IRON AND STEEL BILL

HL Deb 27 February 1967 vol 280 cc893-992

2.36 p.m.

Order of the Day for the House to be put into Committee read.

Moved, That the House do now resolve itself into Committee.—(Lord Shackleton.)

On Question, Motion agreed to.

House in Committee accordingly.

[The EARL OF LISTOWEL in the Chair.]

Clause 1 agreed to.

Clause 2:

Powers of the Corporation

2.—(l) Subject to the provisions of this Act, the Corporation shall have power to carry on any iron and steel activities and to sell iron and steel products and, with the consent of, or in accordance with the terms of any general authority given by, the Minister, to carry on any other activities which any publicly-owned company is for the time being authorised by its memorandum of association or, as the case may be, by its charter of incorporation or other charter to carry on or any company which at any time was publicly-owned was at any time so authorised to carry on; but nothing in this subsection shall empower the Corporation to hold or acquire interests in any company or to form, or take part in forming, any company.

LORD WINDLESHAM moved, in subsection (1), to leave out "or in accordance with the terms of any general authority given by,". The noble Lord said: With the permission of the Committee, I should like to speak to Amendments Nos. 1, 2 and 3, and Amendment No. 55, together. The first three Amendments seek to remove the Minister's power under a general authority to the Corporation to diversify into non-iron and steel activities or to buy into other companies. The effect of the Amendments is that the specific consent of the Minister would be required each time the Corporation wanted to carry on activities that any of the publicly-owned companies can carry on under their existing memoranda of association, or wanted to buy, or buy into, another company, or wanted to form, or take part in forming, another company. Amendments Nos. 1 to 3 apply only to the Corporation itself. The publicly-owned companies are dealt with under Clause 37, and a consequential Amendment is required as well. This is Amendment No. 55 on the Marshalled List, and the same line of reasoning applies there as with Amendments Nos. 1 and 3.

The Minister has said that he is in favour of diversification. He believes that diversification should be allowed provided it does not conflict with wider considerations". He said in another place that he wishes the Corporation to have the same power to diversify as the Schedule companies have at present under their memoranda of association, subject only either to his specific consent or under the terms of any general authority which he may give. This all sounds very reasonable until one looks, as one must, at the memoranda of association of the companies themselves. In these memoranda it can be seen that the activities of the Schedule companies go far beyond anything remotely connected with iron and steel. They include the construction and management of hotels, breweries, private dwellings, newspapers, farming, saw and paper mills—a very wide range of activities indeed. The question, therefore, that has to be asked is whether this sweeping power to take into public ownership is to be used with restraint.

The Minister was conciliatory on this point in another place until it was discovered that, on his instructions, his then Parliamentary Secretary, Dr. Bray, had written to a Labour Member of Parliament who was worried that the Minister was being an insufficiently red-blooded Socialist in this respect. Dr. Bray, in this letter, published in the Sheffield Telegraph (to the great embarrassment, I imagine, of both Dr. Bray and the Minister), and subsequently produced in Standing Committee D, said: Dick Marsh has asked me to assure you that he would be favourably inclined towards any request from the Corporation to extend their diversified activities when this would be to their advantage, and that he would only withhold consent for significant reasons of national economic policy". We must ask the Government, in view of that statement, to make the position quite clear as to what is intended here. The alarm that has been caused over this point, resulting from the now notorious Bray letter, has been picked-up in the Press and elsewhere, and I do not think the Government can be surprised about it. We must hear what their intentions are likely to be in this respect.

It should be noted that the Amendments which my noble friend Lord Erroll of Hale and I have put down on this point do not seek to remove this power of the Minister. What they seek to do is to qualify the power, making it subject to the specific consent of the Minister each time; and, indeed, this is really implied in the Bray letter itself, which says that the Minister would only withhold consent for significant reasons of national economic policy. This, after all, is what would happen in business—the Government's own analogy. They want the Corporation and the publicly-owned companies to have the same degree of freedom that the companies have at the moment. But if any of the scheduled companies, or any other public company, wanted to diversify in this way—to form a new company, to buy a company, to buy into one, to start up a new area of activity, apart from their existing business—it would be the subject of an actual decision of the board of the company; so the commercial analogy is that there would be a specific consent each time.

What we have doubts about is the point of the general authority: that the Minister can give a general authority to the Corporation, and they can then diversify without going back to him for his specific consent. We feel that this is dangerous, and we should like to hear what the Government have to say. I beg to move.

Amendment moved—

Page 2, line 36, leave out from ("of") to end of line 37.—(Lord Windlesham.)

THE MINISTER WITHOUT PORTFOLIO (LORD SHACKLETON)

I understand the object of the noble Lord in moving this Amendment, and his concern, which has been expressed in another place, that this is a subtle plot for wholesale nationalisation without providing particular Statutes to achieve it. I also agree with the noble Lord that the memoranda of companies cover an astonishingly wide range of activities. But I think that where he has gone wrong is in reading rather more into the purpose of the letter which he quoted from Dr. Bray. The important point here is that it is not the Government that under this clause will be initiating the action towards diversification, but the Corporation. Any significant new activity by the Corporation, or the acquisition by them, or by a publicly-owned company, of any significant interest in other companies should have the Minister's specific consent. I want to emphasise this. It is the Minister who has to give consent; it is for the Corporation to decide whether it is a proper activity for them to indulge in.

I should like to make several points on this matter. First of all, there will be some cases where the undertaking of new activities, or the acquisition of new interests, is of no real significance, and not of a kind to arouse the anxieties of noble Lords opposite. There are some activities very closely allied to, and indeed essential to, the provision of iron and steel. One example is the manufacture of coke; and I could give a number of other examples. Then the Corporation may wish to invest money, not only their own funds but possibly pension funds and such like, and here again they must have the full range of the market; and all companies do this with a view to getting a good return on money not immediately required.

But what is clear is that we cannot make the Corporation subject to the Minister on every detailed move. A firm undertaking has been given—and I think the noble Lord accepted this—that the Corporation would be required to seek ministerial consent for each acquisition of interest in a company, except where such an acquisition would be of little significance; and I should like to repeat this undertaking very strongly. I would add that this applies also to the acquisition of interest by publicly-owned companies, and the Corporation would also be required to seek such consent whenever they undertook non-iron and steel activities, except where their doing so would be of little significance.

The question of diversification is a complex one. Those of your Lordships who have had experience in industry and business will be aware that to diversify into areas where there is a lack of expertise is on occasion a somewhat dangerous thing to do. Indeed, any responsible body—and essentially the National Steel Corporation will have a very responsible and high-powered management—must think carefully in terms of the prosperity of the Corporation and of their underlying and principal objectives.

Although, as I say, I understand the anxiety of noble Lords, I give an absolutely unequivocal assurance that this particular power, the general authority, is not intended to be applied except in regard to matters which are of no particular significance. If I felt there was a real point of issue between us, I could well understand that noble Lords might wish to test this issue by means of a Division. But in view of the assurance I have given, I hope they will accept that there is no need to press this further. As I say, the emphasis here is not on the Minister's powers to bring about diversification under this clause, but on his powers to restrain it and his intention to consider on merit whether a diversification is in the public interest. The fact is that this power is needed, and it is the intention of this Government that this power should exist. Indeed, noble Lords may have seen in today's paper certain statements by Lord Beeching on the desirability of having this power. But the removal of this particular form of words will do nothing effectively to limit that, and therefore I hope that the noble Lord will not press his Amendment.

LORD WINDLESHAM

I am grateful for what the noble Lord, Lord Shackleton, has said. This is clearly a matter which depends to a large extent on the interpretation of the power held by the Minister. We have heard that, in the normal course of operation, the Minister will consider each of these applications for diversification and where he believes that they are in the interests of the companies or the Corporation, he will then give his consent. With that assurance, which is something we shall have to watch as the nationalised steel industry gets into operation, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

Clause 3:

General duty of the Corporation

3.—(1) It shall be incumbent on the Corporation—

• (b) to secure that neither the Corporation nor a publicly-owned company shall show undue preference to, or exercise unfair discrimination against, any such persons or any class thereof in the supply and price of such products, but without prejudice to such variations in the terms and conditions on which such products are supplied as may arise from ordinary commercial considerations or from the public interest;

(4) Nothing in subsection (1) above shall be construed as imposing upon the Corporation, either directly or indirectly, any form of duty or liability enforceable by proceedings before any court.

2.51 p.m.

LORD WINDLESHAM

Clause 3 deals with the general duty of the Corporation, and under subsection 1(b) the National Steel Corporation have a duty to secure that neither the Corporation nor a publicly-owned company shall show undue preference to, or exercise unfair discrimination against, consumers. This duty is incumbent on only the wholly-owned subsidiaries of the Corporation and not those of which the Corporation own more than 51 per cent. but less than 100 per cent. This Amendment would substitute all subsidiaries as defined on page 89, lines 10 to 14 of the Bill. In short, what this Amendment does is to include the companies which are controlled by the Corporation but which are not 100 per cent. subsidiaries, owned outright. I beg to move.

Amendment moved—

Page 4, line 6, after ("company") insert ("nor any company that is a subsidiary of the Corporation or of a publicly-owned company".)—(Lord Windlesham.)

LORD SHEPHERD

This is the first occasion on which I have intervened in the Iron and Steel Bill, and I feel I should show my gratitude to the noble Lord, Lord Shackleton, for having given me a first Amendment which appears to be relatively easy. The noble Lord, Lord Windlesham, has set out the purpose of his Amendment, but I fear I must inform him that it goes against the basic principle of the Bill; namely, that the nationalised industry, which consists of the Corporation and the publicly-owned companies, should be only that which would be covered by the "nationalised industry provisions"—the duties and restrictions that were placed upon it under Clause 3.

The Government feel that the partly-owned subsidiaries, which will contain a fair quantity of private capital, should be treated differently from those which are wholly-owned companies. We think it would be wrong to place these companies, many of which will not be involved in the production of iron and steel, in the same position as publicly-owned companies. There are only three companies that fall within this definition which are involved in iron and steel. Therefore in the Amendment we are dealing with only a relatively small number, but on the broader aspect which we have just been discussing the Amendment would have a serious effect and I suggest it might well inhibit some form of rationalisation in that particular field. We believe there may be some of these partly-owned companies which could well be rationalised and in which the Industrial Reorganisation Corporation themselves might be interested.

We think that if the noble Lord's Amendment were to be accepted it would place the private shareholders in those companies in a much more adverse position than they at present enjoy. I do not believe that this is an Amendment which should attract noble Lords opposite because I think they take the view that private capital should be allowed freedom to develop, and if this Amendment were carried I believe it would have an ad- verse effect on that private capital. Therefore I hope the noble Lord will withdraw the Amendment.

LORD WINDLESHAM

I think we can accept that there might be a conflict between the private shareholders and the public shareholding in the subsidiary companies and that at the moment this is a relatively small matter because so few companies are involved. Nevertheless, this is an issue of principle, and I think it would be the desire of noble Lords on this side of the Committee—and probably some on the other side—that this form of partnership between public and private ownership should be a pattern for the future, rather than outright nationalisation of all the assets. We have raised the subject this afternoon because we feel that in the subsidiary companies the Corporation should accept that although the Corporation do not have a statutory duty to avoid discrimination in their trading, this will nevertheless be the general trading in which the Corporation's representatives or the boards of their subsidiaries will conduct their affairs. In the light of what has been said by the noble Lord, Lord Shepherd, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD WINDLESHAM moved, in subsection (l)(b), to leave out "or from the public interest". The noble Lord said: This Amendment is to the same subsection of the Bill, 3(1)(b), concerning the same issue, which is the duty of the Corporation to avoid discrimination in their trading. The Amendment seeks to leave out the words "or from the public interest" at the end of that subsection. The Minister of Power has said repeatedly in another place that the Corporation should operate on commercial principles. Indeed, this is rather a refrain in his speeches. This being so, it is difficult to see the relevance of the words "or from the public interest" in this clause. As it stands, the subsection would have the effect of allowing the Corporation to exercise what might otherwise be regarded as unfair discrimination, provided they believed it to be in the public interest. Who are they to decide? This concerns the Corporation, not the Minister, and who are they to decide what is or is not in the public interest? What will the pressures on them be?

In the Second Reading debate, the noble Viscount, Lord Muirshiel, speaking from great experience, talked of the pressures that tend to mount up in the nationalised industries because of the political movements which can sometimes affect their activity. The public interest might be claimed as the reason for a wide variety of discrimination, particularly against consumers who are competitors of the Corporation, not only in the field of iron and steel but in other areas such as constructional steel work, bridge work, and so on. I do not suggest that higher prices, longer delivery dates and such things necessarily represent the way in which the Corporation would conduct their affairs, but it is possible under this clause that such things could be used systematically to weaken competitors of the Corporation, and the claim could then be made that it was in the public interest for the Corporation to obtain the largest share of the market—the iron and steel market and in the other fields in which the Corporation will be the major influence—and that it is in the public interest because the National Steel Corporation should be profitable. These are far-reaching words, and I think the Government must explain to-day what they mean by this clause and what they think its application will be. I beg to move.

Amendment moved—

Page 4, line 12, leave out ("or from the public interest").—(Lord Windlesham.)

LORD HAWKE

I think my noble friend Lord Windlesham has a very important point of principle here. Over the years we have from time to time taken exception to the words "in the public interest" in various nationalisation Bills where the Minister had to decide what was the public interest, because we said that it is almost impossible for even a Minister to decide. But here we have somebody who is not in a position to decide what is "the public interest". The Corporation are in a position to decide what is the best interest of the steel industry but not what is the general public interest. It looks to me as if the Bill needs to be put right so that any judge of what is "the public interest" will be at least a Minister, which means that the decision will be the collective responsibility of Her Majesty's Government, and not of a public Corporation.

VISCOUNT MASSEREENE AND FERRARD

I should like to support this Amendment very strongly. After all, how is one to define "the public interest"? There is no legal definition of "public interest". We have seen nationalised industries put prices up and up. Is that "in the public interest"? How does one define it? It depends. What may be said to be the public interest from the Socialist point of view is not necessarily the public interest from the Conservative point of view.

LORD SHEPHERD

Quite right.

VISCOUNT MASSEREENE AND FERRARD

That is the point. It seems to me that this clause would be far fairer all round if these words were deleted. I should be quite happy if the noble Lord opposite could define to me the meaning of the words "public interest".

3.3 p.m.

LORD MITCHISON

Like the previous Amendments, this one has been fully discussed in another place, and it seems to me that subsequent Amendments follow discussions in another place. Indeed, they have little alternative. Proceedings on this Bill occupied over 2,000 pages of Hansardin Committee and a long discussion on Report, in addition to the usual Second and Third Reading discussions. I should have thought it would require a very great deal of ingenuity in anyone, apart from his political views or natural diligence, to discover anything new to be said about it at this stage.

The object of this Amendment, so far as I can see, is this. The clause begins by providing, in paragraph (a) that the main duty of the Corporation is to promote the efficient and economical supply—of iron and steel products and so on, and to further the public interest in all respects. Paragraph (a) has apparently passed without comment, and it implies, I should have thought, a very clear recognition that the Corporation have a duty and competence to judge the public interest as its main function. Then we come to the paragraph that we are now discussing, which is really a limiting paragraph about unfair discrimination and so on. As regards that, we may have regard to ordinary commercial considerations but we are not to have regard to the public interest—"we" being in this connection, I agree, the Corporation. There are (and I suppose I may be allowed just to mention them) the following Amendment and another one later on on the Order Paper which do in fact provide for certain machinery about this and which I should have thought are extremely relevant to the discussion we are now having. As the later Amendment, of course, has not been moved, I suppose we need say no more about it now; but when we come to it there is a great deal to be said.

Meanwhile, if there is to be a public interest in this matter, under the Bill the Corporation are to have regard to it in respect of their main function and to discard it in respect of the subsidiary one. I cannot understand the purpose of this Amendment by itself, though I can understand what might be meant if we were now discussing other Amendments. A great deal was said about this matter during the course of the proceedings in another place. One Conservative Member who was quoted by the Minister (so it is the Minister I am quoting, and not the Member) was asked in the course of discussion: If it is in the interests of the Corporation and in the interests of the nation, is it right that it should be stopped? The Member then made the shortest and most memorable speech that was made in the course of the Committee proceedings, by saying, "Yes". That, apparently, is the view of some noble Lords opposite. It is not mine. I do not see why the Corporation should be obliged to disregard considerations of the public interest, whether or not they are the final authority to decide. Therefore, I should have regarded this Amendment as a typical piece of reaction in the interests of private property.

LORD SHEPHERD

If I may say so, I do not find the words "public interest" as sinister as the noble Lord, Lord Windlesham, regarded them; nor do I find them as simple as the noble Viscount, Lord Massereene and Ferrard, found them. I think we must face the fact that both sides of the Committee wish this Corporation to conduct their business very much as a commercial organisation. does. This has from the very beginning been the burden of my right honourable friend's speeches on the Corporation. A private company operates under its memorandum. It has pretty well complete freedom to do as it wishes. However, in the case of the Corporation, set up by Statute, it is natural that certain directions and additions will be laid upon it, and these can be found in Clauses 2 and 3. The first few words of Clause 3(1)(b) state: to secure that neither the Corporation nor a publicly owned company shall show undue preference to, or exercise unfair discrimination against, any such persons or any class thereof in the supply and price of such products". These are pretty tough words. If they were left by themselves, I think they would reduce a great deal the freedom of the Corporation even in commercial terms. Therefore, the Government thought it right that there should be a proviso which includes the words, "ordinary commercial considerations". I gather from noble Lords opposite they do not disagree with that.

We now come to the words "or from the public interest". The Government have felt it right to regard these words as essential to the Bill. A situation may well arise in which, in order to deal with (shall we say?) competition from steel imports the nationalised steel industry will need to reduce prices in specific situations. It may well be that the words "commercial considerations" would cover such an operation. There has been doubt in looking at some of the other parts of the Bill because if we do not put in the words "public interest" it might be construed that the Corporation would be acting contrary to the Statute if they were to reduce their prices in one particular area without reducing prices overall. It would be quite wrong if, in order to meet a specific competition, shall we say from imports, they had to reduce all their prices merely to conform, because this would have a serious effect upon the general financial earnings of the Corporation.

It is for this particular reason and, so far as I can see, no other, that the words "from the public interest" have been inserted. If the noble Lord can think of any other words which would meet this point and would give the degree of flexibility necessary, I am quite sure the Government would consider them. But these are the words that we have selected. At the moment, it is the best we can do.

3.11 p.m.

VISCOUNT DILHORNE

I wish the noble Lord would deal with one further point which worries me considerably. He has drawn a relationship between the memorandum and articles of a company and the earlier clauses of this Bill. So be it. But if a company goes outside the powers contained in its memorandum and articles it can be restrained and dealt with in the courts. Presumably, the noble Lord contemplates that should the Corporation seek to go outside the powers contained in the Statute, then again the Corporation could be restrained by the courts, and that persons could have recourse to the courts to do so. I am glad that the noble Lord indicates that he agrees with me so far, because then there comes what to me is a real difficulty. If you keep the words "public interest" in paragraph (b), undefined as they are, the Corporation in the first place will be able to say that it is an act which they believe to be in the public interest.

"Public interest" covers a much wider field than the expression "commercial considerations". But that means that unless some guidance is given in the Bill to the meaning to be attached to the words "public interest", all the other words that have been written in are a pure waste of time, because no court will be able to determine whether or not the particular action is in relation to the public interest, with those words standing just on their own. So far as I can see no guidance is given.

I wish the noble Lord would be good enough to apply his mind to that question because as I see it this in fact means that the Corporation will be able to do with impunity anything they consider to be in the public interest, although there may be many other people who think that it will not be; and if the matter is taken before the courts the clause itself gives no guidance as to the content of those words.

VISCOUNT ECCLES

I think that the Government are in a great difficulty here, and I am with them in seeing the difficulty. The noble Lord, Lord Shepherd, said that the occasion might come when, to meet competition from cheap imports, the Corporation deliberately sold at, let us say, cost price. Of course, the ordinary business does that, too, and it is perfectly right that that power should be there. I can think of the other circustance, in which somebody has a large export order and comes to the Corporation and says, "if you can supply us with steel at a particularly favourable price we shall be able to shade our offer and shall be able to get this export order". That may well happen, and I am not against the Corporation's having the power to do that, because I think an ordinary iron and steel company would have that power, too.

