole of the Torbay area is united in its desire for county borough status. Surely it would be a pity to throw away all this preparatory work for the problematic and remote reasons which have been advanced this afternoon. I venture to express a hope that your Lordships will refuse to decree a paralysis of progress of indefinite duration by denying approval of this Order. I believe that the question before this House this afternoon is: Are you in favour of action, or inaction bolstered by hatred of change to a better organisation?
My Lords,
"There is a tide in the affairs of men…"
I hope that your Lordships will recognise it by approving this Order.
4.35 p.m.
LORD TAYLOR OF MANSFIELD: My Lords, I will not trespass upon your Lordships' time for too long. Listening to the most interesting debate that we have had, I felt impelled to say a few words about the Order that is before us. Unlike the noble Viscount, Lord Amory, I am not familiar geographically with the

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area to which this Order refers; therefore, I cannot speak about Devon with the same competence and authority that he can. Nor is it my intention this afternoon to go into the merits or otherwise, which have been reflected in the Local Government Commission proposals recommending that this County Borough of Torbay should be created.
The only point I wish to make, in the few words that I have to say, is that since the recommendations were made (we have heard quite a lot from the noble Lord, Lord Leather land, about this), and since the decision of the Minister was given in the early part of this year, circumstances have changed. May I say that this may not be the last Order of its kind that we shall have? I am advised that, in the not too distant future we shall have a similar Order so far as the proposals respecting Sheffield, the Derbyshire County Council and the Chesterfield Rural District Council are concerned, and there may be others. All that is an indication that this is not the last time we shall hear of this particular subject.
May I say, in parenthesis, that I entered local government as a local councillor more than forty years ago, and from that moment one of the topics that has been most discussed in local government circles by those who are closest to it, has been the reform of local government. On that point I have discovered that there is complete unanimity—no one objects to it. But when the various suggestions are put forward about what kind of reform it shall be, my experience has been that it immediately produces a verbal civil war. One of my hopes is that the Royal Commission set up this year will grasp this nettle, and will deal with the structure of local government and set it up more on a satisfactory basis than it is at the moment.
In the presence of the noble Lord, Lord Brooke of Cumnor, I would say that I found that his Act of 1957 on this particular subject really lacked teeth. It is true that it provided for promotion to county borough status, for demotion from county borough status, for amalgamations of certain authorities, and that if a new authority resulting
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from amalgamations reached a population of 60,000, then certain delegation of services would come to it by right and not as a result of the good disposition of the county council. But there we are. All this has been going on for a long time.
What, then, are the changed circumstances which have come into operation during the past few months? The first is that the Local Government Commission, which was set up under legislation passed in 1958, has now been abandoned. Secondly, a Royal Commission has been set up to look at the structure of local government, and it is hoped that they will make their Report by not later than the middle of 1968. What a coincidence it is that this Torbay Order may come into operation almost at the same time as the Royal Commission make their Report. Nobody can anticipate what the Royal Commission may say, but, in view of the possibility of far-reaching proposals regarding the structure of local government and having regard to the evidence which has been submitted by the various local authorities, it is not an exaggeration to say that it is quite possible there may be rather larger units than is the case at present. So far as Torbay is concerned—and indeed other areas, too, such as Sheffield and Derbyshire County Council—I would suggest that, rather than run the risk of two changes in so short a time, it would be advisable to have a complete standstill until the Royal Commission on Local Government has reported.
I noted that the Special Orders Committee did one thing of significance. They rejected the petition of the Devon County Council in relation to a new inquiry, and when one reads all the evidence and sees the arguments which have been put upon more than one occasion—at the meeting with local authorities, at the statutory meetings and in the inquiry itself—one has to conclude that the matter has been threshed out quite sufficiently and that the Special Orders Committee were quite right to refuse an inquiry. But what was significant was that they went on to say (and I feel that this is most germane to our debate this afternoon) that the question of the proposal of a Torbay county borough raises a matter of policy and principle as to whether a change in the

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structure of local government in the Torbay area is desirable at this time.
I am against the Order, not on the basis of a consideration of the merits of the matter, but on the basis of the timing involved. I repeat that, in view of the fact that the Government have created the Royal Commission on Local Government, it would he wise to observe a standstill and let the whole thing be held in abeyance until the Royal Commission report.
4.45 p.m.
LORD NIITCHISON: My Lords, one thing is quite clear to-day, and that is that this Order, like so many others, is not a Party matter. We have had opinions from both sides of the Chamber which differ fundamentally, and, of course, in another place the same thing happens. It is always the same: the county which is going to have parts of it removed, usually into an existing county borough, in this case into a new county borough, says that it will no longer be viable and mobilises the support of the county representatives in another place. The borough, or what is to become a borough, says the opposite and argues—and there is a great deal to be said in favour of it—that it is growing and getting too large to remain a part of a county without going independent on its own. These broad points are bound to happen in a country where there is a movement, for good or for ill, to the outskirts of towns, and where existing towns in most cases aret getting larger. I remember that I had exactly the same sort of experience in regard to the position of Northampton in Northamptonshire. I do not think there is a county in the country which has not had this sort of situation in one form or another. It is certainly nothing new. Then the matter moves from that situation to vituperation. The vituperation consists in the county borough saying, "What about Rutland?", and the country replying, "What about Canterbury?" Neither Rutland nor Canterbury by any orthodox standard is viable. That, then, is the broad question which always arises.
Machinery was set out under the Local Government Act to deal with this type of question. It is quite untrue to say—and I am sure that the noble Lord, Lord Brooke of Cumnor, will agree with me—that those who thought about the matter and set up the Local Government
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Commission did not have this type of problem in mind. It is the most frequent problem of all. What happens is that the Local Government Commission goes into the matter in detail, it hears both sides, perhaps even to excess, but it does so under the machinery of the Act. In this case the business took seven years. Its recommendations are followed by a decision one way or another by the responsible Ministers.
The case which is before us to-day is a very interesting borderline case, because the Local Government Commission changed its mind. Furthermore, it looks to me as though the county council changed its mind, too—at any rate it raised no very active opposition. It conferred delegated powers and led many people to suppose that it was not going to object, until the last moment. That does not matter very much, but this all indicates that it is a borderline case. I will not got into the merits of the matter, for I could not hope to compete with my noble friends who have long and detailed experience of local government. Indeed, I am not sure it is our duty to go into this kind of question. This is the sort of matter which the Local Government Commission and, in turn, the Minister of the day have to consider—questions such as whether they can afford a police force of their own, whether they, like Rutland, will have to borrow their books from the neighbouring county, and similar matters. It takes time. There is no question that people are not fully heard about it. There is no question that evidence is not fully available to the Local Government Commission. Then you come to the Minister's decision later as you did in this case, and then the matter has to go before both Houses of Parliament.
Those of us who have served in another place know this story very well. As a rule, most Members leave the Chamber, except the local Members, and those who have to be there on Government account or on Opposition account, sometimes. The Chamber empties a bit, and there you are. There is the county borough Member putting one case—and in this instance the Conservative Member for Torquay put it—and there are the county Members, in this instance almost all of them Conservatives, putting the other side of the matter. It is not a Party matter at all. That is the position

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in the Commons, and in the Commons it is quite clear that there are Members who are elected Members, and who represent the local interests in a different sense from any which your Lordships can claim to have.
I noticed—and I hope I am allowed to say it—that this particular Order was passed by a very large majority—I think I have the figures right-166 to 10. Of course, on this non-Party issue, the Member for Torquay borough voted in favour of the Order and, on the whole, the county Members did not. Some of them did not vote. One Member whom I should have expected to vote, and who spoke about it from the Conservative Front Bench, did not vote. I do not know what the feeling was, but there is no doubt about the decision. The decision was an overwhelming one in favour of the Order.
With respect to everybody, I do not think it is the function of either House of Parliament on these occasions to go too deeply into the questions that have already been considered by the Local Government Commission, unless of course there is some question of principle involved. I would say at once that there was a little discussion about the cost of a new town hall, or county hall, which had in fact been fully examined elsewhere. That sort of thing inevitably happens. But at the end of the day it seems to me that the governing principle in another place must be, "What are the wishes of the inhabitants of the area, and how are the services for which the local ratepayers are going to pay to be best provided?"
I am aware that there is a list of rather longer considerations which have to be before the Local Government Commission, but it is those two particularly which seem to me to fall to a House of Parliament to consider. With that overwhelming weight of authority behind it, not only the Local Government Commission after long deliberation, not only the Ministry who have a rather special knowledge in these cases, which I think one is bound to recognise, but also the House of Commons by an overwhelming and unusually large majority, the Order comes up here to be considered. I would merely say to your Lordships, with very
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deep respect, that I am not quite clear what function we are performing if we think that we are entitled to reject this on grounds which arise out of either of the two matters which I have been talking about: one is the wishes of the inhabitants, and the other is the provision of proper services.
I say quite frankly—there is no use beating about the bush; it may be King Charles's head for all I know, or it may be the obstinacy of Cato, who put off getting a classical education till he reached the age of 80, by putting into every one of his speeches, "Carthage must be destroyed", but I do not quite know where Carthage is in this connection and perhaps we had better leave it at that—that I cannot think that it is the function of this House, or indeed of either House, to raise questions here about the detail of services, or the broad general question of what is to be done with growing communities on the fringe of a borough, except in so far as the Commons has a special right to represent the wishes of the inhabitants.
I feel that your Lordships must necessarily have rather limited functions. I am not saying that your Lordships do not have power to turn this Order down. I should not deny that for a moment. I just point out to your Lordships what the result would be. Seven years of a great deal of deliberation, a great deal of evidence, the services of a large number of members of my own profession of the law, would have been for the moment wasted, and if the matter is to arise again then they would have to start from scratch, and this in spite of the decision below.
There remains the question which led the Special Orders Committee to ask us to consider the Order, and that is the connection with the Local Government Commission sitting, I think I noticed the other day, in the same offices which were occupied by the Ministry of Land and Natural Resources at one period—and very nice they were, too—for quite a time. That point, too, was answered pretty fully in another place, and no point that I can see was taken about it other than the mere point that it is too near the moment when they come to their conclusions to do anything. I should have thought that was a question which the

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Minister of the day must have considered; and, indeed, a point raised in another place was that he had considered it and, rightly or wrongly, was following certain principles.
Is it right for us to tell the Minister that this question of timing in relation to a Royal Commission is one of such importance that nothing ought to be done and that seven years labours should be wasted? I find great difficulty in accepting that as a reasonable proposition. I do not know how much he knows about the deliberations of the Royal Commission. A great deal of the evidence has been made public. There may be some indication—I do not have it—of what they are going to do. But I cannot believe that Ministers on either side are half-witted, and I should have thought that if he really felt this was an utterly useless Order to bring in he would not have put it forward. Surely one can trust a responsible Minister of the Crown to that extent, apart from any Party question—and I repeat, this is not a Party question.
So, for all those reasons, I feel it would be inappropriate for your Lordships to exercise your undoubted powers to turn this Order down, and to do it on any of the grounds which have been so well put forward by those interested in the fortunes of the County Councils Association. When this sort of question comes to this stage, it goes beyond the interests either of that body or of the Association of Municipal Corporations, or any other of the local authority associations concerned. They have important functions but it is the Act which, as I see it, tells us what the Local Government Commission ought to do and I think, by implication, makes it quite clear that we ought not to repeat in Parliament the deliberations which must necessarily have been before that Commission and the Ministry of the day. I am not saying that your Lordships have no power to turn this Order down—of course your Lordships have that statutory power; there is not the least doubt about it—but I am saying that I respectfully suggest it could rarely be appropriate to exercise that power and that it would not be appropriate to exercise it in a matter of this sort, which, whatever else may be said about it, has certainly had full consideration as a marginal case.
5.0 p.m.
VISCOUNT COLVILLE OF CULROSS: My Lords, I think that if this matter had been under discussion a year ago to-day I would have been able to agree with almost everything the noble Lord, Lord Mitchison, said, at least until he came to the part where he was dealing with the Report from the Special Orders Committee. It may well be right that we in this House ought not to go into the complicated matters of the wishes of the inhabitants, or into the admirable or not so admirable carrying out of the county services, when one of these Orders gets to the very last moment before it is finally put into force. But if this House has this afternoon not given a very friendly reception to the noble Lord, Lord Kennet, or to his Order, I do not believe it is because we are trying to infringe the sort of principle that the noble Lord, Lord Mitchison, was enunciating.
Nor do I believe for one moment that we should wish to pour any sort of scorn upon the work of the Local Government Commission, or, indeed, on the enthusiasm of the citizens and the councillors of the local authorities which it is proposed should make up the new County Borough of Torbay. The Local Government Commission, which produced this scheme, were working on the criteria set out in the Act and the regulations made under it, and I think—in fact, I am sure—they were doing the best they could in the circumstances. So far as the people in the Torbay area are concerned, they may well, of course, be disappointed if, through a change of circumstances, the conclusion of the matter for which they had hoped is not reached. But it is in no way meant to be a criticism of what they have done, or what they have hoped for, if we now suggest that the circumstances are a little different from those in which they first formed these hopes, and that we should discuss the matter upon that basis.
There are few of the detailed matters that I wish to touch upon, because other noble Lords have dealt with them already. The noble Lord, Lord Kennet, dealt with the unity which was displayed among the people in Torbay. I should have thought that this was a quite obvious prerequisite for the whole matter, and that it would have been lunacy to go

