§ 3.46 p.m.
§ Order of the Day for the House to be again in Committee read.
§ Moved, That the House do now resolve itself into Committee.—(Lord Rhodes.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The LORD MERTHYR in the Chair.]
§ Clause 18:
§ Directors' report to include particulars of contributions of political and charitable purposes
§ 18.—(1) If a company (not being the wholly owned subsidiary of a company incorporated in Great Britain) has, in a financial year. given money for political purposes or charitable purposes or both, there shall (if it exceeded £25 in amount) be contained in the directors' report relating to that year a statement of the amount of money so given and of such of the matters referred to in subsection (3) below as are applicable in the circumstances of the case.1768
§ (2)The foregoing subsection shall not have effect in the case of a company which, at the end of a financial year, has subsidiaries which have, in that year, given money as mentioned in the foregoing subsection, but is not itself the wholly owned subsidiary of a company incorporated in Great Britain; but in such a case there shall (if the amount of money so given in that year by the company and the subsidiaries between them exceeds£25) be contained in the directors' report relating to that year a statement of the amount of money so given in that year by the company and the subsidiaries between them and of such of the matters referred to in the next following subsection as are applicable in the circumstances of the case.
§ (3) The matters mentioned in subsections (1) and (2) are the following, namely,—
- (a) the name of each person to whom there has been given money as mentioned in subsection (1) above exceeding £25 in amount or, if it was given for charitable purposes and received by the donee in a fiduciary capacity, the purposes for which it was given and, in either case, the amount of money given;
- (b) in the case of money exceeding £25 in amount given for political purposes by way of donation or subscription to a political party, the identity of the party and the amount of money given.
§ (4) For the purposes of this section a company shall be treated as giving money for political purposes if, directly or indirectly,—
- (a) it gives a donation or subscription to a political party of the United Kingdom or of any part thereof; or
- (b) it gives a donation or subscription to a person who, to its knowledge, is carrying on, or proposing to carry on, any activities which can, at the time at which the donation or subscription was given, reasonably be regarded as likely to affect public support for such a political party as aforesaid.
§ LORD DRUMALBYN
The object of putting down this Amendment is simply to inquire why there is a difference of wording between this subsection and the following subsection. I beg to move.
Page 17, line 18, after ("given") insert ("in that year").—(Lord Drumalbyn.)
§ THE PARLIAMENTARY SECRETARY, BOARD OF TRADE (LORD RHODES)
I take the point. If the noble Lord, Lord Drumalbyn, will withdraw the Amendment, we will consider how the two subsections can best be brought into line.
§ Amendment, by leave, withdrawn.1769
§ LORD POLWARTH
May I ask your Lordships' permission to move Amendment No. 17, in the names of Lord Erroll of Hale and Lord Drumalbyn, because this Amendment, together with Amendment No. 20 is dependent on or consequential to my own Amendment (No. 22) to omit subsection (3) and replace it with three new subsections? I understand, or I was advised, that this is the correct procedure.
§ LORD RHODES
I did not understand it in that way, because on the basis of how the matter was left, the noble Lord, Lord Champion said (in line with what I had said before) that Amendments Nos. 17, 18, 19, 20 and 21 would go, but we would take Amendment No. 16 and then go on to the Amendment of the noble Lord, Lord Polwarth, afterwards.
§ LORD CHAMPION
There was of course some little negotiation about this. Certainly we left it so that Amendment No. 22 in the name of the noble Lord, Lord Polwarth, would be discussed. If it appears, as it appears to me, that Amendment No. 17 is a paving Amendment for Amendment No. 22, I should think that it would be wise to discuss Amendments Nos. 17 and 22 together.
§ LORD DRUMALBYN
With respect, as Amendment No. 17 is our Amendment, I would agree with that. The words it is proposed to leave out by Amendments Nos. 17 and 19 are quite incompatible with Amendment No. 22 in the name of the noble Lord, Lord Polwarth. Therefore, in order for the Amendment of my noble friend to make sense, we should first of all leave out words and Amendment No. 17 is a paving Amendment.
THE DEPUTY CHAIRMAN OF COMMITTEES
May I point out to the Committee that, if Amendment No. 17 is not discussed now, it cannot he called later.
§ LORD DRUMALBYN
Further to that point, we do not intend to discuss Amendment No. 17 again; that was discussed previously. This is purely a technical matter in order to enable Amendment No. 22 to be discussed now.
How are we going to proceed, if this Amendment is going to be accepted, as I trust it will be, unless 1770 we have previously dealt with the paving Amendment?
§ LORD DRUMALBYN
I am afraid I did not make myself clear. It is necessary to move No. 17 in order that No. 22 may make sense.
§ 3.51 p.m.
LORD POLWARTH moved, in subsection (1), to leave out all words after "so given" and to insert:
for political purposes and charitable purposes respectively".
§ The noble Lord said: In moving Amendment No. 17 now, I hope that it will give me an opportunity to explain the substance of Amendment No. 22, on which it depends. I would start by apologising to your Lordships for my absence on the first two days of the Committee stage of this Bill. I am afraid it is just one example of the difficulty of combining an active part both in business and in your Lordships' House simultaneously. However, I am glad that the discussion on this clause was not finally completed two days ago, because it has given us a little time for reflection on the views expressed and the attitudes taken on that discussion, which ended up. I thought from the account of it, in a bit of a tangle.
Clause 18 deals with the publication of the details of political and charitable donations. My Amendment is concerned solely with charitable donations. I realise that in some quarters the subject of political donations is like a red rag to a bull and that disclosure has become something of a sacred cow. Whichever way one looks at it, if I may switch my metaphor once again, I believe that the Government are making rather a mountain out of a molehill. In this I am supported by the view which the Jenkins Committee expressed at the end of the section on political and charitable donations. They said:
But we do not think donations are such an important item in most companies' accounts as to justify an express general requirement to disclose them.
Could we look dispassionately at this question of charitable donations? I speak with some recent experience, having been responsible for leading two major campaigns, one in the purely charitable field and the other for raising
funds for a new university. So I have been in the firing line, as it were, and also at the target end in a number of different board-rooms. In the earlier part of the debate, there was a good deal of talk about directors giving away shareholders' money. This phrase was repeated several times. I find it difficult to accept this complete divorce of charitable support by a company from some other forms of company expenditure which are frequently done for the company's benefit, directly or indirectly—for example, contributions to an educational charity, to youth organisations in the company's area or to other organisations connected with health and welfare which may benefit the company's employees. These are all classed as charitable donations. Even if it may not be so evident as that, it may often be to the benefit of a company's prestige and public standing to be seen to have supported causes of a purely charitable nature. I believe that expenditure on these can be as much for the shareholders' benefit as certain expenditure, for example, on advertising or, if you like, on maintaining well-kept gardens and grounds around a company's head office.
§ I think it is an accepted idea now that public patronage of this kind by companies is not only desirable but, indeed, essential, particularly in these days when private patronage has been more or less squeezed out of existence. There is much talk, too, in these days of the wider responsibilities of companies, not just to their shareholders and employees but also to the community as a whole. This philosophy was hinted at, I think, in the forecast of a future Companies Bill, to be published before long, which would look into the whole philosophy of a company's existence. And I believe that this patronage and support of charities is in accordance with these ideas.
§ So I submit that there is no good reason to require detailed publication of the charitable causes supported and the amounts given to them, any more than there is of other items of company expenditure. I think that directors who have been given responsibility by shareholders for managing their business should be credited with enough responsibility for handling such a minor item of a company's expenditure. I agree with what was said by my noble 1772 friend Lord Drumalbyn in the earlier discussion of this clause, that the provision as included in the Bill is both onerous and invidious. It is onerous because of the time and cost involved in drawing up what may be a lengthy list of donations and printing it in the company's report. I asked a director of one major company what it would involve for them and he said, "A return of 500 different entries"—which would probably mean another 4 or 5 pages of details in the company's report.
§ It is invidious, I believe, because I cannot accept that the publication of these names will not have a deleterious effect on charitable support in general from corporate bodies. We in board-rooms all know under what strong pressure we are from many charitable bodies to support them. I believe that if we are obliged to detail those we have supported in our accounts, we shall be under still greater pressure and that the inevitable effect will be to retrench, to draw more strictly a dividing line between causes which we shall and shall not support, and to make firm rules rather than regard every individual charity on its merits. I believe that that certainly would be the reaction in the board-rooms of which I have experience
Frankly, I do not believe that any disclosure of charitable donations is really required in a company's accounts. We have made the suggestion, which has been turned down, that it would suffice for the aggregate figure in the year to be published. The Government have rejected this on what seems to me to be the lamest possible grounds. Looking at the report of the debate on this clause on the last occasion, I see that the noble Lord, Lord Rhodes, said:
May I at this juncture put our case explicity?… we as a Government do not regard it as sufficient to aggregate these donations in this way?…in any event, I do not think the information that would be given on the basis of aggregates would be sufficient."—[OFFICIAL REPORT, Vol. 278 (No. 84), col. 1639;13/12/66.]
Sufficient for what and sufficient for whom? I think we are entitled to have an explanation that is a little more explicit. The noble Lord wanted us to consider a case for raising the figure below which donations need not be published. I do not think that that is a valid suggestion. The insertion of any arbitrary
level or figure in legislation never is satisfactory; it will be overtaken by changing values. It is the principle with which we are concerned.
§ My Amendment seeks to meet the views of the Government by providing the maximum information that could reasonably be considered desirable by those to whom it is of prime interest—namely, the company's shareholders. It proposes that in addition to publishing the aggregate figure of charitable donations, the company should be obliged to maintain a register in its office, available for inspection by shareholders at all reasonable times and under reasonable conditions, and subject to suitable penalties. I submit that this is a reasonable way of dealing with this subject, which I think has been magnified beyond all reasonable size. Accordingly, I beg to move the first Amendment.
Page 17, line 18, leave out from ("given") to end of line 20 and insert ("for political purposes and charitable purposes respectively").—(Lord Polwarth.)
§ LORD RHODES
I must have a word on the proceedings of the other night. The noble Lord is now taking the opportunity of having a second bite at the cherry. This is probably due to the good offices of his noble friends on the Front Bench. When he suggests that there was a tangle, I would say that the only tangle was the Royal Commission which interrupted the proceedings. Had it not been for the fact that the Royal Commission arrived when it did, in all probability Clause 18 would have been well out of the way now. It was agreed that Amendment No. 16 should be taken to-day, but that Amendments Nos. 17 to 21 should be finished with quite definitely. We agree now to take the Amendment which leads into Amendment No. 22, and are prepared to accept it on that basis. So I hope the noble Lord will be quite satisfied that he is having a chance on his Amendment.
§ LORD RHODES
Oh, no, Lord Chairman. I have not started yet—although I am obliged for the indication of speed.
§ LORD ERROLL OF HALE
May I intervene for a moment to make the matter clear? The noble Lord said, "and Nos. 22, 23 and 24 are still to come", and we understood from this that it was still possible to take the Amendment. We then saw that it was not possible to take the Amendment unless we had the paving Amendment.
§ LORD RHODES
That is quite right. We are all agreed. Christmas is coming, but this does not alter the fact that if it had not been for the circumstances that I have described the matter would have been out of the way.