The difficulty is that if this were a privately-owned company there would be some limit to this kind of variation in price between one customer and another, because the profit and loss account in the end would not work, and a private company cannot make losses beyond a certain point without getting its whole business into trouble. This is not so with the National Steel Corporation. They can cover up a tremendous amount of discriminatory pricing.

I think that what my noble friends really want is some assurance in regard to the extra freedom which a monopoly has to quote different prices to different customers, and which is quite clearly given. Once you put into the Bill that the only thing the National Steel Corporation have to assert is that this particular discriminatory price was in the public interest, no one can challenge it; no one can say otherwise. As my noble and learned friend Lord Dilhorne has just said, it is impossible to prove whether or not it was in the public interest. All they have to do is to assert it. Speaking purely personally, I think that what we want is that this commercial freedom, which is quite natural in the case of so large a business as this, should not be abused. We wish to know whether there is not some way in which something a little less wide open than merely asserting that this is in the public interest could be put in the Bill for the safeguarding of the public.

LORD CONESFORD

May I add one further consideration in support of the point made by my noble and learned friend Lord Dilhorne? He has pointed out how extremely wide is the power given by these words and how difficult it would be for a court, or anybody else, to control their application, even if a court would otherwise have the power. But the point made by my noble and learned friend seems to me to be accentuated, if one may mention it in advance, by the terms of subsection (4) which appear to take the thing out of the purview of any court at any time.

LORD SHEPHERD

From the latter speakers, I think that at least I can say that there is nothing that divides us in this matter. The noble Viscount, Lord Eccles, suggested that the National Steel Corporation will be in a monopoly position. Of course, this is not so. It will be in a dominant position, but it will not be in a monopoly position. It is for that precise reason that we have provided a degree of protection—I think it is in a new Amendment, Amendment No. 51. This will give proper protection to the person's concerned.

We have also a clause dealing with the Consumers' Council which will give protection to the consumers. I should have thought that we were providing a means for appeal to the Minister in any case where the Corporation was behaving contrary to the spirit of Clause 3.

I will certainly consider with my advisers and I will also see the Minister, himself, to find out whether any other words different from "the public interest" could be inserted. As I said when I spoke first, the object of putting in these words was to give a degree of flexibility. They were the words that at that time we thought it right to put in. I will look at this, and if I can meet the point of the noble and learned Viscount, Lord Dilhorne, I will see what can be done.

LORD WINDLESHAM

In view of the serious doubts that have been raised on this Amendment by my noble and learned friend Lord Dilhorne, and by Lord Eccles, and what the noble Lord who has just replied for the Government has just said, I think it is right that I should withdraw this Amendment so that the Government can have another look at it. The noble Lord opposite has told us that he will see the Minister and see whether there are any alternative words which might meet this point. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

3.19 p.m.

LORD ERROLL OF HALE moved to add to subsection (1)(b): and any question whether or not the Corporation have complied with their duties under this paragraph shall be determined by the Tribunal established under Section (Tribunal for non iron and steel making activities) of this Act.

The noble Lord said: If it is agreeable to your Lordships, I would suggest that in discussing Amendment No. 6 we also sider Amendment No. 20, because Amendment No. 6 is really a paving Amendment for the more substantial Amendment No. 20:

LORD MITCHISON

May I interrupt for one moment? Are we not also almost bound to consider Amendment No. 51 which is very similar to Amendment No. 20?

LORD ERROLL OF HALE

I will have a quick look at what Amendment No. 51 is all about. I see that that is a Government Amendment. I would not presume to couple my Amendment with a Government Amendment without the express agreement of the Minister opposite. It is probably more satisfactory for it to be taken separately, if the Minister in charge of the Bill agrees.

As regards Amendment No. 6, which is a paving Amendment for No. 20, I should like to remind the Committee of the debates which have already taken place on the Bill, in which the Government have shown their realisation that they were creating in the steelmaking industry both a public sector and a private sector. The Minister has gone so far as to table the new clause, to which the noble Lord, Lord Mitchison, referred, providing an appeals procedure which goes some way towards alleviating the somewhat understandable anxiety of the steel making private sector with regard to the trade practices of the steel making public sector. That is good, so far as it goes. But nowhere in the debates so far in another place, or, indeed, in your Lordships' House, have the Government yet shown, so far as I can see, any awareness of the difficulties which this Bill will present by creating a public and a private sector in other industries, including certain of the steel-consuming industries. I submit to the Committee that some provision must be written into the Bill to alleviate the natural anxieties of the private sectors in those industries.

Perhaps I can best illustrate my point by citing the case of the structural steelwork and bridgework industry, a virile and important industry which is now to be split asunder into a public sector and a private sector respectively. There are well over 200 individual industrialists in this field distributed throughout the United Kingdom who design, fabricate, and erect structures such as the steel frameworks of multi-storey buildings, power stations; bridges, from the smallest to the largest, such as the bridge over the Severn; transmission towers for high voltage electricity supply; and industrialised sections for factories, schools, hospitals and so on. These are their products, and it is important to note that within the terms of the Bill they are not "iron and steel products" as defined, and those industrialists' activities are not "iron and steel activities", again as defined in the Bill. Their raw material is the rolled section and plate obtained from the steel makers, of which they consume some 700,000 tons a year; namely 700,000 tons of iron and steel products.

To these industrialists this Bill appears as a two-headed monster. One of the heads is the problems they foresee as consumers. The other problem, which is the one I wish to emphasise to the Committee, is the fact that as an industry they are to be split into two. The Bill divides this formerly united industry into two camps. It creates both a public sector and a private sector. This raises for the industry problems which are not thought to have been sufficiently appreciated by the Government. This is a very serious matter, because, out of the 200 or more industrialists or firms which I mentioned, nine are subsidiary companies of some of the fourteen steel making companies named in Schedule 1 to the Bill. Those nine may be relatively few in number, but the situation assumes a very different aspect when one looks at the fact that they are among the biggest in the industry, indeed, they employ a quarter of the total number of employees, and produce a quarter of the tonnage output, which in 1965 was worth over £25 million.

What are the industrialists in the private sector to think? I will tell the Committee what they think. Frankly, they are suspicious. They are suspicious that the publicly-owned companies in the construction industry, being under the control of the Corporation, which includes the steel makers, will receive preferential prices for iron and steel products, which are their raw materials. The private firms fear that the public sector of their industry, which is the constructional steel industry, will receive preferential delivery in time of shortages; they fear tender documents from Government Departments and other nationalised industries may be given earlier to the public sector companies than to themselves, or that perhaps such orders may never indeed come their way at all; or, if they do, that the public sector in their industry may be given unfair advantages.

It is all very well for the Minister to say, as he has done in another place, that he wants an active and strong private sector in the industry, but when he said that he was speaking for the industry which he, as a Minister, sponsors; namely, the iron and steel producing industry. The Minister must now be heard to say—and we hope we shall hear this—that he is aware of the problems flowing from the creation of public and private sectors in other industries, even if those are not under his direct sponsorship, as in the case of the steel construction industry. I submit that the Minister should properly do more than that. He should extend some protection to those private sectors and provide a means whereby it can be shown that there will be no unfair discrimination. The Minister is not the sponsor for the structural steelwork industry and for the bridgework industry, and he cannot therefore refuse them and other such industries the right to some recognisable appeal procedure which is separate to and independent of the Corporation, and indeed of him, as well. I believe this problem must be brought into the open and shown to be recognised, and that some legislative protection must be provided. This is what I have in mind in proposing Amendment No. 6, which, as I have said, is a paving Amendment to the substantive new clause contained in Amendment No. 20. I beg to move.

Amendment moved—

Page 4, line 12, at end insert the said words.—(Lord Erroll of Hale.)

LORD MITCHISON

This is substantially the same Amendment which was presented as new Clause No. 9 on Report stage in the other place on January 19, as can be seen from col. 711 of the OFFICIAL REPORT. It is is differently worded and it is in a different part of the Bill, but the substance of it is the same. It was fully argued there, and the general question of the position of the privately-owned sector (if I may so call it), was also argued at considerable length at a later stage. In the hope that neither of my noble friends is going to promise any more to "look at things again", I should like to recall what the Minister said about it. He said as regards the proposed tribunal which is mentioned in Amendment No. 20—and this is reported in column 733 of the Commons OFFICIAL REPORT for January 19, 1967: I believe that such a tribunal would cut across the direct personal responsibility of the Minister to Parliament. Then he went on to say, in column 734: Basically, if the argument is that the Corporation would want deliberately to conduct its operations to the detriment of the private sector, it is an untenable one. And I have not heard it argued by the noble Lord who moved this Amendment. Second, the procedure for protection in the Bill at the moment is adequate. Third, the type of appeals tribunal as suggested in the Amendment has no precedent. I do not condemn it for this, but given the machinery for consumer representation—these consumers are pretty powerful—and the fact that the Minister can give directions and is answerable to Parliament in such cases as the example referred to by the hon. Member for Hallam, the new clause is unnecessary and will, if anything, detract from the responsibilities of the Minister. That is at the end of a rather long speech, and it seems to me to be fairly conclusive. On the Third Reading in another place the general question about what is called the private sector was considered as indeed one of the four main issues which another place had been discussing for many a long and weary day and night.

What was said by the Minister—and I quote again—was this: There is naturally some uneasiness among companies who will remain in the private sector, and I would like to make it clear where the Government stands. The private sector, although small in relation to the nationalised sector, will consist of about 250 iron and steel companies and about 1,200 iron and steel foundries, with an annual turnover of £400 million to £500 million, and will employ about 200,000 people."—[OFFICIAL REPORT, Commons, 26/1/67, col. 1802.] That is a fairly substantial sector. Later on, he said: The Minister of Power has production responsibilities for the iron and steel industry as a whole, and it must be his aim, and that of his Department, to conduct those responsibilities in a way which promotes a strong and effective nationalised sector and a strong and effective private sector."—[Col. 1803.] I should have thought that that was a fairly clear statement, and a sufficient statement, of the position of the Minister in the matter.

As regards this particular Amendment—it was discussed in principle below—it seems to me rather hard to discuss it without considering also the alternative put forward in Amendment No. 51. That Amendment was promised below and is produced now in performance of the promise, the terms of which were pretty full and were, I understand, accepted at the time as sufficient by the Opposition below. It is surely rather a strange state of affairs when the Opposition raise a point and a promise is put forward below to meet them, which they accept; the Amendment which they had moved is then withdrawn, as it was withdrawn because of that promise, and when the Bill comes to this place we find the Opposition suggesting quite a different form of tribunal, and with a different remit from that which appears in the Government-accepted Amendment, which pleased them so much when outlined to them in another place. I am not quite sure where they stand. If the noble Lord wants to interrupt me—

LORD ERROLL OF HALE

I do not want to interrupt the smooth flow of the noble Lord's language, and I thought he was about to sit down, but I feel that I must make it plain to him that, while I admit that I do not always listen to what he is saying, it is quite plain that he had not been listening to what I was saying. The point of our Amendment is to deal with the non-steel making activities, for which we should like to have a Tribunal. All the discussions in another place, and the Government Amendment which is designed to meet what was then said. deal with the steel making activities of the public and the private sectors. No reference had been made to the non-steel making activities, which is the purpose of the Amendment which I have just moved.

LORD MITCHISON

I did listen to what the noble Lord said, and I assure him that I always listen to anything that falls from his lips with almost reverent attention. I am sorry he feels unable to do the same for me, but I can see the difference. However, it is the same Amendment because it refers to the duties under Clause 3(1)(b), and it is the duties under Clause 3(1)(b) which we are now considering. When you deal with one set of duties in one place and the same set of duties in another, the choice of an instance which may be rather different does not alter the character of the Amendment. I assure the noble Lord that if he will look again at the rather longer language of the new clause which I have mentioned, he will find that it covers his Amendment.

LORD SHEPHERD

I think I should rise, first of all, to assure my noble friend who sits behind me that the Government could not accept the Amendment which has just been moved by the noble Lord, Lord Erroll of Hale. The Government have shown their concern, and have sought to see that there is machinery to ensure that the disciplines of the Corporation are effectively enforced. As in previous nationalisation measures, we have provided for a Consumers' Council to consider all the problems, or any questions which may arise on the activities of the Corporation so far as consumers are concerned. I should have thought that a good number of the industries or companies which the noble Lord, Lord Erroll of Hale, was talking about would fall within that area.

As my noble friend Lord Mitchison has pointed out, we have gone a degree further with Amendment No. 51. This deals with a different aspect, but it shows that the Government seek to meet the concern which has been expressed by those companies which will be affected by the nationalisation of iron and steel. We could not accept the noble Lord's Amendment, because we believe that it would be wrong to set up a Tribunal in this matter, as it certainly would reduce the effectiveness of the Minister and of Parliament. We believe it would be wrong to put a Tribunal between any claimant and the Minister and Government.

Much of what the noble Lord, Lord Erroll of Hale, said arises, I think, on Amendment No. 62, which deals with arm's length trading. I have, I hope, some useful noises to make to the noble Lord on that subject, but I should prefer to save those noises until we come to the Amendment, when we can have a proper discussion. I believe the noble Lord will find that the Minister is very conscious of the points which he has made, and I think the noble Lord will be satisfied. The Government do not believe that the House should accept the idea of a Tribunal to look at the particular aspects which the noble Lord has mentioned this afternoon. But I think he will be fairly close to being satisfied—I hope he will be fully satisfied—when we have our debate on Amendment No. 62. I hope the noble Lord will agree to withdraw his Amendment, and perhaps he can then consider his position between now and the Report stage.

LORD WOLVERTON

The only trouble about these consumers' councils is that they have not really been working very satisfactorily in other nationalised industries. I recently heard a case concerned with Newmarket railway station. I live in New market, so perhaps I should declare an interest. The station there was to be closed down and was to become an unmanned halt, so the local council at New market wrote to the Minister, as did the New market Society, and they were told that they could apply to the consumers' council, but not until after the reorganisation had take place. If they were dissatisfied after the station had been downgraded from the manned station to an unmanned station, they could then make their complaint. I am using this only as an example. These consumers' councils seem to have absolutely no teeth at all, as they are advisory bodies, and the Railways Board, despite a lot of negotiations, had their way. They withdrew all the facilities of the station, although the trains were still running. So I am not at all happy about consumers' councils if they are not given sufficient teeth. In other nationalised industries, such as transport, they are not working very well and the public are not very satisfied with them.

LORD ERROLL OF HALE

In view of what the noble Lord has said in his reply —and I am looking forward in eager anticipation to what he is going to say on Amendment No. 62—and the fact that we shall be able to have another go at this matter on Report, I beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

3.39 p.m.

LORD ERROLL OF HALE moved to leave out subsection (4). The noble Lord said: Subsection (1) of Clause 3 refers to the non-discriminatory supply, delivery and price of the industry's raw material. There are two points that I should like to put to your Lordships to show why this matter is of fundamental importance to the structural steelwork and bridgework industry. First, the iron and steel products from the mills are the construction industry's sole raw materials except for such supplies as welding rods. Secondly, the Bill creates a public sector inside the industry which, in my submission, must not receive more favourable treatment in regard to raw materials than that given to what will still be the privately-owned sector of the construction industry. On the other hand, subsection (4) of Clause 3 completely nullifies any legal protection which would otherwise have been afforded by subsection (1), and reduces the powers of subsection (1) to no more than a pious hope. It was particularly interesting to listen to my noble and learned friend Lord Dilhorne, speaking on an earlier Amendment, when he referred to the question of going to court, because, as he said in that context—and it applies equally well in this—it would seem that, in order to give proper force to the safeguarding provisions of subsection (1), subsection (4) must be deleted from the Bill. That is why I have tabled this Amendment, which I hope your Lordships will see fit to accept. I beg to move.

Amendment moved—

Page 4, line 37, leave out subsection (4).—(Lord Erroll of Hale.)

LORD SHEPHERD

I think the noble Lord, Lord Erroll of Hale, has forgotten the words of subsection (1) of Clause 3. The Corporation must, first of all, promote an efficient and economical supply, and must ensure that such supply is available in the required qualities, sizes and types. This provision lays a statutory duty upon the Iron and Steel Corporation to meet the reasonable demands of persons who are involved in trade—and the duty laid upon it is pretty clear. By this Amendment the noble Lord wishes to give to would-be purchasers a legal avenue for their claims against the Corporation. We think this would be wrong. It would certainly introduce an entirely new relationship between the nationalised industries, Parliament, the Government and the courts. The courts are not the appropriate authority to decide whether the Corporationis carrying out the general duties laid upon it by Parliament. This is for the Minister, who is answerable to Parliament itself. The Minister has many powers which will bear on the way in which the Corporation carries out its duties under Clause 2. For example, he will have the power to issue general directions, which is Section 4(1) of the 1949 Act revived, or any directions arising out of a representation from the Consumers' Council, which is Section 6(6) revived; and the Corporation will need his approval for its capital development programme and its research and development programme. It is quite clear that the Minister will have power to ensure that the Corporation conduct their statutory duties properly.

I have sought advice, and I understand that even if subsection (4) were deleted it is very questionable whether any organisation would be able to take legal proceedings against the Corporation for failing to provide X amount at Y prices. It seems to me—and clearly this is what Parliament's view should be—that it is for the Minister to see that the statutory duties placed upon the Corporation are carried out properly, and if the Minister fails to see that that is done then it is for Parliament to hold the Minister responsible. I think it would be wrong to bring the courts into what is clearly a responsibility of the Minister and of Parliament. I hope that the noble Lord will accept that from me.

LORD ERROLL OF HALE

I should like to thank the noble Lord for his exposition of the position. He rightly points out that it is for Parliament to call in question the Minister's actions if Parliament should see fit to do so, but so often in another place they are too busy to call the Minister to account. Before withdrawing the Amendment, I should be grateful for the noble Lord's assurance that your Lordships will be equally free to call the Minister or his spokesman to account in your Lordships' House.

LORD SHEPHERD

As the noble Lord knows, it is not the Minister who is called to account in your Lordships' House; it is Her Majesty's Government. But, though the Minister responsible may not be present, there have been debates —and I can well remember them myself —in which the Government have been examined and have been criticised for the failure of a particular Ministry within the Government. Certainly, so far as I know, there is nothing that inhibits your Lordships in any particular field, except perhaps finance.

LORD SILKIN

I do not know whether the noble Lord is proposing to withdraw his Amendment, but I have been looking at paragraph (b) of subsection (1), which provides that …neither the Corporation nor a publicly-owned company shall show undue preference to, or exercise unfair discrimination against, any such persons or any class thereof in the supply and price of such products,…". While I appreciate what my noble friend has said, those words seem to me to refer to a quite separate issue which might be capable of judicial interpretation. It may not be convenient to take such a matter to a court, but I should have thought that it is a juridical issue, and my noble friend's answer does not seem to me to cover that. If, however, the Corporation showed undue preference or discrimination, then I should have thought that that would be a matter for the Parliamentary Commissioner. It would be quite open to anyone who complained that undue preference or discrimination had been exercised against him to raise the matter through the Parliamentary Commissioner. That might be the answer. But I would ask my noble friend to make his own answer quite complete, because, while what he said would apply to the rest of the clause, I do not think it applies to paragraph (b) of subsection (1).

LORD CONESFORD

May I say, in support of what has been said by the noble Lord, Lord Silkin, that I think this subsection is closely connected with what we were discussing on subsection (1)(b)? That is why I ventured to intervene in support of the point made by my noble and learned friend Lord Dilhorne when we were considering the words, "or from the public interest". I think that during the further stages of this Bill it will be necessary to consider in very close association the provisions of subsection (1)(b) and these provisions of subsection (4), because they are very closely connected. There are matters which may arise under subsection (1)(b) and which, clearly, as the noble Lord, Lord Silkin, has just pointed out, would be matters that a court could consider.