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ahead without it. So the matter is not perhaps of particular importance, although it will be to the function of the new county borough when it is set up. So far as size is concerned, whether or not this proposed new county borough was just or right under the old criteria may not now be so important. What I think is important is that, having had this proposal to set up a new county borough, there are services which it now seems better—indeed, it may have seemed better all along—should be shared. If that is the case, it is for the same reason, I suspect, that this question is now the subject of the whole of the Royal Commission's inquiry; that is to say, that the size of local authorities with which we have been so long content is not now thought necessarily to be the right size for the future. And so Torbay, in accordance with the trend, considers that the police, fire and other services would be better administered over a wider area.
If what had to be considered was simply the local balance of advantage at the time the Minister made his decision, or when the Commission reported originally, then I would think that, the difficulties on Devon's side having been set out, as they were in paragraph 235, I think, of the Commission's Report, and discussed thereafter, it would be entirely justifiable to come to the conclusion which the Commission and the Minister reached: that, taking all balances into account, this was the right thing to do, and Torbay should become a county borough. But the difficulty was that the setting up of the Royal Commission was then announced. The situation was explained in another place, and I expect your Lordships remember what the right honourable gentleman the Minister had to say about the decisions which either had already been announced or were just about to be announced by him as a result of inquiries under the Local Government Act 1958. I think the noble Lord, Lord Kennet, quoted half of it, but I should like to quote the whole. The Minister said:
"Where decisions have been already announced on proposals by the Commission, the necessary orders will be brought before Parliament as soon as possible. Other proposals on which decisions have not yet been taken will be considered on their merits, in the light
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of the decision to appoint a Royal Commission."—[OFFICIAL REPORT, Commons, Vol. 724, col. 644; 10/2/66.]
My Lords, on the latter class of decisions I do not believe that any disrespect was meant to the Local Government Commission, or that there was any intention to hurt the feelings of the people concerned, if the Government subsequently decided that at this moment it was not necessarily right to give a decision which would otherwise have been correct within the criteria. I know of twocases—that of Rotherham and that of Norwich—where after the date of the announcement of the setting up of the Royal Commission, a decision was given restricting the county borough in each case to very much the area it had before. I do not know why that was so decided, but it may well be that the Government thought that at that juncture, whatever might happen later, it would be better to leave the status quo for the moment. As I say, I do not know; but that might have been the reason, and it might have been a good reason.
That would have been a comparatively minor change, looking at it side by side with the creation of a new county borough. I believe this to be a unique occasion. There are no other new county boroughs which have been recommended for creation by the Local Government Commission whose decision was given, but not implemented, before the appointment of the Royal Commission. It is because of this situation, and because of one other consideration, to which I should like to come in a moment, that I think the House has a special duty, as our Special Orders Committee indicated, to look at this, not as a local matter, in the terms of the noble Lord, Lord Mitchison, but as a matter of timing and of principle.
My Lords, the other point with which the noble Lord, Lord Kennet, dealt in part (it was also dealt with in another place), and which worries me a little, is the financial side. As I understand it, the position is this. At the present moment, Devon County Council, which includes the Torbay area, is receiving a certain grant in total from the Central Government, and it is and was said—and this was the basis of the Local Government Commission's decision—that if the Torbay area was taken away and turned into a new county borough then the

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Devon County Council would get a higher general and rate-deficiency grant. I do not know whether the Torbay County Borough would also get a grant—perhaps the noble Lord, Lord Kennet, could tell me that; hut' as I understood the noble Lord this afternoon, he was saying that the effect of the new system of grants under the Local Government Bill will be this. Whereas, if the old system had stayed, the Devon County Council would have received a higher grant after the removal of Torbay, and would thereby have remained viable, though we have a new form of grant system under the Bill, it will also receive the same sort of higher grant. I should very much like the noble Lord, if he would be so kind as to do so, to confirm in a moment whether or not that is so—and I believe that although, of course, it cannot be accurately computed, under the new system the figure will be a fairly large one.
It seems to me, therefore, that we have two matters of principle to deal with: first of all, the question of the Local Government Commission and the Royal Commission; and, secondly, this financial question. I should very much like the noble Lord, Lord Kennet, to tell the House this about the Royal Commission this afternoon, because I believe that we shall be guided very much by what he says. Assuming that the time scale is something of the order of what he said. in other words, that one might possibly get implementation on the ground of what the Royal Commission has to say in something in the region of seven, eight or perhaps ten years, is the noble Lord certain that it is in the general public interest and the local interest that we should divide up the local government structure in South-West Devon for that sort of period without knowing what is going to happen at the end? Is it really necessary at this time to do something which might easily prejudice the reconsideration of that area on the basis that it might easily last for something in the region of only seven to ten years? Are the noble Lord and his colleagues in Government convinced that we must do this now in the general and the local public interests? Perhaps he could say whether this is his opinion and that of his right honourable friend.
I would agree, supposing that the noble Lord, Lord Mitchison, should feel like raising this point, that this is not a
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matter for your Lordships; but, because this matter has been clarified since the whole affair was discussed in another place, I should like the noble Lord to tell the House whether it is right that the Devon County Council will have to receive as a result of this Order more money in grants from the Exchequer than would otherwise have been the case, and, possibly, if the noble Lord, Lord Pargiter, is right, more money at the expense of other local authorities elsewhere in the country. Are the noble Lord, Lord Kennet, and his colleagues convinced that this is the right time to put the extra burden on the Exchequer? The noble Lord and his Party I am sure are right in saying that many local government projects must be shelved for lack of funds; yet, apparently, this is the time the Government bring forward this Order which, as I understand it, has this effect. Can the noble Lord say whether that is so?—because I believe that the House will be content to judge the Government's Order and the noble Lord's Order upon the basis of his answer to those two important principles.
If the noble Lord and his colleagues are convinced that, at this moment, this is in the public interest—both the matter of prejudice to the future local government in the area and that we should give this extra money to the county council because of this division of responsibilities at this time—then, no doubt, the noble Lord will say so. But it seems to me possible that the noble Lord would like to consider again, possibly in consultation with his right honourable friend, whether it is really the right thing to do to-day to bring forward this Order; or whether, alternatively, at any rate for a moment or for a period of time, the noble Lord might like to take it back for consideration—as I believe he could—and see whether he would not be able to give a rather fuller explanation to the House why it is that the Government consider this to be in the public interest. The local interest I think we have adequately dealt with. I hope that the noble Lord can answer me to-day, but I believe the House would be content if he were to do so on another occasion.
5.15 p.m.
LORD KENNET: My Lords, we have had a longer debate than I expected. I will try to take up a reasonable proportion of the points which have been made

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in the debate; then we can consider together what to do next. The noble Lord, Lord Amulree, introducing his Amendment, raised the question which was to become the leading theme of our discussion; namely, the question of the time-lag between the introduction of the new Torbay county borough and the introduction of the legislation which might follow the report of the Royal Commission for Local Government. A later speaker, I think, said that this period might be that of a few months and asked what point there was in setting up this new county borough and destroying it a few months later. I think it is clear that it will not be a few months; and I shall have something more to say about that later. But let me remind the House that the Prime Minister has said that he expects the Royal Commission to report within little more than two years. It was set up in the spring of this year—it was announced in February—and we expect its Report (and at present there is no reason to revise the timetable) towards the end of 1968. As I say, I shall return to this point again.
The noble Lord, Lord Amulree, also qualified as serious for, I think, the Devon County Council the explanation that I gave of the kind of figures they were going to get in the form of grants in the future. I shall be sorry if anybody got the impression that the situation for the county council was to be serious. My purpose in giving that involved explanation of the new sort of grant was to show how far from serious the position would be; that in some respects the Government knew that they would gain, and in other respects the Government believe, though nobody could say with certainty, they would also gain. To this point also I shall return a little later. I should like to deal now with some of the more detailed points. The noble Lord mentioned the band of undeveloped land which comes half way along the proposed area, the gap between Churston Ferrers and Brixham which is being partly built over. I think, the rest is mainly used as a golf course and land which is kept open for other amenity purposes. If we are to reckon golf courses and amenity land in the middle of conurbations as something which ought to be left to the counties
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and not taken into the county boroughs, we shall find ourselves in a curious position indeed.
I have noticed a contradiction in the speeches made by two noble Lords, both of whom were opposed to the Order, and I thought I should bring it to the attention of the House. The noble Lord, Lord Amulree, welcomed the possibility of an amalgamation between the health and the social services with representation of the housing department within the proposed new county borough. My noble friend Lord Leatherland attacked the concept of the new county borough because certain services would, at least for a time, have to be run in common by the new county borough and the county. It does not seem to me to make too much difference. I think one will amalgamate services, run them separately or jointly as seems the most appropriate. I would suggest to the House that this particular issue should not count too much in either direction. If the Government were to base their case on this possibility we should not get far.
The noble Viscount, Lord Amory, whose experience in the county council field we were glad to benefit from and whose powers I certainly would not admit for an instant are declining, took me up on what I think may have been a lack of clarity in what I said. He asked: What difficulty could it cause for the Royal Commission if we leave things as they are? It would cause no difficulty to the Royal Commission whether he had a change or not. The Royal Commission, by the time it comes to decide what it wants to be done with local government in England, will face a situation in which there are a great many county councils and county boroughs, and whether or not we add slightly to the number of county boroughs and subtract a little from the population of this or that county will not make difficulties in either way. I should have said that it would be equally possible to introduce almost any imaginable pattern of local government as a result of Royal Commissions recommendations, whether or not we set up a new county borough area in Torbay. I hope that I have explained myself more clearly now. It was badly put before.

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I should like to answer one or two points put by my noble friend Lord Leatherland. He asked: If we were starting de novo, should we commend this Order to the House? If by "de novo"he means, if we were to imagine the former Local Government Commission still in existence and about to commence its review of the South-West area would we tell the House now that we should be likely to introduce the proposed change in seven years' time, the answer, of course, is, "No." This brings me to the crux of the question the matters which are in the pipe-line. Up to this point Orders have been made, but certain outstanding suggestions for change made by the Local Government Commission will not be embodied in Orders, and one of the difficulties the Government are facing is deciding where we stop making these Orders.
My noble friend Lord Leatherland raised the question of certain services under this proposed Order, and I should like to take the opportunity of making clear the effect that this Order will have. My noble friend said that the police will not be a separate force. Of course they would not. As the House knows well, under the Home Secretary's new proposals the trend is towards the amalgamation of existing police forces all over the country; it is far from being towards the creation of new ones. We should not regard the fact that eventually the new county borough will not have its own police force as a reason for not setting one up.
The question of the fire brigade is more complex. The fire service property is to be vested in the new county borough but, at the suggestion of the county council, it has been agreed to operate the service jointly for a period of five years, after which the position will be reviewed. It is not the position that the new county borough have said that they are too weak to run their own service, but that the county council have suggested that it should be a joint one.
The question of the ambulance service has been discussed a good deal at Torbay. The new county borough is to provide its own, but will have a joint radio movement centre with the county council, again an arrangement suggested by the county council. All these arrangements are provisional, until new elections are held for the united county borough, and
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largely for this reason we are giving the new county borough council a year to consider all this before they get fully into operation. If they do not like these proposed changes they can make other proposals.
The noble Viscount, Lord Colville of Cuirass, said that there were two overriding questions. I accept his assessment of this. One relates to the Royal Commission and the other to the financial situation for the County of Devon. The noble Viscount asked me to confirm whether it would take seven or ten years from now until we had a new system of local government. I could not confirm it. I think that any member of the Government who confirmed such a proposition would be rash indeed.
VISCOUNT COLVILLE OF CULROSS: My Lords, I was not, of course, asking the noble Lord to confirm that. I was simply asking him to say whether he thought that that was roughly the right estimate.
LORD KENNET: I would not even agree that it was roughly the right estimate. Whatever one may think in general, we do not know what the Royal Commission are going to recommend. Nobody does. It is being pressed in different directions by different bodies, different individuals and different institutions. Most of those concerned are giving evidence which does not press them in any particular direction, but which consists of background material.
It would be wrong to say that the Government want a particular pattern to emerge. If the Government knew what they wanted they might never have bothered with a Royal Commission and might have gone straight to legislation. Still less can we assess when the Government can put through Parliament legislation based on the Royal Commission's recommendations, It would be rash for the Government to suppose that it would be in ten years' time. It is hoped that the Commission will report at the end of 1968. The Government hope to get good proposals which they can adopt and put through swiftly. But we do not feel justified in backtracking on proposals which are coming through the pipe-line from the former Local Government Commission, because of our certainty of getting a new system through rapidly after the Royal Commission report.

