TRANSPORT BILL

HL Deb 01 July 1968 vol 294 cc92-150

7.4 p.m.

House again in Committee.

Clause 39 [Grants for unremunerative passenger services]:

THE EARL OF KINNOULL

Earlier this afternoon I had a discussion with the noble Lord, Lord Bowles, who advised me that he had not been in a position to acquaint himself with a considered reply to Amendment No. 114A and Amendment No. 116A. I do not wish either to embarrass him or to waste the time of the Committee, and therefore I shall not move the Amendments. But I should say that I was a member of a delegation on May 9, some six weeks ago, which met Mr. Carmichael, Joint Parliamentary Secretary to the Ministry of Transport, at the Ministry, and left with him all the Amendments which are now in my name on the Order Paper. We received no reply until I rang the Ministry last Friday. They were good enough to return my Amendments, which I took to the Public Bills Office so that they were put down on the Order Paper. Therefore I find it a little surprising, and a little discourteous, that no brief is apparently available to the noble Lord, Lord Bowles.

LORD BOWLES

May I ask the noble Earl to move the Amendment, and then I shall have a chance to say something. That would be more convenient.

THE EARL OF KINNOULL

I am sorry. I thought that the noble Lord said earlier that he had no reply.

LORD BOWLES

I cannot reply to what the noble Lord has just said unless he moves the Amendment.

THE EARL OF KINNOULL moved Amendment No. 114A:

Page 59, line 8, at end insert— ("Provided that if any station, line or section of line has previously been considered under the provisions of section 56 of the Act of 1962 (or any prior enactment) following a proposal by the Board for its closure or withdrawal of service, the Minister may, if he is satisfied that the station, line or section of line is still unrernunerative and that the provisions of subsection (1)(b) would appear to be relevant in the circumstances, and subject to the consent of the Treasury as specified above, direct that the provisions of this section shall apply to the station, line or section of line and undertake to make a grant in respect of such station, line or section of line.") The noble Earl said: Very briefly, the purpose of this Amendment is to add to subsection (1) of the clause, which concerns grants made by the Ministry for unremunerative passenger services—

LORD BOWLES

May I interrupt the noble Lord? He made a fairly quiet accusation against my honourable friend the Joint Parliamentary Secretary, Mr. Carmichael. The noble Lord said that he was not going to move his Amendment. I asked him to do so just to enable me to tell him and the Committee what I have heard about the matter. Now that lie has moved it, I apologise to him, if apology is due. I made some inquiries about the matter, and I understand that there were conversations between the noble Lord and Mr. Carmichael. I understand that no Ministry officials can begin to draft notes for a reply to an Amendment unless it is on the Order Paper. I shall look into the matter for the noble Lord and let him know to-morrow, if I possibly can, the result of my inquiries.

THE EARL OF KINNOULL

I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD BOWLES moved Amendment No. 115:

Page 60, line 19, at end add ("and (c) in the case of each undertaking for the time being in force under subsection (1) and each service in respect of which grant is for the time being payable under subsection (4) of this section, the amount falling to be paid in respect of that year in pursuance of that undertaking or by way of such grant.")

The noble Lord said: The effect of this Amendment is to require the Railways Board to include in its Annual Reports a breakdown of the total amount of grants payable under this clause in the year in question. Paragraph (b) of subsection (5) of this clause already requires the Board to show in its Annual Reports the total amount of grants. In effect, therefore, the requirement on the Board under the proposed new paragraph (c) will be to break down the total figure it is required to provide under the existing paragraph (b).

This Amendment has been tabled in accordance with an undertaking given by the Minister of State in the course of discussion during Report in the House of Commons of Amendment No. 149, which sought to require the Railways Board to provide information at out the amount of grant paid in respect of each service which had been grant-aided for the first time during the year under review. The Minister of State pointed out that he had already given an undertaking in Standing Committee in the House of Commons that the amount of grant in each case would be announced at the time that grants were approved. He added that in any case it would probably be more sensible to give a breakdown of grants on a continuing basis in respect of every service and not only in respect of those grant-aided for the first time. But he undertook to consider the position further and on this undertaking that Amendment was negatived.

Although, therefore, as I have already explained, no additional information would be made public in consequence of this Amendment, there will be no difficulty about including such a breakdown in the Board's Annual Reports and this may in fact prove a convenience in some respects, in that information published item by item on different occasions will be available in one place. In these circumstances the Amendment has been tabled as a concession to the views expressed in the Commons stages of the Bill.