LORD DRUMALBYN

May I just put one point to the noble Lord? He expressed the view that it was better that the Minister should be accountable to Parliament, rather than that his actions should be questioned in courts. The difficulty I see about that is that so often, when questions are asked in either House of Parliament, the answer given is: "That is a matter of the day-to-day administration of the Corporation". I am bound to say that I have had to give that answer myself occasionally. If that be so—and some of these matters quite clearly are concerned with the day-to-day operations of the Corporation—there would be no method at all of challenging the Minister in Parliament. Emerging out of the discussions that we have had, I think your Lordships seem to feel that there should be some method of challenging the actions of the Corporation if they appear to he giving undue preference or showing unfair discrimination.

Loan MITCHISON

I rise only lest I should be included in the comprehensive list of "your Lordships". With great respect to my noble friend Lord Silkin, I do not agree with him. I do not think there is a proper question for the courts here; and I think, with my noble friend who spoke first on the Amendment, that probably the subsection does not add much to the present position. The best way of looking at it is to take what is probably the strongest case against it, the undue preference to which my noble friend referred. I do not see how the courts could decide what is undue in that respect without going into the functions of the Minister or, in effect, putting the Judiciary in place of the Legislature. I hope that this matter is not going to be pressed to a Division. I think it would be a very serious mistake, and it would not take us any further. I should have thought there was abundant safeguard in Clause 51, which at some time or another we may be able to discuss, and that it about as far as one can go.

LORD SHEPHERD

I think we have gone a little wide of the Amendment. Looking at subsection (4) one sees that it refers to subsection (1), which in itself, surely, is a general provision. I do not see how a court could decide, for example, whether the Corporation had failed to promote an efficient or economic supply. Therefore, subsection (1) could be involved if the noble Lord's Amendment were passed. As I said earlier, we have the Consumers' Council, we have the new provision of Amendment No. 51 and, as my noble friend Lord Silkin suggested—and I am quite sure he is right here—not only is the Minister responsible to Parliament but Members of another place, if they believe there has been mal-administration within the Department, can take up the matter with the Parliamentary Commissioner. I think the general principle must be accepted that in a statutory provision of this sort it would be wrong to put the courts between the Minister and Parliament. I hope the noble Lord will consider this position and will withdraw his Amendment.

LORD ERROLL OF HALE

I should like to thank the noble Lord for his explanation of the points under discussion. The noble Lord, Lord Mitchison, tells us that we ought not to divide. The only thing that tempted me to suggest that we ought to do so was the persistence of the noble Lord in telling us not to. I hope he will bear this in mind. If he goes on, he may provoke us into a Division at a time when we may not have wished to divide. I am not provoked at this early stage of the day, and I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 3 agreed to.

Clause 4: [Duty of the Corporation to review their affairs and report to the Minister]:

3.56 p.m.

LORD DRUMALBYN moved, in subsection (1), to leave out "so far as regards the direction thereof". The noble Lord said: I beg to move Amendment No. 8. Clause 4 deals with the duty laid upon the Corporation to undertake a review of their affairs for the purpose of determining whether the carrying on of the activities that have fallen to be carried on under their ultimate control is organised, so far as regards the direction thereof, in the most efficient manner… It may be thought—and I suggest that this is the right view—that if the Corporation are given the duty of looking into the organisation of the activities which fall within their affairs, there should be no qualification placed upon the survey they are carrying out. The words "so far as regards the direction thereof" are a limitation, a qualification. I should have thought that the Corporation would not have wished, nor would the Minister have wished, that details should be gone into; but rather that the inquiry should be on broad lines. But as soon as you come to the point of making a qualification, you have to be quite certain what you are leaving out.

If you decide to have this qualification, then the Government should make it quite clear what the words are intended to mean. Frankly, I do not think it matters a great deal on this Amendment; though I think it matters a good deal more where the words occur in Clause 7, the subject of my Amendment No. 14. It is important that we should have a clear statement of what the words are intended to mean on this occasion so that we can see what they are likely to mean where next they occur. I hope the noble Lord will be able to give us a clear definition.

LORD SHACKLETON

May I ask the noble Lord whether he is proposing not to speak to Amendment 14 at the same time? He is confining himself purely to No. 8 at the moment.

LORD DRUMALBYN

That is so; for the good reason that it will not be necessary to move No. 14 if the Government can satisfy us now. The words must obviously bear the same meaning in both cases. "Direction" presumably means the functions normally exercised by directors. Considering that responsibility for almost everything that is done by the Corporation or a company is laid upon the Board, it is difficult to see what it is intended to exclude. I hope the noble Lord will be able to tell us what these words are intended to exclude and why it should be excluded.

Amendment moved—

Page 8, line 46, leave out ("so far as regards the direction thereof").—(Lord Drumalbyn.)

LORD SINCLAIR OF CLEEVE

I should like to support this Amendment because I feel there is an additional point to that made by my noble friend Lord Drumalbyn here. When one looks at this phrase—which, I admit, is difficult to understand, and the omission of which do not think will harm the Bill in any way—it is impossible to construe the word "thereof" as applying to anything other than "the activities". The "activities" are the activities to be carried on under the general control; that is to say, the activities of the constituent units of the Corporation. If those activities of constituent units are to be the subject of the direction of the Corporation, then the words could be construed as giving cover for a degree of interference with the day-to-day management of those units. I am sure that is not the intention; I do not think anything has been said either here or in another place which implies that it is the intention. But I think that cover for it is there. Therefore, I hope that that point will be covered when the noble Lord gives his explanation.

THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES)

I hope that what I am about to say will satisfy both the noble Lord, Lord Sinclair of Cleeve, and the noble Lord, Lord Drumalbyn. The reviews and reports under Clause 4(1) are intended to relate to the substructure of organisation between the Corporation and the producing and other operational units under their ultimate control. The provision is included as an alternative to laying down detailed provisions about this sub-structure in the Bill itself, as has been done in other Acts dealing with nationalised industries —for instance the Electricity Act 1957; the Gas Acts 1948 and 1965 and the Transport Acts 1947 to 1962. The reviews and reports are not intended to relate to the internal structure of the Corporation's Board or to the internal management of the individual works, which are subjects not laid down in detail in any nationalisation Act.

It is difficult to express the intended subject matter of the reviews and reports in exact terminology, but the words …carrying on of the activities that have fallen to be carried on under their ultimate control is organised, so far as regards the direction thereof… have been chosen to give the right flavour. The omission of the words: "so far as regards the direction thereof" would completely change the nature of these reviews and reports. If these words were omitted, the reviews and reports might be said to have to cover not only such matters as the internal structure of the Corporation's Board and the internal management of the individual works, but also the efficient conduct of the whole range of activities under the ultimate control of the Corporation, including, for example, the physical development of the industry, the deployment of manpower, research and development arrangements and so on.

There is already provision elsewhere in the Bill for reviews and reports to the Minister on some of these subjects. For example, Section 4(2) and (3) of the 1949 Act revived requires the Corporation to submit for the Minister's approval programmes of investment and of research and development. These provisions are, in general, common form to all the nationalised industries. There is no justification for extending the reviews and reports under Clause 4 so as to impose on the Corporation a very wide-ranging duty of a type which is imposed on no other nationalised industry, and which goes well beyond the question of organisational sub-structure which might alternatively have been laid down in the Bill.

The noble Lord will forgive me if I go on to talk about Clause 7(2). Although he didnot specifically relate his second Amendment to it, he did indicate that the action which he will take will be governed by what I have to say about this. Therefore, I would go on to say that the omission of these words from Clause 7(2) would, in effect, empower the Minister to give the Corporation specific directions, as opposed to his power of general direction under Section 4(1) of the 1949 Act revived, on any aspect of the activities of the nationalised industry. This would completely change the relationship between the Minister and the Corporation and make the Corporation subject to a degree of detailed Ministerial control which is applied to no other nationalised industry, and which would be particularly inappropriate in an industry like steel which would be operating in an intensely competitive international climate. Because the Minister would be answerable to Parliament for the use or non-use of these wide powers of specific direction the relationship between Parliament and the Corporation would also be changed, and the Corporation would, in many respects, particularly in relation to Parliamentary Questions, be under the same degree of Parliamentary scrutiny as a Government Department.

On the first occasion upon which I have answered the noble Lord, Lord Drumalbyn, on something which is not particularly Scottish I should have liked to be able to give a more affirmative welcome to his Amendment. I hope, however, while I am asking him not to press the Amendment, that I have provided him with a satisfactory basis for the withdrawal of the Amendment.

LORD HAWKE

The noble Lord, Lord Hughes, has certainly provided a great deal of information. I am not sure whether it is satisfactory to my noble friend, Lord Drumalbyn, but I find it extremely difficult to understand myself. I am not sure that I disagree with what the Minister believed the clause to mean, but when dealing with Bills I like to try to get them in such a condition that their wording is more or less comprehensible. I do not think that the noble Lord, Lord Hughes, has really explained how it is that these words mean what he wants them to mean. As regards the general point, I am not sure that the Corporation ought not to make a report to the Minister regarding the review of their affairs to determine whether they are carrying on their activities in the most efficient manner. It is not necessary for the Minister to give directions, and so on; but surely the Minister, and thus the general public, is entitled to know whether they are carrying on their activities in the most efficient manner. I should like to hear both my noble friend on the Front Bench and the Minister on that point; and I hope the Minister will give an assurance that he will look at those particular words, and, if he insists on having words in the Bill, see whether he cannot substitute ones which seem to mean something.

LORD DRUMALBYN

May I say another word, because I am afraid that what I am going to say may require a further reply from the Minister? As was said by my noble friend Lord Hawke, the noble Lord has explained what the Government want these words to mean. I would not dissent from the meaning which the Minister has placed upon them. So far as this clause is concerned, I think that the limitations of the scope of the inquiry are right. After all, this has to be done in twelve months and the substructure has to be set up. But I think also—and I am referring to the words when they next occur, as the Minister has done—that what he has said places a very great limitation on the directions which the Minister is entitled to give under Clause 7(2). If I am right, what he has said amounts to this: Clause 4 deals with the various reviews that are to be carried out into the organisation of the sub-structure. These reviews have to be submitted to the Minister, and no doubt will have to be discussed with the Minister.

Taken together with Clause 4, Clause 7(2) would therefore appear to give the Minister the last say—and not to do anything more than that—on what the organisation of that sub-structure should be. If the Minister and the Corporation disagree, the Minister may say to the Corporation, "Well, the sub-structure can be organised in this way or that. You want it this way, but I prefer that." if they cannot reach agreement the Minister can give the Corporation a direction to do it in that way. Is that what the words mean? Does this power of direction go any further than that? If this is what is meant, I suggest to the noble Lord that he looks at the words again. I quite agree that if there is to be some limitation on the scope of the review then you must have some words describing that limitation, but, with great respect, I doubt very much whether the words that have been chosen do so. Even the noble Lord described them as "organisational sub-structure". In other words, they qualify only the word "organized". One might just as well say that the control is organised "as regards the organisation thereof".

I hope that the noble Lord will look at this matter again, because past experience bears out that, whenever a Minister is given the power to make a direction, that power is liable to give rise to trouble. When we give a Minister power related to a subject with a qualification in it, such as we have here so far as the direction thereof is concerned, it is essential that the words should be dead clear. So I hope that the noble Lord will have a look at it again.

LORD HUGHES

First of all, I think I made a mistake by omitting a word from one of my sentences. My noble friend is not sure whether I included the word "not", so, to make sure, I will repeat the sentence: The reviews and reports are not intended to relate to the internal structure of the Corporation's Board or to the internal management of the individual works… I went on to point out that it was difficult to express the intended matter of reviews and reports in exact terminology. It would be discourteous of me to say that I would not look at these words again, but, after all the consideration that has already been given to this matter, I cannot offer much hope to the noble Lord that between now and the next stage of the Bill I shall find a form of words which will convey briefly what he has been trying to elucidate from me and what I have been trying to put over to him. If I cannot explain it in a couple of pages, I find it difficult to believe that I can do it more satisfactorily in an alternative form of three or four words.

There appears to be an impression that this is all that is being done, but I did refer to the reviews and reports which arise under other clauses of the Bill. There will be a full general account of the activities of the nationalised industry in their Annual Report under Section 4(2) of the 1949 Act, which is revived. Also, the Minister can give general and specific directions under Clause 7(2). I hope the noble Lord does not feel that I am too coy in responding to his advances, but I do not wish to give him an assurance when I doubt my ability to carry it out.

LORD HAWKE

Surely this is an important point in legislation. The Minister has said that it is extraordinarily difficult to find words to cover what he intends to mean.

LORD HUGHES

With respect to the noble Lord, I did not say that, but that it was extraordinarily difficult to find words which would better convey the meaning than the words in the Bill.

LORD HAWKE

I think that the first time the noble Lord left out the word "better". But it is important to use satisfactory words, even at the possible expense of putting in a longer phrase.

LORD SINCLAIR of CLEEVE

May I ask the noble Lord, when he looks at this wording again, to consider the fact that in Clause 7(2) the direction is clearly and explicitly the direction of the Minister? The direction provided for in Clause 4 seems to be the direction of the Corporation, or by the Corporation, of their constituent units. I do not think that it was quite clear in the noble Lord's reply.

LORD HUGHES

I will take the opportunity between our dealing with Clauses 4 and 7 of looking at that point.

LORD DRUMALBYN

Since we shall have another opportunity of looking at this, I shall not press the matter further. I doubt whether there is a single noble Lord who knows what the Minister now intends the words to mean, let alone what they do mean. I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

4.16 p.m.

LORD ERROLL OF HALE moved in subsection (1) after "manner" to insert: and to secure the largest degree of decentralisation consistent with the proper discharge by the Corporation of their duties under the provisions of this Act and the 1949 Act as revived by this Act, and to encourage competition between the publicly-owned companies, by causing each such company, or group of publicly-owned companies, if they are so organised, to operate as a separate trading unit, responsible for its own commercial performance and profitability.

The noble Lord said: I suggest that it may be convenient to your Lordships if we take this Amendment and Nos. 10, 15 and 56 together. If that is agreeable to your Lordships, I will proceed on that basis. These Amendments are alternatives, and I would leave it to Her Majesty's Government to choose which they are prepared to accept. They have been put down essentially so that we may have in your Lordships' House a debate on the organisational structure of the industry after nationalisation.

The Minister has repeatedly said in another place that the question of organisation must be left to the present Organising Committee and to the National Steel Corporation, and that no restrictions must be laid upon them. As your Lordships may remember, on Second Reading I postulated that this is putting the matter the wrong way round. First, we ought to decide on organisation, and then we should legislate. Therefore I do not hesitate to put forwards my views about the form in which the organisation should emerge, because I believe that to legislate in vacuo in this way is bad both for the industry and for the national economy. I certainly think that, before parting with this Bill, we ought to have a fairly clear idea of what sort of organisation is going to emerge. If the Government are prepared to accept one or more of these Amendments, we shall be that much clearer. In the absence of acceptance, perhaps they will indicate a little more of what they have in mind about the Organising Committee and about the Corporation.

The whole of the United Kingdom industry has accepted the need for rationalisation into larger units, but it believes that this could be much more satisfactorily achieved without nationalisation, except that the technical changes in the industry, such as the use of oxygen and the introduction of the new converter processes, require much larger plant units to take full advantage of cost efficiency, although, interestingly enough, the new spray steel process being developed by the Millom company shows there may well be a future for small independently operated units using much simpler plant and equipment. At the same time, the world's surplus of steel capacity shows that maximum efficiency, from the largest economically efficient units, is necessary for survival. This is not just a matter for the United Kingdom industry: it is also a question for the old-established steel industries in other countries who are concerned with the same problem, but are solving it, and solving it very successfully, without the need for public ownership. The United Kingdom industry, although it has been threatened with nationalisation for years, has carried out its own studies and set up its own development co-ordinating committee, under the chairmanship of Sir Henry Benson, in March, 1966. The Stage 1 Report of that committee set up a framework for organisation of the industry in the 'seventies, and is now engaged in the more detailed and difficult task of suggesting the groupings which should take place.

By way of introduction to what I hope will be a useful debate in the Committee, I would point out that for a number of reasons the industries concerned think that the operating groups, whatever their final number, should have the maximum of decision left with them and that there should be the minimum of centralisation in the National Steel Corporation. They would like to see the operating groups in competition with one another, and for this reason the Benson Committee recommended that the groups should be multi-product and not single-product groups, thereby enabling each group to compete with one another.

The first reason for this is that, in order to keep competent management and highly trained staff they must be given a full measure of responsibility. Secondly, only by the exercise of competition will the steel industry stop running down the slippery slope into the relative inefficiency of the present nationalised industries, where there are no outside disciplines to make them truly efficient. Thirdly, the steel industry is a manufacturing and trade industry in competition, unlike the present nationalised industries, with overseas steel industries, and initiative and enterprise must be retained in the groups themselves, and not be centralised into the Corporation, if they are to compete successfully in world markets and satisfy the demands of overseas customers. Fourthly, competing groups would be a safeguard both to the private sector of the steel industry and to consumers generally, in that they would be able to go to more than one supplier, with possible different prices, services, quality, delivery and so on. Fifthly, and finally, I submit that competing operating groups would be more in line with the principles and practices of the European Coal and Steel Community, and thus enable the difficulties, admitted by the Minister, which are raised by a single £30 million steel organisation having a dominant market in the market sector to enter Europe. There is another Amendment later in the Marshalled List which will deal specifically with the problems of our entering Europe with a single nationalised industry, and I do not propose to deal now with that aspect.

I submit that what it is essential to ascertain from the Government is the future structure of the nationalised sector of the industry. We want to have the best possible assurance that it will be formed into competing groups: competing with each other, competing in products, in delivery and in service. Without such assurance, we can only draw the worst possible conclusion; namely, that the industry will become inefficient and sluggish. I beg to move.

Amendment moved—

Page 5, line 1, after ("manner") insert the said words.—(Lord Erroll of Hale.)

4.24 p.m.

LORD MITCHISON

I always entertain a slender hope of getting the noble Lord, Lord Erroll of Hale, to divide the House on an indifferent meaning. It would give me some amusement if he did. If he thinks that he is going to stop me from talking by that sort of nonsense, he will forgive me for saying that he will not. Let me come back to the particular point about which we are talking to-day. There has been considerable difficulty about this matter below, because it is extremely difficult to frame an Amendment that really raises the question. I rather doubt whether any of these Amendments do. But what we are actually considering is some form of injunction to the Corporation to keep the existing companies and to promote what is called competition between them. It is quite clear what the real intention is here: that if, by any mischance, this Amendment, or any part of it, were accepted, it would make it easier to commit what I feel would be a fatal bunder and re-denationalise steel.

It is not, of course, a whole industry that is being taken over. We dwelt on that, and it is rather part of the case that has to be made in support of this Amendment to suggest that it is a whole industry. But it is not. It is no doubt difficult to define exactly what the iron and steel industry is, but on any form of definition a considerable minority element in numbers and functions, capacity and employment is being de- liberately left out, and is being so left out without in any way diminishing the Minister's responsibility, and without, so far as I can see at present, any attempt to impair the competition which may, and will, occur between the private sector and the public sector. Indeed, great care is taken throughout the Bill to see that the private sector is not to have cause for complaint.

It is not, therefore, competition between the private sector and the public sector that we are talking about; it is simply a question of the organisation of the public sector itself. I find this rather an extraordinary proposition to put forward at the moment. We all know that Stewarts and Lloyds, Dorman Long and another company have been, and I think still are, in process of a form of amalgamation. We are dealing with an industry in which competition since 1933 has been distinctly restricted under any Government, yet we are told that we must at all costs promote some form of free competition. All I would say is that it does not seem to me to follow in the least. The evidenceis the other way round.

What have been the reasons for the constraint that has been put upon competition in the industry? First of all, it has been a question of certain activities which had to be carried on by the industry as a whole, and a list of these was given by the Minister below. I need not go through all of them, but one, for instance, is labour relations. Another, which is probably the most obvious, is the question of imports. Another is the financial relations between the companies. This, I should have thought, was a substantial point, because during the period when steel was nationalised, with considerable success, one of the major improvements made was the financial arrangements of and between the various companies in it. In these circumstancesI should have thought no one could suggest either that a considerable amount of centralised activity was not necessary, or that it had not always prevailed in the industry at the will of the industry itself. I do not think the noble Lord, Lord Erroll of Hale, would deny that if it were put to him. But he is a good denier, and I cannot be certain of this.