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On the financial question, the noble Viscount asked if the increased grants to Devon would put an extra burden on the Exchequer. No, they will not. The proposal under the Local Government Bill is that the aggregate of Exchequer grants to the local authorities shall remain unchanged, but because of the introduction of the new system of grants, there will be a new distribution between one recipient authority and another. It is obvious that when we are lowering the rate able value per head of the county the county is going to expect a higher grant per head than it did before. I tried to give some outline of how this is going to work in my opening speech. If we are reducing the population, at the same time we are reducing the rate able value per head for the remaining population. It may be that the aggregate sum will not be higher, but assuming that it is and that it does not come from the Exchequer, it is obvious that this is going to fall on the local authority. There are local authorities whose needs are decreasing for various reasons, just as there are others whose needs are increasing, as in the case of Devon. All have to be handled together under the Local Government Bill.
I should like to confirm what my noble friend Lord Mitchison said. I do not think that we in this House should be too confident in seeking to put this matter right. We only consider it for a few hours, though I know that some noble Lords have considered it for a much longer time. We are a body of amateurs considering this for one afternoon. This issue was raised first by local opinion in Torbay. The Order is wanted by the people who live there. Devon County Council do not want it. The matter was therefore referred to the Local Government Commission to assess. The first opinion was that it was a bad plan. The second opinion, after they had been more fully into the proposals, was that it was a good plan. They so reported. The Minister sent an inspector, who went into it all over again and reported that it was a good plan. The Minister himself then went into it on the basis of his inspector's report and decided that it was a good plan. He so informed the House
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of Commons, who discussed the matter under the Affirmative Resolution procedure and decided by an overwhelming vote that it was a good plan.
If my noble friend Lord Leatherland maintains that Torbay have been scampering out, trying to drag in this and that village, and monkeying with the figures as between the Census and the Registrar General's figures—and what I say was based on the Registrar General's figures—that, in short, they have been trying to pull the wool over the eyes of all those institutions whose duty it is to assess, to judge and to decide this issue, I think that he is seeing a lot of villains on one side and a lot of fools on the other in this sector of our national life. I know the House will join with me in disputing this.
Nevertheless, we must not regard all such considerations alone, and in view of the considerable weight of opinion and learning which I judge exists in the House this afternoon, and in view, frankly, of my own wish to get together again with my right honourable friend the Minister and examine what has been said in your Lordships' House, I should like to make the following suggestion to the noble Lord, Lord Amulree. If he will withdraw his Amendment, I will withdraw my Motion. I would point out to the House that this does not have the effect of slaying the Order, but simply of withdrawing it from the Order Paper for this afternoon. It may be reintroduced later. On that basis, I would ask the noble Lord, Lord Amulree, to withdraw his Amendment.
LORD AMULREE: My Lords, in view of what the Minister has said, I ask your Lordships' leave to withdraw the Amendment, on the understanding, of course, that I shall be able to move it, should I wish to do so, when the Order is debated again. Before I sit down, I should like to thank noble Lords who have spoken in the debate and have given me a great deal of support.
Amendment, by leave, withdrawn.
LORD KENNET: My Lords, I beg leave to withdraw the Motion.
Motion, by leave, withdrawn.

FORESTRY BILL [H.L.]
5.31 p.m.
House in Committee (on Re-commitment) (according to Order).
House resumed: Bill reported without further amendment; Report received.

PLANT HEALTH BILL [H.L.]
House in Committee (on Re-commitment) (according to Order).
House resumed: Bill reported without further amendment; Report received.

BUS FUEL GRANTS BILL
5.32 p.m.
Order of the Day for the Second Reading read.
BARONESS PHILLIPS: My Lords, I beg to move that this Bill be now read a second time. The purpose of the Bill is to enable the Minister of Transport to make grants to bus operators, for their stage services, in respect of the 10 per cent. surcharge on motor fuel duties which was imposed under the regulator on July 21. The Minister is already refunding to bus operators the 6d. per gallon increase imposed in the Autumn, 1964, Budget. When the 10 per cent. surcharge was imposed, the Prime Minister promised that it, too, would be refunded. The Finance Act 1965 gave the Minister of Transport power to make grants to cover the 6d. increase. The Minister introduced a scheme of payments, after consultation with the bus industry, and that scheme is available to make the extra payments now promised. But the Minister's powers under the Finance Act 1965 are specifically limited to the 6d., and these powers must be extended before payments can begin.
The Bill will first of all extend the Minister's existing power to pay grants by raising the limit of 6d. per gallon, to which I have referred, to cover the additional amount payable by virtue of the Order which imposed the 10 per cent. surcharge (3·9d. per gallon), this power being retrospective to the date of the surcharge, July 21, 1966. It will also give the Minister a continuing permissive power, subject to the approval of the Treasury, to pay grants in respect of any surcharge imposed under any future
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use of the regulator. This must not be taken to suggest that the Government would in all cases accept that such grants should be paid. That would necessarily depend on circumstances at the time, and the provision implies no automatic commitment to do so. But the provision has been included so as to avoid any future difficulty of this kind which might arise.
Bus operators are already receiving grants totalling about £4½ million per year in respect of the 6d. increase. The additional payments, for the surcharge, can begin as soon as Parliament authority under this Bill has been obtained. In a full year, they will amount to nearly another £3 million if the surcharge is continued. The actual payments made in the current financial year will be just over £1 million. This takes account of the fact that the surcharge did not begin until July, and that, because claims are quarterly and some operators take a little time to submit them, many will fall to be paid in the next financial year rather than this one.
My Lords, the original grants in relief of the 6d., and the present grants, are being made to spare from these taxation increases, which have been generally imposed, the stage bus services, which are, broadly speaking, the essential local bus services in both town and country. They are a vital part of public transport which it is the Government's policy to strengthen. I commend this Bill to your Lordships for Second Reading.
Moved, That the Bill be now read 2a.—(Baroness Phillips.)
6.36 p.m.
LORD NUGENT OF GUILDFORD: My Lords, may I thank the noble Baroness for commending this Bill to the House and explaining its purpose to us? As I understand it, and as she said, it implements the Prime Minister's promise on July 21 last to pay the rebate in respect of the regulator surcharge as it affects the public bus services. I may say that I follow the somewhat complicated arithmetic which results in £1·1 million being provided to implement this undertaking for the remainder of this financial year. I also understand that the repayments are made quarterly in arrears, and that, because it takes some time for bus companies to fill in the forms which they must fill in, £1·1 million will turn out to be sufficient this year.

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I wish to make only two brief comments on the Bill. The first is that, although this is the season of good cheer, this is no act of Santa Claus giving us a handsome Christmas present. It is really no more than an act of grace—if I may say so, rendered all the more so by the noble Baroness so charmingly commending the Bill to the House—because the Bill must be seen against the background of the total amount of taxation which the Government have imposed on the road user, both public and private, in the past two years, which is no less than an extra £280 million per annum. The annual value of this little Bill i s£2·9 million per annum. So this is giving us back roughly 1 per cent., or 2½d. in the pound, of what is being taken away. So that when I say that this Bill is no more than an act of grace, it is the act of grace of the highwayman who, having rifled your pocket, gives you back a few coppers to pay your bus fare home. I am sure that Robin Hood would have treated us rather more generously than that. However, beggers cannot be choosers, and we must be thankful for the small mercies which the noble Baroness has been gracious enough to give us. Therefore Her Majesty's Opposition welcome this small gesture to the public bus services.
With regard to timing, I have observed that some five months have now passed since the Government imposed this new tax. The bus companies, therefore, are suffering from inconvenience as a result of the delay in repayment of tax to them, and this, coming, as it does, on top of the forced loan which they now have to carry for the selective employment tax, is probably causing them some financial embarrassment. Consequently, we on this side of the House are anxious to do everything possible to help Her Majesty's Government to make amends for past delays by expediting the Bill on to the Statute Book now. I have much pleasure in commending the Bill to this noble House.
BARONESS PHILLIPS: My Lords, I should like to express my appreciation of the noble Lord's acceptance of this Bill. He may be glad to know that in all the papers this morning my stars told me that I should receive no opposition to-day, and I am grateful that he,
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at any rate, has borne this out. I appreciate his feeling that this is an act of grace, though I would say that it does not flow from me personally. I am sure the noble Lord would agree that in other Acts Her Majesty's Government are giving similar rebates to other industries, and although he quoted a figure of £2 million, the total figure will probably be much greater. He will be glad to know that this Bill is retrospective. I know that he has been studying the same material as I have, and he will know also that as soon as the Bill takes effect these small operators, of whom we are very conscious, will receive this refund just as quickly as they complete the necessary forms.
On Question, Bill read 2a: Committee negatived.

LOCAL GOVERNMENT BILL
5.42 p.m.
Order of the Day read for the Consideration of Commons Reasons for disagreeing to certain of the Lords Amendments.
LORD KENNET: My Lords, I beg to move that the Commons Reasons for disagreeing to certain of the Lords' Amendments be now considered. It may be for the convenience of the House if I move this Motion formally, so that the main discussion may take place on the next Motions which I propose to move; namely, That this House doth not insist on their Amendments to which the Commons have disagreed. I think it would be for the convenience of the House if the first of these Motions were to cover Amendments Nos. 1 to 6 en bloc and the second to cover Amendment No. 7, that being a different subject. I beg to move.
Moved, That the Commons Reasons for disagreeing to certain of the Lords Amendments be now considered.—(Lord Kennet.)
On Question, Motion agreed to.
COMMONS REASONS FOR DISAGREEING TO CERTAIN OF THE LORDS AMENDMENTS
[The references are to Bill (98) as first printed for the Lords. The Commons Reasons are printed in italics]
LORDS AMENDMENTS
[Nos. 1–6]
Clause 21, page 16, line 45, leave out ("three") and insert ("six")
Clause 21, page 17, leave 21, leave out ("three") and insert ("six")
Clause 21, page 17, line 30, leave out ("three") and insert ("six")
Clause 22, page 17, line 42, leave out ("three") and insert ("six")
Clause 22, page 17, line 43, leave out ("six") and insert ("twelve")
Clause 22, page 17, line 45, leave out ("three") and insert ("six")
The Commons disagreed to these Amendments for the following Reason:
Because they affect rates levied by local authorities and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.
LORD KENNET: My Lords, with the leave of the House I beg to move that this House doth not insist on their Amendments Nos. 1 to 6, to which the Commons have disagreed. As the House will remember these Amendments extended the period for which unoccupied houses would be free from rates from six months to one year, for new houses, and from three months to six months, for other properties. We discussed these issues at length in Committee. Briefly, the Government believe that their proposals are already so moderate that they may do all too little towards the objective of discouraging owners from keeping properties empty for long periods. The provisions are adoptive: they cannot produce rates on any empty property before next July at the earliest; no property will be rated until it has been empty for three months, and then rates will be payable at only half the normal level. There are a number of exemptions, cast in fairly generous terms, and power for the Minister to extend the exemptions by regulations if experience shows that to be necessary.
It is a matter of judgment whether the provisions are too hard or too soft, or whether, as my right honourable friend and I believe, they strike about the right balance. The Opposition, both in this House and in the House of Commons, have contended that in this one particular, the length of the free period, they are too hard. The Government do not accept that view, and the House of Commons have rejected it. I hope that your Lordships will agree that it is not an issue on which they feel it necessary to delay the passage of the Bill. I beg to move.
Moved, That this House doth not insist on Amendments Nos. 1 to 6, to which the
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Commons have disagreed.—(Lord Kennet.)
LORD BROOKE OF CUMNOR: My Lords, I have no intention of delaying the passage of this Bill. I am obliged to the noble Lord, Lord Kennet, for making a statement to the House on the merits of this case, though he and I are in disagreement as to those merits. For my part, I believe that this is a part of the Bill which will be found to work unsatisfactorily in practice, and a future Government may have to amend it.
There is one matter of some importance to which I think I should invite your Lordships' attention before we let these Amendments go. If your Lordships will read the Commons Reasons you will see that the Commons disagree to these Amendments
"Because they affect rates levied by local authorities."
I think your Lordships should know that in another place it was not argued that the Commons should disagree with these Amendments on grounds of privilege. Indeed, it is not surprising that it was not, because in fact the Commons agreed to a number of other Amendments made by your Lordships to the Local Government Bill which affect the rates levied by local authorities to no less extent than this set of Amendments do. If your Lordships will read Erskine May, you will find on page 838 this sentence:
"The Commons now generally waive their claim regarding amendments made to Bills that they have sent to the Lords dealing with municipal, county and local rates and assessments."
However, on this occasion the Commons did not waive their claim to privilege, and therefore there is no more to be said.
On Question, Motion agreed to.
LORDS AMENDMENT
[No. 7]
Clause 29, page 23, line 22, leave out from ("date") to end of line 24.
The Commons disagreed to this Amendment for the following Reason:
Because it involves a charge on public funds and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.
LORD KENNET: My Lords, I beg to move that this House doth not insist on this Amendment, to which the Commons