The noble Lord need not think that we on this side of the Committee are in any way less appreciative of what companies do in the way of contributions to charities than are noble Lords on that side of the Committee. I can give many instances of companies who have factories where they are the main employers in the district—I could name half-a-dozen straight off—wheretheir contributions are valued and where their support builds up a strength in the community. There is no argument about that, in any shape or form; it is a most valuable feature of our everyday life. And it has its counterparts in other parts of the world. I was reading Gower the other day about the law in respect of charities in America, and he definitely quoted cases in America where they are very cognisant of the benefit that accrues through a company's making charitable contributions, whether for academic or other purposes.
The noble Lord minimised the altruism and purity of it when he likened charitable donations to making the gardens nice round a company's office. I regard the charitable contributions that a company disburses much more highly than that. It is true to say that the other night when we were discussing this subject we made overtures in terms of the amounts, and I still stick by that. We will look at this question of the individual amount and raise it. I cannot say at this juncture to what it will be raised, but I am optimistic that something a little more substantial will be agreed upon.
Coming to Amendment No. 22, I would point out that this Amendment would leave out subsection (3). This subsection I requires information to be given in the 1775 directors' report about any political Party, person or charity to which a company, with its subsidiaries, has given what in a year amounts to more than£25—ignore the figure of£25, because we are going to substitute something for it. In place of the subsection, the Amendment would insert provisions requiring the company to keep at its registered office a register open to inspection by members, showing the details of the money it and its subsidiaries have given for charitable purposes. No detailed information would be given either in the directors' report or in the register about political contributions. If it was in a register of this description, it would not be available to the public to see it. It would be for the members, or, as you like to call them, the shareholders, if they took the trouble to go along to the company's office. But if it were in the directors' report it would be different, because this would be filed for public inspection.
We might as well face the issue and save time in this way. We regard it as important that this information should be available for examination by the public. I do not want to speak for a long time on this matter or, indeed, to work up any heat on it. As I said before, Christmas is coming. But it depends on what is said. I will leave it at that. I am afraid we cannot accept the Amendment.
Before the noble Lord sits down, could he say whether he is referring to charitable or to political contributions? Unfortunately, they tend to get mixed up. On this side of the Committee we are talking about charities, and we should like to know from the noble Lord why he wants the whole of the general public, rather than the members of the company who provide the money, to see where it has gone.
§ LORD RHODES
That is a fair point; the two do tend to get mixed up. But I was trying to explain that the same principle applies both to charities and to political contributions. I should have thought that it would be a good thing to itemise the charities. The business people to whom I have spoken—and I know many who are in a position to disburse charity—have no objection to this. It would seem that some people think that 1776 we have something against it. Well, we have not. We are in favour of this, and there is no prohibition here. The intention of this requirement is quite innocent.
§ LORD BOOTHBY
There is nothing innocent about this at all. We all know the object of the Government: it is to stop companies contributing to the Conservative Party. That is what it comes to, and that seems to me not altogether unreasonable. I have had some political experience, and by no stretch of the imagination can the Conservative Party, the Labour Party or, indeed, the Liberal Party, in so far as it exists, be described as a charitable organisation—if anything, the opposite. I cannot think why the Government were not content to draw a distinction between political Parties and charitable organisations and let it go at that, and save a great deal of unnecessary paper work.
§ 4.11 p.m.
§ LORD DRUMALBYN
The first thing is to dispose of this question of the aggregate once again. This is a subject that we discussed earlier, and my noble friend who moved the Amendment and I are in agreement that it would have been much better if the Government had seen fit to accept that Amendment. That does not arise at the moment, although of course we are perfectly at liberty to put down a similar Amendment again at Report stage.
What we are now discussing, granted that the details of the charities should be published, is the way in which they should be published. On this the noble Lord who speaks for the Government has said nothing. All he has said is that the same principle applies to both. But does it? As I pointed out on the previous occasion, and as my noble friend said, in some cases there are companies who make 500 separate contributions to charities and yet, as I pointed out, the number made to political Parties is (what shall we say?) about one-hundredth part of that. I do not want to be precise on this matter—and I shall be taken to task if I suggest limiting the number to four. Surely, however, there is an essential difference between the two types of contribution. The noble Lord concedes that there is no purpose in disclosing the details of charities to the public at large—he accepts that. But, he said, "We must not make a difference in the way 1777 in which we deal with these two matters. "But if they are essentially different—and, as my noble friend Lord Boothbay said, these are entirely separate matters—why? Why cannot the noble Lord, Lord Rhodes, make any difference? He has given no good reason whatsoever, except that it is nearly Christmas.
§ LORD RHODES
The noble Lord, Lord Boothby, has made probably the most telling interjection that will be made in this debate. He said that it is to stop companies contributing to the Conservative Party. He went on to say that he did not think it was unreasonable. I may agree with him on the basis of unreasonableness, but I disagree with his statement that we are trying to stop it. We could not care less whether they contribute to the Tory Party or whether they do not. They can contribute, so long as the shareholders know; and if the shareholders do not know they have every right to know. There are many shareholders who will agree with what the noble Lord, Lord Boothby, said: that what is proposed is not unreasonable. That disposes of the political element in this.
When it comes to the charitable element, there is no question but that it is a highly desirable thing. We on this side believe that it is a highly desirable thing, but that the contributions should be itemised. It may be that we were wrong in the original amount of £25. But I would remind the noble Lord that this matter of bringing in the charities with the political element arose in another place; it was not suggested on our side of the House. If he will be patient and will read in Hansard the debate which took place on February 21 of this year in another place, he will realise that there is a tremendous amount of support on the Opposition side in another place for the inclusion of charities.
§ LORD RHODES
No. We are not slow to take hints. If we can take a hintor accept an Amendment from the Opposition which is a good one for the benefit of the Bill, we are all for it. We have accepted many Amendments up to now, and maybe we shall accept many more. But on this I cannot be stirred.
§ LORD CONESFORD
I wish to understand the noble Lord, if I can. He said that another place had expressed its view on this clause. How did it do that if this clause has never been before another place?
§ LORD RHODES
That is not quite up to the noble Lord's standard, because normally he comes to this House having done his homework. But he has picked this up because we are being agreeable and good-tempered in allowing this to be discussed again, as it were. We did not finish it off the other night—I keep coming back to this. This political element of contributions was included in the earlier Companies Bill which was read a second time in another place on February 21 of this year. It was made quite apparent by the Opposition there that if the Bill had included charitable contributions they would have had no objection to it whatever. On that basis I rest my case.
§ LORD MITCHISON
It is the privilege of Back Benchers to get in the way of everybody at times, and I am sure that the question I am about to ask is one that I ought to be able to answer quite easily. But the question is this. The object of this Amendment is to leave out subsection (3) and to insert certain provisions relating, I agree, to charitable contributions only. But if we do leave out subsection (3), what happens to the political side of the clause? Take, for instance, subsection (1) of Clause 18.That says:If a company…has, in a financial year, given money for political purposes …there shall…be contained in the directors' report relating to that year a statement of the amount of money so given and of such of the matters referred to in subsection (3) below"—but there will not be any subsection (3) if the Amendment is carried—as are applicable in the circumstances of the case.It therefore seems to follow that all we may put in about political contributions is the statement of the amount of money so given; there will be no need to put in the matters referred to in subsection (3), which at present cover political contributions, and includethe name of each person to whom there has been given money1779 and, where the contribution exceeds a specific amount, the identity of the Party and the amount of the money so given.
I always remember the well-known company director who used to contribute to all main three political Parties. He was a very strong anti-Communist, and he never contributed to that Party. He contributed the same amount to the Conservative Party, the Liberal Party and the Labour Party, on the grounds that, however improbable it might seem at the moment, any one of them might come to power, and he desired to stand in the good books of all three. One sees the point of that attitude but there are other considerations to be taken into account.
As to the names of the people to whom the contribution is made, this seems to me important. I understand that it is the practice of the Conservative Party rarely to have contributions given direct to them. They are given to what I may call "stooge" companies formed for the purpose, which then pass the money to the Conservative Party. I do not know why they want to do this. It is not for me to consider the motives of high statesmanship in connection with Party finances. But there it is. One would rather like to know what their names are, because one is curious about this sort of thing, and also one is interested to know, if the names do not tell us enough, which political Party is intended.
§ LORD BOOTHBY
Can the noble Lord give us any grounds for this rather astonishing statement that the Tory Party has a lot of stooge companies with people contributing to them and the money is then just quietly and surreptitiously passed on to the Conservative Party Central Office? This is complete news to me.
§ LORD MITCHISON
That is because my noble friend does not read The Guardian and other papers sufficiently. He would find a lot of details there. It has probably not been in the Daily Telegraph, but some of the Press have had the story. I will give the noble Lord a private lesson afterwards, if he likes.
§ LORD BYERS
Is not the noble Lord referring to the United Industrialists, and other organisations of that sort, all of which have been known for some time?
§ LORD MITCHISON
I am always very careful what I say about this subject because one can have new stooges, and the stooges of Yesteryear may not be the stooges of to-day, but I should have thought the practice of giving to companies formed for the purpose had been rather notorious for some time past. Of course, if I am misinformed and anyone on behalf of the Conservative Party likes to tell me that this is all wrong, and that any contributions they receive from companies are always received directly into Party funds, I shall be only too pleased to withdraw my remarks, but the members of the Conservative Party are very honest and I do not think they would say that to me.
Therefore, without developing this particular point any further, I should like to know whether the Government are accepting the withdrawal of subsection (3) as regards political objects. It is not for me to talk about charities at the moment—I am sure we shall all try to do the right thing for them—but I am not certain about the political purposes, and I think we ought to be clear what is happening. May I ask the movers of the Amendment whether it is their intention that the information contained in subsection (3) should no longer be obligatory as regards political contributions and, if so, would they give us a general indication why?
§ 4.24 p.m.
§ LORD CONESFORD
It is clearly for those in whose name this Amendment stands to say what their intention is as regards the disclosure of the names in the case of political contributions. For once I am in agreement with the noble Lord, Lord Mitchison, that, if we are in favour of Amendment No.22 in regard to charities, it might be necessary to have consequential Amendments to deal with the political matters. But I approach this question in the same way as my noble friend Lord Hawke. What I want to know is what is the Government's attitude as regards the charities. Of course, I accept from the noble Lord the Parliamentary Secretary that he does not wish to injure the charities, but I wonder whether, if he leaves the Bill as it is without this Amendment, he will not in fact be injuring them. It seems to me that this is one of the matters which 1781 the Government have not fully considered.
I admit that I have no experience of being on the board of a company, because no company has ever taken the risk of putting me on the board; but I have had some experience of being an applicant on behalf of a charity. The charities on whose behalf I have appealed have been educational charities. I have appealed, sometimes with success and sometimes without, for one of the new universities in which I was particularly interested, and I have appealed also for a grammar school in which I was interested. It may be that the response of those who contribute to charities of that sort would be to contribute a sum not so small as to be affected much by the clause, but, if it is necessary to give this publicity to every single charity above a fairly small figure, will not the board of a company be subjected to very great pressure by innumerable people who are not included in the list, and may not the result of that be that the company which has hitherto contributed to a number of charities will say: "Well, the only way out of this is to stop almost every contribution to charity?" Is there not a real risk of that, and can that be the result the Government wish to bring about? I can quite see that they may wish the shareholder to have the right to find out, but, as I understand it, that is provided for in Amendment No. 22.
I do not think the noble Lord who has replied for the Government has really shown that the provision is necessary or that it will not injure charities. Frankly, what worries me is that there have been so many other recent acts of the Government showing great indifference about the effect of their actions on charity: the most notorious being, of course, the selective employment tax, where a savage contribution has to be made by charities, who lend the money to the Government and then subsequently get it back. The Government have never indicated what part of their work they wish the charities to abandon, but they have compelled them, of course, to abandon some. I wish the Government would be a little more sympathetic towards the charities.