The drafting of this Amendment: might appear unnecessarily complicated at first sight. The effect, however, is simply to require the Railways Board to break down the information under paragraph (b) of subsection (5). The complexity is due to the need to be consistent with the concept of "undertakings" introduced in subsection (1) of the clause, and to embrace also the transitional grants in closure cases covered by subsection (4), which are not the subject of undertakings. There is also the need to make it clear that the figures to be given will be those of grant due to the Board in respect of a particular period, rather than of the actual cash which passed in that period. I beg to move.

LORD WINDLESHAM

This is the clause which concerns grants for unremunerative rail services which are kept open for social or economic reasons. We on this side of your Lordships' Committee accept the principle of grants for unremunerative lines, but we believe it is in the interests of the Railways Board and of the taxpayer that they should be very carefully scrutinised and kept down to the minimum. A sum of £55 million is envisaged for the first year, and at a later stage—on Report stage, perhaps—it would be interesting to have some information from the Government as to how this figure of £55 million for unremunerative lines has been arrived at, and also how it relates to the varying figures which are contained in the Report of the Joint Steering Group. I do not press those points now because I think that the noble Lord will want to look at them.

As the noble Lord, Lord Bowles, has said, this is a concession by the Government arising out of the Committee and Report stages in the House of Commons, and undertakings which were then given. It shows the value of the detailed discussions in another place on those clauses which were discussed before the guillotine came down. We welcome the new subsection, which will now mean that the amount of subsidy for each unremunerative service will be individually shown. We regard this as an improvement. It was one which was introduced by one of my friends in another place, and we welcome it.

On Question, Whether Clause 39, as amended, shall stand part of the Bill?

THE EARL OF KINNOULL

I wonder whether I may ask one question on Clause 39. It relates to these unremunerative lines. Before the list of lines is published, will there in fact be a public inquiry to allow passengers to request that their particular line should be put on this list? I am afraid I have not given the noble Lord notice of this question, but if he could look into it I should be very much obliged.

LORD BOWLES

I will look into the matter and write to the noble Earl.

Clause 39, as amended, agreed to.

Clause 40 [Grants pending elimination of surplus track and signalling equipment]:

LORD BOWLES

This Amendment is a concession. It implements an undertaking given by my right honourable friend the Parliamentary Secretary in another place. We accept that the Railways Board should indicate in their annual report the amount they receive in any year under this clause of the Bill as a matter of proper public interest, and the present Amendment ensures this. I beg to move.

Amendment moved—

Page 60, line 40, at end insert— ("(5) The report of the Railways Board under section 27(8) of the Act of 1962 for any year in respect of which a grant is made to the Board under this section shall include a statement of the amount of that grant.")—(Lord Bowles.)

LORD WINDLESHAM

Here again, this is a concession, and one which we welcome. We regard it as desirable that there should be as much publicity, as much information made available, as possible, and the fact that the reports of the British Railways Board will show this information in the future is, we think, an improvement. So here again we welcome this Amendment by the Government.

LORD BEAUMONT OF WHITLEY

We, too, welcome this concession. There are a number of similar concessions in the course of the Bill whereby the Government have agreed to offer more information on this kind of matter, and in order not to waste the time of your Lordships' Committee later I should like to say that we welcome this wherever it has happened. I think this and other Amendments like it provide notable improvements to the Bill.

Clause 40, as amended, agreed to.

Clause 41 [Financial provisions as to Boards and new authorities]:

7.16 p.m.

LORD WINDLESHAM moved Amendment No. 117: Page 61, line 7, leave out ("combined").

The noble Lord said: This group of Amendments falls into three sections, as we see it; Nos. 117 to 123, No. 124A on its own and No. 125A on its own. So, with the permission of your Lordships' Committee, perhaps it might be convenient if I spoke to Nos. 117 to 123.

Clause 41 concerns the financial duty of the existing Boards under the 1962 Act and the new authorities which are set up under this Bill—the National Freight Corporation, the National Bus Company and the Scottish Group. In subsection (2) of Clause 41 an obligation is placed on these Boards and Authorities to ensure that their revenue accounts at least break even. In this first set of Amendments, Nos. 117 to 123, we propose that this obligation should apply to each separate business of the Boards or the new authorities and to each separate subsidiary company. The aim of our Amendments is to ensure that individual activities are not involved in undesirable cross-subsidisation of a type which has been condemned by the Government in their own White Paper, The Nationalised Industries: A Review of Economic and Financial Objectives. The White Paper pointed out the risk of this sort of cross-subsidisation. and warned against the misallocation of resources that could result. We must remember that these Boards and authorities are going to have very considerable powers to engage in a wide range of activities.