That being the position now, it seems to me that what we have to decide on this question—in a way a theoretical question —is the degree to which we can have separate functioning and separate competition between the companies in the industry, whether they remain in the same form as they are now, or whether, in accordance with what they have been doing themselves, they take a rather different form. Is this something that can possibly be put into an Act of Parliament or laid upon the Minister or the Corporation? I should have thought that this was the reason why no Amendment of a satisfactory character appears to have been produced.

The real reason is that it is impossible to find something that will go into a form of words and tell you how far there must be competition within the industry. It is a question which must vary, not only as regards the companies, but, I should have thought, far more important, as regards the products concerned. If you look at the industry now, you will see that there are products in which there is little or no competition—I would not quite say there is none. The overwhelming importance of Stewarts and Lloyds in making tubes (they were in my constituency for 19 years) has always existed. It does not prevent there being other competitors. But what happens there is a different form of competition. It is competition between the iron and steel tubes, on the one hand, and the plastic tubes, on the other, with the result that Stewarts and Lloyds have now taken to making plastic tubes. I can see nothing in this arrangement which covers that kind of thing.

I come back, therefore, to what I should have thought was a fairly simple principle: that if you are going to hand over this industry to be run by a Corporation and by the existing companies, or some of them, then you must tell them the general principles upon which they are to proceed. But the question of the extent of competition will normally be, I should have thought, an ordinary commercial one; and where it is not that, it will be a question of the public interest.

A further question lies behind this. I think it is a difficult one, and again one for the Minister and the Corporation, as I see it. It is how far the future development of the industry is going to be local and how far it will be functional; that is to say, whether you are going to endeavour to prune within a given area the makers of some particular products or those who carry on some particular form of activity. But this, again, is the kind of thing to which this Amendment will not conform and as regards which it could serve no purpose and only introduce an element of confusion. Except in so far as this is merely a political gesture of some sort, I cannot but think that this Amendment would result in cramping the efficient carrying on of the industry, both as regards the ordinary working of any commercial project and also as regards the national interest.

I come back to the last point about this issue. The nationalisation of steel in this Bill has always seemed to me fundamentally a question of power. This Amendment, as I see it, is an attempt to cramp the necessary power of those who have to run the industry under this Bill by a piece of dogma which does not happen to fit in with the facts of the industry and the organisation foreshadowed by the Bill. For all those reasons, these Amendments seem to me to be fundamentally on the wrong lines. They were discussed under a new clause in another place, like everything else we have been discussing to-day, but I am afraid I found nothing in the discussion to alter my own opinion about it. I am not saying anything about the European question, because that also raises some broad issues, but I suppose we shall come to it in due course.

4.31 p.m.

VISCOUNT MASSEREENE AND FERRARD

May I ask the noble Lord one question? If the operating groups within the Corporation are not to be allowed to compete at all with each other, how can one get commercial discipline? There will be a vast, monolithic Corporation. Noble Lords have mentioned the private sector, but that is only a tiny percentage and it will have no bearing at all. I should have thought that the Government wanted to make a commercial success of steel nationalisation, and that therefore they would have been only too pleased to introduce commercial discipline into the Corporation. If one does not allow for groups to compete, how can one get such commercial discipline? One has to have that in the interests of the consumer, and I should be glad to receive an answer from the noble Lord.

LORD MITCHISON

I can only answer it shortly because I do not want to take up the time of the Committee. I did not in fact say that competition should be eliminated; I did not say that one could not get commercial efficiency without some form of competition. That may be the case, but it was not what I said, and I must ask the noble Viscount to think for a moment what competition has amounted to in this industry. He will find that it has been very restricted indeed, and recently there has been a good deal of trouble about fixed prices in the industry.

LORD WOLVERTON

I should like to support this Amendment, because it seems to me to be extraordinary to come to Parliament and ask for powers and then not to tell Parliament how this great industry will be reorganised in the future. I mentioned this on Second Reading and said that I feared the great companies would be broken up and one central organisation set up, and although there might be regional boards everything would be controlled from the centre. I do not think that is wanted. This is not a consumer industry, like electricity or gas; it is a large manufacturing industry. I was hoping that the great names would be kept, and I think we ought to be told whether we are going to keep Dorman, Long and Company in the North-East, fully owned by the Corporation, or whether it will be broken up and become the North-East Regional Board. We have been told absolutely nothing about it, except that it is the business of the Organising Committee. That Committee have now been sitting, under the chairmanship of Lord Melchett, for some months, and I should have thought they could have told Parliament how this great industry is to be organised. I strongly support my noble friend Lord Erroll of Hale in his attempt to get a little more information out of Her Majesty's Government.

THE MARQUESS OF ABERDEEN AND TEMAIR

I think I am probably the only Member of your Lordships' House who was concerned with the running of a steel company under the 1949 Act. I am not sure whether I said this in my speech on Second Reading. However, the reason why that Act did not do more harm than it actually did was that each individual company was kept indepen- dent and operated as such, with due competition. Also, in export work the name of the company is of particular importance. Of course, rationalisation—whether it is nationalisation or not—will in any case bring certain companies closer together, but it is so important for the industry, particularly in regard to export work, that these great names, which have been known since the beginning of the steel industry, should be kept alive.

LORD SINCLAIR OF CLEEVE

should like to support this Amendment. Whatever we individually may think about nationalisation in principle, or the timing of this Bill in particular, I am sure your Lordships on all sides of the Committee are concerned with trying to make this reorganisation work. Whether we say that we are trying to make it work for the greater good of the country or in order to do less harm, is quite immaterial. We want to make it work. I have had some experience of large-scale industrial organisation. I got to know a little about the steel industry during the war and since, and I am absolutely clear in my mind that the general purpose of this Amendment in particular, and the series of Amendments to which my noble friend Lord Erroll of Hale has referred, will help to make this nationalisation work.

Surely, there must be direction in the broadest sense only. There must be the maximum degree of decentralisation and also the maximum degree of competition, not necessarily with all the smaller units but in a merging of units as recommended by Sir Henry Benson's Report, Part I, which, broadly speaking, I think is extremely sound. These Amendments seek to put into the Bill a general direction which I think is of great value, and I should be interested to hear what objections there are in principle to not accepting these Amendments.

4.40 p.m.

LORD SHACKLETON

I am a little surprised at the arguments that have been advanced in support of this Amendment, and I am shocked that my noble friend Lord Mitchison should have thought there was any possible ulterior motive behind Lord Erroll of Hale's moving of this Amendment; I am quite sure the last thing he wished to do was to leave the industry in a posture more suitable for re-denationalisation, if I have got it the right way around. I should like to meet the arguments that have come from noble Lords opposite, and in particular from the noble Lord, Lord Sinclair of Cleeve, on their merits. He himself has considerable experience of large-scale industry, and I therefore hope he will consider the arguments I put forward on why these Amendments are unacceptable.

I must stress that these Amendments are inconsistent with the general purpose of the Bill, which is to achieve certain objects which it has been the view of the Government would be so difficult to achieve under private ownership that it was necessary in effect to set up a nationally owned organisation with a degree, frankly, so far as this country is concerned, of monopoly control. I noted that the noble Lord, Lord Erroll of Hale, was careful only to make the most passing of references to the general arguments on nationalisation, and I will, therefore, not seek to redeploy the whole of the arguments which we had on Second Reading. Nor would I suggest the noble Lord was not on a point of the very greatest interest from the standpoint of industrial organisation.

I would say quite firmly to noble Lords that acceptance of these Amendments would predetermine the principles of organisation in important respects, particularly on the question of decentralisation. This would mean not only that the initial organisation would have to be based on these principles, but that it would be impossible to make changes without amending legislation. Here I want to differentiate between the object and the method. The object is to set up a Corporation which will be able more easily to achieve what could not be achieved under separate, disparate fragmented ownership. I am not using these words in any pejorative sense. I think we all—whether the Opposition, who do not believe it is possible to achieve the end in this way, or those of us who do—acknowledge that this is one of the main arguments set forth for nationalisation.

There are various ways in which these aims can be achieved. But the industry itself has not yet settled how it would, if it continued under private enterprise, achieve the measure of reorganisation which is generally agreed in the first Benson Report to be necessary. It is not reasonable to suggest that, because the Government believe that a unitary structure is necessary for achieving our purposes, we must state in advance what particular form of sub-structure is necessary within that orginsation. If we were to accept these particular arguments, there would be a statutory obligation, not only to have a large degree of decentralisation—which I should have thought was accepted without argument as being something that will be necessary—but also that, whatever the recommendations as to the form of organisation, these units should operate as separate trading units responsible for their own separate commercial performance and profitability.

I do not wish to upset the noble Lord. Lord Erroll of Hale. If 1 make a reference to modern management techniques, I hope he will not pull my leg when I talk about computers or mathematical optimising techniques, but the fact is that these are now techniques available to management and they induce a different type of structure. I know this because it has affected organisations in which I have been involved in private industry, where it has been possible to achieve more economically certain forms of operation which could not be achieved on a centralised basis before—in such matters as stock control. The noble Lord, Lord Sinclair of Cleeve, will be aware of this, if I may just show the noble Lord, Lord Erroll of Hale, that there is some basis for my remarks. For all I know, the noble Lord, Lord Sinclair of Cleeve, would be pressing for that degree of central control in the Imperial Tobacco Company. It is possible now to provide central services, to cost them properly, and allocate central charges.

LORD SINCLAIR OF CLEEVE

May I say I think it is perfectly possible to have completely central control computer-wise and yet have maximum decentralisation in the sense we are discussing now.

LORD SHACKLETON

It might even in certain respects make decentralisation easier. But it does clearly affect the nature of the beast in relation to commercial performance and profitability. I am not disagreeing that there is a need, as there must be in any large organisation, for decentralisation. The Amendment, to my mind, makes an unreal dis- tinction between centralised and decentralised organisation, and between competition and co-ordination. Indeed, there is almost a sort of mystique about decentralisation. Decentralisation is a good thing; the "goodies" are decentralisers and the "baddies" are centralisers. There is a cyclical nature in this; at one moment you centralise and as soon as you put in your new organisation, for whatever purpose it may be, it will be the duty, indeed the necessity, for management to throw off as much as they can.

The approach which the Government adopted in their preliminary studies, and which the Organising Committee are now adopting, is to identify those functions where a considerable degree of central control is necessary in the interests of the strategic planning of the industry. These central functions are likely to include—indeed, this is fundamental to the case for public ownership—the control of investment programmes and major investment projects, both the old negative control that existed under the Iron and Steel Board and the more positive control which is necessary with regard to new investment and indeed to retirement of obsolescent plant. Other functions are the control of cash flow, pricing policy, major labour negotiations—and, after all, most large organisations in industry to-day have a degree of central policy control in the field of personnel management, and particularly in the deployment and career development of top-grade staff. This is something which most large industrial organisations, whether in the nationalised or in the private sector, do to-day. They exercise functions of this type centrally. It has been most interesting to look at particular areas of British industry. The noble Lord may be aware of these areas which were organised on a much more competitive separate trade business but which have inevitably found themselves driven into the type of organisation which is best known to us as in such great companies as Imperial Chemical Industries.

Subject, however, to these central functions and to the Corporation's statutory responsibilities for the efficient management and financial results of the nationalised industry as a whole, it is likely that the Corporation will delegate to the managements of the groups into which the industry is likely to be reorganised a substantial degree of responsibility for day-to-day operations. The groups would be held responsible by the Corporation for their results, and a suitable system of budgetary and statistical control would be introduced for this purpose.

This is "old hat" to most people who have been engaged in industry—the degree of competition that is possible within a form of budgetary control. But in this context, this statement of principle, drawing the distinction between centralisation and decentralisation has little meaning. The question is a practical one, as to what can best be done at the centre and what can best be done in the groups, always bearing in mind the general principle that management in the centre, so far as possible, must try to throw off as much work as it can down the line. This is the principle which, in my view, applies in almost any form of human organisation.

This will not rule out a measure of competition between the groups into which the industry is reorganised. There will certainly be technical competition in respect of quality and service. It may well be possible to achieve some form of financial competition, or indeed trading competition, but this is more difficult in an industry where for many years there has not been the degree of price competition which is more widely known in the rest of competitive industry. Indeed, this is the nub of the situation with regard to the steel industry. Obviously, there should be delegation of responsibility if we are to achieve both initiative and vitality.

Again, there will be other areas, even in the field of orders, where it may be necessary to concentrate in order to maximise production, and the most profitable production. It may be necessary to concentrate on certain works. It would certainly not be consistent at all with the Corporation's statutory responsibilities, for the efficient and financial results of the publicly-owned companies or with central control of investment, labour negotiations and price policy, if they were to decentralise to the extent that the noble Lord envisages.

Because this is an interesting topic I could go on at considerable length, but I admired the self-restraint of the noble Lord, Lord Erroll of Hale, and I will not therefore press this matter too hard. I would only say that clearly some measure of competition is possible, even within a monopoly group, as indeed you will find competition within firms within a private enterprise group. But it would make complete nonsense of the purposes of the Bill if, in advance, before the high-powered organising Committee which has been set up with quite clearly specified objectives is at work, if Parliament or the Government at this stage were to dictate the particular form of organisation that should be adopted.

I am grateful to the noble Lord for putting down this Amendment and giving us an opportunity of an interesting discussion. But I confess that I was not convinced by his arguments, and unless there is some—I hesitate to use the word "sinister" motive behind this Amendment, I hope he will not press it, because it would be quite unworkable and, I would say, unreasonable in the context of the needs of this industry.

4.56 p.m.

LORD ERROLL OF HALE

I am sure noble Lords in all parts of the House would wish me to thank the noble Lord, Lord Shackleton, for giving us so full a reply to the interesting debate which we have had, and for attempting to illustrate the Government's thinking or, as some unkind people might say, lack of thinking, on this important subject. However, we know what the Government's mind is. An interesting and fascinating byproduct to a debate is always to learn what are the latest vogue words in Whitehall. One or two new ones appeared in the Minister's justification this afternoon. "Discounted cash-flow" is now an "in" word; "centralisation" is O.K., and "decentralisation" is not O.K.

LORD SHACKLETON

May I interrupt the noble Lord? I could give the noble Lord a list of words if he wishes, such as "cash flow" or "discounted cash flow", which those who have been active in business have been familiar with for years and which are also commonly used in Whitehall. If they are unfamiliar to the noble Lord I may help him by providing them in advance of debates.

LORD ERROLL OF HALE

Most of the jargon is familiar to me, I am sorry to have to admit. But what is interesting is to see what is fashionable currently in Whitehall and what is not. It is clear that in Labour circles "cost effectiveness" is now out as a vogue word, though it was quite popular two years ago. "Centralisation" is in, "decentralisation" is out. "Regulated competition" is O.K. "Centralised budgetary control" is an "in" word. All these words, which are trotted out so light-heartedly by members of Her Majesty's Government, not solely by the noble Lord, Lord Shackle-ton, who has replied so courteously, serve only to show that the Government as a whole have no clear concept as to what this industry should be like after it is nationalised.

They have said "Nationalise first and let"—another vogue word—"the high-powered Organising Committee sort it all out." There is nothing particularly high-powered about the Organising Committee. It is a group of one or two men some of whom know nothing about the industry, and one or two who have said that they do not like the idea of nationalisation. They have been got together. The only good thing about the Organising Committee is that there are no professors on it—at least we have been spared that. They are the biggest "jargon Aires" of the lot.

So we have not got far to-day. We have re-established one important fact: that the Government do not know why they have nationalised the industry, or what it is going to be like when it has been nationalised. Our modest attempts to improve this position have been ignored by the Government, and therefore it only remains for me formally to beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 4 agreed to.

Clause 5:

Publication by Corporation of lists of prices and conditions of sale

5.—(1) The Corporation shall from time to time publish, in such manner as appears to them best adapted for informing the persons affected, and in such form as appears to them appropriate, notices containing prices which they propose should, in normal circumstances, be charged in the United Kingdom by them and publicly-owned companies for iron and steel products, and terms and conditions on which they propose iron and steel products should, in normal circumstances, be sold in the United Kingdom by them and publicly-owned companies.

4.59 p.m.

LORD WINDLESHAM moved, in subsection (1), to leave out "in normal circumstances," and insert "normally". The noble Lord said: With the leave of the Committee I will, in moving Amendment No. 11, speak also to No. 12. These two Amendments seek to remove the words "in normal circumstances" from Clause 5(1) in both places where they occur, and to substitute the word "normally". We propose this because the words "in normal circumstances" are ambiguous. What I think is intended in this subsection is the prices which the Corporation and the publicly-owned companies will charge in the normal course of trade and not what they hope to charge when trade is normal.

In this connection the quotation "normal" from Jowett's Legal Dictionary is relevant. The meaning there given to the word "normal" is: Opposed to exceptional; that state wherein, any body most exactly comports in all its parts with the abstract idea thereof, and is most exactly fitted to perform its proper function, is entitled 'normal' ". However semantic we get about the meaning of the word "normally" (and I do not think one should make too heavy weather of this point), keeping within the terminology of the Bill and what the Minister himself said, "off the cuff", in the House of Commons, it seems to me that the word "normally" gets closer to his own meaning. In an exchange in another place on January 18, the Minister of Power said, when questioned on this point [OFFICIAL REPORT, Commons, col. 447]: It is clear that I am referring to the prices charges by the Corporation for the products which are normally in use; those applied in the vast majority of cases as a normal matter and so on. For those reasons we suggest that the word "normally" is closer to what is actually meant in Clause 5. I beg to move.

Amendment moved—

Page 5, line 20, leave out (",in normal circumstances,") and insert ("normally").—(Lord Windlesham.)

LORD MITCHISON

I rise merely to say that I find exactly the same ambiguity in the word "normally" as the noble Lord finds in the words "in normal circumstances". I further observe that when the Minister took up this question he found it quite clear. He simply said: "It is difficult to define the legal position in terms which the layman can understand. Lawyers are able to go into these matters at much greater length and with much great security." With that behest upon me, I hastily sit down.

LORD WINDLESHAM

I think that what the Minister said was not "with much greater security", but "with much greater obscurity".

LORD MITCHISON

I am so sorry. It was a slip of the tongue if I said "security". I meant to say "obscurity".

LORD HAWKE

If the noble Lord, Lord Mitchison, finds "normally" ambiguous and my noble friend Lord Windlesham finds "in normal circumstances" ambiguous, they cannot both be wrong. Surely there is a very strong case for substituting an entirely different word. I can quite see that there is grave ambiguity about both sets of wording.

LORD HUGHES

The Government do not accept that there is any ambiguity about the clause at all, but as these Amendments are consistent with the intention of the clause, and as I always believe in using a single word instead of three, I can advise the House to accept the Amendment.

LORD WINDLESHAM

We are most grateful for what the noble Lord has said. We hope that this will clear up any ambiguity which there may or may not be.

On Question, Amendment agreed to.

LORD WINDLESHAM

I beg to move Amendment No. 12.

Amendment moved—

Page 5, line 24, leave out (",in normal circumstances,") and insert ("normally").—(Lord Windlesham.)

On Question, Amendment agreed to.

LORD ERROLL OF HALE moved to add to subsection (1):

"including those publicly-owned companies who are themselves consumers of iron and steel products."

The noble Lord said: This Amendment would, if accepted by Her Majesty's Government, as I hope it will be, require the Corporation to show that their published prices for iron and steel products will refer additionally to those of the publicly-owned companies which are not themselves steel producers but steel consumers. It will also show that they are to pay the same price for their raw material as is charged to their competitors in the private sector. There are a number of situations where this is a matter of importance. In one case the British steel constructors, those in the private sector, are competing with those in the public sector, and there are other applications with which I need not burden your Lordships this afternoon. I very much hope the Government will be able to accept this Amendment.

Amendment moved— Page 5, line 25 at end insert the said words.—(Lord Erroll of Hale.)