There is a lot to be said on the subject of political contributions. A most relevant interjection was made by the noble 1782 Lord, Lord Boothby, and I think he got very much nearer to the truth than the Government may be willing to admit; but at the moment I do not wish to discuss the political contributions. There may be an opportunity to do that on the Motion that the clause stand part, or on a subsequent Amendment. I agree with the noble Lord, Lord Mitchison, that if the existing intended provisions about the political contributions are to stand, some part of subsection (3) must stand. But what I cannot see is why the Amendment of my noble friend Lord Polwarth is being resisted in so far as charities are concerned.
§ THE EARL OF IDDESLEIGH
May I beg Her Majesty's Government at this time to offer to confer with the noble Lord, Lord Polwarth, and his friends on this whole subject? I am perfectly sure that as regards genuine charities there is no difference between the two parties in this matter. I am confident that the noble Lord, Lord Polwarth, has no intention of bringing in political contributions by any backdoor or any side door. The question is how the genuine desire on both sides of the Committee, and certainly on these Benches, that the flow of money to charities shall not be dried up, can best be effected. Surely it is a matter, at this stage in the discussion, for the Government to offer a conference to my noble friend Lord Polwarth.
§ BARONESS ELLIOT OF HARWOOD
May I also add a few words, in order to appeal to the noble Lord on this matter, because in the course of my life I have raised very large sums of money for charities of different kinds—at some times more successfully than others; but it is a tremendous undertaking. In the course of years, millions of pounds are raised for charity. The money comes from businesses and other sources, and these sources are varied and widespread.
I can think of companies (indeed, I think this has already been said, and the noble Lord will bear me out in this) which, because of their enormous spread, particularly companies that have to do with retailing and have branches through out the country, will give to charities in their own localities; and if one adds up the total they give in the course of the year, one finds that it comes to a large 1783 number of small entries. It is going to create a lot of work and trouble if all these items have to be recorded,£10 by,£10,£ 20 by,£20,,£50 by £50. in everybody's accounts. It might end up by the head office simply saying, "We will 'dish' out so much to charity from the central office", say, in London, and then somebody who is trying to raise money in Newcastle or Glasgow will get the answer: "It is all being done from London". One of the advantages of the system of being able to apply wherever you are raising money is that you can get the interest of the branch of that company in different areas.
The noble Lord, Lord Rhodes, is very interested in what happens in Yorkshire. If he were trying to raise money in Yorkshire, I am sure he would be very disappointed to be told to go and get it in London, simply because the unfortunate people who had to produce the accounts for the firm had to record all these innumerable sums of money throughout the country and said: "A plague on all your houses! Let us do it in one lump sum from London". It will be very unpopular indeed in Scotland and Wales and the north of England. I hope the noble Lord will consider this dispassionately as a practical matter and produce some other proposal, instead of this method which may injure the flow of money to charitable organisations. I am sure he does not want that. I beg him to take this provision back and see whether or not something more sensible cannot be arranged for this particular purpose.
§ LORD WAKEFIELD OF KENDAL
I should like to add my name to those of other noble Lords who have been making this appeal to the Government. For much of my life I have been concerned with appealing for charities as I am at the present time, and I have been at the receiving end of appeals, either as a director of a company or individually. I am absolutely certain that if this Bill goes through as it is, charities will be harmed. There is no doubt about it. The question the Government have to make up their minds about is, do they want to harm the charities? If they do, the Bill must go through as it is. If, on the other hand, they feel there is something in what noble Lords have been saying and that charities will be injured, I 1784 beg the Government to have another look at the matter. Surely it must be possible to withdraw the Amendment with a view to their having a look at it and re-writing what may be necessary in a consequential Amendment at Report stage. I am sure they do not intend to injure charities, but they will—believe me, they really will—if this clause goes through as it is. Would they take another look and try somehow or other to distinguish between charities and political contributions in a satisfactory way? I am sure it would be of real public advantage in every possible way. I make an appeal to the Government to have another look to see whether something can be done so as not to injure charities.
§ LORD CLITHEROE
May I add one word to this discussion? I entirely sympathise with the objects of my noble friend Lord Polwarth in his Amendment. I also sympathise a little with the noble Lord, Lord Rhodes, who, I suspect, is in a drafting difficulty. I can see both problems. I would suggest that the Committee accept the sense of Lord Polwarth's Amendment, which would mean that companies would not have to give in their annual report a list of all the charities to which they have subscribed, but would have a list in their office which any member of the company could look at. It is a very wise, sensible suggestion. I entirely understand that the Government do not wish this applied to political or semi-political or semi-semi-political contributions. I believe this Amendment can be redrafted in a way to meet both sides, and I hope the noble Lord, Lord Rhodes, will, on Report stage, bring forward an Amendment which will meet Lord Polwarth's point without giving away his own.
§ LORD ROYLE
My main concern with regard to the Amendment I share with the noble Lord, Lord Mitchison. I am concerned with regard to the drafting of the Amendment because of paragraph (b) of subsection (3), and therefore before we can proceed to anything like a Division, consideration will certainly have to be given to that point. I see the noble Lord, Lord Polwarth, nods his head in agreement.
I should not for one moment like it to be thought that there is an argument in your Lordships' House where one side 1785 of the House is very concerned about charitable organisations and the other is not. I want to assure noble Lords that we on this side are just as concerned about the help given to charitable institutions as are noble Lords on the opposite side. I would make this proviso, and I think it is an aspect which has not been sufficiently considered. There are very many charities that do not of necessity attract the support and sympathy of every person who is a shareholder in a particular company. It may well be, for example, that the Society for the Abolition of Cruel Sports may be regarded as a charity, and a certain board of directors may be very sympathetic towards it, but that same company may have a number of shareholders who engage in hunting activities. They would surely have the right to say, "You are putting money into this organisation; we deeply object to it", and it could apply adversely.
The other point which comes to my mind, and it may well be in the minds of many shareholders of companies, is the criticisms which have been in the past and are at present levelled at certain charities because of their excessive administrative expenses. They have critics, and those critics may be shareholders in companies which are subscribing. These matters have to be considered. But let it be said again from this side of the House that, so far as the great charities are concerned—and I especially agree with regard to educational charities—there is as much support from this side as there is from the other. I would end by asking my noble friend whether a fur-there look can be given to this matter, so that we may arrive at what is a real position of justice. I did not want it to he thought we were not sympathetic to these matters.
§ LORD CITRINE
I am really puzzled at this debate. Nearly all the discussion that has taken place so far has been concerned with charities and the charitable aspects of the Bill. This Amendment, as I see it, goes far beyond that. As I see it, the Amendment is to delete—it is stated specifically here—the whole of subsection (3).
§ LORD POLWARTH
May I say that I entirely agree that in this respect the Amendment as drafted is probably faulty. 1786 I intended to deal solely with the charitable position and not disturb the political position. I agree that the Amendment is probably faulty in this respect, and would very much hope that we could put it right later on. I would apologies if that has given rise to misunderstanding.
§ LORD CITRINE
I am still puzzled. The subsection is in two parts. If it is proposed to withdraw the reference to paragraph (b), what I have to say need not be said at this stage in the debate. But if it is the intention to bring in at a later stage in the debate some revival of the idea to get rid of the provisions of the Bill in respect of political contributions, I should certainly oppose that as firmly as I can.
§ 4.40 p.m.
§ LORD SANDYS
There is still one further point which has not been mentioned up to date that I should like to raise in support of the Amendment put down by the noble Lord, Lord Polwarth. It is that certain charities are also companies. Here I should declare an interest. I am a member of a board of directors of a charity which is also a company—namely, OXFAM. OXFAM will suffer quite materially if the Bill goes through as it is at present drafted, because in regard to its substantial income it would, as I understand it, have to itemise every single donation to all other charities all over the world. This would involve a most intolerable burden and, as has rightly been said from the Opposite Benches, as its expense ratio is much criticised by donors I feel that it would be greatly appreciated by OXFAM and indeed many other charities if this problem could be looked into most seriously by the Government. Therefore I would warmly support Lord Polwarth's Amendment.
§ LORD DRUMALBYN
May I be allowed to complete the speech in which I was interrupted? I thought earlier that I was giving way to the noble Lord. I put a question and he immediately leapt up, I thought to answer that question, but he continued with his speech. However, the debate that has taken place will, I am sure, have convinced the noble Lord that there is real sincerity and great importance attached to the spirit behind this Amendment. Like many of the Amendments that are moved from this side of the Committee, it is far from perfect. 1787 I think that the noble Lords, Lord Mitchison and Lord Citrine, were perfectly in order in drawing attention to its limitations. But my noble friend, in introducing it, made it abundantly clear that he was concerned with only the charities aspect of this matter. What we have been trying to get out of the noble Lord is whether there was any real reason why there should not be some distinction between the method of treating political contributions and that of treating charities.
The noble Lord referred to a debate in another place and I think, for the Record, it would be only fair to say that the two Back-Benchers to whose speeches he referred were not advocating positively that charitable contributions should be published, but were saying that if political contributions are to be published, why should contributions to charities not be published too? There may be force in that argument. I should have thought that it is not an argument that the Government would want to rely on altogether. But, even if there is some force in it, there is no necessity for the two to be treated in exactly the same way. So I beg the noble Lord to have another look at this matter, to make certain, as is the sense of the Committee to-day, that whatever arrangements are finally come to they will not mean charities.
§ LORD SILKIN
May I say just one or two words? First of all, I think it is conceded on all sides that the actual Amendment cannot stand up, and it would be absurd to pass such an Amendment which is faulty by general admission. Therefore, I would hope that the noble Lord would be willing to withdraw the Amendment and, if he so desires, come back again at a later stage. I should also like to express the view, which I am sure everyone who has listened to this debate shares, that we greatly appreciate the fact that the noble Lord has moved the Amendment in such a moderate way. If I may respectifully say so, I found his speech most interesting and valuable, and this discussion has been valuable.
I think we all agree that there is a distinction between charitable contributions and political contributions, and therefore they must be dealt with separately. As regards charitable contributions, I am quite sure in my own mind 1788 that the Bill as it stands is unsatisfactory. To have a limit of £25 seems to me absurd, and I would imagine that if the limit were £100 Lord Polwarth's objection in regard to his 500 contributions by his company would be greatly reduced.
§ LORD SILKIN
The noble Lord is associated with a most exceptional company. I should like to know the name of it because I may make certain approaches to him. Speaking quite generally, I think that if the limit were substantially raised to£100 it would remove a great many objections which have been voiced to this provision.
The other point is whether the list of contributions should be open to shareholders alone or to the general public. I think the general public as well as the shareholders ought to know. I shall not attempt to enlarge or elaborate on the argument, but in my view the general public are as much entitled to know of the charitable contributions of important companies, especially if we raise the limit to a figure of, say£100. If I may advise the Government, the noble Lord should offer seriously to reconsider the whole question and come back again at a later stage with an Amendment. I think that if he does that all parties would be satisfied.