I do not think we want to anticipate now the debate on Clause 48, but there is a need to identify the leads of various activities and to make information on these available for public scrutiny. We do not believe that subsidiaries should be developed by the Board or the authorities unless they can be profitably run. Otherwise there is a risk of wasting public funds; and secondly, and perhaps more likely, there is the question of dilution of management effort. If the small number of skilled managers who are available to work in senior positions in the Boards and authorities were concerned with the supervision of subsidiaries and separate businesses, we think that that would not be the best use of their time. Amendment No. 123 is more specifically on that point. I beg to move Amendment No. 117.

LORD BEAUMONT OF WHITLEY

We, too, regard this as an extremely important clause, and I think that on this matter we are at one with noble Lords on the Conservative Benches. We take this as having a considerable bearing on Clause 48, and we hope that there will be considerable concessions on this clause. The noble Lord, Lord Windlesham, has already mentioned the matter of paragraph 18 of the White Paper on the financing of nationalised industries, and its desire that there should not be cross-subsidisation and misallocation of resources. The Government may object, as indeed they did in another place, that it is a matter of great difficulty to, isolate individual businesses, and than these Amendments are too vague to implement. I do not think this is so. Any really efficient private company, no mater how big, so organises its financial affairs that it can tell whether it is making a profit or loss, not only on any particular subsidiary but on any particular s lop or business in that subsidiary. It may he that companies do not publish this in their accounts—I think that probably they should—but, even so, there is a much greater obligation on any kind of nationalised or public industry, whose shareholders are compulsory shareholders and have not chosen to take shares in it, to lead the way in making it quite clear what is paying and what is not.

There is one last point. I should like to ask the noble Lord, Lord Windlesham, a question on his Amendment No. 123. In another place, when his friends put this down, Mr. Heseltine said that he did not wish to pursue it and that it w as put down in error. He apologised to the Committee, and said it was not necessary because the provisions it seeks are already embodied in legislation. Has the noble Lord changed his mind about that or was Mr. Heseltine in error?

LORD WINDLESHAM

I do not think we should have moved that Amendment on its own. But since I have spoken to all of them generally I suggest that the general set of arguments apply to the full range of Amendments. I would not want to pursue that particular Amendment.

LORD BEAUMONT OF WHITLEY

If I may say so, the noble Lord's friend did exactly the same thing. He spoke to all of them and said he did not want to pursue this one because he thought it was already embodied in legislation.

LORD WINDLESHAM

It is possible, then, to proceed with the debate on the general principles.

LORD HUGHES

Having regard to the reception which the Liberal Amendment No. 113 received from the Conservative Benches and, for that matter from the Government Benches, the noble Lord, Lord Beaumont, shows commendable Christian virtue in turning the other cheek; although I am not quite certain that all the arguments that he advanced will commend themselves to noble Lords opposite.

As the noble Lord, Lord Windlesham, said, Amendments Nos. 117 to 123 are linked in seeking to achieve one purpose. The subsection in its present form imposes on each authority a duty to secure that, overall, their own revenues, combined with those of their subsidiaries, are not less than sufficient to meet all proper charges to revenue, taking one year with another. The Amendments would substitute for this a duty to secure that the revenue of "each separate business" of the authority and of each of its subsidiaries is not less than sufficient to meet the charges properly chargeable to revenue on each of these separate businesses, taking one year with another. Some degree of flexibility would, however, be imported by the addition of the provision in the last of the proposed Amendments in that the authority may direct that profits obtained in one business shall be used to offset losses made in another business. This, in fact, would seem to imply that the principle of cross-subsidisation should be permitted to continue in certain circumstances.

I must resist these Amendments for a variety of reasons. First, as the noble Lord, Lord Beaumont, predicted I might, I do so because the proposed duty is imprecise. It is not clear what "separate business" is intended to mean. In the case of B.R.B., for example, this could be interpreted as a requirement simply to distinguish between the railway activity as a whole, and the ancillary activities such as shipping, hotels, et cetera. Or it could be taken as implying that the Board are to distinguish rail passenger and freight services as separate businesses; or to go down to a fine degree of detail involving a separate financial duty in respect of activities such as the operation of car parks, where again there might be a distinction between parking and petrol sales under the new powers provided by Clause 48. The determination is bound to be a subjective view on whether or not the Board were complying with their duty.