LORD HUGHES

The Amendment would make no difference at all to the Bill. The obligation to publish the normal prices and conditions of sale for iron and steel products sold by publicly-owned companies applies to sales by all such companies, whether or not they consume steel as well as well as produce it. I was able to accept the two previous Amendments because they accomplished the same purpose by reducing the content of the Bill. I must advise the Committee not to accept this Amendment because it accomplishes the same purpose by adding a number of unnecessary words.

LORD ERROLL OF HALE

Naturally, I accept the noble Lord's analysis of my Amendment; but I reserve the right to scrutinise the reply carefully and, if necessary, to return to the matter at a later stage. In the meantime, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 5, as amended, agreed to.

Clause 6 agreed to.

Clause 7:

Miscellaneous provisions relating to the Corporation

7.—.

(2) The power conferred by the said section 4 on the Minister to give directions to the Corporation shall extend to the giving to them of such directions as appear to him to be requisite to secure that the carrying on of the activities that have fallen to be carried on under the ultimate control of the Corporation is organised, so far as regards the direction thereof, in the most efficient manner, notwithstanding that the directions may be of a specific character.

5.6 p.m.

LORD DRUMALBYN

moved, in subsection (2), to leave out "so far as regards the direction thereof." The noble Lord said: We now come back to these words "so far as regards the direction thereof" which this Amendment seeks to omit. The words in this case differ from the use of the words in the last case, because there, in Clause 4. they were a limitation upon the action of the Corporation, whereas in this case they are a limitation upon the action of the Minister. Clause 4, to which this power relates, says: The Minister may, after consultation with the Corporation, give to the Corporation directions of a general character as to the exercise and performance by the Corporation of their functions…in relation to matters which appear to him to affect the national interest… In subsection (2) of Clause 7 that power is extended by the power conferred upon the Minister to give the Corporation: such directions as appear to him to be requisite to secure that the carrying on of the activities that have fallen to he carried on under the ultimate control of the Corporation is organised, so far as regards the direction thereof, in the most efficient manner… The first question I would ask is whether the interpretation which my noble friend Lord Sinclair of Cleeve has placed upon this word "direction", as opposed to the word "directions", is right. My noble friend associates the two words together. I did not read them in that way, because it seems to me that the words "directions…in relation to matters which appear to him", and so on, mean directions as to the Corporation's activities, whereas the words, "so far as the direction thereof", concern the direction of the activities, which is a quite different matter. The first time the word "directions" occurs, it refers to directions by the Minister; where the word "direction" occurs, it means, if I understand it correctly, direction of the Corporation's activities. I do not wish to stand between the noble Lord and his explanation of the meaning of these words, and accordingly I now beg to move the Amendment.

Amendment moved—

Page 6, line 26, leave out ("so far as regards the direction thereof").—(Lord Drumalbyn.)

LORD MITCHISON

With great respect, I do not see how one can have a different form of words in Clause 4 from the form of words we are now discussing. This follows Clause 4 exactly.

LORD DRUMALBYN

To save time, I would interrupt the noble Lord to say that I think I made it clear that I moved to leave out these words in order that we could have an explanation.

LORD HUGHES

May I say to the Committee—

LORD MITCHISON

I understood the noble Lord to be drawing some distinction between the use of these words in one place in the Bill and their use in another. Surely there can be no such possible distinction. It is exactly the same thing that is being referred to; it is in exactly the same language, and they must be the same thing. But since what the noble Lord is apparently doing is seeking to get an answer to the question he put in relation to Clause 4, I will sit down.

5.10 p.m.

LORD HUGHES

I am sorry that I am much more likely to be agreeing with the noble Lord, Lord Drumalbyn, in his interpretation than with my noble friend, because the fact is that the way the noble Lord. Lord Drumalbyn, has put it is perfectly correct. The first use of the word "directions" refers, as he has said, to the instructions of the Minister. The second use of the word in the phrase "the direction thereof" is a reference to the activities of, say, a board of directors —the duties of those who direct. So we have this perhaps unfortunate but, I think, completely unavoidable circumstance, that the same noun is being used in the same subsection to describe different activities.

However, Parliament has chosen to use this phrase "the directions of the Minister", and if we started to talk about the instructions of the Minister it would immediately raise doubts whether an instruction and a direction were the same thing or different. Also, your Lordships should remember that Clause 7(2) relates to the reviving of the powers under Section 4 of the 1949 Act, which are general powers. In Clause 7(2) in relation to, if I may use the term, the activities of the board of directors, the Minister is given a power to give instruction and in this limited activity the power may be of a specific nature. But it is only in relation to these directorial activities that we can be specific. If we take out these words it means, as I said in the last discussion, that we are giving the Minister power to issue specific directions to the Corporation over the whole field of its activities.

It was said by the noble Lord, Lord Sinclair of Cleeve, that whatever views noble Lords might have on the desirability or otherwise of nationalisation, and, in particular, of nationalisation of steel at the present time, they would wish the Bill to work, but if we accepted the Amendment the very converse would be the result. The Corporation could possibly be subject to such day-to-day direction by the Minister, end to such day-to-day raising of its activities in Parliament, that it would be impossible for it ever to work as a commercial organisation. I hope, therefore, that the noble Lord, Lord Drumalbyn, will feel that at the second time of asking I have made the position a little more clear than, apparently, I succeeded in doing the first time.

LORD MITCHISON

One's Scots friends never mind one totally disagreeing, and I totally disagree with my noble friend in what he said at the beginning of his speech. I invite noble Lords to look at the language for one minute, because it is the language which we are considering. In subsection (1) of Clause 4 the Corporation have to undertake a review of their affairs for the purpose of determining whether the carrying on of the activities that have fallen to be carried on under their ultimate control is organised, so far as regards the direction thereof, in the most efficient manner". That is what they have to look at. When one looks at subsection (2) of Clause 7 one finds that the power conferred on the Minister by Section 4 shall extend to his giving the Corporation such directions as appear to him to be requisite to secure that the carrying on of the activities that have fallen to be carried on under the ultimate control of the Corporation is organised, so far as regards the direction thereof, in the most efficient manner". It is exactly the matter which it had to review and report on under Clause 4, and if the same language is used with a different meaning in the one place from that of the other, then all I can say is that it is highly misleading.

I do not totally disagree with my noble friend because, like him, I think that the Amendment ought not to be accepted. For that reason, I do not propose to develop this somewhat tedious and fusty point, if I may so call it, any further. But it seems to me that the same words used in relation to the same thing must mean the same in both places.

LORD HUGHES

I should not like the matter to rest there because having, I think, reached agreement with the noble Lord, Lord Drumalbyn, on the different use of the word "directions", I am rather dismayed to find that my noble friend thinks I was suggesting that the phrase "as regards the direction of" in Clause 7(2) had a different meaning from the use of the words in the earlier clause. In fact, it does not. What I was pointing out was that in Clause 7(2) we were using "directions" to refer to the instructions of the Minister, and using "the direction thereof" to describe the activities of those who were running the concern. I am sorry if in persuading, as I hope I have done, noble Lords opposite of the meaning of the words in Clause 7(2), I have created the impression in the mind of my noble friend that we are saying that something means one thing in Clause 4 and another thing in Clause 7. That is not the case, because, as he has stated, the use of this phrase in both clauses refers to the activities being carried on within the organisation.

LORD HAWKE

There is one point which fogs me, and that is that the word "direction" has two totally different meanings; one is geographical and the other denotes a command. To my mind, in both of these contexts both meanings could be equally correct. Therefore, I suggest the word should be replaced by one which does not have two different meanings.

LORD HUGHES

The noble Lord is quite wrong when he says that there are two meanings used, one being geographical and the other a command. There is no geography in it at all. They are two different types of command. One is a command issued by the Minister, which is called in Parliamentary terms a "direction of the Minister". The other concerns the activities carried on by a board of directors, which is the direction which they give to their organisation. Geography does not come into it.

LORD HAWKE

I understand what the noble Lord wants the phrase to mean, but, equally, I maintain that it could be read to have a geographical meaning. Therefore, I suggest that he should choose a word which has only one meaning.

LORD HUGHES

I am very sorry, but we seem to be turning this debate on the Iron and Steel Bill into a re-writing of the dictionary.

LORD HURCOMB

I hesitate to interrupt in this debate, because I have been Chairman of a nationalised industry and, therefore, anything I say will no doubt be suspect. But I hope that the whole Committee agrees that the very last thing we want to do is to give the Minister the power to give specific directions, except within the very narrowest compass. If I understood rightly the noble Lord who has replied for the Government, he said that that is really the effect of this clause.

I was concerned in the past with the establishment of a good many public corporations, which were then thought by all Parties, and particularly by noble Lords who sit on the other side of the House, to be a good solution in cases where public intervention could not be avoided. But I still think that we have tended to go much too far in substituting Government control for the control of the corporations. Where their financial position has been such that vast sums of public money have had to be voted to them, that, I fear, was inevitable. But I still think that the more these public corporations could be regarded as part of the industry and commerce of the country, and less as sub-departments of Whitehall, the better. In this industry, more than in others, this seems to me to be necessary because it is marginal. It goes beyond the public utility services like gas, electricity and transport. I therefore hope I am right in understanding the replies that have been given from the Government Bench as meaning that the effect of this clause is to limit the Minister's right to give specific directions to a very narrow organisational compass indeed.

LORD DRUMALBYN

I think your Lordships will be very grateful to the noble Lord, Lord Hurcomb, for giving us the benefit of his experience on this particular matter. Noble Lords will perhaps remember from the earlier part of what I said previously that this is the kind of impression that I, too, was trying to convey. I think that the misunderstanding which arose between the noble Lord, Lord Mitchison, and myself arose because I did not say that these words had two different meanings. I said that their use in one case related to the limitation on the powers of the Corporation, whereas in the second case it was a limitation on the powers of the Minister to give directions. What one is really trying to find out is what that limitation is so far as the powers of the Minister are concerned. I think this was the point to which the noble Lord, Lord Hurcomb, was also referring.

Personally, I would agree with him entirely that it is highly desirable that the limitation should be very narrow. It may be that the proper interpretation of the words "extend to", in regard to directions of a general character, is that the directions should still be directions of a general character in the national interest but related to the activities that have fallen to be carried on under the ultimate control of the Corporation.

LORD MITCHISON

Perhaps the noble Lord would allow me one minute to say that subsection (2) here is really a rather minor addition to the considerably larger powers given to the Minister by the revival of Section 4 of the 1949 Act.

LORD DRUMALBYN

I would entirely agree with that, but it is an extension of those powers. In other words, it appears quite clearly that the Minister is to be given more powers than were envisaged under the previous Act. It is an extension. It says that they are to extend to—

LORD HUGHES

But surely the noble Lord will agree that, if the words which he seeks to take out are in fact taken out, the Minister will be given a very much wider extension of powers than the Bill contemplates at the present time.

LORD DRUMALBYN

I entirely agree with that; and I thought I had made it plain from the start that it was because of the importance of this matter that I wanted an explanation of those words, and that the Amendment was put down merely to get an explanation. I still feel (and I notice that the noble Lord, Lord Hurcomb, shares this feeling) that as the words stand now the Minister is given power to give directions in circumstances wider than those which existed under the previous Act—and we are not yet at all certain how much wider the circumstances are. The noble Lord, Lord Shackleton, was at an earlier stage talking about the need for centralisation at the same time as the need to pass down the line (I think those were his words) as much responsibility as possible, to decentralise as much as possible; but the fact remains that the ultimate control remains with the Corporation, and that it is all within their direction. I believe that at any rate some refinement of this power is required, and I hope that the Government will think about this between now and the next stage of the Bill. I do not know whether the noble Lord wishes to say anything before I withdraw the Amendment.

LORD HUGHES

No, I do not think so.

LORD DRUMALBYN

In that case, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.25 p.m.

LORD WINDLESHAM moved to add to subsection (2):

"Provided that such directions shall, wherever it is possible in the opinion of the Minister so to do, conform with or take account of the provisions of the Treaty signed at Paris on the 18th April, 1951, establishing the European Coal and Steel Community."

The noble Lord said: This Amendment, No. 16, arises out of the Second Reading debate, in which I raised the question of Europe. The subject was also referred to by the noble Lord, Lord Ogmore, from the Liberal Benches; by the noble Lord, Lord Merrivale, and the noble Viscount, Lord Massereene and Ferrard, from these Benches; and by the Lord Privy Seal, who replied. If I might briefly recapitulate the Second Reading debate on this point, the reasoning which was presented to the Government from this side of the House was that the rules on competition and on market dominance under the Paris Treaty could create a problem for a nationalised British steel industry which, in capacity, would amount to between 20 and 25 per cent. of the combined European and United Kingdom capacity. I quoted the Minister of Power from the debate in another place on January 19 on the Report stage of this Bill, when he said that he accepted there could be difficulties (that was the word he used) and that these would have to be negotiated.

The noble Earl the Leader of the House, in reply, choosing his words with evident care, said that the Government are entirely satisfied that this Bill is compatible with the Treaty of Paris". That was in column 140 of our debate on February 13. This assurance was repeated twice by the noble Earl, and was given some emphasis; and, although he allowed himself a personal comment in the course of what he said, that did not alter in any way the statement he made on behalf of the Government. Therefore, we can take this as a considered statement of Government policy, and one which should be looked at this afternoon with care and applied to the analysis of the type of problem which we suggested on Second Reading might arise and which I should like to develop this afternoon.

This Bill is an enabling Bill. In the main, it is concerned to authorise the acquisition of assets, and the question of ownership as such is immaterial under the Treaty of Paris and also under the Treaty of Rome. It does not matter if an industry is in public ownership or is in private ownership. What does matter is the control and operation within that industry. In that sense, therefore, the Bill, as an enabling Bill concerned with the acquisition of assets, is clearly compatible with the Treaty of Paris, and nobody would argue about that.

THE EARL OF LONGFORD

May I interrupt for just one moment in order not to take up time unnecessarily when I come to reply to the noble Lord? The noble Lord misunderstood this point. He says that nobody would argue that it is incompatible, but in fact he himself said that it was, or that he understood it to be, incompatible when he was speaking in the debate. I have the reference. It is in column 132.

LORD WINDLESHAM

The point I made to the House on Second Reading—and I hope it is accurately reported in Hansard—was that the question of ownership is immaterial under the Treaty of Paris. I never suggested—I certainly never intended to suggest—that the question of ownership was relevant in any way at all. The argument I went on to advance was that if the nationalised steel industry operates as a single unit of production, then there might be problems, but not from the point of view of ownership. Could I proceed with this discussion on what is or is not incompatible, since whatever may have been the noble Earl's understanding on Second Reading, I am developing the same point now?

THE EARL OF LONGFORD

I am in the position of having Hansard in front of me, and I am not sure whether the noble Lord is. But I do not want to interrupt him further.

LORD WINDLESHAM

On the question of what is "compatible" or "incompatible", I do not want to argue the question of ownership at all. As the noble Earl said, that can be left out of this debate completely unless other noble Lords want to raise it. But what do the words "compatible with the Treaty" mean? Do they mean in accordance with the Treaty as it stands, or do they mean capable of negotiation so as to be in accordance with the Treaty? Further, does "the Treaty" mean the content of the original Convention only, does it mean the content plus its later Amendments, or does it mean the interpretation given to the provisions of the Treaty by the High Authority? These are all, I suggest, gradations of possible meaning when one says something is "compatible with the Treaty".

The crucial question, which was not covered by the noble Earl's assurance on Second Reading, as it was given on that occasion, is how the British steel industry will stand in relation to the E.C.S.C. after nationalisation. This has to be judged from the standpoint of its actual operation and control. Is it to be regarded, in the words of Mr. Lee when he was Minister of Power in the House of Commons on May 6, 1965, as a single unit of direction with a capacity of 30 million tons of crude steel a year".—[OFFICIAL REPORT, Commons, col. 1581.] or is it to be regarded as a number of autonomous competing groups?

There has been a fairly full debate on the question of decentralisation and competition this afternoon. Under Articles 60 and 63 of the Paris Treaty, steel making units must offer products at individual and competing prices. Will the Corporation's activities be compatible with the Treaty of Paris here? That is the first question. The second question is: What powers will be retained at the centre and what will be delegated to groups in accordance with the current interpretation of the Treaty of Paris? Will the Corporation, and will the Minister, be conscious of the needs of Europe here? The third question is: How will the possibility of any Government subsidy to assist payment of compensation debt interest be handled? Will this be compatible with the Treaty? Direct subsidies are not allowed at all under the rules on competition implicit in both the Rome and Paris Treaties. Nor are hidden subsidies, on which there is a considerable body of case law. These are the sort of questions—I have selected only three of many—which can arise out of the shape that the nationalised steel industry will take.

May I mention briefly the very recent decision of the High Authority on the proposed reorganisation of the German steel industry? In the Steel Review, No. 45 (January, 1967) there is an article on pages 16 to 19 which describes the rationalisation taking place in the German steel industry. There are 31 West German producers of bulk steel who have agreed to form themselves into four sales syndicates on a regional basis. Under these agreements the identities of the member companies remain intact and they have limited their independence by agreement only to the extent that it is necessary to achieve the aims of common selling arrangements.

Until now the High Authority have never authorised any one unit controlling more than 10 per cent. of combined European capacity. Yet, because these four selling agencies will be so large—one of them controlling up to 14 per cent. of total European capacity—the High Authority, just in the last few days, have agreed to the proposed rationalisation in Germany, but only with reservations. There are three conditions, it is understood, which are based on Article 65 of the Treaty. These are: prevention of collusion on prices between the four selling agencies; prevention of any form of interlocking management between the four; and prevention of any kind of market-sharing between the four. Each of these things would be likely to cause distortions in the overall market. These requirements are in accordance with Article 65 and other articles of the Paris Treaty.

Obviously, the noble Earl cannot comment on this decision in detail. But it is an example of the approach the High Authority have taken in Germany and would be likely to take (or so one must assume) in this country. Therefore, I would submit, in moving this Amendment, that the Government have a case to answer here. The noble Earl on Second Reading gave your Lordships a relatively concise statement of Government policy which covered the question of ownership but did not go into the sort of detail which I think he will agree can be debated, on the lines I have suggested this afternoon. I beg to move.

Amendment moved—

Page 6, line 28, at end insert the said proviso.—(Lord Windlesham.)

LORD MITCHISON

I have only one complaint to make about the noble Lord's perusal of the debates below. I do not wonder, having got through the Second Reading, that he may have blanched a little when it came to the Committee proceedings. In the result, he never got as far as the Third Reading. In the Third Reading the Minister took four main points. This was one of them, and I think it throws a useful light on the Amendment we have to consider to-day. The Minister said: The [fourth] issue is the question of our relations with Europe. It really must he obvious now, even to the Opposition, that the Government are sincere in their present efforts to see whether or not there is a basis from which it would be possible to open negotiations for British entry into the European Economic Community. But we cannot be sure yet that our discussions with the Six will lead to a successful conclusion and until we are, the idea that this House should draw up its legislation on a set of rules over which it has no control and in which it played no part in formulating is stupid. We cannot commit ourselves in our legislation to follow the practices of the Community until such time as we are in direct negotiation with them, and one of the difficulties that the Opposition faced last time in the negotiations with the Six was that they never really understood the difference between unconditional surrender and negotiation."—[OFFICIAL, REPORT, Commons, 26/1/67; col. 1807.] Then he goes on to say—and I will not read all of it, the Committee will be glad to know—

LORD ST. OSWALD

You have been saying some silly things.

LORD MITCHISON

I dare say the noble Lord thinks them silly; but he is not the Minister. I am reading what the Minister said at the moment and it is the Minister's, rather than the noble Lord's, opinions which matter. The Minister went on to say: I have given a good deal of time to this problem and I say that, given the necessary political will, the Bill as drafted is quite reconcilable with membership of the E.E.C. Is this not the complete answer: that there is no incompatibility between nationalisation, or the Bill in these general terms and membership of the European Community?