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have disagreed. The House will remember that this is the Amendment about loan charges on lighting on trunk roads. If the noble Lord opposite agrees, I think perhaps there is no reason for me to go once again into the merits of the case. The case for the Government was stated fairly fully, and the case for the Opposition equally fully in Committee in this House, and we are now faced with the Commons disagreement.
Moved, That this House doth not insist on Amendment No. 7, to which the Commons have disagreed.—(Lord Kennet.)
LORD BROOKE OF CUMNOR: My Lords, in this case again I do not wish to delay the proceedings. The Commons have stated that they disagree with this Amendment "Because it involves a charge on public funds". Therefore, there is no more to be said.
On Question, Motion agreed to.

INDUSTRIAL REORGANISATION CORPORATION BILL
5.48 p.m.
Order of the Day for the House to be put into Committee read.
Moved, That the House do now resolve itself into Committee.—(Lord Shepherd)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD STRANG in the Chair.]
Clause 1:
The Industrial Reorganisation Corporation
1.—(l) There shall be a body to be called the Industrial Reorganisation Corporation (in this Act referred to as "the Corporation") having the functions assigned to it by the following provisions of this Act.
(6) It is hereby declared that the Corporation is not to be regarded as the servant or agent of the Crown or as enjoying any status, immunity or privilege of the Crown, or as exempt from any tax, duty, rate, levy or other charge whatsoever, whether general or local, and that its property is not to be regarded as the property of, or property held on behalf of, the Crown.
LORD DRUMALBYN LORD DRUMALBYN moved, in subsection (6), to leave out "to be regarded as" where it first occurs. The
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noble Lord said: May I suggest that we take the first four Amendments together, because I think that will be for the convenience of the Committee? The purpose of these Amendments is to draw a distinction between what is stated in the Bill, that the Corporation "is not to be regarded as the servant or agent of the Crown," and so forth, and the effect of the Amendments, which would mean that the Corporation is not to be the servant or agent of the Crown. There are four separate points here. One affects the status of servant or agent; the second the status, immunity or privilege; the third tax, duty, rate, levy or other charge, and the fourth, the question of property.
As to liability to taxation, the difference is unimportant because the only groups of people who have to do the "regarding", if I may put it that way, are those who collect the taxes and rates and duties and levies, and those to whom an appeal against the collection or assessment of such imposts lies. But there is surely a difference between the question whether a body is to be regarded as a servant or agent of the Crown and the question whether it is in fact the servant or agent of the Crown. If it is to be regarded as a servant or agent of the Crown it seems to be a question of law, whereas the question as to whether it is a servant or agent of the Crown is one of fact.
I take it that a servant is someone who acts on the instructions, or expectation of instructions, of another, and whose independence of action is to some extent circumscribed by those instructions or the expectation of them. To some extent it is plain in fact that the Corporation will be the servant of the Crown since it is bound to comply with directions of a general character given by the Secretary of State under Clause 2(4). The fact that the Secretary of State retains the power to make or withhold loans or payments under Clauses 4 or 5 indicates that the Secretary of State will exercise a considerable degree of control, but that might be little more than the relation between banker and client. If, however, the Corporation has to come to the Secretary of State and put each separate proposition to him before it gets any money, then the relationship will be much more intimate than that of banker and client, and if

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the Corporation is to be told by the Government the fields in which it is to operate, then the relationship will be still more intimate.
The purpose of this group of Amendments is to give the Government the opportunity to tell your Lordships what the relationship between the Government and the Corporation will be. Is the Corporation to he given a job and left to get on with it, or is it to be carrying out the business and behests of the Government? As Clause 2(1) stands the Corporation is in theory perfectly at liberty to decline to accede to a request made by the Secretary of State that it should establish or develop, or promote or assist the establishment or development of, any industrial enterprise. Is that liberty a reality or will the Corporation be expected to comply with such a request? I beg to move.
Amendment moved—
Page 2, line 5, leave out ("to be regarded as").—(Lord Drumalbyn.)
LORD SHEPHERD: I am very pleased that the noble Lord has moved this Amendment on the basis of a probe, because if he had proceeded with the Amendment we should have been forced to amend practically the whole of Clause 1. I think it is quite clear that the Government had in mind that the Corporation should be an independent body, and I think it is generally recognised that we have appointed a Corporation of distinguished and independent-minded men, and we wish them to operate within the terms of the Bill with the greatest possible freedom. As I understand the position, the Government have no power to instruct the Board on how it should perform its duties. Clause 2(4) is very wide. Perhaps I may explain it with this illustration. Under that clause the Secretary of State might recommend or request the Corporation to pay special attention (shall we say?) to the cotton industry as a whole, to see what amalgamations and mergers could usefully take place. But it is quite clear that the term "general character" would not permit the Secretary of State to instruct the Corporation to proceed and encourage a merger between two, or even between three or four, specific companies. It is quite clear that the term "general character" is of a very general nature.
With regard to the point raised by the noble Lord in terms of the use of loans,
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the banker and client relationship, here again I would assure the noble Lord that the Government will certainly not use the making of loans as a control over the everyday policy of the Corporation. I think I can assure the noble Lord that if the Corporation were forced to come to the Secretary of State or the Treasury when a very large merger was involved, the Government and the Secretary of State would not use that position in any way to affect the judgment and decision of the Corporation.
The words in subsection (6) have been used on numerous occasions. The noble Lord himself may be aware of the Airports Authorities Act 1965, in which the words "to be regarded" were included. Perhaps the noble Lord may be more familiar with the Sugar Act 1956, where again the words were used in the same way. With those few words, and special stress on the fact that the Government do not intend to exert in any way an influence on the everyday working of this Corporation, but wish to see it as a freely independent body working within the general terms and proposals contained in the Bill, I hope the noble Lord will withdraw his Amendment.
LORD BARNBY: At this stage could the noble Lord expand a little in regard to the mechanics of how the procedure will develop? May I refer particularly to paragraph 6 in the White Paper, which described this? I think the noble Lord instanced the case of the cutlery industry. What I seek information on is any particular section of an industry which is different from the others and is distinguishable from them, where it would be considered by many familiar with the industry (even with many in the industry) that the situation was such that un-profitability was the result of what one might call an amount of unreasonable competition. Where will the impetus come from?
For instance, if the Inland Revenue cared to explore the aggregate results even of public companies, or companies which have to register at Somerset House, or those coming under the new proposal of the Companies Act, because there is an obvious lack of profits in a particular industry and the continuance of that must be disadvantageous to the national interest, it is difficult to see what are the mechanics whereby steps would be

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initiated. Would a "little Neddy" be involved in the first place? It does not seem that it can be the Corporation itself. The initiative must come from some quarter which urges that there might well be an advantage in the application of the provisions under the Bill, which, with certain reservations, would appear to many to have much merit. It is difficult to see exactly how the mechanics would function. Perhaps the noble Lord could expand on that.
LORD SHEPHERD: I should be very willing to respond to the noble Lord, Lord Barnby. I have a feeling I shall perhaps be able to answer him best when I move the first Amendment that appears under my name on the Marshalled List. If he would be content to wait until then, I think it would be convenient because the point the noble Lord has just made, while it may be very valid, hardly arises on the Amendment the noble Lord has moved. I would say, however, that the Government do not contemplate using the power in the Bill for recommending to the Board with any great frequency, and then only in very special circumstances.
LORD DRUMALBYN: If I may say so, this is a subject to which we can revert when we come to the financial aspects of the Bill later on under Clause 5. I would thank the noble Lord for his explanation, and beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
Clause 2:
The Corporation's functions
2.—

(1) Subject to the provisions of the next following subsection, the Corporation may, for the purpose of promoting industrial efficiency and profitability and assisting the economy of the United Kingdom or any part of the United Kingdom,—

(a) promote or assist the reorganisation or development of any industry or section of an industry; or

(b) if requested so to do by the Secretary of State, establish or develop, or promote or assist the establishment or development of, any industrial enterprise.

(2) The Corporation shall have power to do anything whether in the United Kingdom or elsewhere which is calculated to facilitate the discharge of its functions under the foregoing subsection or is incidental or conducive to their discharge, including—
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(d) the acquisition and placing at the disposal of others of premises and plant, machinery and other equipment.

(6) In this section references to an industry include references to any description of commercial or financial activity and "industrial" shall be construed accordingly
6.1 p.m.
LORD SHEPHERD LORD SHEPHERD moved, at the beginning of subsection (1), to leave outs "Subject to the provisions of the next following subsection". The noble Lord said: On Second Reading the noble Lord, Lord Aldington, after giving the Bill warm support, made a comment upon the drafting of the Bill. As I remember it, his main complaint was that we were giving functions to the Corporation but not laying down a duty. I explained in reply to the noble Lord that we were under some difficulties; that if you were to place a duty and make it explicit perhaps in that way you would exclude a particular point merely because you had omitted to include it in the duties so specified. After conversations with the noble Lord, and through the ingenuity of Parliamentary Counsel, I hope we have been able to provide a series of Amendments, which appear on the Order Paper, which will meet the point that was made by the noble Lord, Lord Aldington.
I am now moving Amendment No. 5, and I should like to speak also to Amendments Nos. 6, 7, 8 and 10. The Amendment of substance is Amendment No. 7; No. 6 is a further paving Amendment and Nos. 8 and 10 are consequential. The new subsection has two parts. It makes it clear that the Industrial Reorganisation Corporation's first duty will be to survey British industry in order to identify the sectors where structural changes are needed. This perhaps is the point the noble Lord, Lord Barnby, was making. The Corporation will then have to select the sectors where an intervention seems most likely to have useful result sand concentrate their resources on those sectors. The new subsection makes it quite explicit that the I.R.C. will be responsible for setting their own priorities. No doubt they will look to the Government for advice and information during the first phase of their work for identification of the sectors where reorganisation is required, but they will also hope to receive advice and information from many other sources, especially from industry and the