The second reason that I cannot recommend these Amendments to the Committee is that the proposed duty would imply an unrealistic degree of precision in accounting. There would be no practical difficulty in giving an authority a separate financial duty in respect of each subsidiary. The ability to organise in this way implies a clearly distinguishable activity or set of activities, and the ability to produce precise meaningful and separate accounts. But where an authority itself engages in a number of activities of distinguishable classes or a subsidiary does likewise there is a problem about the allocation of joint costs, which the Amendments ignore. The allocation of joint costs to identifiable activities or "businesses" is to a large extent a matter of judgment rather than fact.

It is more than a matter of quantifying the respective use made of a joint asset (though this basis is difficult enough when one considers the fluctuations which may occur); regard must be had also to the differing ability of the various uses to contribute to the total cost. No enlightened commercial undertaking would dispute this. Account is taken of considerations of this kind by Section 17 of the Companies Act 1967 under which companies conducting business of two or more classes have to give information in the Director's report, but not the accounts, on the division of turnover and an option only on the approximate extent to which each class of business contributed to the profit or loss of the company. This is, in effect, a recognition that there is nothing absolute about such determinations. If the financial duty proposed is to be meaningful it must be related to something which is precise and ascertainable.

The proposed duty would be far too detailed and inflexible. This is another reason why I do not find them acceptable. There is probably little doubt that the movers of the Amendments do intend the duty to cause the authorities to go down to a very fine degree of detail in distinguishing activities as separate businesses; for example petrol sales at car parks. This is their way of trying to ensure that activities are engaged in only where they are remunerative, and that a basis is laid for fair competition. I must say that I subscribe to the objectives of fair competition and efficient operation, since there is no doubt that long-term cross-subsidisation is economically wasteful, and financially undesirable. But it is really going too far to suggest that large corporations such as these are must invariably adopt a narrow, compartmentalised approach to their business as these amendments imply. As in major commercial and industrial groups in the private sector, the broad and the long view must be taken. This should not be carried to the extent of ignoring the above criteria, but there must be some degree of flexibility.

To sum up, this series of amendments would seem to me to be an attempt to secure some further statutory assurance that the new manufacturing and trading powers will be conducted on strictly commercial lines and on a basis of "fair competition".

It would be fair to say that in Committee in the other place the Opposition said they wanted two things: first, information; they wanted to be able to see what was going on and they wanted that information to be published from time to time in a form that would make it possible for anyone concerned and, of course, Parliament, to examine all the activities of these organisations. The purpose of the Amendments then, in another place, was to ensure that the accounts when produced would be quite understandable and comprehensive. Secondly, I think the Opposition wanted to ensure that the individual activities referred to were not involved in—and I think the words used were— some hocus-pocus method of cross-subsidisation which is not discoverable by anyone contemplating an examination into those activities as covered by the accounts… The Minister was then my right honourable friend, Mrs. Castle. She gave an assurance which I most definitely repeat, that the new manufacturing powers will be operated on a commercial basis. Provision is already made in Clause 48(4) for the Minister's approval of proposals made by the undertakings for the exercise of these powers to be subject to any conditions which the Minister sees fit to impose, and for a direction to be given at any time that any of the activities concerned are to be discontinued. For these reasons the Amendments are, in the view of the Government, quite unworkable.

LORD BALFOUR OF INCHRYE

The arguments of the noble Lord, Lord Hughes, against long-term cross-subsidisation would be more convincing to me if the Government were not every year doing exactly what he says that we should not do by means of this Amendment. Every year a Service Minister brings forward what is known as "Monk's Resolution" which is viremont, which means that the surpluses of one Vote can be devoted to the deficiencies of another; that is to say the surplus on the Vote for works and buildings, the building of barracks or furniture, we will say for the Royal Air Force, may be used to meet deficiencies in the Pay Vote. Really the arguments of the noble Lord, Lord Hughes, fall to the ground when the Government themselves are equally guilty.

LORD HUGHES

My Lords, I think this is very much beside the point. We are talking about the commercial activities of British Railways and the transport undertakings generally. I am not at all certain that anyone on either side of the Committee would argue that the Defence Forces were run on a commercial basis.