§ LORD MITCHISON
Before my noble friend replies I should like to mention two points. I am glad to hear that this is, after all, not a googly but is only a "no ball". But accepting that, as of course one does, I share Lord Silkin's view that this is, after all, a question of disclosure and that there is a great deal to be said for the public, as well as the shareholders, being able to see what is going on. I quite agree that there is a great deal to be said both ways, but I really cannot accept that it is going to interfere with charities because a certain amount of disclosure should be made and because it should be disclosure to the public at large. I quite accept that many noble Lords opposite sincerely think that a mistake. But, after all, like other noble Lords I have been some time in the world, and I may perhaps admit to having been a director of a company at 1789 one time—several companies in fact—and indeed to having made a few charitable contributions. I just do not accept this suggestion without a bit more evidence about it.
I want to say one more thing. The noble Lord, Lord Wakefield of Kendal (I think it was), thought that you ought to treat charitable and political contributions in the same way. I am not quite sure that I understood him rightly. I am glad to see that he is shaking his head. One has to be careful about this. Charities are a tricky business when you come to the question of defining them. Speaking "off the cuff" and without having the case in front of me, I think there is a reported case in which contributions were made to what appeared to be an educational object—Ashfield, was it? It was some case north of London. It was, in fact, a Conservative organisation. When it was taken to the court the decision—as I say, I am speaking"off the cuff ", but I think this is right—was that, though in fact the objects of the trust appeared to be purely educational, the way in which it was run made its purpose other than educational. I perhaps ought to say at once that I happen to know, so far as the Labour Party is concerned, of another case where the organisation does, I think, keep strictly to political education. But it is very hard indeed, with a body which has a definite political complexion, not to get some confusion between the charitable purpose of the education and the political purpose of the views of its own Party. One has to be rather careful about this line. It is not an easy one when it comes down to practical cases.
§ LORD FRASER OF LONSDALE
I am sure that the noble Lord who has just spoken, being a distinguished lawyer, would know that the hard cases he has cited do not make good law. There will always be some hard cases and the courts can take care of them. I rise to say that I thought the noble Lord, Lord Silk in, was most conciliatory and made a suggestion for disentangling this matter now and speedily. I have an alternative to suggest, with equal friendliness, and that is that we vote for this Amendment, beat the Government, and thereby compel Lord Rhodes to take it to the Minister—unless he is willing to say that that is just what he is going to do.
§ LORD MITCHISON
That is a wholly unreasonable suggestion, and I rise to say this. No doubt the noble Lord knows more about the law than I do; I have only practised it; but he does not know more than the Judges do.
§ LORD RHODES
I am taking the opportunity to reply. May I support my noble friend Lord Silk in in his praise of the noble Lord who moved this Amendment in the moderate way in which he did? But I would have been very thankful if my noble friend had given me a bit of a pat on the back, too; for I answered in a moderate way. I liked the story by the noble Lord, Lord Mitchison, who quoted a gentleman who made contributions to three political Parties so as to make sure of whatever it was he was going for. It reminds me of an old reprobate in the locality where I live who died a few months ago. His daughter fetched the parson, and the parson said to him, "Do you now renounce the Devil and all his works?" and the old man said, "Nay, lad, I'm not going that far. After all, you never know." I would not say that it is the same with Lord Mitchison.
Let us get straight, quite briefly and quickly, what this Amendment involves. I was obliged to the noble Lord, Lord Ciitheroe, with his first-hand knowledge and his experience in another place for putting his point. This Amendment would leave out subsection (3), which has to do with political contributions. We do not accept that in the slightest degree—let me be quite clear on that point. The noble Lord accepts that he would not have chosen this form, if he could have done it in another way. His Amendment then requires information to be given in the directors' report about any political Party, person or charitable purpose to which a company or its subsidiaries subscribe; and it mentions the amount. In place of the subsection the Amendment would insert provisions requiring the company to keep at its registered office a register open to inspection by members showing the details of the money which it and its subsidiaries have given for charitable purposes. No detailed information will be given in either the directors' report or the register about political contributions. If the noble Lord has no intention of objecting to the subsection applying to political 1791 contributions, which the noble Lord, Lord Clitheroe, also indicated, well and good; but the argument is joined on the basis of the disclosure of contributions to charitable institutions. I have no mandate on this whatever. I will say forthwith that I have been impressed by the arguments in the Committee, from all sides, and may I say that I will take it back and have the matter reconsidered to see what we can do.
§ LORD POLWARTH
May I start by thanking the noble Lord opposite for what he has just said? I am glad that he and his colleagues have exculpated me of bowling googlies. In his first innings the noble Lord stonewalled most effectively; but in the second innings he played a little more openly. I am very grateful to all noble Lords who have taken part in this discussion and who have supported me. I should like to make it perfectly clear that, so far as I am concerned, my object in moving this Amendment is to deal solely with the charitable contributions, regardless of what anybody else may wish to do on the other aspect. Therefore, I was particularly grateful to the noble Lord, Lord Conesford, who brought the debate back to this aspect from the political byways into which it had strayed. On the question of a limit, and the offer to put the limit higher, I still do not feel that this would be a reasonable solution. Whatever figure of limit is chosen it will be arbitrary. It will mean one thing for a company like I.C.I.; it will mean a totally different thing for a small or, at present, exempt private company. It will not have relevance of any kind. If we are to find a solution, let us get away from setting any arbitrary limit.
Another noble Lord referred to the desirability of disclosure to the public. I am all in favour of disclosure to the public of information if that disclosure serves a useful purpose. But I am far from convinced that disclosure for its own sake is inevitably a good thing. Reference was also made to the generosity and charitable giving of American companies. I am sure we are all aware of this. We are also aware that the standard of information supplied by, and required of, American companies in their reports is of a high order, yet there is no requirement in American company law for a disclosure of charitable donations, either 1792 in detail or in aggregate. Having said this, I am grateful to the noble Lord for offering to reconsider the matter to see whether we can arrive at an acceptable solution. I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
LORD DERWENT moved, after subsection (4), to insert:
( ) This section shall not apply to any money given for charitable purposes outside the United Kingdom by any company or other body corporate incorporated outside the United Kingdom.
The noble Lord said: My noble friend Lord Tangley has, unfortunately, to be away for a short time, and he has asked me to move the Amendment on his behalf. It is quite a simple Amendment. Its object is to ensure that where a company has world-wide ramifications, and subsidiaries overseas, any charitable donations given by the subsidiaries in the country or countries in which they operate will not have to be divulged in the head office report. I would stress that in some countries charitable donations are made quite regularly by companies to various forms of charity which might hardly be considered charities in this country, though they are essential to anybody operating in that country. This is a small point, but I hone the Government will look at it sympathetically. I beg to move.
Page 18, line 11, at end insert the said subsection.—(Lord Derwent.)
§ LORD RHODES
We are sympathetic to this Amendment. If the Amendment is withdrawn, the Government will consider putting down another one at a later stage which will achieve part, at least, of what the noble Lord, Lord Tangley, had in mind.
§ LORD DERWENT
On behalf of my noble friend Lord Tangley, may I say how delighted he will be? On his behalf I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ On Question, Whether Clause 18 shall stand part of the Bill?
§ 5.0 p.m.
§ LORD DRUMALBYN
May I say one quick word on this clause, just to make certain that there is no misunderstanding? I revert to what I said in moving 1793 the first Amendment. We do not, of course, accept the noble Lord's point of view on the aggregate of political contributions. I made it clear to the noble Lord at an earlier stage that we believe that if the details are to be disclosed, then it is only right and proper that steps should be taken to make certain that no discrimination or victimisation results. We shall put down an Amendment at the next stage to ensure that that is so.
§ LORD CONESFORD
I rise only to raise a point on subsection (4). Subsection (4) is in two parts. It deals with what is meant by giving money for political purposes; and a company gives money for political purposes if(a) it gives a donation or subscription to a political partyor(b) it gives a donation or subscription to a person".And then it describes the person intended to fall within the paragraph. I think the Government will agree with me that, as a matter of legal construction, the word"person"in paragraph (b) means a legal person and not merely a natural person; that is to say, anybody known to the law as a person, whether another company, a partnership or whatever it may be. I think I am right, so far as paragraph (a) is concerned, in saying that nowhere in this measure is there a definition of "political Party". I do not know, for instance, whether the Fabian Society would be considered a political Party, nor do I know about the position of the Committee (I forget what the Committee is called) interested in nuclear disarmament. I am not sure whether that would be a political Party within paragraph (a) or possibly a "person" within paragraph (b). But if it were a "person" within paragraph (b) and not a political Party, what political Party would it be held to be supporting? Would it be the Labour Party or would it be the Communist Party?
There are many points of considerable legal difficulty which it seems to me may arise on this wording. I am not sure how subsection (4) can be worked at all, without listing the institutions which the Government believe, at any rate, to come under paragraph (a), and possibly listing those which come under paragraph (b). The difficulty, so far as paragraph (a) 1794 is concerned, is that we are giving no guidance at all about what is meant by a "political party". When we come to paragraph (b) the "person", as I say, need not be a natural person but may be an artificial or legal person. But a company comes within paragraph (h) only if it is helping one of the bodies which comes under paragraph (a), and with many of these persons it may be very difficult to say. The company may help more than one Party, and great doubts may arise about whether it is helping a political Party within the meaning of paragraph (b).
I think those matters are worthy of being looked at by the Government before we come to a later stage of the Bill, because I take it that, whatever else the Government intend about these provisions dealing with political contributions, they at least desire that they should be workable.
§ LORD RHODES
In answer to the noble Lord, Lord Drumalbyn, about the discrimination, I entirely agree with him, and may I say that the Government would take a very serious view of this. What more I can say, I do not know at the moment. But we should take a very serious view, if it were thought that discrimination was likely to ensue. I noticed that the noble Lord said that the Opposition would put down an Amendment. When it comes, we will consider what sort of answer can be given.
With regard to the noble Lord, Lord Conesford, the information which will have to be given will be the total contributions made for political and charitable purposes as a whole, and where the contributions to a donee exceed a certain amount the name of the donee and the amount will have to be given. That is as the Bill stands. The political contributions which I am talking about—
§ LORD RHODES
Wait a minute. Just be patient. I am coming to subsection (4) in a minute. The political contributions relate not only to "a political party of the United Kingdom or of any part thereof" but also to a person. I am not going to enter into an argument on a Jesuit basis, or on a legal basis, with the noble Lord, because I do not know 1795 anything about the interpretation that he has in mind about a "person": whether it is an artificial thing or an individual. But I should have thought that in this case a "person" would have meant both.
Subsection (4) defines giving money for political purposes as indirectly or directly, givinga donation or subscription to a political party of the United Kingdom or of any part thereof".Even to me that is clarity itself. Then we go on to paragraph (b), which refers to givinga donation or subscription to a person whoto the knowledge of the companyis carrying on, or proposing to carry on, any activities which can, at the timeof givingreasonably be regarded as likely to affect public support for….a political party…Here the words "directly or indirectly" have the effect of requiring disclosure in cases where the donation is made not, for example, to a political Party, but to a nominee for such a Party. That is what the subsection means.
§ LORD RHODES
Wait a minute. The words in paragraph (a)a political party of the United Kingdom or of any part thereofare intended to secure the disclosure of political contributions to political Parties of local significance. That is something which is very much in people's minds in a locality. The contribution might even be for anybody who was wanting Scotland to become independent, or for a Scottish National Party, or a Welsh National Party, or a Yorkshire Independence Society, if someone wanted to do something in a way which would mean that it was a political endeavour. I should have thought that it was quite clear, and I, as a layman and not a lawyer (and there are plenty in this House who probably know a lot more about it than I do), would have said that in this case a "person" is either a person in the ordinary sense of the word, or could be, as the noble Lord suggests, a body.