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City. On the basis of a total picture which they build up they will decide which schemes they should seek to promote and assist.
The choice of the most promising possibilities from among the many that will be open to them will be one of the most important aspects of the Corporation's work and will demand all the financial and industrial skill and expertise which the Corporation's members can bring to bear on it. The success of the I.R.C. operations will depend to a large extent on whether they pick the right schemes to back. This is why the Government are so grateful to the distinguished members who have offered to serve on this Corporation. It is therefore right that the Corporation should be given full discretion to set their own priorities and be responsible for the choice they make. With these Amendments we have included now a duty to run side by side with the functions. I appreciate that it is not word for word the suggestion that the noble Lord, Lord Aldington, made on Second Reading, but I think it goes very much to the heart of the point that the noble Lord made, and I hope it is now acceptable to the noble Lord and to the Committee as a whole. I beg to move.
Amendment moved—
Page 2, line 14, leave out from beginning to first ("the") in line 15.—(Lord Shepherd.)
LORD ALDINGTON: I would express my gratitude to the noble Lord, Lord Shepherd, for this Amendment, and say that I join with him in congratulating the Parliamentary counsel who has found the way round a great many of the pitfalls and difficulties with which he briefed the noble Lord on Second Reading and about which he argued with me for a little while. I am very glad that, without torturing the present drafting of the Bill, it has been found possible to insert a duty.
It would be perhaps rather churlish to make the following comment, but I am going to do so. I think it is a second best, if I may say so, in drafting a Bill to put the duty after the function. It is surely unusual to appoint somebody to do something for you, and to tell him how he should do it before you tell him what he is to do; but this is, I think, forced upon us, due to the rather in-
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tricate drafting of the Bill. As the noble Lord says, this Amendment meets my main point, or most of my main point, that I put to your Lordships during the Second Reading debate. There is one part of my point which it does not meet, however, but on reconsideration I think it is right in not trying to meet it.
I told your Lordships that I thought it would be wise, in setting up a body whose main purpose was to increase industrial efficiency (that is, of course, the main background purpose we have in mind for this Corporation), that that body itself should be run efficiently and should seek in the long run, not in the short run, to make a profit for itself. But on further consideration I think it would be extremely difficult to give the Corporation a duty which was workable in a practical way, because of the nature of the way in which it is likely to operate in the early days, and also because it is, I think, the wish of most of your Lordships, with the Government, that the Corporation should seek to achieve its objects by giving advice and encouragement, rather than by actually participating. In those circumstances, of course, it would be difficult sometimes for it to get any income. So there is a point there which I now surrender.
There is one point, however, that has arisen since we considered this Amendment. Unless I misunderstood something the noble Lord said on the first Amendment moved by my noble friend, in view of the Secretary of State's power, under subsection (4), to give general directions, the duty of the Corporation to give effect to such directions might impinge upon this particular duty. I thought I heard him say that an example of the kind of general direction which the Secretary of State might give was a direction to have a look at the cotton industry. I must say that that would be rather a remarkable direction to give to Sir Frank Kearton. But if such a general direction were given, would it not impinge upon the clear duty now given the Corporation to use its own direction about such matters? Perhaps the noble Lord can answer that question, because I think it is quite important. There may, of course, be rules about the interpretation of Statutes, of which I am not aware, which subordinate the

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second duty to the first; but perhaps the noble Lord will advise us.
LORD DRUMALBYN: I should like to congratulate the noble Lord, Lord Shepherd, and my noble friend Lord Aldington on the successful outcome of their negotiations in this matter; and I congratulate my noble friend on having put up the idea that it was important that we should know what the main duty of the Corporation was to be. I must say that in putting this down as the duty of the Corporation, the Government have, possibly inadvertently, uncovered the fact that this whole Bill represents just an idea and that they have had no study in depth to see what the need for this Corporation was. They have just had a thought that it would be a good thing to have a Corporation, and now, and only now, the Corporation have to consider which industries it will be expedient to reorganise or develop. This answers some of the questions which we might have put at a later time, as to which industries the Government themselves thought should be reorganised and developed, and what were the studies that led them to this conclusion. But as I say, I believe that this Amendment improves the Bill, and I should welcome it.
LORD SHEPHERD: At this stage of the evening, and with an important Committee stage to follow, I do not wish to go into any depth as to what the Government have in mind as to which industries will need the attention of this Corporation. I think the noble Lord is quite wrong—in fact, I know that he is—in saying that this Bill is merely an idea, because all of us who have had modern experience with industry recognise that a lot is to be gained if we can have rationalisation; that if (to use a phrase that I have used many times) we had a few more lions in our industrial field and a few less cubs, we should have greater competition which no doubt would have greater effect in our export effort.
I agree with the noble Lord, Lord Aldington, that in the terms of this Bill my choice of the cotton industry and its chairman was perhaps ill-advised. I was merely trying to define what a direction "of a general character" would be. It is quite clear—and this is what I was trying to stress—that a "general
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character" is of a wide implication. The noble Lord, Lord Aldington, regretted that we could not include all the words that he had in mind, particularly "on grounds of profitability". I believe it to be true that we should not judge the success of this Corporation merely in terms of the pounds, shillings and pence which they may eventually earn for the taxpayer. I think the success of this Corporation must be judged upon the quality and the success of the mergers they have encouraged. I hope that the Corporation will show a handsome return, but it will certainly be a number of years before this is possible. This is a point which we shall no doubt be able to discuss on later Amendments, when we deal with the capital position of the Corporation. With those words, I hope that the Committee will now accept the Amendments that stand in my name on the Marshalled List.
On Question, Amendment agreed to.
LORD SHEPHERD: I beg to move this Amendment.
Amendment moved—
Page 2, line 19, leave out ("or section of an industry").—(Lord Shepherd.)
On Question, Amendment agreed to.
LORD SHEPHERD: I beg to move Amendment No. 7.
Amendment moved—
Page 2, line 22, at end insert—
("( ) In determining how to exercise its functions under paragraph (a) of the foregoing subsection it shall be the duty of the Corporation to consider which industries it would be expedient to reorganise or develop for the said purpose and to seek to promote or assist the reorganisation or development of those industries which in the opinion of the Corporation it would be most expedient to reorganise or develop for that purpose.").—(Lord Shepherd.)
On Question, Amendment agreed to.
LORD SHEPHERD: This Amendment is consequential. I beg to move.
Amendment moved—
Page 2, line 26, leave out ("subsection") and insert ("provisions of this section").—(Lord Shepherd.)
On Question, Amendment agreed to.
6.16 p.m.
LORD DRUMALBYN LORD DRUMALBYN moved, in subsection (2), to leave out paragraph (d).

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The noble Lord said: I beg to move this Amendment, the effect of which would be to leave out the particular power that is given to the Corporation in subsection (2):
"The acquisition and placing at the disposal of others of premises and plant, machinery and other equipment."
This subsection now authorises the Corporation
"to do anything, whether in the United Kingdom or elsewhere which is calculated to facilitate the discharge of its functions under the provisions of this section."
If it is entitled to do anything, presumably it would be entitled to do this, and therefore I can only conclude that the reason why this particular power was inserted is that it is a paradoxical power; it is unexpected. That is so, because if it is entitled to do anything, there is no point in specifying this in particular, unless it is unexpected, unusual, and possibly undesirable.
The real point about the Corporation is that, generally speaking, they must be a financial institution, and it is unusual for financial institutions to acquire premises and plant, machinery and other equipment and to place them at the disposal of others, unless we are thinking of hire-purchase institutions or something of the kind. This is an exploratory point, but on the face of it it is difficult to reconcile this particular power with the other powers of the Corporation, because it would be perfectly easy for them to make the money available for the purchase, or indeed for the hiring, of such plant, machinery and equipment. "The acquisition" must mean "the ownership"—you acquire and own. It is not at all clear why the Corporation should acquire and own premises, plant, machinery and other equipment. There may be something to be said for the premises, but so far as plant and machinery is concerned, that is by no means so clear. I should be grateful if the noble Lord could give us further clarification on this matter, and I beg to move.
Amendment moved—
Page 2, line 34, leave out paragraph (d).—(Lord Drumalbyn.)
6.18 p.m.
LORD SHEPHERD: The noble Lord, Lord Drumalbyn, is quite correct in saying that subsection (2) will give to the Corporation power to do anything, which
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means that without these particular definitions or specifications it would do all these things without their being named. The reason for its insertion was merely to illustrate what the Board could do. I think I should make it perfectly clear that the Government do not believe that the Corporation should set themselves up as a sort of general leasing agent for equipment. But, as I said on Second Reading, there may be circumstances, particularly when three companies are being rationalised, when the best possible assistance that could be given to those companies would be in the field of modern machinery, computers or special forms of manufacturing equipment.
The noble Lord may be quite right in saying, as he did on Second Reading, why not give them money instead of equipment? In the end it will be the choice not only of the Corporation but, in particular, of the companies which merge, as to what form of assistance is given in bringing about the merger. I do not believe there is anything sinister in paragraph (d). It is merely to illustrate, for those who read the Act, the type of things the Corporation can do to assist in a particular merger. The noble Lord is absolutely right that the Corporation would have the power to do this particular thing, even if it were not included in the Bill. But I repeat that the Government have not in mind that the Corporation should set themselves up as a grand hire-purchase organisation or leasing agent for machinery.
LORD INGLEWOOD: May I ask the noble Lord one question? In each of his last three speeches he referred to mergers and the encouraging results which flow therefrom; in other words, he spoke of mergers as being the prime object of this Bill. May I ask whether the Government are also anxious to do what they can to help individual companies to reach new heights which, with some help from outside, might be possible? It is not just a matter of mergers, mergers, mergers, the whole time. I think I am right in saying that the noble Lord, Lord Brown, is wearing a tie of a remarkable firm. Is that not right?—unless my eyesight fails me.
LORD BROWN: No, it is the Melbourne Football Club.
LORD INGLEWOOD: I know that the other day the noble Lord was given a tie by a business house which he went along to see. I must declare some small interest, although my association with that business has been too short to claim any credit. One of the things which I am sure any Government wish is to help firms to achieve that sort of success, individual success as well as success by merger. Could the noble Lord, Lord Shepherd, clear that point?
LORD SHEPHERD: I am well aware of what the noble Lord says, and the Government have a great deal of sympathy. We are now dealing with a Bill whose sole purpose is the rationalisation and reorganisation of industry, in relation to which is the merger of organisations into larger units. This is why I am forced to stress the word "merger". I sympathise and take the point which the noble Lord made about individual companies. I know my noble friend Lord Brown is in fact very active with the Board of Trade in bringing that about.
LORD DRUMALBYN: I should like to thank the noble Lord for the explanation he has given. As I understand it, he has told your Lordships that this is not to be one of the major activities of the Corporation. If that is so, it is a little difficult to see why it should be set alongside three other activities which undoubtedly will be among their major activities. Although I feel that this is a little unusual and somewhat unnecessary, I cannot object to its inclusion. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
LORD SHEPHERD: This Amendment is consequential on Amendment No. 7. I beg to move.
Amendment moved—
Page 3, line 11, after ("to") insert ("a section of an industry and 'industry' includes").—(Lord Shepherd.)
On Question, Amendment agreed to.
Clause 2, as amended, agreed to.
Clauses 3 and 4 agreed to.
Clause 5:
Exchequer investments in Corporation otherwise than by way of loan
5.—(1) Subject to the provisions of section 7 of this Act, the Secretary of State may with the approval of the Treasury pay to the Corporation such sums as he thinks fit not
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exceeding in the aggregate £50 million or such greater sum as he may from time to time by order specify.
(7) The power to make any order under this section shall be exercisable by statutory instrument; but the Secretary of State shall not make any such order unless a draft of the order has been approved by the Commons House of Parliament.
6.23 p.m.
LORD DRUMALBYN LORD DRUMALBYN moved, in subsection (1), to leave out "£50" and insert "£25" [million]. The noble Lord said: It may be convenient if we take Amendments Nos. 11, 12 and 14 together.
LORD SHEPHERD: Not 13?
LORD DRUMALBYN: That covers a rather different point, but I do not object to its being taken together with the others. We are here dealing with the financial provision for the Corporation. The Government spokesmen have said time and again that this Bill is an experiment, and I think your Lordships will be bound to raise your eyebrows and ask whether it is right, or wise, to commit the public purse to such huge sums of money on an experiment. One might ask whether it would not be much better to limit expenditure in the first instance. After all, the upper limit of expenditure of the National Research and Development Corporation is £25 million. That expenditure has been going on for quite a long time, and, by any standards, £25 million is a lot of money. Here we have £50 million as a limit to the Exchequer investment, which may be increased by order from time to time, with an overall limit of £150 million for all the money which the Corporation may obtain, whether on guarantee or by loan from the Government or by Exchequer investment.
In winding up the Second Reading debate, the noble Lord implied that there were some mergers which have already been as good as arranged, and that the Bill is urgently needed in order to ensure that they are not frustrated. I might ask him whether they would be frustrated if they were disclosed now. If they would, I should not press the noble Lord to reveal them. But on the question of finance, it seems to me to be a dubious practice for the Government to set up a Corporation before power is given by