LORD WINDLESHAM

The noble Lord, Lord Hughes, has talked about the difficulties of achieving precision in accounting, and we accept that. But accounts should show something of the nature of the business. If at all possible, they should give an indication of the progress of the different aspects of the business. I do not want to press this Amendment—I think that we should move on—but I feel with the noble Lord, Lord Beaumont of Whitley, that this is an extremely important matter 'which deserved to be aired again. It cannot be said too often that the accounts of the Railways Board must be scrutinised by the public at all times. Having said that, I beg leave to withdrawn the Amendment.

Amendment, by leave, withdrawn.

7.33 p.m.

LORD WINDLESHAMmoved Amendment No. 124A:

Page 61, line 10, at end insert— ("Provided that in the exercise of the powers given to it by sections 6, 13(1) and (2) and 14(1)(d) of the Act of 1962 and sections 45, 46 and 47 of this Act a Board or a new authority shall be under a duty to ensure so far as practicable that these businesses are conducted on a commercial basis.") The noble Lord said: This Amendment follows on the previous Amendment. Clause 41(2) places on obligation on the Boards and the new authorities to break even. We believe that that is not enough and that it would be unwise just to settle for such a low target, bearing in mind the Government's stated aim that the railways should be run as a commercial organisation. In Amendment No. 124, which has now been removed from the Marshalled List, a figure of 10 per cent. profitability was stated. We have altered that because it may be that stating a figure is too rigid. It is extremely difficult to define what capital is employed, what are the capital assets in the railways, even now, let alone after the write off. Therefore the percentage return on capital could be a fairly meaningless concept and it may be that a figure of 10 per cent. or something of that sort would be too high at first. The wording of this Amendment seeks to make the same point in a more general way.

LORD HUGHES

I think it is correct to say that this Amendment has been put down in place of another which was withdrawn and which laid down that the undertaking should make a profit of not less than 10 per cent. I think it has been redrafted, probably in the light of discussions which took place in Committee on June 25 on a comparable Amendment to Clause 11 of the Bill. The Opposition then said that it was necessary to require the ancillary activities of Passenger Transport Executives to be conducted in fair competition with similar private enterprise activities and that the Boards should therefore have a higher profit target than was represented by the basic financial duty to break even.

My noble friend Lord Stonham pointed out that it was quite unacceptable to impose any statutory duty to earn any set level of return. This would have led to great difficulties in defining what was meant by profit or capital and would also have been unfair to the Boards and to the public in preventing useful services, such as left-luggage facilities, from being provided. It would also have made it impracticable for the Boards to develop new lines of business. I think the Opposition have clearly appreciated the force of these arguments and they now suggest a form of Amendment which to the Government is less objectionable and which, on the face of it, seems in principle to be a reasonable requirement to lay on the nationalised transport bodies. It is not, however, one which the Government can accept as it stands—the last three words are good, are they not, my Lords?

There are defects in the Amendment. In the first place, it is technically defective the homework has not been as well done as usual because it refers to Sections 45, 46 and 47 which would have been correct in the Bill some time ago, but it should now read Sections 48, 49 and 50. Secondly, it is defective in that it quotes a section which will be repealed by the Bill, Section 6 of the Transport Act 1962, dealing with hotel powers. I do not say this in criticism of the Opposition, because in the past I have been subjected to the same difficulty. These are merely points showing how difficult it is to single out a particular activity to which a separate financial duty would apply. The fact is that Clause 41 deals with the actual overall financial duty of each of the nationalised Boards in a most general way. The clause states that it is the duty of each Board to secure that its revenues, taken together with the revenues of the subsidiaries, "are not less than sufficient", and so on.

This general financial expression of duty of the Boards does not preclude them from earning any particular rate of return on the capital employed in their various activities or from behaving in a commercial way, in all cases where the ancilliary activities are of a kind which enable direct profits to be made, and the Government will expect the Boards to behave commercially in the sense intended by the Opposition. But the inclusion of a provision on the lines of the Amendment as a qualification of the general financial duties of the Board is unacceptable, since it would be an unnecessary refinement as regards the ancilliary activities and indeed would threw doubt on the proposition that the Boards in any case are generally expected to act on a commercial basis in the conduct of their main business.

The whole point of having a financial duty is to set a minimum below which a Board must not go, hearing in mind that all its capital is normally provided on a fixed interest basis, so that the charges on the capital have to be met before it can be said to be breaking even. In the private sector, however, dividends can be passed on equity capital without a company falling down on legal obligations. Moreover, as the Committee well knows, successive Governments have set higher levels of performance for the Boards through the requirement to meet financial objectives settled in accordance with the doctrines laid down in the White Papers dealing with the economic and financial objectives and obligations of the nationalised industries.