§ LORD CONESFORD
I am very sorry that the noble Lord has not understood 1796 my point about paragraph (b), and I am sure it must be my fault. But I think the noble Lord will find, when he consults his advisers, that a person can come within paragraph (b) not merely if he is a nominee, which is what the noble Lord said in his last speech, but also if he is in a position which is much more widely described. I gave an example earlier. I cannot remember the names of all these bodies, such as the Campaign for Nuclear Disarmament, and all that class, but—
§ LORD CONESFORD
I do not care which you take, but you can take a great number. I wonder whether the Government have fully considered whether they will or will not come within (b) if you cannot identify the Party which will be benefited. I gave as an example a body which might be thought to benefit, or possibly to benefit, both the Labour Party and the Communist Party.
§ Clause 18 agreed to.
§ Clause 19:
§ Directors' report to include, in case of certain companies, particulars of exports
§ 19.—(1) lf, at the end of a financial year, a company whose business consists in, or includes, the supplying of goods does not have subsidiaries, then, unless the turnover for that year (so far as stated in the accounts in respect of that year in pursuance of Schedule 8to the principal Act) does not exceed £20,000, there shall be contained in the directors' report relating to that year,—
- (a) if, in that year, goods have been exported by the company from the United Kingdom, a statement of the value of the goods that have been so exported from the United Kingdom during that year;
- (b) if, in that year, no goods have been so exported from the United Kingdom, a statement of that fact.
§ (2)If, at the end of a financial year, a company has subsidiaries, then, unless neither the business of the company nor that of any of the subsidiaries consists in, or includes, the supplying of goods, there shall he included in the directors' report relating to that year—
- (a) unless, in the case of the company and of each of its subsidiaries, no goods have been expored by it in that year from the United Kingdom, a statement of the aggregate of the values of the goods which, in the case of the company and of each of the subsidiaries, have been exported by it in that year from the United Kingdom;
- (b) if, in the case of the company and of each of its subsidiaries, no goods have
1797 been exported by it in that year from the United Kingdom, a statement of that fact.
§ (3) For the purposes of this section, goods exported by a company as the agent of another person shall be disregarded.
§ On Question, Whether Clause 19 shall stand part of the Bill?
§ 5.12 p.m.
§ LORD ERROLL OF HALE
Before we part from this clause, I should like to take the opportunity of asking the noble Lord who is going to reply just what is its real purpose. It is quite plain what the clause intends to achieve—namely, the publication in the directors' report of the exports of a company doing more than £20,000 worth of business in goods in a year. But when the information has been published that it has exported such-and-such a percentage or such-and-such a value, what are the Government going to do with the information? Because if they are not going to do anything with the information, there is really no point in publishing it.
On the other hand, do the Government intend to write letters to those firms whose export performance, in their own opinion, is not up to the norm? Or, perhaps, to a company whose performance is apparently poor when compared with another's? And does the wretched company then have to come along to see the appropriate Minister at the Board of Trade (who may be the noble Lord, Lord Brown, who has been charged with special responsibilities in this field) and have to prepare a long explanation as to why it has not done as well as Lord Brown thinks it ought to have done? Or is such a company going to have to face the music in some way or another? If it is not going to have to do any of these things, then I can find very little justification for this clause at all; but if it is the Government's intention to proceed to make use of this information, then I think they are going far too far in their otherwise laudable attempts to increase our exports.
There is another important matter, and that is that the disclosure of this information may in certain circumstances do positive harm to a firm's activities abroad; and I am sorry to find that, so far as I can tell, there is no safeguard for this matter in the clause as it stands. I would ask the noble Lord at least to consider the possibility of allowing firms 1798 to be exempted from the requirements of this clause where they can show that the publication of the export figures could be harmful to their work abroad.
Then, the whole purpose of the clause is manifestly unfair as between one firm and another, because many firms do not export for the simple reason that they are engaged in supplying components and assemblies to other firms which are making up completed articles for export. Such firms, of course, will have to put up a nil return, or possibly a very small return, in respect to spare parts directly exported, and it will look as though their performance, of perhaps 0.3 of their total output, is very bad, when in fact the whole of the finished products of the other firm is wholly dependent on the efficiency and reliability of delivery of the components and assemblies firm.
A particularly good example, of course, is a well-known diesel engine maker who manufactures a very large number of diesel engines which are incorporated in tractors which are then exported as complete units. The tractor building firm will get all the credit for those exports and will be able to show a very large figure for exporting, both in terms of value and in terms of percentage. I must admit that I think it would be quite impracticable to start getting firms to indicate indirect exports of that sort, but that only serves to demonstrate the manifest unfairness as between one firm and another.
Then, of course, it is characteristic of a Socialist Government to concentrate solely on goods. They do not like invisible exports. They do not understand them; they think they are something to do with the City and so they leave them out. If this clause is to have any meaning at all, it ought to include all forms of export activities. Agencies are to be excluded under subsection (3); insurance firms are to be excluded; banks and all the other activities of the City of London which contribute so much to our balance of payments, are all excluded. Why?
The hotels of this country make a tremendous contribution to our balance of payments. Not only the big London hotels, but hotels in many different parts of the country, boast of a regular stream 1799 of visitors, not only from North America, which is very important, but also from sterling area countries, such as Australia, New Zealand and South Africa. We know the Socialist Government do not like the tourist industry. They do not like people enjoying themselves. They do not really like hotels; so perhaps it is a blessing to hotels that they are left out. But it does make rather a nonsense of the purpose of any of this clause that such important sectors of our economy, which are making substantial contributions to our balance of payments, should be left out and that the emphasis should be entirely on goods—and, then, goods only when the firm is manufacturing more than £20,000 worth in any one year. As the noble Lord, Lord Brown, doubtless knows, there are many small firms which are very proud of their export records, but they are to be left out. They are the "small fry". They are too small to be co-ordinated, probably too small even to be bullied by the noble Lord when he gets his hands on these figures. I beg to move that the clause be rejected.
§ LORD MITCHISON
I accept, of course, the complete and absolute sincerity with which we all know the noble Lord, Lord Erroll of Hale, to express his views, but that does not prevent me from wondering sometimes how on earth he arrives at them. I listened just now, and I can only say this to him. I read through this clause, and it seemed to me to have a fairly clear object, which I do not think he even mentioned, and I found very great difficulty in attributing to it unfairness, or the deep machinations which he seems to find in the most surprising places.
What it seemed to me to do was this. In a trade which was supplying goods—and that is all we are dealing with for the moment—there should be some firms which would be doing extremely well in what I am sure we would all agree is the very important matter of exports, and other firms which would not be doing so well. The noble Lord has, I think, given examples of two companies which do well in this respect; and nowadays we have taken to giving decorations to ladies and gentlemen who have distinguished themselves in the export trade. Without going into the detail of all that, I should 1800 have thought that even the noble Lord, Lord Erroll of Hale, would recognise, with his past experience of the Board of Trade, that there was some advantage in trying to promote exports, and that at any rate one of the possible ways of doing it was a little disclosure of what people were and were not doing in that field.
Let me give him an instance. I am a child in these matters. I have no doubt he knows how you disclose the precise amount that a merchant bank, say, has contributed to the export campaign, or the almost equally complicated question of what an hotel does in that direction. I am sure he understands, but I can only tell him that I do not. But I do understand the position regarding one of the main industries in my own former constituency. Kettering made boots and shoes, and this is a trade that is changing a little. The materials are changing, and the structure of the trade is changing out of a number of comparatively small companies of a private character into a structure rather dominated by big firms. All that is perfectly true, but when at the end of the day you looked at their efforts to export boots and shoes, you found that there were some rather remarkable differences which I think required a little explanation. I think they knew it themselves.
I knew some firms who made extraordinary efforts to promote exports in this trade, and others who said that it was all too difficult. I should have thought that it was a good thing that the results of that should be published. After all, there are facilities nowadays for assistance for exporters, assistance by way of information, credit and so on; and I should have thought it reasonable that if a firm was doing rather badly one should know it and that their attention should be called to the possibility of doing rather better in one way or another. Some things, I agree, present peculiar national difficulties.
There was a centre—not actually in my constituency but not very far from it—that made most of its products in the form of policemen's boots. Policemen's boots are notoriously large. They are, perhaps, not wholly exportable. I do not know enough about the habits of the flics in Paris or policemen in other countries to know whether you can do 1801 much about exporting policemen's boots. There are difficulties like that. This may sound a frivolous point; but it is a real one. Therefore I say to the noble Lord, Lord Erroll of Hale—and I know that I am a child and an innocent in these matters, and I do not really understand all these things—that I read this clause and it seemed to me to have a good and fairly simple purpose. If we expand it a great deal by putting in some of the things that he suggested, I am not sure that it would then be workable. But I should like to add that it did not strike me as being unfair to anybody. I thought it a suggestion in the national interest with which we might all concur and that it did not involve any Party question at all.
§ LORD WAKEFIELD OF KENDAL
I would support my noble friend Lord Erroll of Hale when he says how unfair this is. It is unfair because there are very many companies in this country, as he said, who do a great deal of exporting by way of supplying components. I am a director of a company which, as well as exporting directly, provides a lot of wrapping for goods that go overseas.
§ LORD BROWN
I wonder whether I might interject a point of clarification? I do not want to interrupt the noble Lord in what he is saying, but I think there is a misunderstanding here. The clause insists that a certain category of firms must state their turnover. There is nothing in it to prevent any company other than those in that category from stating anything it likes.
§ LORD WAKEFIELD OF KENDAL
The difficulty is that many companies that do a considerable amount of exporting indirectly do not know where the articles that they are providing for other goods which are exported are going. In the case of the company of which I am a director they know they are supplying wrapping for some goods but do not know what proportion of this wrapping is going overseas. They know that a great amount of the goods for which they supply wrapping goes overseas, but the proportion cannot be determined. I suggest that this clause might do more harm than good. Many firms may feel extremely disgruntled, knowing that they do a great deal of export trade for which they get no credit at all because their contribution is 1802 indirect. I suggest that the clause be looked at again.
§ LORD McCORQUODALE OF NEWTON
I should like to support what my noble friend Lord Wakefield of Kendal has said. The noble Lord, Lord Mitchison, said that he was a child in these matters; and, if I may say so without offence, that was apparent to everybody who listened to him. Take the trade with which I am associated, book printing and publishing. Half the books that are printed in this country at the present time are exported. The figure is something between 40 per cent. and 50 percent. But they are exported by the publishers. The printers do not publish in their accounts that they do any exporting, neither is the author allowed to claim that he is an exporter. The exporter is the publisher although he has neither written the books not printed them. Is that fair? I should say it is not.
I cannot understand the object of this clause. It seems to me that any firm which is exporting and wishes to tell its shareholders can put it in their directors' report. There is nothing to stop them from doing so. A great number of companies do so. But some firms are doing exports and do not wish to allow foreign competitors to know that they are exporting in those lines. I do not wish to go into details, because I should be giving away trade secrets; but I can assure the noble Lord, Lord Brown, that I know of certain exports from this country, very valuable ones, to which the trade unions and other interests in the countries to which they are exported have strong aversion and against which they continually make attacks in the Parliaments and in the Senates of those countries. If we are going to advertise unnecessarily what these products are and to where they are going it will only aggravate the opposition to our own exports.