But this Amendment goes far beyond that. It says that in all cases, wherever it is possible in the opinion of the Minister the directions he gives shall conform with or take account of the provisions of the Treaty signed at Paris on the 18th April, 1951, establishing the European Coal and Steel Community. We have not yet acceded to this. I cannot see how you can tell a Minister in a Statute that he has either to conform or, at any rate, to take into account provisions of the Treaty when you do not know what adaptations will be, or may have to be, made to it if we are going to enter into the Common Market. That, I think, is the short answer to this proposal.

May I tell the noble Lord that I was interested to hear what he was saying about the difficulty with the German monopoly—I was going to say—or something approaching a monopoly in these matters? I remember going over to Luxembourg and seeing the European Coal and Steel Community. They had exactly this point very much in mind. It seems to me that it has been their main trouble all through, and I do not think it follows that a particular decision taken now will necessarily be the last word on the subject—it certainly is not the first. That is an illustration, is it not, of the difficulty here? We cannot legislate with reference to something when we do not know whether it will affect us at all; whether it will affect us in part, or what the modifications will be in the way it affects us. It seems to me quite impossible that one should put that into this Statute. If it has to be done at all, it will have to be done in some other Act relating to our accession to the Coal and Steel Community, not in this measure. This is something which we cannot yet apply because we do not know, and we cannot know, how it affects us.

VISCOUNT MASSEREENE AND FERRARD

The noble Lord, Lord Mitchison, talks of "the short answer". The short answer is that if you do not conform to the Treaty of Paris, you will not get into Europe. By forming this huge Corporation, which will have some 22 per cent. of the productive capacity, you are completely going against every Article laid down in the Treaty of Paris. You might at least try to conform.

LORD MITCHISON

In case anybody takes that remark too seriously, may I say that that is not the case? There is nothing incompatible between this measure and nationalisation, on the one hand, and the Treaty of Paris, on the other—not in its broad lines. The question is whether there is any change. I see that the noble Lord is shaking his head. Perhaps he had better go and talk with President de Gaulle about it.

LORD BLYTON

I want to support the noble Lord opposite by saying that, in my opinion, he is quite right on the question of the conditions implied in the Treaty of Paris in relation to both coal and steel. While the ownership is not disputed, it is undoubtedly the fact—and there have been court cases with the High Authority on these matters—that under its cartelisation clause the High Authority can deal with large units. I speak as one opposed to our entry into the Common Market but from an entirely different basis from the arguments of the Opposition. I am all for nationalising steel and for making a single unit of direction; and I want to see an end to the fragmentation of the whole industry. I fear that if we join the Common Market, the High Authority may say to us that, even though our steel industry would be nominally nationalised, we should have to fragment our organisation into different parts so that there would be some semblance of competition in the international field when we became a member of the European Coal and Steel Community.

I was deeply involved in the Treaty of Paris in 1950 when the noble Earl, Lord Attlee (then "Clem" Attlee), sent me to put the case on behalf of the Labour Party against the Treaty. I can assure the Committee that, if we enter the Common Market, steel nationalisation will not be destroyed in that we shall be the nominal owners of the industry, but it will be fragmented and if we do not accept what the High Authority dictates, their own court of justice, under the Treaty, will make the decision for us.

5.44 p.m.

THE EARL OF LONGFORD

I came equipped to reply to the Amendment and, unless the Committee wishes me to refrain, I would feel it my duty to do so. A good deal of other matter has been brought in. The noble Lord, Lord Windlesham, pursued an argument that he had with me at the last stage of the Bill; and, if I may say with respect to one of the rising hopes of your Lordships' House, he did not make much attempt to speak to the Amendment. The noble Lord explained a good deal of what was in his mind in relation to it, but he did not argue for the Amendment.

May I return for one moment to the discussion which I had with the noble Lord on the last occasion? This is the sentence I was anxious to place before him. He said last time: The fact that the consequences of this Bill will be incompatible with British membership of the Common Market is accepted by the Minister of Power."—[OFFICIAL REPORT, 13/2/67, col. 132.] That simply is not so. If the noble Lord goes on saying that, he is disagreeing with the Minister of Power, and it is not true. The Minister of Power said there would no doubt be difficulties, but he never said there would be any incompatibility, so I am afraid that the noble Lord mis- understood the Minister of Power. Again, if I may say so, the noble Lord keeps bringing up this word "incompatibility". It is his word. I am quite ready to go on talking about it, but it has not, if I may say so, an awful lot to do with the Amendment—

LORD WINDLESHAM

But—

THE EARL OF LONGFORD

May I just finish this little point? I can only say that something is, or is not, incompatible, and he will realise that I am acting on advice. It is not my personal wisdom which enables me to say this. I repeat, there is nothing in this Bill which is incompatible with the Treaty or with any amendments which have been made to it. The way in which the Treaty has been interpreted by the High Authority has no legal force and has varied over the years. I had hoped that when replying to the Amendment I could pass away from this verbal question, or argument as it now seems to have become, of incompatibility.

LORD WINDLESHAM

I am grateful to the noble Earl for giving way. I should like to clear up one point since he has referred to my Second Reading speech, and since he also interjected when I was moving this Amendment this afternoon. The noble Earl referred to the fact that I had said: The fact that the consequences of this Bill will he incompatible with British membership of the Common Market is accepted by the Minister of Power. The noble Earl said that I had said the Bill was incompatible. I did not say that because of anything connected with ownership. Earlier in my speech in the Second Reading debate I said: The first point to make clear is that the issue of ownership as such is immaterial to membership of the Common Market or, in this case, the European Coal and Steel Community."(col. 131.) So, merely to get this out of the way, may I say that it was no part of my case to claim either compatibility or incompatibility because of ownership. My whole argument was based on the control and operation of the British steel industry after nationalisation, and that is the question I developed again this afternoon.

THE EARL of LONGFORD

One may go on arguing. We are both on record, and I can only say that last time the noble Lord made a false statement. I have read it out once already. It is not true. I would have hoped that he would have withdrawn it. I cannot force the noble Lord to withdraw it. If he goes on saying it is correct, I can only say that he completely misunderstood the Minister—

LORD WINDLESHAM

The word "consequences".

THE EARL. OF LONGFORD

—The noble Lord has said what he said last time, and I cannot help him. I must just leave him, so to speak, in his misunderstanding, but what he said is incorrect. The Minister, at any rate, would not accept it as correct, and nor would I.

May we now come to the actual Amendment that the noble Lord and his colleagues have placed on the Marshalled List, because I think that the Committee is entitled to a reply to the Amendment rather than perhaps to join in this prolonged verbal dispute between the noble Lord and myself. Here is this Amendment, about which we have not heard very much so far, which states that Provided that such directions shall, wherever it is possible in the opinion of the Minister so to do, conform with or take account of the provisions of the Treaty…". This does not seem to us a foolish Amendment. We are not going to be unpleasant about it. In many ways we are in sympathy with the object of this Amendment. The Government have made very clear, as my noble friend Lord Mitchison was good enough to explain, our readiness to join the European Economic Community, which would mean also joining E.C.S.C., so long as the essential interests, to which my noble friend Lord Blyton rightly pays so much attention, are safeguarded. We all know that we are pursuing this objective very actively. The Prime Minister is doing so abroad at the moment. I want to make plain that if we do not accept the Amendment, it does not mean that we are any less anxious to enter the E.E.C. than are noble Lords opposite.

However, we cannot accept the Amendment as it stands, because it would carry positive disadvantages. I do not say that they would even be major dis- advantages, but one should not accept an Amendment if it carries any disadvantages at all. It in no way promotes the success of the negotiations to join the Community. Let us take our position as it is now. We are not members of E.C.S.C. We should, of course, reach a new situation if we became members; but if we are not members, it would be absurd to require the Minister, in taking decisions which may be vital to the future of the steel industry and therefore to our economy, to have regard to a Treaty to which we are not subject. That would place us under a totally unnecessary handicap so long as we are not members. Clearly we are not getting any advantage by doing that. If the noble Lord wanted me to pursue that point, I could labour it. But, until we do join, decisions must be taken, in our own national interests, though in taking those decisions we shall pay attention to the prospects of joining—or at any rate, to good relationship with—the Community.

Secondly, the Government do not believe that one form of organisation is more likely than another to be compatible with membership of the E.C.S.C. or that it would be necessary, in order to produce this compatibility, to organise the nationalised steel industry into a small number of groups with some degree of competition between them. Therefore, we do not think it necessary to modify our own arrangements in the direction which noble Lords opposite may have in mind, as there would be no positive advantage in this ahead of joining the E.C.S.C. Thirdly, the Amendment would in practice be unworkable. An essential part of the provisions of the Treaty of Paris is the system of control exercised by the High Authority. It is not clear how that can be reproduced in this country while we remain outside the Community.

Fourthly, the Six are now considering the fusion of the E.C.S.C. with the E.E.C. and EURATOM, which were established by the Treaty of Rome. If the Amendment were inserted in its present form, it might mean putting into the Statute Book a provision which might soon be out of date. The Amendment would be unnecessary if we joined the E.C.S.C., because the Treaty of Paris would become part of the law of this country and the Corporation would be automatically bound by it. The Amendment would then be inappropriate because it does no more than require the Minister's directions merely to take account of the provisions of the Treaty of Paris wherever it is possible in the opinion of the Minister so to do". The Government have no desire to insert in the Bill provisions which will be appropriate only while we are outside the Community. Therefore, I must emphasise that the Government would not accept the Amendment.

LORD WINDLESHAM

I hope it will not be thought impertinent if I say to the noble Earl the Leader of the House that I am surprised by the line that he has taken in his reply. This Amendment was put down to enable the Committee to debate whether or not steel nationalisation might create problems under the Treaty of Paris. This was raised on Second Reading, and in reply to the whole debate, the noble Earl said on this point: I quite agree that perhaps it would be better to pursue it at a later stage."—[OFFICIAL REPORT, 13/2/67, col. 141.] This is precisely what we are now doing. We are pursuing at greater length what was raised on Second Reading. I have no intention, nor has anybody else, of pressing this Amendment.

The noble Earl has said that the Government do not agree that one form of organisation for the steel industry would be more compatible than any other form with the Treaty of Paris. I advanced a fairly detailed argument against this, but I appreciate that it is difficult for the noble Earl to comment immediately. Perhaps it is my fault for not having given him advance warning. But I have not been able to appreciate the noble Earl's answer. We must accept the statement he has made on behalf of the Government but I should be grateful if my argument could at least be considered, in particular the reference to the High Authority's decision on the rationalisation of the German steel industry. Perhaps the noble Earl might at a later stage reply in writing, because I should be interested to know his comments.

THE EARL. OF LONGFORD

I am sorry if I seemed in any way discourteous to the noble Lord. That was far from my intention.

LORD MITCHISON

I hope that when this matter is discussed regard will be had to the fact that a considerable proportion of the Dutch coal industry is nationally owned. I forget offhand which others are nationalised, but there are other industries.

LORD WINDLESHAM

I do not want to follow that argument. As I have said, it is not a question of what is privately or publicly owned. I think I have now said enough on this Amendment. What we on this side of the Committee hope is that both the Organising Committee and the Minister, in planning the shape of the British steel industry, will take account of a European future for British steel and not just a limited national future. Having said that, I beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

5.53 p.m.

LORD SHACKLETON moved to add to the clause:

"() The Corporation shall not make, or permit to be made, any substantial change in the manner in which the carrying on of the activities mentioned in the last foregoing subsection is organised, so far as regards the direction thereof, except with the consent of the Minister or in pursuance of a direction given by him by virtue of that subsection."

The noble Lord said: It is with some nervousness that I move an Amendment in which the words "so far as regards the direction thereof" appear again. I only hope that the noble Lord, Lord Drumalbyn, is not listening and will not ask for an interpretation, but perhaps I may say on this that I am in agreement with his interpretation. It is as the phrase would be understood in the Institute of Directors rather than in the Royal Geographical Society.

I hope that this Amendment will be acceptable to your Lordships. It arises out of undertakings given in another place. During the Report stage there the Opposition moved a new clause to provide in effect that the Corporation should make no substantial change in the nationalised steel industry's organisation without the Minister's consent until they had submitted to the Minister, probably within a year of vesting, the first of the reports they are required to make on organisation under Clause 4. The Parliamentary Secretary to the Ministry of Power said that the proposed new clause was acceptable in principle and that the Government would consider introducing Amendments in your Lordships' House to give effect to the intention.

This Amendment not only fulfils that undertaking but goes further. The Opposition's Amendment was designed merely to prevent the Corporation from making substantial changes in organisation so far as regards the direction thereof (if I may say that quickly) without the Minister's consent until they have submitted their first report to him. It seemed to the Government illogical to confine this to the first part of the reorganisation and thereafter leave the Corporation free to make substantial changes in a way not envisaged in the report.

May I say to the noble Lord, Lord Hurcomb, that I am very much in agreement with his view about the Government's not trying to run the nationalised industry. But this is a fundamental matter and again there is restriction in this magical phrase. This would prevent any substantial changes at any time, except with the Minister's consent or by his direction. It also ensures that the Corporation cannot evade the intention of this provision by acting through the publicly-owned companies. In practice, of course, the Corporation would undoubtedly obtain the Minister's consent before making substantial changes in organisation, but this Amendment will increase the extent of Parliament's control, because it brings it within the Minister's responsibility—and this is really the Parliamentary control over the nationalised steel industry's organisation—by establishing the position on a formal basis and thus making the Minister answerable to Parliament for any consents that he gives, or equally declines to give. I hope that this Amendment will be acceptable. I beg to move.

Amendment moved—

Page 6, line 28, at end insert the said subsection.—(Lord Shackleton.)

LORD WINDLESHAM

As the noble Lord, Lord Shackleton, has said, this was an Opposition Amendment moved in another place by Mr. van Straubenzee. We welcome the Government's action in accepting the Amendment. In the other place, the Parliamentary Secretary said he was able to accept the principle, but wanted an opportunity to redraft and put down a Government Amendment in this House. The Amendment, as the noble Lord has said, goes rather wider than the Amendment moved by the Opposition in the other place, but it is none the less welcome on that ground.

LORD DRUMALBYN

May I make one point on this? I understood the noble Lord, Lord Shackleton, implied, if he was not quite saying it, that this new subsection places some limitation on subsection (2). I do not think he can really have meant that. It does not in any way limit the directions which the Minister may make. What it does, if I understand it correctly, is to prevent the Corporation from making these substantial changes except with the consent of the Minister.

LORD SHACKLETON

It is with great anxiety that I discuss this at all with the noble Lord who has great skill in reading deeply and subtly into these words. I assure him that if my language was so loose as to give that impression, I can only say that I never heard him make the sort of error of which he has accused me.

On Question, Amendment agreed to.

Clause 7, as amended, agreed to.

Clause 8 [Re-establishment of Consumers' Council and committees]:

6.3 p.m.

LORD ERROLL OF HALE moved, in subsection (1), to leave out "(2)" and insert "(2)(a) and (b)". The noble Lord said: In moving Amendment No. 18 I suggest that we might consider dealing with Amendments Nos. 19, 71, 72, 74 and 75 at the same time, as they are all related. If I have your Lordships' agreement, I will assume that we are debating all these Amendments together. With the Bill as at present drafted the Minister must within six months of the vesting date re-establish the Consumers' Council from the old 1949 Act, which will consist of an independent chairman, appointed by the Minister, between 15 and 30 other persons who are consumers of the products of any of the principal activities of the Corporation and the publicly owned companies, and—and this is important—two members of the Corporation nominated by the Corporation.

The staff and establishment of the Council are to be provided by the Minister and, with the Council, will be paid by monies voted by Parliament. The Council can, of course consder any matter affecting the interests of the consumers, including prices upon which a representation has been made to them by a consumer or matters which appear to them ought to be considered. In this connection the definition of the word "consumer" is of particular importance. It means (if one can refer to Section 59(l) of the 1949 Act, as revived in this Bill) a person who uses these products for manufacturing purposes (self-defined as including the carrying out of building operations and works of construction, of civil engineering, and the treatment of products by any process) or is engaged in the me chanting of those products. I should, like to add a word here about the importance of me chanting in the iron and steel industry, because the iron and steel import and export merchants remain a wholly private enterprise body and will be peculiarly affected by the activities of the Corporation as to whether they are to be allowed to continue their activities, particularly in the export field. The word "consumer" does not include any person who is a user of finished products (unless used for construction or civil engineering).

The Council has powers, which are similar to those of other consumer councils, to report to the Minister on its conclusions, and the Minister may thereafter give directions to the Corporation, and the Corporation shall give effect to any such directions. In view of the fact that the Council consists only of persons who are consumers of the products of the principal activities of the Corporation, and that the National Steel Corporation group will produce a far greater variety of products than any other nationalised industry, it would appear wrong that the National Steel Corporation should have two representatives on the Council itself. After a complainant has stated his case to the council, the deliberations of the council take place in private, and if representatives of the National Steel Corporation are to be allowed at those deliberations, it is quite clear, I submit, that the National Steel Corporation either has, or would appear to have, some advantage over the complainant. Equally, if the staff of the Council are to be neutral, appointed by the Minister, separate from the National Steel Corporation, it seems peculiar and contrary to principle that the National Steel Corporation should be represented on the council itself.

I therefore submit to your Lordships that we should seek to persuade the Government to accept these Amendments, and to remove the representatives of the Corporation from the proposed membership of the Consumers' Council, and make the council itself a more effective body in making representations, which we hope will not be many in number, against the Corporation itself. I beg to move.

Amendment moved—

Page 6, line 39, leave out ("(2)") and insert ("(2)(a) and (b)").—(Lord Erroll of Hale.)

LORD HUGHES

In speaking to this Amendment, the noble Lord sought to associate a number of other Amendments with it, and I think, by mistake, he included Amendment No. 71. I think it should be No. 72. Amendment No. 71 is the Amendment about the £100,000 limit. Then I think there are also three other Amendments in the Schedule, Nos. 79, 81 and 82, that follow on the same point.

LORD ERROLL OF HALE

In that case, as the Government obviously have greater knowledge of the details than we have, I should be grateful if the noble Lord would read out exactly which Amendments we are discussing together.

LORD HUGHES

The noble Lord suggested Nos. 18, 19, 71—and I suggest that this should be 72, 74 and 75, and I think that Nos. 79, 81 and 82 are also related.

LORD ERROLL OF HALE

I am grateful to the noble Lord.

LORD HUGHES

These are interesting Amendments, and they deal with a matter where we are agreed about the objective—to make the Iron and Steel Consumers' Council a vigorous and effective body. The arguments for and against the Amendment are fairly well balanced. There are advantages in having representatives of the Corporation on the Consumers' Council. They can supply the Council with detailed and expert information and help it to take part in a continuous two-way flow of ideas between the Corporation and consumers, which would be of great advantage to consumers. No report can be made to the Minister as a result of a meeting provided for by Section 6(7) of the 1949 Act, revived, however, unless a decision to do so has been taken at a normal meeting at which the Corporation representatives are entitled to be present.

We recognise, however, that the independence of the Council would be somewhat enhanced if it did not include representatives of the Corporation. Perhaps more important, the independence of the Council would be seen to be enhanced, and this is a field where appearances matter. Most of the advantages of the presence of members of the Corporation on the Council could in practice be obtained by arranging for members of the Corporation to attend when appropriate as assessors, in the same way as officials in the Ministry of Power attend to assist the Coal Consumers Councils although they are not members of the Councils.

The question is, therefore, whether the advantages of somewhat enhancing the independence of the Council outweigh, or are outweighed by, the advantages of the rather easier flow of ideas with the Corporation which may result from the presence of members of the Corporation as full members of the Council. I personally feel that the noble Lord, Lord Errol of Hale, who moved these Amendments has made out a good case, but I cannot accept the Amendments to-day. They are in any case technically defective. However, I propose to bring the arguments which have been advanced by the noble Lord, Lord Erroll of Hale, to the attention of my right honourable friend the Minister of Power, and perhaps the noble Lord will provide us with an opportunity of considering this matter further on the next stage. I hope that on this basis he will feel that he will not be losing by withdrawing the Amendments at the present time.

LORD ERROLL OF HALE

I thank the noble Lord, Lord Hughes, for what he has said, and for seeing the reasoning behind our Amendments. I accept, of course, that they may well be technically defective, to use the normal phrase, and I therefore beg leave to withdraw the Amendment, in view of the handsome assurances given by the noble Lord.