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Parliament and possibly to commit Government money in connection with activities for which Parliamentary approval has not yet been obtained. It seems to me that the Government ought now to be in a position to give a clearer indication of what they have in mind in regard to finance.
What, for example, is the estimate for 1967–68 under the two heads of loan, on the one hand, and Exchequer investment on the other? The amount covered by that estimate would not necessarily be spent but, on the other hand, it would equally be possible for a supplementary estimate to obtained should the Corporation be overspent. All we know is that the upper limit of expenditure is £150 million. We do not know for how long that is to last. We know that the Government would have to come back to Parliament for anything further in that regard, but in regard to Exchequer investment the limit of £50 million, within the overall limit of £150 million, could be increased.
I have put down these Amendments to halve the sums merely in terms that such sums are very large indeed, and that the Government ought to have some idea of what their commitments are likely to be and, therefore, ought to be able to give us some idea of what they are before we part with this Bill and before such sums are voted. So far as I can see, no indication of any kind was given in another place on this matter. The Government plainly had no idea whatsoever at what rate it was expected that this money would be spent. Indeed, from time to time Government spokesmen gave the idea that they much hoped that none of it would be spent at all. If they do not spend it they cannot earn anything on it; and, further, the whole concern will not be viable. The Government are in rather a dilemma over this matter, but I think it is absolutely essential that, when legislation of this kind is introduced, the Government should have some fairly clear idea of what the money is going to be spent on and how long it is likely to last. They need not have an exact idea, but they must have some general idea. I beg to move.
Amendment moved—
Page 4, line 23, leave out ("£50") and insert ("£25").—(Lord Drumalbyn.)
LORD SHEPHERD: I am most grateful to the noble Lord, Lord Drumalbyn, for taking these four Amendments together, because they really hang together. I think I should correct the noble Lord: he has taken up a point on which I sought to correct him on Second Reading. The Corporation do not exist, and therefore they are not in any position to bring enquiries to a position where one could say that a merger had been arranged. What I said on Second Reading was that a number of enquiries had been made, and I hoped that by getting an early passage of this Bill any serious enquiries about what assistance could be made available for a merger should not be lost.
The noble Lord wants to know why we have selected £150 million in the first instance as the total liability of the Corporation. We took into account the size of mergers which have taken place in recent years, and it was felt that £150 million as the total liability—not necessarily capital—was about right in the first instance. I have no reason to believe that we are either right or wrong. This is a reasonable anticipation of what is likely for—shall we say?—the next five years.
The noble Lord has asked whether we have any idea of the sums which the Corporation are likely to need from the public Exchequer during the next financial year. I will be quite frank with the noble Lord. I know, but what I do not know is whether that amount has yet been signified in any way to another place. Having heard so much recently about Commons' privilege, I am not quite sure whether it would be right for me to divulge that figure at this stage. I will ascertain whether on Report stage I can give that figure. But at the end of it, the answer must surely depend upon to what extent the board of the Corporation are able to carry out the duties which the noble Lord, Lord Aldington, was so anxious that the Corporation should have.
LORD FRASER OF LONSDALE: May I ask the noble Lord whether he can elaborate this matter a little? There are said to be some companies which want to merge, or are thought to be wanting to merge, and they must have told the Government this—in secret, I

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suppose. I am not complaining of the secrecy, because until a merger eventuates it is not a good thing that the shares should be dealt in by those who know, at the expense of the wider public who do not know. So here we have some companies which wish to merge, or are imagined to be wishing to merge, and they go secretly and ask the Government; therefore the Government want to hurry the Bill along to help them. If they are worthy mergers which have merit, which are viable and commercially sound, why do they go quietly and secretly to the Government to ask for a Bill to provide capital for them? Why do they not go to the market? Is it because they are not viable, or not very respectable, or not very likely to make a profit, or because there is some crazy idea that the Government can do these things better than other people? Could the noble Lord explain how this can be? How are the Government to provide money, and for what? Is it for something which is not worth commercial money, or what?
6.34 p.m.
LORD SHEPHERD: I must say that I am getting into some difficulties. This is the second occasion on which points of broad principle have arisen when I was arguing a point of detail. But I would say to the noble Lord, Lord Fraser of Lonsdale, that the Bill has not been brought in because various companies have been to the Board of Trade or to the Government and have said that they wanted to merge. It has been the view of the Government that we needed to see a rationalisation within our industry; that companies should come together and make themselves more powerful production units than they are at present. The Governmentfelt—and I think there is a general understanding on this point—that the market, to which the noble Lord referred, has a very important part to play. This Corporation in no way prohibit its activities, and certainly will not, as I understand it, provide facilities which the City itself could provide. What we see here is a Corporation which will deliberately seek to create mergers, as opposed to sitting merely as a post office waiting for companies to come to it with a letter saying, "We want assistance. We want to merge." The Corporation will
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not in any way affect the City's function in mergers which now exists through the merchant banks.
If I may, I will now return to the question of the capital of this organisation. I believe that £150 million is as good a figure as any for this Corporation. It is not anticipated that the Corporation will receive anywhere near this sum, because in quite a number of cases there will be questions of guarantees which will have to be taken into account as regards the total liability of £150 million.
In regard to the £50 million, which one might call the equity holding of the Corporation, this is a figure which, again, is a rough estimate, because we recognise that if in the early days the Corporation were to receive funds merely by Exchequer loans, they would be involved in considerable interest payments without, perhaps, any immediate dividend. We think it would be wrong to place the Corporation in this position, and therefore we take the view that part of the general capital of the Corporation should be in the form of equity. As the noble Lord will be aware, there is power to consult between the Corporation and the Secretary of State as to the interest which the Corporation should pay the Exchequer on that equity capital. It may well be, in the first instance, that only a very small portion of the £50 million would be paid by the Exchequer, but that is a question of consultation between the board and the Secretary of State and the Treasury. I think the power of variation is very sensible, because, as the noble Lord said, this is to a certain extent an experiment. It may well be that there ought to be a larger share of the general figure in the form of equity, but this is a matter which, again, would be considered by the board and the Secretary of State.
LORD DRUMALBYN: This is a very large amount of money on which to have such a short debate and, of course, there are many ramifications. One could discuss for a very long time, for example, whether the Corporation are likely to be expected to make a contribution simply from the point of view that a merger is something which the Corporation want, and that, therefore, to some extent this may be bringing about cut-price mergers. At the same time, the Corporation must

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pay their way. I should like the noble Lord to make it clear, as I think was made clear in another place, that the Corporation will not necessarily negotiate the mergers themselves; they will be quite content, if they think a merger should take place, if it is negotiated elsewhere and in the usual way.
LORD SHEPHERD: Yes, certainly.
LORD DRUMALBYN: But he will see my point that, it that is so, then the advantage of the Corporation doing it can only be that the Corporation are willing to do it more cheaply, at the public expense, than it could be done on the market in the ordinary way. So we are faced with the difficulty that the use of public money will take place to some extent in competition with the market. Having established that—I notice the noble Lord nods his assent—one goes on to the next point, which is that the Corporation have at their disposal the finance from the Exchequer; and, from what the noble Lord has said, they apparently have finance pretty well "on tap" up to the limit that is imposed. I think that has sufficiently revealed the position, and unless the noble Lord wishes to contradict me or to add anything, I beg leave to withdraw the Amendment.
LORD SHEPHERD: The only point I would take up with the noble Lord—and here I think he is wrong—is that I certainly did not give the impression of the Corporation going for cut-price mergers, or that they would in any way seek to undercut the normal functions of the City. The noble Lord is quite right in saying that if the Corporation can bring together two, three or four companies which are willing to merge, and if the City, the merchant banks, are willing to finance it, perhaps with the guarantee of the Corporation, then the Corporation and the Government would be very pleased to see it. The whole purpose of this Corporation is to have the most flexible way of obtaining their objective.
LORD FRASER OF LONSDALE: Before the noble Lord withdraws his Amendment, will the noble Lord, Lord Shepherd, forgive me if I press him a little further to make this clear? It is possible for the House, or anyone who reads what has been said, to misunderstand what I said or what the noble Lord, Lord Drumalbyn,
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said. It is possible to imagine that he or I were concerned to protect merchant bankers. I want to say that I have no interest in the City or in merchant bankers, none whatever. I am not concerned whether this will compete with them or whether it will not. What I am concerned with is that there can be no purpose in this exercise that I can see unless it be to create unprofitable mergers or uncommercial mergers. If the mergers are worth producing, they will be produced. What, then, is the purpose of this Corporation, and what is this money going to be spent on?
LORD SHEPHERD: I must say that I am very sorry the noble Lord, Lord Fraser of Lonsdale, was not here for our Second Reading debate, when we went into the purposes of this Corporation. But in view of the question which the noble Lord has put, and not wishing to delay the Committee, may I say this to him? The normal function of the City and the merchant banks is to facilitate arrangements in cases where two or three bodies voluntarily go to the bank and say, "We wish to merge. Will you help us?" Although there are some occasions, of course, when one company wishes to merge with another and they use the merchant banks to bring a merger about, in some cases there is, or there may be, a bit of dislike by one company of being taken over by the other; but this is the normal function of business. What the Government have in mind so far as this Corporation are concerned is to seek out, for the benefit of industry and of the companies concerned, the types of mergers which will be of benefit to those companies, to the industry itself and to the country as a whole. It is to seek out mergers, as opposed to merely sitting back and waiting for bodies to come to them.
LORD DRUMALBYN: I beg leave to withdraw this Amendment.
Amendment, by leave, withdrawn.
Clause 5 agreed to.
Clauses 6 to 8 agreed to.
Clause 9 [Reports and information]:
LORD ALDINGTON: I beg to move Amendment No. 15, the object of which is to include in the items that have to be reported for any accounting year any

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requests which may have been made by the Secretary of State under Clause 2(1)(b), where the clause says:
"…the Corporation may…if requested so to do by the Secretary of State, establish or develop, or promote or assist the establishment or development of, any industrial enterprise".
It seems to me that if requests of that kind are made, whether they are carried out or whether they are rejected by the Corporation, the public should be informed, and that is the purpose of the Amendment. I beg to move.
Amendment moved—
Page 7, line 16, at end insert—
("(a) shall set out any request made by the Secretary of State during that year, under section 2(l)(b) of this Act.").—(Lord Aldington.)
LORD SHEPHERD: Of course, the responsibility for making the report clearly lies with the Corporation, except that in Clause 9 we have a number of specific requirements as to what the Corporation should place in the report. The Government have always had in mind that the Corporation would place on record any request that they received by the Secretary of State. If the noble Lord wishes it to be written into the Bill, the Government are very happy to accept it.
On Question, Amendment agreed to.
Clause 9, as amended, agreed to.
Remaining clauses agreed to.
Schedule agreed to.
House resumed: Bill reported, with Amendments.

NATIONAL COAL BOARD (ADDITIONAL POWERS) BILL
House in Committee (according to Order).
House resumed: Bill reported without amendment; Report received.

COMPANIES BILL [H.L.]
6.50 p.m.
Order of the Day for the House to be put into Committee read.
Moved, That the House do now resolve itself into Committee.—(Lord Brown.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD STRANG in the Chair.]
Clause 1 agreed to.
Clause 2 [Abolition of status of "exempt private company"]:
On Question, Whether Clause 2 shall stand part of the Bill?
LORD DRUMALBYN: I did not move Amendment No 1 and I should like to explain why. It is because, on consideration, it seemed clear to me that it would not fit in with the earlier part of Clause 2. If Section 129 of the Companies Act 1948 were to be repealed, reference in Section 190 to "exempt private companies" would be meaningless. Therefore there is no point in retaining Section 190. Moreover, it is the case that the Jenkins Committee, quoting the Cohen Committee, stated that there was very little support for the maintenance of the present exemptions in respect of auditors and directors. Those representations had been made to me, and in the circumstances I did not think it worth while to pursue my first Amendment. I have had the opportunity of discussing the point with the noble Lord opposite, and I am grateful to him for having given me that opportunity.
At the same time this is such an important clause that I think it would be impossible to let it go without some discussion. I am sorry not to see the noble Lord, Lord Goodman, in his place, because he made such a very stirring speech on it on Second Reading. Jenkins (I think it easier to refer to the Jenkins Committee throughout as "Jenkins") stated in their Report that disclosure for what are now exempt private companies was right in principle, and necessary to protect those who trade with or extend credit to limited companies. I would not quarrel with that; but, of course, Jenkins himself qualified it by saying