§ LORD BROWN
Could I make another point of clarification? There is no intention in the clause, expressed or otherwise, of asking firms to publish the names of the markets to which they export their goods.
§ LORD McCORQUODALE OF NEWTON
The trade of which I am thinking—and it runs into many millions of pounds—is directed to only one market 1803 which is well known, and there is no other market outside this country for those goods; and the opposition on the other side is well-known. This clause is only going to do harm to our exports. Surely it can be left to the good sense of the firms who export to give that fact publicity when it is all to the good, and not to give it publicity when it is going to do harm to the exports of this country. I wish the Government and the Board of Trade (who nearly always, when they begin to interfere with these things, put their heavy foot into it) would sometimes refrain from interfering in things which business men of this country know something about.
I hope before this debate is over we shall hear from some noble Lord what really lies in the mind of the Government in wanting this information and to what purpose it is to be put. I had hoped that the noble Lord, Lord Mitchison, would tell us. Even though I once represented a constituency where one of the principal industries was the manufacture of boots and shoes, I feel that he chose a bad example. It is well known that the opportunity to export boots and shoes is very limited since every other country has a fairly highly-developed industry of its own. What can the noble Lords opposite want with these figures, except, as the noble Lord, Lord Erroll of Hale, said, to use them to bully those that they do not like. Do they want to publish lists of the kind that one used to have published at school—form lists? Surely we are dealing with adult matters here and not something teenage. There are enough statistics of goods exported, and surely the Board of Trade and their regional offices have sufficient contact to know what is going on, without asking firms to go to all this trouble and to be forced to publish results which are so easily misunderstood by many people that they can only do harm. I hope that if the noble Lords opposite cannot show how they can use this information responsibly—which to date they have not been able to do—they will agree to withdraw this clause.
§ LORD CHORLEY
I suggest that the type of goods that it is essential to keep secret must be very small and this must be a very unusual case. I should have thought that it could have been got over 1804 by giving the Board of Trade power to issue a permit which would cover that sort of case. Disclosure to Government Departments is always confidential, and there are cases where Government Departments are given the opportunity to issue permits of this kind.
§ VISCOUNT BRENTFORD
I would reiterate the request that the Government tell us for what purpose they really want this information. It seems to me that it can only be to penalise those companies which do not publish good export figures. There is a wide variety of reasons why a company may not be able to export, just as there may be a variety of reasons why a company can export. I recall when I was a member of the Government going to Leicester to look at one of the most old-fashioned companies that I have seen in my life and which had not had any form of modernisation for a hundred years, and I saw there the production of many thousands of brown cotton stockings. I told the chairman of the company that I was exceedingly interested in the method of production, and I asked where he found a market for brown cotton stockings, as, so far as I was aware, every lady of my acquaintance wore nylon stockings and was not interested in brown cotton stockings.
He said, "Nylon is a very interesting subject. We have heard of nylon, and we are contemplating setting up an enquiry into whether or not it might be advantageous to go into the manufacture of nylon stockings." I said, "Yes, but I should like to know where you sell your brown cotton stockings." He replied, "In North-Western Australia. All the ladies there wear brown cotton stockings." If this provision had been in operation then, that company would have got immense credit for something for which they were not in any way responsible. It was purely a traditional custom with which they happened to be connected and it was not as a result of any of their efforts whatsoever.
Another aspect of the matter I have not heard referred to is that of the company which deals in the Middle East. If that company is required to publish its export figures to the Middle East it will run into very great trouble and difficulties indeed, because immediately it publishes its export figures for its exports to Israel 1805 it will be banned from exporting to any of the Arabian countries—an outcome which cannot possibly be of advantage to the company, to our exports or to this country as a whole. I hope that the Government will accede to the request to inform us why they need this information, so that we may judge whether or not it is information which companies should be required to supply.
Of course we all want to see exports increased, and my reading of this situation is that some bright person at the Board of Trade had a brainwave and said, "Let's have a league table. That will encourage them all. "But, like so many brainwaves which emanate from that ivory tower, when it comes to be examined in practice it is found to have all sorts of disadvantages that the begetter of the idea never dreamed about. The whole of industry in this country co-operates over exports. How could the great engineering works of this country export unless somebody supplied their workmen with overalls and cloths for cleaning their machines? How could they export if somebody else did not supply them with cutlery to use in their canteens? The whole of the exports of this country represent one vast act of cooperation, and to think that by producing a league table of people ultimately to get the credit you will not put some stigma on the companies not in the table is, in my view, just wishful thinking.
§ 5.34 p.m.
§ LORD BROWN
It seems to me that the noble Lord, Lord Erroll of Hale, has made nearly all the comments and asked nearly all the questions which everybody else has asked, with one minor exception; so I will confine my reply mainly to what he said. I think he covered in advance all the questions asked subsequently, although the subsequent questions included different details. I am not going to start off by talking about the purpose of the clause. It is going to be a great pleasure to me to make that statement later, but I want first to deal with some of the other things. I do not want to finish up what I have to say on this important issue with a mass of tiny detail.
The first question asked of me was what are the Government going to do with this information? With the greatest 1806 respect, it would seem that some noble Lords opposite are obsessed with the idea that if any information is produced by any company, or perhaps any other institution, it is inevitable that the Government will use it for some malevolent or bothering purpose; that they will do something with it to somebody. The noble Lord, Lord Hawke, seems to get a lot of nightmares over this sort of thing. He has already constructed in his mind a league table with which we are going to bother industry. I will come to the purpose of the disclosure of these export figures, as I said, at the end of what I have to say. Let me assure the Committee that we are not going to set up league tables or use the figures to do things to people in any sense of the word. The second point made was about harm being done to companies abroad. Hypothetically I think it would be quite possible to construct cases where you might be able to argue that harm was being done to the overseas relationships of companies by quoting the case of companies which export to only one customer in one country. It is conceivable that there is a tiny number of companies where this happens. I do not know of any, but in general this would be an extremely exceptional occurrence, and I do not think that we have to legislate for tiny exceptions to the general trend.
A number of noble Lords have made some very heartfelt, and no doubt sincere, comments about the unfairness of the proposal to exhibit these export figures to what they have categorised generally as indirect exporters. Let me be the first to agree that "indirect exporter" is a term which would necessarily have to cover a large section of the country's services and industries. There are a great many people who consider that suppliers of components are special types of indirect exporters. This really is not so. Anybody who contributes to the process of producing an export is, in fact, an indirect exporter; and if you try to define the category of indirect exporter, inevitably you find yourself including almost everybody who has anything to do with commerce or society in the country.
The point I would make, which I think has been overlooked by those who have spoken on this matter, is: who makes the selling effort overseas? This is a crucial point. We want to give full 1807 credit, and ever more credit, to those who are prepared to undertake the onerous task of doing market research, initial marketing effort and all the rest of it, overseas; and the people who do this are the direct exporters. If an indirect exporter is fortunate enough to number among his customers those who export a large proportion of their total production, that indirect man is a very fortunate person, because he is getting increased volume of orders for his component materials simply because his customers are indulging in this extremely serious overseas effort on behalf of our economy and on behalf of the supplier as well.
§ LORD ERROLL OF HALE
I am most grateful to the noble Lord, Lord Brown. Perhaps he is coming to the point; but if the exporting agents are the people who are doing all the exporting, why are they left out of this clause?
§ LORD BROWN
Export agents are people who act on behalf of companies overseas and are not principals in the deal. The noble Lord knows this very well indeed. If a legal definition is wanted of the term "agent", which we hope to be able to provide from the Board of Trade in the very near future, in order to clear up a great deal of misunderstanding about this, it is necessary to come up with some such words as "somebody who acts on behalf of another without himself being the legal participant in the deal". That is what an agent is. If in the term "agent" you include those who buy goods from companies in this country and sell them overseas—that is to say, act in the role of principal—they will disclose a turnover as being direct exporters. I hope that I have cleared up that point.
It may be that what I have said deals with this general accusation of "unfair to indirect exporters". It may be disappointing for praise to be bestowed on those who actually indulge in all these marketing and selling activities overseas, which are sometimes very expensive and certainly require a great deal of effort. But unless we are prepared to discriminate to a much greater extent in the way we give encouragement, in order that we can give still further encouragement to 1808 our direct exporters (and by so doing, of course, we necessarily put the indirect exporter in a lower place) we shall not solve our economic problems.
THE MARQUESS OF ABERDEEN AND TEMAIR
May I ask a question about subsection (3)? The noble Lord referred to the propaganda and advertising work which is done before an export can be made. Surely there are organisations who do the whole of this work and manufacture nothing themselves. Are they to receive nothing for the work they have done?
§ LORD BROWN
If these firms manufacture nothing, but are principals in the transactions—that is to say, they buy the goods in this country and engage in all the market research and the selling overseas—they are direct exporters, and they get the praise. The noble Lord, Lord Erroll of Hale, in reference to hotels, made the comment that the Government did not like people to enjoy themselves. I think that a comment of this sort is out of place and I pass it by. But let me make it clear that the difficulty in making any calculation of foreign earnings by hotels and financial and insurance institutions; is immense. In making calculations one has to take account of outgoings in other directions and produce the net amounts, and by the time all the necessary information is obtained one has a very complex result.
I do not see why we should stop drawing the attention of the community to the existence of these direct exporters just because it is not possible to give equal prominence to others who are doing at least as good a job. I admit that it is rough justice to exclude a statement of the overseas earnings of banks, insurance companies, and hotels, but because of that difficulty I do not think it is logical to say that we should not give praise to those who are directly exporting. In any case. there is nothing at all to prevent any financial institution from including in their own report and accounts a statement of what they are doing in exports. I should be delighted to see such statements about their contribution to our balance of payments. It has been suggested that it is unfair to leave out small firms. But here again there is nothing to prevent them from putting their export figures in the report and accounts. I think that if we had not 1809 drawn this line, the complaint might have been made that this was too much bother for the small firm.
I must make one comment on the firm exporting brown cotton stockings, mentioned by the noble Viscount, Lord Brentford. He asked why a firm supplying the export market with what customers wanted should benefit by some action it had not brought about. I think that a firm that goes out into the world and finds more markets for brown cotton stockings is doing this country a good turn and is not to be criticised for that.
Now let me come to the purpose of the clause. Ours is a society which has been suffering from recurrent balance-of-payment difficulties for the last fifty years—indeed, I could almost say the last hundred years. If we look into our history, I think we shall find that one of the principal causes has lain in the fact that ours is also a society which, for reasons I do not fully understand, has never given commerce and industry the place to which it is rightfully entitled. When we reach the stage in our society when a father, upon being asked about the future career of his son, replies, "Well, John is my best lad and the most intelligent—he is going into industry. The others are good lads and we will find a place for them in the professions" we shall have reached a situation which we ought to have reached a long time ago. It has already been reached in America and Germany, which are successful exporting countries.
If we have given too little support to the status of industry and commerce, we have equally failed to give due status to those who directly export our goods overseas, and the more that can be done to inform the members, the shareholders, the employees and the middle managers about the direct exports of the companies with which they are associated, the better it will be for the growth of our exports. If this figure has to be published by industrial companies every year, we can he assured that all the directors will see it when they come to look at the draft balance sheet and accounts. I know that many directors are going to look at this figure and say, "Is that all we directly export?" For the first time such a company is going to have to face its own music. I am not saying that it 1810 will have to face the Government's music. but it will have to face the facts of its own situation.