Amendment, by leave, withdrawn.

Clause 8 agreed to.

Clause 9:

Vesting in the Corporation of securities of scheduled companies.

9.—(1) Subject to the provisions of this section and to the provisions of Part II of the 1949 Act revived by the following provisions of this Part of this Act, all securities of the companies specified in Schedule 1 to this Act shall, on the vesting date (as defined in subsection (5) below), vest in the Corporation by virtue of this section, free from all trusts and encumbrances.

(2) Securities created by a company specified in the said Schedule 1 as collateral security for a loan to that company shall be excepted from the operation of the foregoing subsection, but any securities so created shall be cancelled as from the vesting date.

6.14 p.m.

LORD CONESFORD moved, in subsection (1), to leave out "securities" and insert "ordinary and preference stocks and shares". The noble Lord said: I think it will be for the convenience of the Committee if I take this Amendment, No. 21, with the three following Amendments, all of which are consequential. The effect of Amendment No. 21 is that the ordinary and preference stocks and shares of the 14 companies will vest in the National Steel Corporation but the present owners will retain the debenture and loan stocks, and the contractual rights between those holders and the company concerned will remain as they are now. If my Amendment is accepted, the Government will therefore acquire the control of the companies, which is the object of the Bill, and they will acquire that control with a greatly reduced expenditure of public money which, other things being equal, I imagine they would welcome. Moreover, the Government will avoid the injury to the credit of the British Government, at home and abroad, that may, I fear, otherwise result from their present proposals for the compulsory acquisition of these fixed interest stocks.

May I remind the Committee that, if the Bill is passed in its present form, the 14 companies concerned will all remain in existence. I am referring, of course, to the immediate consequences of the passing of this meansure. The fixed-interest stocks will remain in existence, but they will pass from their present owners to the National Steel Corporation. In return, the owners will receive a Government stock, particulars of which are not yet known, and will lose all their existing contractual rights to the redemption of the stocks they hold.

Let me state briefly how the owners of these stocks acquired them and the contractual rights which go with them. For the example that I will give I propose to speak of a stock sold to the public by the Iron and Steel Holding and Realisation Agency, which I shall call "ISHRA" for short. Many of the debenture and loan stocks were so sold by ISHRA, though some were sold direct by the companies. Everybody, however, is, I think, agreed that the two categories should receive the same treatment. Let me therefore now turn to a stock issued by ISHRA.

May I remind the Committee that ISHRA was set up under the 1953 Act? The members of ISHRA were appointed by the Treasury to return the industry to private enterprise, "as they may, with the approval of the Treasury, determine". ISHRA was given statutory power to acquire and sell securities. Under these powers ISHRA acquired the stocks concerned with monies provided by the Treasury and under Treasury control, and offered them for sale to the public on the terms of prospectuses. Each prospectus provided for all the usual matters mentioned in prospectuses; that is to say, the interest that would be paid on the security, the date or dates of repayment, the price at which it would be repaid, and all other matters customarily dealt with. Of all these contractual rights this Bill, as it now stands, proposes to deprive the owners. Stocks redeemable at par or over on a stated date will be compulsorily acquired at the price of allotting Government stocks worth (to give an example) £81 or less. This course has greatly shocked authoritative writers and various respected City interests and concerns, economists and other public men throughout the country.

I do not want to give many examples, but I think it would be fair to the Committee to give one, and I should therefore like to refer to a few sentences in the letter written on behalf of the Council of the Stock Exchange to the Chancellor of the Exchequer, which was quoted in the Third Reading debate in another place. My quotation will be quite short, but as it is typical of many of the representations that have been made I think that it will be useful to this Committee. The letter is dated 15th November last year, and it is from the Chairman of the Stock Exchange to the Chancellor of the Exchequer. The passage I want to quote is as follows: My Council has been considering the compensation terms proposed for holders of those redeemable fixed interest securities of iron and steel companies which were offered for sale by the Iron and Steel Holding and Realisation Agency. The Iron and Steel Holding and Realisation Agency is a Government agency which was established under the Iron and Steel Act 1953, and in the prospectus or document of offer the securities to which we refer were clearly stated to be redeemable on certain conditions. In view of the terms on which those stocks were sold to the public, my Council consider that it is only equitable that the holders should be given the option of retaining their securities and thereby obtaining the redemption price at the appropriate time. The absence of such options would lay the Government open to the allegation that there had been a breach of good faith. I think that is all I need quote. That shortly expresses, on behalf of one important interest in the City, the view that is widely held.

In my submission, the proposals as they are now contained in the Bill before us are not merely shocking and injurious to British Government credit; they also offend against a well-established principle of English law. In saying this, I am not overlooking Section 28 of the 1953 Act, about ISHRA not being regarded as a servant or agent of the Crown. That has not the effect of making any difference to the legal principle which I am about to enunciate.

I think the noble Lord who is to reply will agree that I mention statutory provisions which may appear to be against my contention, and that is why I mention Section 28, though, in my submission, it does not in any way alter the legal principle which I am now going to quote to the House. That principle was stated as long ago as 1864 by Cockburn when he was Chief Justice, in the following words. I am quoting from the case of Stirling v. Maitland, and this is what Cockburn, Chief Justice, said: I look on the law to be that, if a party enters into an arrangement which can only take effect by the continuance of a certain existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances, under which alone the arrangement can be operative. That is the principle of law on which I rely. That principle has been expressly upheld and approved by a decision of this House, sitting in its Judicial capacity; namely, Southern Foundries (1926) Limited v. Shirlaw, which is reported in [1940] Appeal Cases 701. In that case Lord Atkin, after quoting the passage from Cockburn, Chief Justice, which I have just read to the Committee, used these words: That proposition, in my opinion, is well established law. It is that principle of law which, in my submission, is clearly contravened by the existing proposals of Her Majesty's Government for taking over these fixed interest stocks issued by ISHRA.

Let me point out to the Committee that, if any other body were contravening this principle, as Her Majesty's Government propose to contravene it by the provisions of this Bill as it stands, there would be a remedy in the courts. I concede at once that, if the Bill were passed in its present form, there would be no remedy in the English courts, because Parliament can make anything legal that it chooses. But that will not necessarily prevent the action of Her Majesty's Government being questioned in courts outside this country, and, above all, in international courts. I believe that, if the Government insist on putting into this Bill provisions that are contrary to a well-established principle of English law, that will adversely affect the credit of British Governments at home and abroad, now and in the future.

I venture to add one other consideration. If it appeared that, as a result of this Bill, the National Steel Corporation had acquired its assets or escaped its obligations too cheaply, and in breach of established legal principle, that might cause Her Majesty's Government difficulty in their negotiations for entry into the European Community and in the relations of the National Steel Corporation with the European Coal and Steel Community. I give that as an additional reason why the Government should not take the action at present proposed without very careful further consideration.

I now come to the solitary reason given, as far as I can find, in the proceedings in another place in defence of the action which the Government are taking under this measure. I have read with care the speech of the Chief Secretary to the Treasury in Standing Committee on November 23 of last year. As it gives the only reason so far given by Her Majesty's Government in defence of what they are now doing, I propose to read out the exact words used by the Chief Secretary for the Treasury (col. 889 of the Committee's Proceedings) in order that there may be no doubt that I am not misrepresenting him. Let me say at once that of course I accept the bona fides of the Chief Secretary to the Treasury and that he believed that what he said was right. I shall read what he said and then give my reasons for thinking that he was, in fact, wrong. He was arguing that it would be useful, or even necessary, to take over these debenture stocks in order to facilitate a reconstruction of the companies which the National Steel Corporation might find desirable. This is what he said—and I am quoting from col. 889: If the Corporation wanted in its wisdom to wind up a company as being part of the process of rationalisation and carrying out its responsibilities, if the prior owners of the debentures were still extant they could go to the courts and prevent the full reorganisation thought necessary by the Steel Corporation because their interests might be prejudiced. With the greatest respect, that is bad law, and what he said is simply not the case.

Let me say at once that I do not profess to be an expert on Company Law, though both when I practised at the Bar and when I was a Minister at the Board of Trade I had from time to time to consider it. I have, however, consulted some of my friends who practise in this sphere. My only regret is that none of the Chancery Law Lords is here at this moment, but I have reason to think that they will not disagree with what I am about to say. The rights of debenture holders depend, of course on the trust deed. But in general—and there is no exception to this, I think, among the stocks now concerned—a company has an unfettered right to go into liquidation. If the winding up of a company were desired by the Corporation the debenture holders could not stop it. What might happen, I concede, is that their debentures would thereupon become repayable according to the terms on which they were issued. But that is quite different from saying that they could prevent the company from being put into liquidation. They could do nothing of the sort. So far as I am aware, no reason has been given why the companies or the Corporation which this Bill will set up should be exempted from their obligations to the debenture holders under the ordinary law of the land.

I am grateful to the Committee for the patience with which they have listened to my developing what I believe to be a most important case. May I say this in conclusion? I admit straight away that I am opposed to this Bill, but I should like to assure the noble Lord who is to reply that I should move' this Amendment with equal confidence, and I hope some persuasiveness, even if I were in favour of this Bill. I say that because, if my Amendment were adopted, there would be nothing to stop Her Majesty's Government from acquiring the control of these 14 companies as they desire, but in my opinion my Amendment would avoid the grave injury to British credit which must result if the Government are seen to be contravening, and to be contravening unnecessarily, a well-established principle of English law. I beg to move.

Amendment moved—

Page 7, line 27, leave out ("securities") and insert ("ordinary and preference stocks and shares").—(Lord Conesford.)

6.34 p.m.

LORD MITCHISON

So far as I know, there is no principle in English law that applies to questions of compensation in a Statute, and that is all we are considering here. The object of this Amendment is to remove from the take-over the debentures of a number of iron and steel companies. I should not think that in terms of cash it would make an enormous amount of difference whether they stand to be paid by one person or another at the end of the day; but there is no case for it and there are some dangers about it. The same thing was said, if I remember rightly, when the railways were taken over, and look at the position the railways were in. The London and North Eastern Railway at that time—I forget if it had defaulted on its debentures or not—had certainly failed to pay any other dividend; and practically all of them were, I do not say "broke", but on the verge of insolvency at the end of the war. Supposing the Government had then left the debenture holders to look to the railways, I think their answer would have been that they would far prefer to look to the Government for payment.

The real catch about this is in the rights of the debenture holders; and the answer was actually given in the same column that the noble Lord read from. The question of the compensation of the holders of these securities was dealt with by the Chief Secretary to the Treasury during the debate on the Committee stage of this Bill on November 23, when he said that to allow the debentures or similar securities to remain in private hands after the nationalisation of steel would be impossible, since the rights of the holders could frustrate the purpose of the National Steel Corporation, the Minister and Parliament in any rationalisation or reorganisation of the industry. I should have thought that was obviously true, and an obvious reason for not allowing this innocent looking Amendment.

One has to remember that, quite apart from what we are doing in this Bill, the iron and steel industry has been in serious trouble, and it still is. It is not only in this country that the iron and steel industry is in trouble, but all over the world. I give a few instances here. They are in the Commons Hansard of the same date, January 26, at col. 1810, and I quote from what the Minister said. He said that the output was so much, and capacity utilisation fell to 79 per cent. on average. Imports are likely to total 12 million ingot tons compared with 750,000 ingot tons in 1965. Exports last year dropped by over 250,000 million tons as compared with 1965. The results of all this are reflected in the preliminary figures for the year 1965–66 of eight major steel companies", and so on.

I think it is just as well to be perfectly clear that the iron and steel industry, when it is being nationalised, is in pretty sore straits, and they are straits which it shares with iron and steel industries in other countries. On the other hand, I should have thought that it was perfectly clear that if that was the position, some sort of rationalisation of the financial structure of the industry might—I do not say will—be necessary. From the point of view of the debenture holders, I see no point whatever in what is proposed, and I see no principle of English or other law applying to what is done in a Statute, particularly in a Statute of this character.

There we are. Is there any more to be said about it than that? There is one thing I think. The compensation has been fixed at market value. That is the compensation for debentures as well as for ordinary or preference stocks and shares. What is really happening is that the debenture holders appear to think that they have not got enough. All I can say is that it is on exactly the same basis as everyone else, and I see no reason whatever why they should be taken off or why they should get any more money than they are now getting. In fact, I think this Amendment israther—well, I will sit down.

6.40 p.m.

LORD SHEPHERD

If a layman may follow two eminent, I was going to say Queen's Counsel, but, to use our own phrase, noble and learned Lords on this legal matter, I would say that I well recognise the importance of this Amendment. I was grateful to the noble Lord, Lord Conesford, for the manner in which he introduced his Amendment. Naturally, he will understand that I do not intend to cross swords with him on the law. I will certainly look most carefully at what he has said. As I, as a layman, understand the position, the Government, following the 1953 Act, were not acting as a party to any transaction. The agency ISHRA was not the servant of Government or Parliament. ISHRA was offering the shares, although in practice the debentures were being offered, I think I am right in saying, in practically all cases on behalf of the companies. Therefore, I think it is right to say—and we should have this clearly in our minds—that the debentures rest upon the entity of the company and the value of that company. I think we should not forget that, because I want to deal with the reasons that the Government felt it necessary to include debentures with the other securities which they take over through nationalisation.

The main object of taking these companies as set out in Schedule 1 into full public ownership is to make possible a far-reaching rationalisation of the industry. The necessary changes will have to be radical and they must be made quickly. The Corporation must therefore, subject to the control of the Minister and Parliament, have a completely free hand to make them without having to take any remaining private interests into account. But debenture holders have quite legitimate rights which could hamper the Corporation in carrying out these changes. In particular, they would have important rights if the Corporation, as sole shareholder, proposed to wind up the companies of which they were creditors as part of its reorganisation of the public sector. I would refer the noble Lord, Lord Conesford, to Section 307, of the Companies Act, 1948, which would empower debenture holders to appeal to the High Court to determine any question arising out of a winding up or to supervise the winding up itself.

These rights on the part of the debenture holders would, moreover, not only tie the Corporation's hands; they would also cut across the powers of the Minister and Parliament under the Bill. Under Clause 7(2) the Minister can give the Corporation specific directions on questions or organisation, which may include questions of company structure, and he is of course answerable to Parliament for the use he makes, or fails to make, of this power. Indeed, the Opposition requested in another place that the Minister's powers over organisation should be strengthened by preventing the Corporation from making any substantial changes in organisation without his consent; and we have just been discussing a Government Amendment to achieve the undertaking which we gave in another place. It seems, therefore, to be generally agreed that there should be no obstacle in the way of complete ultimate control by the Government and Parliament on organisation questions. If, however, there were debenture holders, they might be able to appeal to the High Court on certain questions arising out of the exercise of the Minister's power. In short, it would be impossible to reconcile the continued existence in the industry of private interests which might be affected by any reorganisation with the proposal that the Minister and Parliament should have the last word on that reorganisation.

A further objection to the Amendment is that nationalisation would alter the underlying security on which these stocks rest. Even though no explicit Government guarantee will be given it is inconceivable that the Government could ever allow any of the companies to default on their obligations. For the stocks to be allowed to run on would therefore mean that their holders were receiving interest at a rate appropriate to industrial fixed-interest stocks while having British Government security on which the appropriate interest rate would be lower. In other words, we should be treating debenture holders differently from holders of equity capital. I think the noble Lord would agree that we may well see in regard to a number of companies which have raised debentures—this is subject to the approval of the Minister and, of course, of Parliament, but on the advice of the Corporation—they will change very radically. Therefore, this is bound to raise the question of the continuation of debenture stocks. It is for these organisational reasons, and for no other, that we have felt it necessary to include debentures with the equity.

I should not accept that the Government have acquired the iron and steel industry "cheaply". If one looks at the figures one sees that the compensation will be of the highest order. Certainly I think in every case the amount of compensation is higher than the shares are worth to-day. If noble Lords are in any doubt, I am quite prepared to give the latest figures of debenture stocks. For instance, if one takes Colvilles 4½ per cent. Debenture stock 1975–85, as quoted on February 16, which is not very many days ago, they stood at 72¼, whereas the estimated compensation will be £75. In the case of Dorman Long 4½ per cent. Unsecured Loan Stock 1969–74, the price quoted on February 16 was 75¼, whereas the estimated compensation will be £80 10.0d. Then if one takes John Summers and Sons Ltd. 6½ per cent. Second Debenture Stock 1976–78, the price on February 22 was 96¾, whereas the estimated compensation will be £102. These figures will show that certainly on to-day's figures we are compensating quite adequately. I do not believe there is any advantage to the State or to the country in paying too much or too little for all the securities of the industry. If I may say so, I would share the view of my noble friend Lord Mitchison and say that, if anything, we have erred on the high side; but I think that is right when one is acquiring shares of this type.

LORD SOMERS

May I interrupt the noble Lord for one moment? I am very glad to hear the figures which he has quoted, but he must take into account the fact that, with the prospect of nationalisation in the future which stood before the industry from a good many months ago, the steel market has dropped to the very bottom figures, and that therefore the compensation which he has quoted is not going to be so very generous.

LORD SHEPHERD

I am not quite sure what the noble Lord means by "the steel market". Does he mean the price of steel as a product, or the price of shares?

LORD SOMERS

The price of shares.

LORD SHEPHERD

I will say to the noble Lord, and I will say it straight, that if we were to withdraw the nationalisation Bill to-day, there would be a very heavy fall of shares on the Stock Exchange. It has in fact been the Government's intention to nationalise which has kept many of these shares, not all of them, at their present figure. In terms of the stocks which we shall be issuing in replacement of all the securities—that is, the equity and the debenture stock—as my right honourable friend the First Secretary intimated in another place, they will not only be, as is required in a later clause, Clause 10, "of a value equal on the date of the issue", but those stocks will be redeemable. It is the Government's intention to see that those who hold stocks, whether they be equity or debenture, shall receive stock of equal value in Government securities. I think myself that the Government have perhaps erred on the generous side, but I would not criticise them for that. There are many outside this House who wouldcriticise us for having been too generous, but I do not think that accusation can be made in your Lordships' House.

LORD MITCHISON

If I may, I should like to correct a small slip, not of my own but of the Commons Hansard. I quoted the following sentence correctly: Exports last year dropped by over 250,000 million tons as compared with 1965. It is obviously much too large a figure since the total output was only 24.3 million tons, and I think the answer is that Hansard, and not in this case I, put in a million when it ought not to have been there. For their and my error I humbly apologise.

LORD CONESFORD

Two speeches have been made in reply to my Amendment, the first by the noble Lord, Lord Mitchison, who said that I had no point of law. With the greatest respect to the noble Lord, I prefer the view of the law taken by Cockburn, Chief Justice, and Lord Atkin, sitting in a judicial capacity, to the views which he expressed. I very much hope, however, that the Minister, who I know is going to give consideration to what I have put before him, will perhaps consult with the noble and learned Lord the Lord Chancellor, on the propositions of law which I ventured to put before the Committee.

I did not say a word, I think, about the quantum of what was going to be paid, nor did I mention anything about the ordinary shares. My objection, against what is proposed for the debenture holders, is that the terms completely ignore their contractual rights on the basis of the securities which they now hold. The principle of English Law which I ventured to give to the House arises notwithstanding the fact that ISHRA may not be an agent of the Crown. At every stage in this transaction it has been the British Government who have been concerned. They acquired the stocks, they sold the stocks, they approved the terms on which they were sold, and they now propose to ignore the contractual rights of the holders. The principles of law being those I quoted from the leading case approved by a decision of the House of Lords, it is my genuine belief that Her Majesty's Government's credit, and the credit of all future British Governments, will in fact be injured by what is now proposed.

I turn now to the far more reasonable speech of the noble Lord who replied. He suggested that the reorganisation might be more difficult if this step were not taken. I think, in fact, that he greatly exaggerates those difficulties. The reorganisation either will or will not involve the winding-up of some of these companies, but, whether it does or does not, the rights of the debenture holders cannot appreciably delay whatever the Government may have in mind, or whatever the Corporation may have in mind. Nevertheless, I am grateful to the noble Lord who spoke for the Government for his undertaking that he will be good enough to see that the arguments that I have ventured to put to the Committee are considered in the highest quarters.