It is true that the Railways Board and Waterways Board have made losses in the past, but the provisions of the Bill will give them a new deal and at the same time take away the Government's power to pay them deficit grants. Thus they will have a new discipline forced on them and an added incentive to behave commercially. Nevertheless, the three words to which I directed attention earlier apply. The Government recognise the strength of feeling that there should be some statutory declaration about the need for the Boards to behave commercially in the conduct of their ancilliary activities, especially when they are in direct competition with private enterprise.

I would therefore say that, having regard to the views that have again been expressed, we are prepared to consider tabling a further Amendment to the Bill to meet the point underlying the present Amendment. This might be on the lines of amending the existing declaration in Clause 48(7) that the Boards should act as though they were engaged in a commercial enterprise in carrying out activities under that clause by extending it to cover all the new powers given by Clauses 48, 49 and 50 of the Bill. I must say frankly that we want a little more time to consider exactly what the form of the Amendment should be, and I hope that when it is tabled the Opposition will find that we have at least gone some way to meet the points which have been expressed in this Amendment.

LORD WINDLESHAM

When the noble Lord began to criticise the drafting with such care, I began to hope that he was going to make a concession on this point; and he has done so. I thank him for that encouraging reply, which we will study. It sounds to us a useful and worthwhile concession, and therefore I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

7.40 p.m.

LORD WINDLESHAM moved Amendment No. 125A:

Page 61, line 15, at end insert— ("() Each of the authorities to whom this section applies shall ensure that its annual report includes a statement on the affairs of each separate business of the authority and of each of its subsidiaries.")

The noble Lord said: This is the last of our Amendments to Clause 41. Its aim is to place a duty on the Boards and the new authorities to include in their annual reports a statement of the state of affairs of the main subsidiaries and the separate businesses. The Government have said that it is their intention that the authorities should be run on commercial lines. This Amendment would result in what is, after all, normal business practice. It is usual to refer to the state of affairs of subsidiaries. Therefore, I hope that this provision may be included in the Bill. As with our previous Amendment, we have, I hope, learned and profited from the discussions in Committee last week. The noble Lord will have noticed that we have withdrawn the previous wording of Amendment No. 125 and inserted the wording which now appears in the Marshalled list. I beg to move.

LORD HUGHES

We do not think that this Amendment is necessary. The reports and accounts of nationalised bodies are always published together, and the Minister will make it clear to the Boards that he will require their reports to include appropriate information unless the accounts themselves do so. I want to repeat as a firm assurance that it is the intention to secure that the reports and accounts of nationalised undertakings are in line with good commercial practice and give comparable information to that normally published by large undertakings in the private sector. There is no intention on the part of my right honourable friend the Minister to hide what the authorities, or their subsidiaries, are doing. It is only because we consider that the Amendment is unnecessary that we do not accept it. We accept the reason behind the Amendment, and that is why I repeat, in definite terms, this assurance as to the way in which these undertakings must operate in these matters.

LORD WINDLESHAM

We accept that assurance, and I thank the noble Lord for stating it so clearly and definitely. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 41 shall stand part of the Bill?

LORD NUGENT OF GUILDFORD

I would like to say a word on subsection (6) which, rather surprisingly, has got slipped into the Bill. It provides an extra £30 million for London Transport. The Bill, which does almost everything, does not mention London Transport anywhere else. Suddenly, on Report stage in another place, subsection (6) appeared and there has been very little explanation why it is required and why it has suddenly been pushed into the Bill. The Government's explanation was that they had just discovered that the Minister's power to lend to London Transport Board might run out before the transfer to the Greater London Council had been finally settled. But only two months previously, the Minister had asked Parliament to increase the borrowing powers of London Transport to £270 million which he said would last until the middle of 1969.

Two comments I feel should be made about this method of managing our financial affairs. The first is that it is objectionable for the general taxpayer to be made to subsidise London Transport's current trading losses. It is impossible to justify asking the citizens of Manchester and other cities in the Kingdom to pay out of their taxes extra money in order to make Londoners' bus fares cheaper. May I say in passing that by this method of introducing this extra £30 million there are limited opportunities of finding out what the money is going to be used for and just how much is going to be used for current subsidy.