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that in respect of emoluments, in respect of turnover, there was good reason for exempting private companies—and, I think he added "rents" as well.
The question which I think we shall be considering at intervals throughout our discussions on this Bill is how far one ought to exempt private companies. The Bill places further liabilities for disclosure on companies as a whole, and it is doubtful whether we ought to extend the existing liabilities—which in any case would be extended to private companies under this particular clause—still further in the rest of the Bill. It is also open to doubt (the noble Lord, Lord Milne, made this point in the course of the Second Reading debate) how far one should press upon private companies the liability for the full disclosure that applies to public companies.
Perhaps it would he right at this stage for me to see whether I have correctly understood what is involved. Under Section 124 of the Companies Act, an annual return has to he filed by the companies having a share capital. Under Section 126 it has to be filed within 42 days of the annual general meeting. Under Section 127, a certified copy of the balance sheet, together with every document required by law to be attached to it, has to be annexed to the annual return, with a certified copy of the report of the auditors and a report of the directors. Section 129, which is to be repealed by Clause 2 of this Bill, exempts private companies complying with the conditions set out in that section from the requirements of Section 127.
Under Section 156 the documents required to be annexed to the balance sheet are the profit and loss account and the group accounts to which have to be attached the auditors' report; and, under Section 157, the directors' report, which must give the dividend recommended, and the amount proposed to be carried to reserves. The report must also deal with any change in the nature of the business of the company or its subsidiaries or in the classes of business in which the company has an interest.
"so far as is material for the appreciation of the state of the company's affairs by its members and will not in the directors' opinion he harmful to the business of the company or of any of its subsidiaries".
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These duties are to be considerably modified in the clauses as we come to them.
In the case of a public company, in which any member of the public can take shares, it is clearly desirable not only that the accounts should be available to the public but that the directors' report also should be available. In the case of any private company whose articles prohibit the offer of any of its shares or debentures to the public, it is plain that if the principle enunciated by Jenkins is accepted the accounts should be available to the public as the price of limited liability. But it is by no means clear that the directors' report, designed as it is to enable the state of the company's affairs to be appreciated by the shareholders, should be so made available. This is a clear distinction between the accounts and the report.
I think it is right, when we are considering, as we are here, the principle of dispensing with the status of exempt private companies, that we should consider in principle whether the companies that have so far been exempt should have any alternative relief from the full necessity to disclosure. I thought that the point made by the noble Lord, Lord Milne, was a good one. I am sorry not to see him in his place; but, as he is not here, perhaps I might be allowed to say that he suggested to me—and the noble Lord is a chartered accountant—that one way out of it would be through the certificate of solvency procedure. If, for example, private companies were to be obliged to give a certificate of solvency within, say, six months of the end of their financial year, this would give exactly the satisfaction that creditors are required to have. And it is, of course, mainly in favour of creditors, that Jenkins made his recommendation. These are two separate forms of qualification which could be devised to the general principle that private companies should make disclosure in the same way as public companies. I feel that this is a very important step that is being taken—we are dealing with something like 300,000 private companies; I do not know how many of them are exempt—and we ought to discuss this matter before we dispose of this particular clause.
6.59 p.m.
LORD CHORLEY: The noble Lord who has just resumed his seat has made a speech which he might have made appropriately at this point instead of in not moving his Amendment. He covered a good deal of ground and covered it very pertinently—I think there is a good deal in what he said. But if the Committee will allow me a few minutes I want to go even wider before we part with this clause. I should like to make some observations on the whole problem of exempt private companies and the problem of the private company itself. In fact, we are celebrating the obsequies of the exempt private company.
The death warrant was deplored by a number of speakers on Second Reading, notably by the noble Lord, Lord Goodman, in a powerful speech. I confess that I am rather surprised that no attempt has been made to stay this execution by the noble Lord or by some of the other noble Lords who took such a strong view in favour of the exempt private company. If I could have stayed, I should have liked to cross swords with the noble Lord, Lord Goodman, on Second Reading. Unforunately, as your Lordships will remember, there was a long list of speakers, and as I had an engagement which took me away it was not possible for me to discuss his valuable speech. I agree with a good deal of it, but not with the fundamental premise on which it was based. It is on this theme that I want to say a few words to your Lordships now.
I have always taken the view that the private company was a legislative mistake and a business mistake as well. It may well be thought that it is a waste of time for me to plunge a dagger into the expiring corpse of the exempt private company, but I hope that your Lordships will forgive me for making some observations of a general character because I have been a student of Company Law for a long time and it has always seemed to me that we made a mistake in 1907 when we brought the private company into existence by the Companies Act of that year. It was led up to by a most unfortunate decision in your Lordships' House—the famous case of Saloman, which I will not go into now, and which has always been a subject of controversy in the legal profession and more widely.
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It was suggested in the Second Reading debate that there is a basic difference between a great public company, such as I.C.I. with tens of thousands of shareholders, and the small family concern very often consisting of the manager and his wife. The public company provides an ingenious and exceedingly valuable method of obtaining the large amounts of capital which are needed in modern industry and commerce. But I can find no similar justification for the small private company which, having been granted the inestimable boon and privilege of limited liability, has become an umbrella under which the small capitalist can and does in many cases shelter himself from the obligation to pay his just debts to his creditors.
If a private trader continues his business when he knows perfectly well that he is insolvent he commits an offence under the Bankruptcy Act. But if he has thought of establishing a small private company, which he can perfectly well do, he escapes this sort of situation and may carry on what is little better than a fraudulent business. I have no doubt at all that the great majority of private companies are honourably carrying on their business and pay their debts, but a sizeable minority are really little more than vehicles of debt evasion. If your Lordships will bear with me a moment, it is interesting to see that of the compulsory winding-up petitions, which are now running at more than 10,000 per annum—in 1965 they numbered 12,062—the great majority are petitions by creditors, which means that the companies in question are not paying their debts. In 1965 some 36,000 companies were registered. Only a fraction of 1 per cent. are public companies, so the great mass of these are putting themselves into the position to use this method of evading the just payment of their debts.
This is only one aspect of it. As the noble and learned Lord on the Woolsack pointed out on Second Reading, the private company has been one of the main vehicles used by tax evaders over the years. There is no question about this. An enormous amount of Parliamentary time and draftsmen's skill has been put into attempts to prevent this, and no doubt to a substantial extent it has been prevented, but it is still the case that the private company can be,

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and is, used for the purpose of evading taxation.
Even worse, in my submission, is the fact that the private company can be, and very often is, used as an engine of oppression. It may seem strange to unknowledgeable people to be told that many widows have been caused great suffering, and even brought to something like penury, by the manipulation of these provisions in the law which restrict the transfer of shares of private companies. A shareholder dies with a large holding in a private company and leaves it to his widow. She may find it impossible to get a fair price for these shares because—and often they are members of her own family—thesurviving directors treat her in a disgraceful way and there is no satisfactory provision in the Companies Act for the protection of oppressed people in small private companies. The reports show case after case in which this provision has been used in this oppressive way.
The noble Lord, Lord Hawke, with whom I found myself much more in agreement than usual, in his excellent Second Reading speech two or three weeks ago, instanced another example of this, in which a wife who happened to have one more share than her husband was able to turn him out of the company—a thoroughly oppressive piece of work. If there were time, I could give more examples and expatiate on this point at great length.
I think that the old-fashioned partnership, under which after all the tremendous commercial and industrial prosperity of this country was built up in Victorian and earlier times, was an altogether fairer type of business organisation and much less unjust in its effects on business people. Unfortunately, this Bill does not abolish the private company, although the Jenkins Committee proposed in effect to do this and to have just one kind of company. This Bill leaves the 1907 Act extant and the restriction about transfer of shares can still be used. I do not think that the provisions about publication of accounts hits at the real mischief of the private company in any way. No doubt if you are going to have private companies there is a good deal in what Lord Goodman was saying, namely, that the proposals may make it more difficult to carry on a private company;
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for to treat a small private company as this Bill does—that is, to treat it from a number of points of view and from the point of view of accounting in particular, just as a large public company is treated—has obviously a great deal to be said against it.
What we really need as the noble Lord, Lord Hawke, indicated in his speech, is some new type of organisation for a small business. I agree with what the noble Lord said or what his friend the Chancery barrister said. He thought it was fundamentally wrong to treat private companies in exactly the same way as public companies, and he said that this has been recognised in some Continental countries which had separate codes according to the type of company that was being set up. He was absolutely right about this. One of the most serious omissions in the Jenkins Report is that it shies off this important problem altogether. This is really one of the most extraordinary things about the Jenkins Report.
Professor Gower who was a member of the Jenkins Committee and whose book on Modern Company Law is a work of outstanding importance was invited some years ago by the Ghanaian Government to draft company legislation for that country. In doing so he took this very point and drafted a separate code for what he called the Incorporated Private Partnership in which he made separate provision for this type of business organisation. Indeed this is a legislative point into which we in this country might go with great advantage. It is interesting to notice that while Professor Gower's work in this way has been pretty well ignored in this country, not only by the Jenkins Committee of which he was a member, on the other hand, a great deal of attention has been paid to it in some other countries, notably Israel. This, as I say, is most interesting, and also disappointing.
As many of your Lordships will know, Professor Gower is now a member of the Law Commission. I am sorry that the noble and learned Lord the Lord Chancellor is not with us, because I should respectfully like to suggest to him that in co-operation with his colleague at the Board of Trade he should remit this problem of the proper structure of a new type of organisation for the small

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business to the Law Commission, who obviously, while Professor Gower is a member, are particularly well placed for drawing up a useful report which could in due course be considered by Parliament, who, after all, must take the final responsibility for seeing to it that the type or organisational structure which our business requires is provided for the business world.
It really is quite ridiculous that we should go on trying to mould these rather outworn types of organisations—organisations devised for a very different situation from that which exists now in the late twentieth century, and devised for the purpose of dealing with the sort of business requirements which existed in the nineteenth century—to meet the requirements of the modern world. I hope your Lordships will agree that this is a matter of great importance and that it is perhaps legitimate for one to stray a little away from the exact terms of Clause 2 in order to bring this matter to the attention not only of your Lordships but, I hope, of a rather wider public.
7.16 p.m.
LORD COHEN: I hope I shall be forgiven if I follow to some extent the probably improper course that was followed by the last speaker—namely, to make a Second Reading speech on this Committee stage. However, I think I can justify myself in view of what the noble Lord, Lord Drumalbyn, said. I feel I have some justification in intervening, as the exempt private company owes its origin to the Report of the Committee over which I presided in 1945. I am quite unrepentant for having signed that Report. We expressed our opinion then as to the validity of the principle of the fullest information practicable about the affairs of companies being available to the shareholders and the public, and we recommended considerable extension in the information previously given in accounts. But we recommended an exception in the case of the exempt private company, because we had a good deal of evidence as to the advantage the filing of full information might give to the large concerns vis-à-vis the small concerns. And similar evidence appears to have been given before the Jenkins Committee.
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If your Lordships look at Paragraph 61 of the Report, you will see that they state in the first two sentences:
"We appreciate the argument that the filing of accounts may cause embarrassment or inconvenience to some exempt private companies, though the fears which have been expressed to us on this score are, we believe, exaggerated (like the fears expressed to previous Company Law Committees about the effect of the publication of full accounts by public and, later, by non-exempt private companies). We think that in general such disadvantage as there may he should he accepted, because disclosure is right in principle and necessary to protect those who trade with and extend credit to limited companies."
With that, if I may say so, I respectfully agree. But they went on to suggest that certain concessions might be made to the exempt private companies, because they did not think that that kind of information—though very important that it should be known to the shareholders and prospective shareholders—was of great importance to the creditors, who were concerned with the net figure; and they suggested that directors' emoluments, company turnover and rents should not be required to be disclosed in the file accounts of companies whose securities had not been quoted or offered to the public, but that this information should be given in the accounts of such companies circularising members and debenture holders.
What I should have said, if I had spoken on Second Reading, would have been that I regretted that this exception did not seem to be covered by the draft Bill. Amendments are proposed, such as Amendment No. 8 (I do not know whether the noble Lord, Lord Drumalbyn, will move it when the time comes), and I will not inflict myself upon your Lordships again if and when we come to those Amendments, which go a long way and even further than suggested by the Jenkins Report, because they suggest that private companies whose shares and debentures are not quoted on the Stock Exchange, to put it shortly, should be exempted from disclosing certain pieces of information as to emoluments and the like in the accounts which they file, though I think they should be bound to disclose that information to their shareholders. If I may say so with respect, I would approve the principle of the Bill—namely, that in the case of private companies the wide exemptions should be very much reduced. I hope that the