§ LORD MCCORQUODALE OF NEWTON
May I interrupt the noble Lord, because he seems to be so ignorant about this? The Government are at present paying a subsidy of up to 3 per cent. to firms for exports. All the directors know this amount when they see the accounts. Surely every board of directors are delighted to see the amount that it comes to and will have it at their fingertips? I am sorry for the woeful ignorance of the noble Lord.
§ LORD BROWN
The noble Lord has accused me of ignorance. I think he is skating on to thin ice here, because if a company has no exports there will be no export rebate to show on the accounts, and the directors cannot ask why they do not have an export rebate figure there. So I refute the noble Lord's accusation of ignorance, which I think is a little unfair. The fact that the figure of direct exports is going to be disclosed will doubtless mean that directors may begin asking some awkward questions of the management and employees. But if the figure is a very good one, it will be a heartening stimulus to those who are doing their national duty.
§ LORD COLERAINE
I do not want to spoil the effect of the noble Lord's peroration, but, while I can see that this clause may provide some very slight stimulus to exports, it seems to me that it will put some exports at risk. I think that the noble Lord was a little cavalier, and even light-hearted, in his dismissal of any danger there may be to our export markets in the disclosure of too much information. He said that if it is in the chairman's statement or directors' report, it will be drawn to the attention of the directors. I cannot conceive of any company in which the directors are not already fully seized of the importance of the export trade. As for the people in the works, they see the stuff going out. They know where it is going, and they are seized of that too. But there seems to me a very real danger in some of our overseas markets.
The noble Lord said that we suffer from a balance-of-payments problem. So do other countries and we export to 1811 markets which have periodic balance-of-payments crises. I am chairman of a company which does a big export trade, and I have often thought that it would be nice to put in the chairman's statement or in the directors' report some figures to show the extent of that trade. But I have always been warned—and I think the warning has been right—that if I did that people in some market on the other side of the world, or in Europe, or in one of the developing countries, could get hold of our accounts, as competitors do, and could go to their Government and say: "You see the measure of this company's export trade. You see what a threat it is to us in the future. You must do something about this. You must either impose a tariff or you must insist on the company manufacturing in this country instead of in the United Kingdom. "I suggest to the noble Lord—I would not say that it is a serious danger—that very likely the practical disadvantage of this clause could far outweigh the theoretical advantage he outlined in his speech.
§ LORD CONESFORD
There is one question that I should like to put to the noble Lord, Lord Brown. I understood him to say that his general object was to increase the prestige of industry and trade in this country, and that is an object with which I feel a certain sympathy. He also said that they did not here enjoy the prestige of some of our rivals, and I think he mentioned the United States and Germany. The question I should like to ask is whether the company law of either of those countries has any provision such as the provision we are now discussing.
§ LORD BROWN
To deal with the last question first, frankly, I do not know whether such a provision prevails in other countries. If it does not, it would not affect in the slightest the arguments that I have put forward.
To correct one misapprehension, I do not think I said that the prestige of industry was lower in this country than it is in these other countries. What I said was that the prestige of industry to people in this country was lower than the prestige of industry in the U.S.A. to the people in the U.S.A. or the prestige of German industry among people in Germany. I have made a rather confused 1812 point, but I hope that it is understood. I do not want to be misunderstood on this matter. I am all for not knocking British industry.
Another noble Lord made a point about the danger of exposure, and I cannot deny that dangers of this sort can conceivably arise, and do arise. But one has to deal with this situation in a practical way, and exports in general are things that make themselves reasonably obvious in a market. In fact, many companies will go to work in a market to advertise the volume of their sales as indicating how good their goods are. If there is one thing that you cannot disguise in a market it is the fact that you are selling goods in that market. This is one of the most difficult things to keep secret. I am not dealing with the point facetiously, although I may be smiling. The whole idea of keeping secret the fact that you are pushing large amounts of exports into a market seems to me to be a difficult proposition. The Government of the country can so easily look at the imports and get the figures. So any attempt to keep these figures secret by not encouraging British firms to publish their total exports, which cover all markets in the world, does not seem to me, with respect, to be a particularly cogent point.
§ LORD ERROLL OF HALE
The noble Lord would help the hard cases very much if he would consider putting down an Amendment on Report giving the Board of Trade discretionary power to allow individual firms on application to the Board of Trade to withhold these figures when in their opinion it is found to be damaging to the export prospects of those firms. Why cannot the noble Lord be decent to the firms who are liable to be hit? It is quite easy to do this, instead of saying that the majority must have its way, and the small minority will have to go to pot. It might be more considerate to people who may be hurt by this extraordinary course, which I do not think will do much good.
§ LORD BROWN
I should be willing to concede that the noble Lord had a point there, if anybody had taken the trouble to provide us with evidence of these firms. But this Bill has been available for inspection for a long time now; no evidence has been given to us in this connection, and it is difficult to think of 1813 any firms that fall into the categories named. I am not questioning the sincerity of those who say that such firms exist, but there would have to be some small number of such firms before we could have a movement in this way. As I say, we have no evidence of this at all. I am not being churlish on this. If evidence is produced, I will undertake to look at it.
§ Clause 19 agreed to.
§ Clause 20:
§ Limitation of operation of sections 16 to 19
§ 20. None of sections 16 to 19 (both inclusive) of this Act hall apply to a report attached to a balance sheet of a company laid before it in general meeting in respect of a financial year ending before that section comes into operation.
§ 5.56 p.m.
LORD DRUMALBYN moved to leave out all words after the second "before" and to insert:
1st April 1967 or the coming into operation of that section, whichever is the later.
§ The noble Lord said: I move this Amendment very much in an exploratory way, and I should like to explain the purpose of my doing so. I think the noble Lord will appreciate that this is a difficult little clause, because, if I understand it aright, Clause 16 comes into operation after six months from the date on which the Act is passed, and Clause 17 comes into operation twelve months from that date. As to Clauses 18 and 19, I take it that they come into effect on the day when the Act is passed. But I am afraid I have been unable to find this. I would suggest to the noble Lord that, from the point of view of giving any figures of this kind, the best thing to do is to fix the date on which the Act should come into operation at the beginning of a quarter, since the financial year of a company runs from the beginning of a quarter to the end of the fourth quarter. I think this would be much more convenient.
§ I am not sure whether I have taken the right date here as April 1. I have found it difficult to interpret this. I suggest that it might be as well to redraft this passage to make clear, if possible, when the various clauses do come into operation. When you first read the Bill you assume, I think, that all the clauses will come into operation on the same 1814 day, and it is not until much later in the Bill you find they come into operation on a different day. I wonder whether the noble Lord would consider this suggestion. I beg to move.
Page 19, line 6, leave out from ("before") to end of line and insert the said new words.—(Lord Drumalbyn.)
§ LORD RHODES
I agree with the noble Lord that this is an intricate clause, but I hope that I shall be able to explain it to him. Clauses 16 to 19 of the Bill deal with the information to be given in the directors' report. Clause 42(1)(b) brings Clauses 16, 18 and 19 into operation six months after the passing of the Bill, and Clause 42(1)(c) brings Clause 17 into operation twelve months after the passing of the Bill. Clause 20 limits the operation of Clauses 16 to 19 so that they do not apply to a directors' report on a period which ends before the clauses come into operation.
Let me illustrate it. It is impossible to be certain how long the Bill will take to go through all its stages in both Houses, but one can hazard a guess, and it is unlikely that it will receive the Royal Assent before the end of June, 1967, at the earliest. On this basis, Clauses 16, 18 and 19, dealing with the general content of the directors' report and information about political contributions and exports generally, will not come into operation until December 31, 1967.
Clause 17, requiring certain analyses of turnover in the directors' report, would not come into operation before mid-1968. Thus a directors' report attached to accounts laid before a company in general meeting in 1968, dealing with the financial year ending before the end of 1967, would not have to comply with Clauses 16 to 19.
Let me say that the proposed Amendment will have the effect of exempting from compliance with the requirements of Clauses 16 to 19 a directors' report dealing with a financial year ending before April 1, 1967, or the coming into operation of the clauses, whichever is the later. As the Bill is drafted, however, the clauses could not possibly apply to a directors' report relating to a financial year ending before April 1, 1967, and, as has been explained, would probably not 1815 apply to a report relating to a financial year ending before December 31, 1967, at the earliest. I therefore submit that the Amendment is unnecessary, and I hope that after my explanation the noble Lord will withdraw it.
§ LORD DRUMALBYN
I am grateful to the noble Lord for his clear explanation of the effect of this clause. He did not deal with the point I made, that it might be convenient if the coming into operation were not dependent entirely on the date of the passage of the Bill but on, say, the last day of a quarter immediately after the passage of the Act, or something of that kind. I do not wish to press this Amendment at the present time, but I wonder whether the noble Lord could consider that suggestion before the next stage.
§ Amendment, by leave, withdrawn.
§ On Question, Clause 20 agreed to.
§ Clause 21 [Directors' report to show, for certain items included under authority of proviso to Section 163 of the principal Act, corresponding amounts for preceding financial year]:
§ 6.4 p.m.
§ LORD RHODES moved to leave out Clause 21 and insert the following new clause:
§ Directors' report to show, for items included under authority of proviso to section 163 of the principal Act, corresponding amounts for, or as at the end of preceding financial year
§ ".Where advantage is taken of the proviso to section 163 of the principal Act to show an item in the directors' report instead of in the accounts, the report shall also show the corresponding amount for (or, as the case may require, as at the end of) the immediately preceding financial year of that item, except where that amount would not have had to be shown had the item been shown in the accounts."
§ The noble Lord said: Paragraph 11(11) of Schedule 8 to the principal Act makes a requirement that there shall be stated the corresponding amounts at the end of the preceding year for all items shown in the balance sheet. Those who 1816 are accustomed to seeing balance sheets understand that well. Paragraph 14(5) requires that there shall be stated the corresponding amounts for the preceding year for items shown in the profit and loss account. So there are the two things there: the balance sheet and the profit and loss account.
§ Clause 10, subsections (2) and (3), of the Bill state that amounts at the end of or for the preceding year do not have to be given in respect of the new items required by the Bill in the first of the company's accounts that are required to show the new items. For example, suppose a particular company is first required to show turnover in its accounts for the year ending on March 31, 1967. An exception is made in Clause 10(6) for the new items relating to emoluments For these items, corresponding amounts for the preceding year are required in the first accounts in which the items appear. In the example, the company would have to give in its accounts for the year ending March 31, 1968, figures relating to emoluments in that year and in the preceding year.
§ The purpose of Clause 21 as drafted was to require that when information about emoluments was given in the directors' report the corresponding amounts for the preceding year should be stated, as they would have been stated had the information been given in the accounts or in a statement annexed to the accounts. The clause does that. But it might be thought to imply either that no other accounts item may be given in the directors' report, from the wording of the clause as it was, or that, if some other item is given, there is no obligation to hive the corresponding amount for the preceding year.
This is a very technical point. It is because the words
required by this Act to be given in accounts, and is thereby allowed to be given in a statement annexed
refer really to what can be given in the accounts and what can be given in a statement annexed. Our intention here is to clear this small item up. First, these words mean precisely what they say, in which case the proviso is relevant only to Section 196, and Clauses 6, 7 and 8. Your Lordships will remember that Clauses 6, 7 and 8 relate to directors'
disclosures. No other accounts items are to be given in the directors' report. This is a confusion that could arise. I ask the noble Lord to accept that what I am saying is right—I know it is right.