The second point I feel that should be made before we let the Government have this Clause is that, as an insight into the Government's financial management, it really is alarming. To them £30 million may not seem very much, but it seems a large sum to the taxpayers who have to pay. It is really astonishing that the Government should be unable to tell, to the tune of £30 million, what their financial position is. Anyway this subsection has been inserted into this vast Bill, which makes no reference at all to London Transport. When I read it last month, it reminded me of a local water undertaking's Bill at the end of the century into which the town clerk put the words: …and the marriage of the Town Clerk is hereby dissolved". It is alleged that this slipped through Parliament without being spotted. Maybe the story is apocryphal.

In any event, this time the irrelevancy has been spotted. I think that the Government should be called to account for the two points I have made: how much is going on capital expenditure, which Government grants are supposed to cover, and how much on current subsidy? And what is the explanation for this extraordinary method of dealing with a very large sum of the nation's money?

LORD HUGHES

It is not a new thing for deficits of the London Transport Board to be financed in this way. I am not at all certain that when the noble Lord referred to the dissolution of the Town Clerk's marriage, he was not thinking that the Government might have attempted to slip in the dissolution of the Greater London Council! I do not think that that would have occurred to us, but if it had, we should probably not have managed to be as successful as the Town Clerk was alleged to have been.

There is nothing foolish or sinister about this. Negotiations for the transfer of an undertaking like this cannot be accomplished overnight. I have no doubt that the noble Lord is well aware that there was considerable hard bargaining and that in the passage of time losses mount up. It is as simple as that. We believe that the amount of money here provided is sufficient to enable the transfer to the G.L.C. of the undertaking to take place in a satisfactory fashion. Of course, if the noble Lord wishes to suggest that he should go to his friends on the G.L.C. and suggest to them that in the interest of the taxpayer they should settle on a basis more favourable to the Government, I have no doubt that we will look sympathetically at an Amendment of that kind, provided he can assure us that the transfer will still take place.

I am sorry that without notice I am unable to give a breakdown as between capital and revenue. But I hope that the noble Lord will accept that the insertion of this figure at the time when it was inserted was merely a recognition of the changes which had taken place in the interval.

LORD NUGENT OF GUILDFORD

I must congratulate the noble Lord, Lord Hughes, on making one of his usual first-class speeches, despite the obvious difficulty he must have had for material. I do make the point that there is obviously a substantial element of subsidy here. It is really unique. We do not do this for any other city in the country. This is why, and quite rightly, the Government have been making this settlement with the G.L.C. in order to transfer London Transport to them. Then it is up to them to decide how to do it, and whether the ratepayers should pay more or less to keep the service going. But I would remind the noble Lord that in combing through the proceedings in another place I discovered that the Government promised that there would be a statement on this by the end of last month. We really ought to have had it by today, and in that event I should not have had to ask the noble Lord these questions.

Clause 41 agreed to.

Clause 42 [Additional financial provisions as to Railways Board]:

7.52 p.m.

LORD NUGENT OF GUILDFORD moved Amendment No. 126:

Page 62, line 9, at end insert— ("() Not later than 1st January 1970 the Board shall draw up and agree with the railway trades unions a new labour productivity agreement with appropriate provision for redundancy.")

The noble Lord said: I beg to move Amendment No. 126 on the Marshalled List, in the names of my noble friends and myself. I think this Amendment is self-explanatory. It is founded on responsible thought in this connection, and we move it in all seriousness. The effect of Clause 42, among other things, is to reduce the capital debt of British Railways to £300 million. This involves, if my arithemetic is correct, writing off a sum of no less than £1,317 million. This is a huge sum of money, probably something approximating the capital expenditure which the nation has provided for modernisation over the last dozen years.

I am not opposing this writing down of the capital. Indeed, we wrote down a substantial amount of capital in 1962, and I think this is the right way to deal with the structure of the railways. I cannot say, of course, whether £300 million is the right figure; it may well be. But certainly in industry capital is worth at the end of the day (I am sure all noble Lords agree with this) what it can earn. So I am entirely in favour of setting this at a realistic figure. But do not let us comfort ourselves with the thought that we are being asked to write off 19th century assets. We are not. We have done all that. Substantially, this is post-war capital that we are writing off. So it must be seen for what it is—a very large sacrifice which the British nation must make in order to put British Railways on a viable basis and give them a fresh start.

