HL Deb 12 December 1966 vol 278 cc1503-23

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 moved, in subsection (6), to leave out "to be regarded as" where it first occurs. The 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 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.)


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, 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.


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 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.


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.


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


  1. (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,—
    1. (a) promote or assist the reorganisation or development of any industry or section of an industry; or
    2. (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. (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— 1508
    1. (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 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 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.)


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- 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 second duty to the first; but perhaps the noble Lord will advise us.


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.


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 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.


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.


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.


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 moved, in subsection (2), to leave out paragraph (d). 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.


The noble Lord, Lord Drumalbyn, is quite correct in saying that subsection (2) will give to the Corporation power to do anything, which 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.


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.


No, it is the Melbourne Football Club.


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?


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.


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.


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 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 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.


Not 13?


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 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.)


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.


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 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.


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 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.


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 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.


Yes, certainly.


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.


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.


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, 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?


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.


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]:


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 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.)


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.