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noble Lord who presents this Bill will consider before the Report stage whether something cannot be done to give effect to the concluding sentence of paragraph 61 of the Jenkins Report which I have read to your Lordships. I will not inflict myself any longer on your Lordships, except to say, with respect, that I agree with the course the noble Lord, Lord Drumalbyn, adopted in not moving his first Amendment.
7.21 p.m.
LORD HAWKE: I thank the noble Lord, Lord Chorley, for his kind references to my remarks on Second Reading, which I am sure will be read with gratitude by the eminent Chancery lawyer who inspired them. As the noble Lord well knows, they were not strictly invented by me. In my 25 years in your Lordships' House I have noticed that Governments of all complexions are apt to quote Royal Commissions as Holy Writ, but I have come to the conclusion that if they do that, they should at the same time say why they have not carried out all the recommendations of Royal Commissions. One cannot have one's cake and eat it. Either Royal Commissions are not Holy Writ or else they are, and you must carry out all their recommendations.
As the noble Lord, Lord Chorley, said, the burden of my Second Reading speech was that a new animal should be invented, a sort of incorporated partnership. That, of course, would come forward at a time when the Government were producing fresh thoughts on Company Law in general. But if we are to amend this Bill in any way, this would be going part of the way towards that. So I should like to hear from the noble Lord in charge of the Bill whether the Government's predilection is towards new thought for the next legislation, or some amendment of this Bill.
I quite agree with the noble and learned Lord, Lord Cohen, with his vast experience, that to put all these burdens on the small private company will produce an intolerable degree of bureaucracy in the shape of filing accounts, and so on. Though the noble Lord, Lord Chorley, deployed a certain number of reasons why the exempt private company should be reformed, what they boiled down to was that there was a very small proportion
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of people who went bankrupt in running these companies. The noble Lord rather hinted that they went bankrupt on purpose. I prefer to think that in the vast majority of cases they went bankrupt because they found the pace a bit too hot for them and were not able to make a profit. Quite frankly, his complaints about tax evasion, oppression and bankruptcy—
LORD CHORLEY: May I interrupt the noble Lord? You cannot go bankrupt if you are running a company—that is the whole point of it. If you are a private trader, your goods and chattels are made available for your creditors, but not if you are running a business through a private company.
LORD HAWKE: I think perhaps I expressed myself badly. The noble Lord was talking about windings-up and so on. He hinted that in general these seemed to be the result of deliberate evasion of creditors. In the majority of cases the people concerned are not clever enough to make a profit out of running their business. The fact that they will have to file accounts, et cetera, I do not think will be of the slightest assistance to the widows who would be oppressed, or the Inland Revenue who have their tax evaded, or the creditors who will find companies going bankrupt on them. Therefore, I think it is a great pity that the Government have partially accepted the recommendations of this Committee.
VISCOUNT ECCLES: I wish to intervene only briefly. I find the exempt private companies a most difficult question. If one looks at it—and I hope perhaps I may declare my interest from the point of view of a large firm; in this particular case Courtaulds is my firm—one sees there are two conflicting considerations. First of all, of course, it is absolutely true that it is very difficult to find out whether certain exempt private companies are creditworthy or not. If they are asked for their accounts—it is generally said that the bank manager does that sort of thing—in many instances their accounts are not worth the paper they are written on; they are not even audited. For a business that has a vast number of small accounts it is sometimes very difficult. Therefore, from the point of view of collecting debts and

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having a proper means of discovering the credit-worthiness of customers, what the Bill does is a good thing. On the other hand, there is no doubt that if the small individual company were compelled to give away all the information which it is asked to give away under this Bill the large company would be in a much stronger position. I think I ought to say that, knowing exactly how this would work.
Suppose, for the sake of argument, a large company has a number of shops in different towns. Under this Bill the individual turnover of those shops will not have to be given. It will be aggregated in the turnover of the group as a whole. But the small man in a shop alongside, whose turnover one would very much like to know—and, of course, one does not know it now—will have to give that information, and it will be of advantage to the big man.
I wonder whether the Government cannot find some way in which quite rightly to make the exempt private company that is enjoying the benefits of limited liability really pay for those benefits in telling us whether it is creditworthy or not, but at the same time so that that small man is not put in a weaker position than he is already vis-à-vis the big industrial or commercial group. There ought to be some way in which we could find a compromise between the two. I do not want to win all along the line, nor do I want the private company to continue fraudulently getting credit.
THE MINISTER OF STATE, BOARD OF TRADE (LORD BROWN): I am grateful to the noble Lord, Lord Drumalbyn, for not moving his Amendment, because I think it has given us a little more time for a broad discussion on Clause 2. I am unfamiliar with this process, and it struck me that it was very like a Second Reading debate. But I think perhaps that is justified because, as the noble Lord, Lord Chorley, suggested, Clause 2 brings about the demise of the exempt private company; and in so far as it does that it sets a sort of climate for the rest of the Bill. As such it is a very important clause indeed.
Perhaps it would be as well to make quite clear precisely what withdrawal of the exemption privilege is going to mean. I will make the points quite quickly. It
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means that companies will lose the exemption to file accounts; or, to put it positively, which I think would be better, exempt private companies will find themselves in a position where they will be required to file accounts with the Registrar of Companies for public inspection. They will be required to have qualified auditors and independent auditors. They will be unable to lend money to their directors. There is one other matter, concerning Northern Ireland, which I do not think is particularly important.
When we look at these four points as requirements to which they will now have to submit I think it is possible to overestimate the burden of these points. If one were to say to people from many other countries, "We are going to take the tremendous step of making all our limited liability companies fall in line on these points", I think some of them would say, "We are surprised to know that they have not always fallen in line in this particular way". Nevertheless, it is an important step, and it is reasonable for the question to be put as to why it was not considered possible to produce another type of institution more suitable for the smaller companies.
The noble Lord, Lord Cohen, has himself asked this question, and with great respect I would quote back from the Cohen Report itself, which tried to devise a definition for the purpose of exempting
"what can roughly be called the small family business incorporated as a company".
That Committee, however, were reluctantly driven to conclude that it was impracticable to define the companies which they had in mind by reference to the capital, the number of employees, the turnover, or even by a combination of these tests. We all know what happened: we ended up with the exempt private company defined in such a way that 70 per cent. of all limited companies become exempt private companies, and we know this means that the four points I have just made do not have to be met by something over 300,000 companies. I do not believe that any of us want to go on in that way.
The noble Lord, Lord Chorley, has suggested that it would be a good thing if we could put to the Law Commission for the future the idea that something more suitable should be built if possible.

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We are faced, however, with the fact that we have to make some change to better the existing situation. In facing this change the Government have been presented with the problem that, in their submission, to attempt to draw further lines of demarcation is not possible within the terms of reference of the 1948 Act. It is too difficult; there are so many possibilities of loopholes, and we propose, therefore, to take the extremely bold step of moving gradually towards big changes. We are taking a big jump now by having one sort of limited liability company in the country. No doubt this will mean further work and difficulty for many small companies, but we shall come to some ideas for minor amelioration of these as we go through the Amendments, and I shall try to be as helpful as I can in endeavouring to meet some of the points raised.
There is no doubt we are adding this burden. On the other hand, let us make the point that there are many very small companies in this country (and this is in answer to the noble Viscount, Lord Eccles) which have miserable sets of accounts. In one sense, people tend to be rather proud of the fact that they can run a small business on a few scraps of paper. But when one looks at some of the shops in the less well built parts of some of our towns, and sees filthy windows with sleazy-looking goods flung into the windows—and some of these places really smell—one realises that they would be very much better off as a result of a good spring cleaning and a reasonable set of well-drawn-up accounts to show them just how stupid they are in the way they run their business. These people employ many thousands of employees, and I do not think we ought to lean over too far in our sympathy for the additional trouble to which the small companies are to be put. I have some sympathy for them; on the other hand, we should not go too far in extending our sympathy in this particular way.
I should have asked the noble Lord, Lord Hawke, a question when he was speaking, but I understood him to suggest that if a Royal Commission were set up to produce a report such as the Jenkins Report, the Government ought to accept either all its recommendations or none of them. Am I wrong in that interpretation?
LORD HAWKE: The noble Lord has slightly misheard me. My experience suggests that when a Government wish to take one recommendation and regard it as Holy Writ they ought to take the whole lot. Otherwise they can take a recommendation but they must not regard it as Holy Writ.
LORD BROWN: I note the distinction, but I must be a little cautious as long as the noble Lord is in the House, from standing too firmly on a particular point made by the Jenkins Committee. We are faced with a practical difficulty of expediency; and I am not ashamed of expediency. The difficulty is that if in fact we had set to work to produce a Bill which covered practically all the Jenkins Report it would not be in this House this evening. It would be doubtful whether it would be in this House a year hence, because there are the considerations of finding Parliamentary time, and of drafting.
Already this Bill, which is deliberately a limited Bill in order that it may find its place in the Parliamentary timetable, has given rise to an enormous amount of work. There are 87 Clauses, and as a newcomer I am dismayed at the amount of comment which has to be made in order to get the position clear in the minds of myself and others on this side of the Committee. I have the greatest sympathy with those who have not had the advantage of these excellent notes. If we had taken all the Jenkins recommendations into account we should have had an enormously indigestible Bill.
I was asked whether I could give some idea of the sort of shape that the next Bill would take. I think that is asking a little too much. Many wide issues are being discussed concerned with the structure of relationships between shareholders, customers and employees inside companies, but I could not commit the Government in any way.
LORD HAWKE: I think I was the one who asked the noble Lord that question and I do not think he has it quite right. He has since said that he is going to provide for some amelioration of the private company in this Bill, and I was wanting him to say whether that was his line or whether the Board of Trade would be thinking of the next legislation

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on the lines of producing legislation to provide a separate type of animal for the incorporated partnership.
LORD BROWN: I note the point and I confess I simply do not know whether or not the next legislation will be able to produce the animal. It requires a great deal of thought.
I have tried to deal with as many points as possible raised in this debate on Clause 2 stand part. I think the salient features are the fact that we are taking this big step and are producing the one type of limited liability company. It is acknowledged to be a bold step and we know it will entail quite a bit of trouble for many companies, but we believe that the need for further information and greater protection of creditors, the need for efficiency and the difficulty of drawing lines, are such that in toto this big step is justified. As I say, we will attempt to introduce one or two ameliorations in response to Amendments put forward to various clauses. With that, I think I can close my remarks, and I hope I have answered some of the questions put.
LORD DRUMALBYN: May I make one or two observations? First of all, I would say thatI am very grateful, and I am sure all my noble friends are, for what the noble Lord has said. But I do not think, for my part, I can quite leave the matter there. The noble Lord has said that the Government have decided to take a bold step and equate the private and the public company, but he went on to say—and I think we were all glad to hear it; I am sure my noble friend Lord Eccles will be and I certainly agree with every word he said—that he would attempt to introduce one or two ameliorations, which, I take it, is one or two examples of relief for private companies, where he feels that is possible. As he knows, there are a good many Amendments down seeking to do that. My point in raising the matter at this time was simply to suggest that if we do that, we are dealing with the matter in a rather piecemeal way.
I revert to what I said before. I fully agree that all companies should have to
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provide accounts and that those accounts should be duly audited by independent auditors. I agree with the Jenkins recommendation about accounts. But the directors' report is not part of the accounts; it has merely to be attached to the accounts. There is a complete distinction. The suggestion I was throwing out to the Committee, and I was hoping the noble Lord would take up rather differently, was that it would be possible to deal with the whole of this question in one, if the unquoted companies were exempted from the necessity to attach the directors' report to the accounts filed with the Registrar. Of course, the directors' report would continue to be circulated to the shareholders. It seemed to me that this was one way in which this could be done. Then we should not have to go into the detail that we shall have to go into on each of these Amendments to particular clauses dealing with the directors' report, because it would not be filed with the Registrar. That would be one way of doing it. I hope that the noble Lord will at least consider it. It will not be difficult to put down an Amendment. We shall not arrive at it to-morrow, in any case, and it could be considered. It seemed to me, in considering this matter as a whole, the demise of the exempt private companies, that this was the opportunity to air the whole question.
I think this has been an extraordinarily useful debate. We had the intervention of the noble and learned Lord, Lord Cohen, and my noble friends Lord Eccles and Lord Hawke. I think we can now leave this clause, in the knowledge that the Committee, every single person who has spoken, has agreed with the broad principle that Jenkins enunciated: that the principle of disclosure as a whole should be accepted. But Jenkins suggested that certain exemptions should be retained, and in the rest of the Bill we shall be sticking closely to Jenkins and trying to work out means of ensuring that his recommendations are carried out.
Clause 2 agreed to.
THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): I understand that the next Amendment is a very considerable one. In the circumstances I beg to move that the House do now resume.
Moved, That the House do now resume.—(Lord Champion.)
On Question, Motion agreed to, and House resumed accordingly.

BARONY OF FRASER OF ALLANDER
The LORD CHANCELLOR The LORD CHANCELLOR acquainted the House that he had received from Sir Hugh Fraser, Baronet an Instrument of Disclaimer of the Barony of Fraser of
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Allander, delivered in accordance with Section 1 of the Peerage Act 1963.
Leave of Absence granted to the Lord Noel-Buxton for this Session—Terminated.

LEE VALLEY REGIONAL PARK BILL
Reported, with Amendments.
House adjourned at a quarter before eight o'clock.