§ The second point is that the words "given in the accounts" may be taken to embrace "given in the balance sheet" and "given in the profit and loss account". On this second construction, which is perhaps the more generally accepted, other accounts information, such as that required by paragraph 11 of Schedule 8 to the principal Act, may be given in the directors' report. The aggregate market value of quoted investments is an example. The amended version of Clause 21 makes it clear that when advantage is taken of the proviso to Section 163 to show any item in the directors' report instead of in the accounts, the corresponding amount as at the end of the preceding year or for the preceding year has also to be shown if it would have had to be shown if the item had appeared in the accounts. In short, disclosure of an amount relating to the preceding year cannot be avoided by showing the amount for the current year in the directors' report instead of in the accounts. I beg to move.
Leave out Clause 21. and insert the said new clause.—.(Lord Rhodes.)
§ LORD DRUMALBYN
I am we are grateful to the noble Lord for that explanation. For myself, I feel that I should want to read it again before I knew what it meant. But I know that is my fault and not the noble Lord's.
§ On Question, Amendment agreed to.
§ Clause 22 [Penalization of failure by directors to secure compliance with requirements of the principal Act and Part I as to directors' report]:
§ On Question, Whether Clause 22 shall stand part of the Bill?
§ 6.10 p.m.
§ LORD DRUMALBYN
I must confess I am not entirely happy about this clause. In conjunction with Schedule 6 this clause apparently repeals subsection (3)of Section 157 of the principal Act, under which it is an offence not to state in the directors' report the dividend recommended, if any, 1818 and the amount that it is proposed to carry to reserves; but in that section the manner in which they comply with subsection (2) was left entirely to the discretion of the directors.
Under this clause it is also to be an offence to fail to comply with Clauses 16 to 21. Noble Lords will see that the maximum punishment on conviction is imprisonment for a term not exceeding six months or a fine not exceeding £200. I do not think anybody would object to making it an offence not to disclose the matters referred to in Clause 16, although I am not entirely happy about subsection (1)(f): I rather feel that may fail in its object. But I wonder whether it is really necessary to make it an offence, for example, where a company considers that one class of its activities differs substantially from another, to fail to state the turnover and profitability separately for each. If two companies have exactly the same activities, one of them might take the view that they were substantially different and the other might not. One is left wondering whether one company would be guilty of an offence because the other takes a different view.
Then as to the stating of the value of exports, I should have thought it undesirable to make it an offence in the manner stated. It is quite possible to make it an offence not to state ascertainable facts, but I should have thought it was undesirable to make it an offence not to state facts which are to some extent nebulous. Nothing could be more nebulous than the value of exports. Some are sent on consignment, some direct; some are shipped to subsidiaries at various prices. In any case, is it reasonable to make it an offence not to state the exports, and, in particular, not to state that one never has had any exports and never could have any exports? This seems to me to be going rather too far. I wonder whether the noble Lord could look at this clause again? One knows the difficulties of determining offences but one does not want to create offences unnecessarily. The anxieties about Clause 19 have been mentioned, and I think it is rubbing it in a good deal to make it an offence punishable with a fine of £200 or six months' imprisonment not to state the exports.
§ LORD RHODES
I am obliged to the noble Lord. He was not making the point that there should be no penalties at all, because if he had done that he would have been going against precedent and what is embodied in the law as we know it; because these penalties are there already. He is merely trying to pick out one of those penalties which applies to a particular item and saying that it would be unjust if it were carried out. I suggest, however, that if there is a discipline in an Act there has to be some inducement for it to be carried out; and this is one. I do not think it would be in the least onerous, and I do not think a penalty of £200 in this sort of circumstance would worry anybody. However, at this moment I cannot enter into a hypothetical argument about how it would affect firms with different categories of goods. I think the penalty is quite reasonable in the circumstances.
I think we must remember that we are now legislating for 300,000 more companies than have been legislated for before, and I should have thought it much more reasonable, on the assumption that there will be a certain amount of misunderstanding and mistakes over this, to say that the penalty of six months' imprisonment should come into operation only for a second or subsequent offence.
§ Clause 22 agreed to
§ Clause 23 agreed to.
§ Clause 24 [Penalisation of dealing by director of a company in options to buy or sell shares in, or debentures of, the company or associated companies]:
§ LORD DRUMALBYN
The purpose of these Amendments is to secure that directors are not placed in a worse position as regards rights than other members of the company—if for instance, rights are conferred on holders of any class of share or debenture to elect to convert them into shares of another class or to subscribe for further shares of the same 1820 or another class, to exercise those rights in common with other holders of securities of the same class, and to acquire shares with such rights on the open market. It looks as if the clause as drafted might be held to preclude them from doing so, and if that is so I think some alteration is plainly desirable. I beg to move the first Amendment.
§ Amendment moved—
Page 20, line 4, at beginning insert—
("Subject to the provisions of subsection (3) of this section")—(Lord Drumalbyn.)
§ LORD RHODES
It might save time later if I now give a full explanation of what we are trying to do here, because it might shorten the discussion on Amendments 27 and 29.
§ LORD ERROLL OF HALE
Could we not deal with the Amendments we are now discussing, and then go on to Amendments 27 and 29 afterwards?
§ LORD RHODES
That is what we are doing. I am dealing with Amendments 26 and 28. Clause 24 prohibits a director from buying an option to acquire or dispose of shares or debentures of his company or of a company in the same group. It is particularly directed against the purchase of the call, put and double options that can be bought on the Stock Exchange. It is not intended that the prohibition should extend to the buying of a right to subscribe for shares or debentures. In two particular cases the Bill makes this quite clear by implication. If the noble Lord will turn to Clause 28(2)(a) he will see that it contemplates that a director may buy from his company a right to subscribe for shares or debentures of the company, and Clause 26(1)(b)(iv), together with Clause 26(7), contemplates that he may buy from another company in the group a right to subscribe to that other company's shares or debentures. I think that makes it quite clear.
The noble Lord, Lord Drumalbyn, may fear that somewhat similar transactions, not explicitly mentioned in this Bill, are prohibited—for example, the buying of a right to subscribe which is bought not from the company itself but on the Stock Exchange or from a member of the company. Such a right would normally be available for purchase after a rights issue. The noble Lord may also have in mind that it applies to convertible debentures, 1821 and may consider it possible that even although the buying of a right to subscribe for ordinary debentures is not prohibited, the buying of a right to subscribe for what are called convertible debentures is prohibited. A distinction might exist if the exercise of the right to convert is not to be regarded as a subscription to the shares into which the debentures are to be converted. (I am dealing with this matter fairly fully for the benefit of anybody who wants to read it in Hansard.) If there is a doubt on this point, for instance on the nature of the transaction which takes place when a right to convert is exercised, it might be held that the mere buying of convertible debentures on the market was the buying of a right to call for delivery at a specified price and within a specified time of a specified number of shares and so within the prohibition imposed by the clause.
If the effect of the Amendment is as I have explained, and it is clear that it is to ensure that some at least of the transactions set out above are outside the prohibition imposed by the clause, the Government would be willing to consider whether some addition to the clause is necessary in order to limit its scope. We are quite prepared to do that. If the noble Lord feels it requires a little more clarification, we are prepared to do that. But the terms of the Amendment are not suitable in the present form.
One reason for this is that the words in the Amendment "shares or debentures referred to" would appear to be the shares or debentures referred to in subsection (1) of the clause. If they are, these shares and debentures would not be held by a person at the time he buys a right to call for delivery of them, and that puts the timing out. I resist the Amendment as it is, but will undertake to consider sympathetically what the noble Lord has said, and if consideration shows that an Amendment is desirable the Government will put one down at a later stage.
§ LORD DRUMALBYN
I am very grateful to the noble Lord for his explanation, which again I should like to read carefully, and I dare say many much more expert than I am will want to read this carefully. I am grateful to him for having said he will consider it, and I shall look forward to his putting down an 1822 Amendment at a later stage. I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 6.24 p.m.
LORD ERROLL OF HALE moved, in subsection (1), after "shall" to insert:
unless the purchase shall have been previously approved (either generally or by reference to the particular transaction) by the company in general meeting".
§ The noble Lord said: It might be for the convenience of the Committee if we take Amendments Nos. 27 and29 together. I should like to make it plain that I am in agreement with the intention to prohibit directors from taking put or call options in their company's shares, since it is plainly wrong that a director who is in possession of confidential information about the company's business affairs may be able to turn this information to his own advantage by engaging in such transactions. But it seems to me—and this is why I have tabled these two Amendments—that the clause is far too widely drafted and it will bring in transactions which it is obviously intended not to catch.
§ For instance, it will prevent a director of a public company from buying convertible shares in his own company through a recognised Stock Exchange. Moreover, it would appear to put a complete stop to share option schemes, which, despite the penalty in the 1966 Finance Act, may still be looked upon as a legitimate way of offering worthwhile incentives to directors and senior managers. The Jenkins Committee said such schemes should not be prohibited, and it is clear that the Government intended to follow this recommendation since Clause 16(1)(d) requires directors' reports to state the existence of such schemes. It does not ban them. I also believe that Clause 24 should not apply to unquoted companies or, if they are preserved—perhaps they will be—exempt private companies.
§ Not only do the same opportunities for a director to make an improper benefit for himself not arise in the case of the private company, if only because of the absence of a ready market for his company's shares, but perfectly genuine transactions for financing a private company will be inhibited. It is by no means uncommon for a person with capital, in return for a seat on the board, to agree 1823 to put money into a private company with certain option rights attaching to the equity shares. I think it would be very wrong if these transactions were to be banned; and this is the reason I am proposing these two Amendments, which I hope the Government will see fit to accept. I beg to move.
Page 20, line 20, after ("shall") insert the said words.—(Lord Erroll of Hale.)
§ LORD RHODES
May I ask the noble Lord whether the first Amendment is directed towards employees' option schemes or whether it is directed to a rights issue and so intended to ensure that a director is not deprived of a right available to the members of the company and approved by them?
§ LORD RHODES
If that is the noble Lord's intention, we will have another look at the clause to see whether an Amendment is necessary to ensure that the prohibition it imposes does not go too wide. I think that will satisfy the noble Lord on the first of his Amendments.
I come to the second. There are two parts to this. The first would make the prohibition imposed by Clause 24 on option dealings by a director in shares or debentures of his company apply only when the shares or debentures are quoted on a prescribed stock exchange. The clause is particularly directed against the purchase of the call, put and double options that can be bought on the Stock Exchange. These options are concerned with the shares or debentures that are quoted, and so would continue to be prohibited if the Amendment were accepted. It is doubtful whether there is much scope for dealing in options on shares of unquoted public companies, and there can be hardly any scope for dealing in options on shares in private companies. So with regard to this part of the Amendment we have really no objection to it; we agree with it and would accept it in principle.
The second part of the Amendment is intended to ensure that the prohibition imposed by the clause does not extend to such transactions as the taking up of a 1824 right when there is a rights issue, or buying or subscribing for convertible debentures. This is also the purpose of Lord Drumalbyn's Amendment No. 28. We will have another look at the clause to see whether it is desirable to limit its scope. If we do that, the Government will take account of the proposal in the first part of the Amendment which would limit its scope to quoted shares and debentures. I undertake to do that if the noble Lord will consent to withdraw this Amendment.
§ LORD ERROLL OF HALE
I should like to thank the noble Lord, not only for his explanation but also for his generous offer to have the clause reconsidered in the light of the various suggestions put forward. In the circumstances, I am naturally happy to withdrawn this Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 24 agreed to.
§ House resumed.