I would conclude by saying that I believe my Amendment is calculated to help the Government and not to do them harm, even if they proceed, as they obviously intend to do, with the nationalisation of steel. My Amendment is in no sense a wrecking Amendment. I accept the undertaking of the noble Lord, Lord Shepherd, that these matters will be considered further and, reserving the right, if necessary, to revert to the matter at a later stage, I now ask leave of the Committee to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 9 agreed to.

Clauses 10 to 14 agreed to.

Clause 15:

Provision of production facilities to he subject to Minister's consent in certain cases

15.—

(4) A notice under subsection (2) of this section shall be so framed that, so far as practicable, the consent of the Minister under that subsection is required only in cases where the provision of the additional production facilities concerned would be likely, in the Minister's opinion, substantially to affect the efficient and economic development of production facilities in Great Britain.

(9) References in this section to the provision of additional production facilities shall be construed as references to the provision of new production facilities and to the reconstruction of, or making of additions to, existing production facilities; and in this section "production facilities" means premises, plant or machinery used or proposed to be used for the carrying on of any activities included in paragraphs 2 and 3 of Schedule 3 to the 1953 Act.

6.57 p.m.

LORD WINDLESHAM moved, in subsection (4), after "substantially", to insert "and adversely". The noble Lord said: Under the 1953 Iron and Steel Act, Section 6(3), producers of iron and steel were required to get the permission of the Iron and Steel Board before providing additional production facilities above a certain level. The Board was entitled to withhold its consent only if it was satisfied that the proposal would, in the words of that section, seriously prejudice the efficient and economic development of production facilities in Great Britain. When this Bill concerns any future extention of production facilities in the private sector—not those of the Corporation or the publicly-owned companies—above the level fixed by the Minister, we find that there has been a small but significant change. The wording of Clause 15(4) is such that the consent of the Minister turns on whether or not extra production facilities would "substantially"—that is the word used in the subsection: affect the efficient and economic development of production facilities in Great Britain. This is a purely quantitative criterion. But surely the Minister is not going to turn down good schemes. What he needs—and, presumably, this is the reason for this subsection—is the power to turn down bad schemes or schemes which, for whatever reason, he thinks should not be permitted to be implemented. Therefore, I submit that the wording of the 1953 Act, which refers to proposals which might "seriously prejudice the efficient and economic development" is more appropriate than the word "substantial" in this Bill. For these reasons I am moving in this Amendment to add the words "and adversely", so that the subsection would read: …substantially and adversely to affect the efficient and economic development of production facilities in Great Britain. I beg to move.

Amendment moved—

Page 16, line 19, after ("substantially") insert ("and adversely").—(Lord Windlesham.)

LORD SHACKLETON

I think the noble Lord has got himself into slight confusion on the logic. Subsection (3) of Section 6 of the 1953 Act is not on all fours with this particular subsection, and I hope I can convince the noble Lord that it would he illogical to accept this Amendment. Subsection (4) of Clause 15 deals only with notices defining those development projects which must be submitted for the Minister's approval. It provides that, so far as practicable, these notices shall make the Minister's consent necessary—that is, the consent only—for that class of projects likely, in his opinion, "substantially to affect" development. One can define this class in advance, but it is impossible to define in advance the class of projects which would "adversely" affect development. This is not a question of when consent should be refused; it is a question of when it should be sought.

Whether projects would adversely affect development will depend on the individual circumstances of each, and it is the whole point of the procedure laid down in Clause 15 to decide which of these projects having a substantial effect will also have an adverse effect. It would really stand the whole process on its head if the Minister, in the process of having to consider whether something was adverse or not, was limited only to those which in some way were adverse by definition before he made up his mind whether they were adverse. It goes without saying that, when the Minister is examining those projects having a substantial effect, he will withhold his consent only from those having an adverse effect. I hope I have made this clear to the noble Lord. I appreciate the difficulty of matching one Bill with another, but I am quite convinced that there is a lack of logic about the Amendment, due to the difficulty that always exists in comparing one Statute with another.

LORD WINDLESHAM

I appreciate that difficulty. The noble Lord has told us that the Minister will use his power under this subsection rather in the way that we have debated. In other words, if the Minister believes that a proposal is "adverse" as well as "substantial", then he will rule against it; if he does not, he will probably agree. That being so, having had that forecast, if I might so describe it, of the way in which the Minister will use his power, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD HUGHES moved, in subsection (5), after "except" to insert: after giving to the person seeking the consent notice containing particulars of the reasons for which he has not yet given the consent and".

The noble Lord said: It might be convenient for the Committee if I were to draw your Lordships' attention to the fact that Amendment No. 27 is consequential upon this Amendment, No. 26. These Amendments are moved as a result of an undertaking given in another place. On the Report stage there, an Amendment was moved to provide that, before a hearing under Clause 15(5), which deals with the control by the Minister of major development projects in the basic fields of iron and steel making by private sector companies, an applicant should be furnished by the Minister with a statement of the "potential difficulties" of his case. It was always the Government's intention that, in advance of a hearing, any applicant should be given a written statement of the difficulties in his case; and my right honourable friend the Parliamentary Secretary to the Ministry of Power gave a categorical assurance that this would be the Minister's invariable practice. He was afraid, however, that the applicant's position might be prejudiced if the Minister put it on record that he saw difficulties in the case, but he undertook to reconsider the point.

I am glad to say that we have now worked out this Amendment, which will put in the Bill a provision to ensure, as I think everyone would want, that an applicant will know which points he will have to answer at a hearing, and yet will also ensure that his position is not prejudiced. This Amendment will therefore achieve the same object as the Opposition Amendment moved in another place, but without its danger. I beg to move.

Amendment moved— Page 16, line 24, after ("except") insert the said words.—(Lord Hughes.)

LORD WINDLESHAM

We are grateful to the Government for tabling this Amendment. As the noble Lord has said, this is an Amendment which arises from an Opposition Amendment in another place. On Report stage in another place the Parliamentary Secretary was a little reluctant to accept it, but the Government, having looked at the intention again, have come up with this form of words, which is acceptable to us. We regard this Amendment as an improvement to the Bill, and it has our support.

On Question, Amendment agreed to.

LORD HUGHES

I beg to move Amendment No. 27.

Amendment moved— Page 16, line 25, leave out ("the person seeking the consent") and insert ("that person").—(Lord Hughes.)

On Question, Amendment agreed to.

7.7 p.m.

LORD ERROLL OF HALE moved, in subsection (9) to leave out "premises". The noble Lord said: I beg to move Amendment No. 28, and I suggest it might be for the convenience of your Lordships' Committee for me to take No. 29 at the same time. Clause 15 of the Bill seeks to provide that the provision of additional production facilities in iron and steel making in the private sector should be subject to the Minister's consent in certain cases. The object of the clause, as I see it, is to prevent a part of the private sector from so enlarging its facilities as either to embarrass the publicly-owned companies or to set up a situation where efficient iron and steel making in this country might be prejudiced. The power is limited by subsection (4), which says that the Minister may issue an order preventing such development from taking place only in cases where, in the Minister's opinion, it would substantially…affect the efficient and economic development of production facilities in Great Britain. So the purpose behind the clause is reasonable and, I think, is adequately safeguarded.

There are, however, two matters on which I think it would be helpful if the Government would give us an indication of what is in their mind, particularly with regard to subsection (9), where there is a definition of "production facilities". Clearly the Minister will have regard to the size of the proposal submitted to him, and if "production facilities" are to mean, as line 5 suggests—namely, …premises, plant or machinery used or proposed to be used…"— then the total cost of the project will be unnecessarily inflated, and might give rise to the Minister's thinking that it was a larger proposition than was in fact being submitted to him.

Dealing with premises, I can see no reason why premises should be included. In any case, the word "premises" is not defined in the Bill; and it is normally taken to mean land or buildings. Of course, what the Bill is seeking to do is to control the installation or reconstruction of iron-making plant and steel making plant. Buildings as such are, of course, quite irrelevant for the purposes of this clause. Blast furnaces are seldom, if ever, housed in a building; whereas steel furnaces almost invariably are. The whole phrase "production facilities" is perhaps a rather loose one. That is why I am attempting to sharpen the definition somewhat by suggesting that "premises" should be deleted. As I assume it is desired to control only the installation or reconstruction of iron and steel-making plant, and that only those items should be controlled, there is therefore no need for a global provision covering the whole of the new installation, which might well include in the same premises—and I emphasise the word "premises"—rolling mills, et cetera, which would not be "production facilities" within the meaning of the Bill.

A similar situation arises in regard to the use of the word "machinery", on page 17, line 6, of the Bill. The accepted term used by the industry to describe its apparatus is "plant". Admittedly furnaces and converters have cetrain ancillary machinery to operate them, but that machinery is of no use without the basic plant. So the word "plant" embraces machinery ancillary to but essential for, and exclusively used for, the steel-making or iron-making process. If, on the other hand, the word "machinery" is included in the Bill as it now stands it would necessarily include a good deal of machinery in any reconstruction scheme not directly concerned with the iron or steel-making process as such. I therefore submit that the word "plant" is adequate to cover what the Minister intends to achieve in this clause of the Bill, and that the words "premises" and "machinery" should be deleted. I beg to move.

Amendment moved— Page 17, line 5, leave out ("premises").—(Lord Erroll of Hale.)

LORD SHACKLETON

The noble Lord, in addition to moving this Amendment, asked for a further explanation on certain aspects of this clause, and I will attempt to deal with that first as it sets the background. This clause is, of course, a more limited form of control than is exercised now by the Iron and Steel Board over the provision of the "additional production facilities". It confines it very much to the basic field of iron and steel making. It is worth noting that the private sector is going to be a good deal freer than it has been under the Iron and Steel Board. Indeed, it is my right honourable friend's intention—and I hope this meets the point of the noble Lord—to apply even wider, or, shall I say, more generous, criteria to those areas where he would be likely to wish to exercise his control. He said it would almost certainly not be lower than £100,000. Indeed, I think I can say that in this respect this clause does lighten very definitely the area of control over the private sector.

To turn to these particular Amendments, they are rather ingenious and, again, I see what is the intention of the noble Lord. On the face of it, I can see they provide a certain convenience, but, for reasons which I will try to explain as clearly as possible, they would, in fact, complicate the job of the Minister in administering this particular control and would threaten the smooth working of the machinery to be established by it. Indeed, they could work to the detriment of firms in the private sector. "Premises", "plant" and "machinery" will all have to be provided in connection with the provision of more iron and steel making capacity. As regards "premises", steel furnaces are usually inside a building and therefore on premises; and the furnaces rest in foundations, which are constructed as a work of civil engineering and would naturally be regarded as forming part of the "premises". These foundations are in fact of great importance in the overall work and account for a third or even a half of the expenditure on installing the furnace. As regards machinery, it would plainly be difficult to draw an absolutely clear distinction between plant and machinery. Certainly such important items of equipment as cranes and charging equipment would naturally be regarded as machinery rather than plant. In short, premises, plant and machinery are all essential to the installation of new capacity.

The Amendment would therefore in effect restrict the operation of the clause to a part only of the facilities which would have to be installed to increase iron and steel-making capacity. This would lead to uncertainty and difficulty. For example, the Minister's notices under Clause 15(2) defining the projects to be submitted for his approval could only define them by reference to a part of them, which would perhaps account for no more than half the total cost. And, in considering the projects, the Minister might be hampered unless he felt quite free to take into account all the relevant facts. For example, if there was a question of choosing between two private sector projects it might well be desirable to take account of their total capital requirements and overall profitability. One could see this particularly in considering different types of steel-making capability. It must, therefore, be in the interests of the private sector that the Minister's control should work as smoothly and efficiently as possible, and that it should not be confused by the sort of anomalies that I think may be created if we were to accept the Amendment.

We have adopted the precise phrase which occurred in Section 34(1) of the Iron and Steel Act 1953, which as I have said gave the Iron and Steel Board similar control over development. The view of the Board is that the omission of the words "premises" and "machinery" would have made their administration of this control more difficult. So while I am interested in this helpful attempt to simplify the Bill, I think regrettably it fails in its objective.

LORD ERROLL OF HALE

As there will be time before Report stage to study the Minister's comprehensive and helpful answer to this point, I beg leave to withdraw my Amendment while reserving the right to re-table it on Report.

Amendment, by leave, withdrawn.

Clause 15, as amended, agreed to.

Clause 16:

General financial duties of the Corporation

16.—(1) It shall be the duty of the Corporation so to exercise and perform their functions under this Act and the 1949 Act as to secure that the combined revenues of the Corporation and all the publicly-owned companies taken together are not less than sufficient to meet their combined charges properly chargeable to revenue account, taking one year with another.

LORD WINDLESHAM moved to add to subsection (1):

"over a five year period, commencing at the end of the first financial year of the Corporation".

The noble Lord said: With the leave of the Committee I should like in moving this Amendment to speak also to Amendment No. 57. This Amendment is based on two statements of Government policy contained in two White Papers. First, there is the Government's own White Paper on Steel Nationalisation (Command 2651), which in paragraph 31, page 12, said: It is the Government's intention to apply to the nationalised steel industry the principles and procedures set out in the White Paper on the Financial and Economic Obligations of the Nationalised Industries under which financial objectives are agreed with the boards concerned.

The White Paper referred to was published in April, 1961, so it was a statement of policy by a previous Government, but one that has also been agreed to by the present Government. The White Paper (Command 1337) says, in paragraph 19 on Page 7: The Government consider that the financial objectives of the nationalised undertakings under their Statutes should now in general be interpreted on the following lines: (a) Surpluses on Revenue Account should be at least sufficient to cover deficits on Revenue Account over a 5-year period:"— those words, if I may say so in passing, are italicised in the White Paper and given emphasis— in arriving at the surpluses and deficits for each year there should be charged against the revenue the items normally so chargeable (including interest, and depreciation on the historic cost basis). (b) Provision should also be made from Revenue for:—

1. (i) such an amount as may be necessary to cover the excess of depreciation calculated on replacement cost basis over depreciation calculated on historic cost basis as in (a) above.
2. (ii) adequate allocations to general reserves which will be available inter alia as a contribution towards their capital development and as a safeguard against premature obsolescence and similar contingencies."

LORD MITCHISON

Would the noble Lord allow me? He will notice that the reference is to the interpretation of existing obligations, and if he looks at the existing obligations which are summarised at the beginning of paragraph 5 of the same White Paper, he will see that they are in the form in this Bill. It is therefore not a question of putting in new form obligations but a question of interpreting existing ones, is it not?

LORD WINDLESHAM

That would be for the Government to reply to. The aim of our Amendment is to introduce into the Iron and Steel Bill a definite period instead of whatever is meant by the existing rather vague words. I understand that these words taking one year with another are familiar in other nationalising Statutes. I must confess I cannot understand what they mean as they stand. I suggest, and this is the purpose of the Amendment, that it is desirable, in the light of the accepted policy of both parties as contained in the White Paper on The Financial and Economic Obligations of the Nationalised Industries, to have a more precise period. We propose the same period as did the White Paper, Cmnd. 1337, of five years. That is the reason for this Amendment, and I beg to move.

Amendment moved— 17 line 16 at end insert the said words.—(Lord Windlesham.)

LORD MITCHISON

There seems to be two points about this Amendment. The first is that it provides for only one five-year period and the whole thing is then to stop, as I understand it. I am glad to see that the noble Lord indicates that is not the intention. Perhaps he would like to look again at the wording of the Amendment. The other point, surely, is this: that this White Paper, Cmnd. 1337 was, I agree, introduced by a Conservative Government. I do not think it was opposed; I think that it represents, at any rate, a substantial measure of agreement and it described quite correctly the usual phrase, which is in paragraph 5 …that their revenues should, on an average of good and bad years (or some similar phrase) be not less than sufficient to meet all items properly chargeable to revenue…". That is the usual phrase in one form or another. What they suggested was not that that phrase should be altered in any way, but that it should be applied over a five-year period and I can see no very great difficulty in that.

I must say that I share the feeling of the noble Lord, Lord Windlesham, that it is a rather vague phrase, and I think that probably you have to have it in that form; and that it was to attach uniformity to its vagueness that this inquiry was made, and the report which he has quoted emerged. Therefore, it seem to me that if you now put in a different phrase such as the Amendment suggests, you may say you are giving effect to the intentions of the White Paper, but in fact you are really not adding to them at all. The intentions are there applicable to the phrase as it now is, and I noted that in another place the Minister specifically referred (true, he got the name slightly wrong) to the principles of this White Paper as governing his performance. I suppose, therefore, that we may conceivably be told by the Government that this Amendment is really unnecessary, and too narrow. They may, or they may not, have some other objection to it. I think it is a dangerous thing to put in the Bill. It can do no good and it might do some harm.

LORD SHEPHERD

The noble Lord, Lord Windlesham, has moved what is perhaps one of the more important Amendments on this Committee stage. I have four foolscap pages of brief which I am quite willing to read to the Committee, but we are making very good progress and I doubt very much whether what I should say would add to what my right honourable friend the Chief Secretary to the Treasury was at pains to say during the Committee stage in another place.

May I say to the noble Lord, Lord Windlesham, that we are with him to the full extent on his Amendment. In fact, the Amendment is in line with the White Paper on The Financial and Economic Obligations of the Nationalised Industries, which was published in April 1961, Cmnd. 1337. It is interesting to note that, when in office, the Conservatives, after publishing that White Paper, introduced their own Transport Act in 1962, but they did not think it necessary to put in that legislation the very tight provision which the noble Lord, Lord Windlesham, suggests would be appropriate in this Bill. I think it as well to have this objective in mind. The Government would expect that the Corporation and the companies would be able so to adjust their organisation and production as to carry out the provisions in this Bill. There are very stringent responsibilities placed upon them. I come back again to Clause 3(1): It shall be incumbent on the Corporation…to promote the efficient and economic supply…". and under Clause 16(1) clear duties are laid upon them.

At first sight I was sympathetic to the idea of including this Amendment in the Bill, but if one looks at what may be the consequences, I think that the noble Lord, Lord Windlesham, would agree that it would be better not to put it in, though we all agree that this should be the aim and the end for the Corporation. We do not know what rationalisation and reorganisation may have to take place in the next few years, and what effect that may have on the income of the Corporation as opposed to the immediate costs of such rationalisation. On the other hand, we must also recognise the difficulties that steel producers throughout the world are experiencing. And so, while it must be the aim, clearly if we put it in Statute form, we should put the Corporation in a very strange position in that if they failed to achieve their objective or the requirements placed upon them by Statute, the Government might have to come forward with a Bill to relieve them of any consequence of their failure to achieve what was required in law.

May I say, finally, to the noble Lord, Lord Windlesham, that we are at one with him in wishing to meet the Amendment to the maximum extent within the Statute. Certainly great responsibility will lie on the Minister, but we wish to see in the Statute the necessary disciplines on the Corporation. We believe that they should aim to break even, taking one year with another, over a five-year period; but having said that, we think it would be wrong, and breaking precedents set by previous Administrations, to lay that down as a statutory obligation.

LORD WINDLESHAM

I should like to thank the noble Lord, Lord Shepherd, for that tremendously conservative speech. He has said he agrees with the purpose of the Amendment and that it will be the aim of the Corporation to act in the way the Amendment would require them to act. He reminded the Committee that there are other obligations on the Corporation in the Bill which have a financial effect, and that these are important also. This Amendment raises wide issues—indeed, it involves the whole question of the accountability of nationalised industries to Parliament. That is a subject which concerns all your Lordships, but this is neither the time nor place to debate it, so I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 16 agreed to.

Clauses 17 to 23 agreed to.

LORD SHACKLETON

It might be for the convenience of the Committee if we were to break now. I should like to express my appreciation of the cooperation of noble Lords opposite, and of the clarity of their Amendments and speeches. I hope that we have been able to be helpful, and I hope that we shall have some "goodies" to give away to-morrow. I beg to move that the House do now resume.

Moved, That the House do now resume.—(Lord Shackleton.)

On Question, Motion agreed to, and House resumed accordingly.