Our Amendment requires that British Railways should match this massive contribution from the nation by putting their own house in order with an effective manpower-productivity agreement. Put in simple terms, I want the British Railways Board to do a deal with the railway unions, the N.U.R., A.S.L.E.F. and T.S.S.A.: I want them to buy the rule book. And perhaps this present time is a significant moment to say this. Let me say, in passing, that I entirely support the Government's position in the present dispute. This is something which the Board must settle. I am sure that the Government are right to keep out of it, and I am sure that the noble Lord, Lord Robertson, who is here, would endorse that sentiment. I know that the Board have been trying for some time to negotiate a new labour-productivity agreement with the unions and the present work-to-rule action is of course the union's riposte to the Board's refusal to make a flat-rate increase. In my view, as I say, the Board are right to refuse a further increase without a new and more realistic productivity agreement. Past experience, unfortunately, confirms that they will never get the productivity agreement unless they insist on agreement before giving the rise.

The average railway wages grade is £21 10s. a week. So it is nearly £1 above the average of all industries and services. Therefore the hardship claim, which used to exist, is no longer there. This does without doubt bring us back to the fact that increases of wages there, as anywhere else, should be matched by increased productivity. The need in British Railways is very great. Wages amount to no less than 64 per cent. of total costs in the railways. This is an enormously high figure. Let me say that wages and salaries together amounted to £342 million, against the total revenue earned of £438 million, in 1967. These figures dramatically illustrate the urgency of a radical new deal to make labour more productive on our railways. One can illustrate the point. If wages were to rise another 10 per cent., and revenues were to fall another 10 per cent., the total revenues would hardly be enough to pay the total salaries and wages bill.

This excellent White Paper on Railway Policy was very guarded on the prospect of improvements in labour productivity. I would refer noble Lords to page 17, paragraphs (d) and (e), where they say in paragraph (d): Postulated improvements in locomotive and crew utilisation and in wagon working might prove slower and more difficult to realise. Then, further, they say: It will prove difficult, even with special help, to reduce manpower at the rate implied in the forecast. Yet it is evidently vital for the future of rail solvency, even on a reconstructed basis, to achieve just this. I presume that the consultants whom the Government employed were asked to investigate this problem, and have given advice on it. It would be most interesting to know what the advice was. I wonder whether noble Lords opposite will be able to tell us what is the present measure of railway manning; what can be done to improve the situation.

We are all familiar with the things that we see—the double manning in the loco cab, and so on—but we realise that this is only a small part of the picture. I make the point that when the nation is being asked to agree to write off this huge sum of £1,317 million we are entitled to ask on behalf of the shareholders —that is to say, the nation—what is happening about this; what is the measure of the problem of overmanning, and what is being done to cope with it. I expect I shall be given the answer that appears in the Railways Report of last year: that there had been a rundown since 1961 of 180,000 men, and 20,000 in 1967. Well that is good as far as it goes. But that is obviously only a beginning, and goes only part of the way.

I come now to the second part of my Amendment; that is, the provision for redundancy. In this connection I was interested to see the new clause proposed by the noble Lord, Lord Lindgren, which appears on the Marshalled List of Amendments with regard to redundancy. In my view, the British Railways Board cannot make a worth while new deal with the unions unless the Government give them a little elbow room to negotiate. I do not mean now at this minute: I set this over a period of 18 months to two years. You cannot expect to buy the rule book for nothing—nobody has ever done so. This time, I want to see British Railways make a deal which really clears away restrictive practices. But that cannot be done just on a straight wage negotiation; it must be something much bigger. This really would affect our railways for the 20th century role we want them to have.

There is, I would suggest, a reasonable precedent for this. In the Coal Industry Act 1967 there was provided a sum of £130 million in order to ease the rapid rundown of manpower in the mines over the following four years. I do not know what would be needed in regard to British Railways, but Clause 42 provides the large sum of £700 million for future borrowing. So they obviously have plenty in hand there. I know that it would be worth a considerable sum to the nation to get the railway manpower situation on a fully efficient level, and it would be a wonderful thing for them. It must be thoroughly bad for everybody to have the kind of overmanning that I believe exists at present. I do not know what reduction would be involved, but I am sure the Ministers must know. I do not want to embarrass them by pressing them to give an answer—indeed, I am sure that they will not give an answer.

I am not asking that this should be done now; the present wage dispute must be settled and the men must get back to work. But, looking ahead over the next 18 months, this is something that must be done. At the present time we just go on limping from one wage dispute to another. I wish that the noble Lord, Lord Robertson of Oakridge, were here. I do not know whether he would feel inclined to talk about it—possibly he could not. We all like the people on the railways, whether they are in the salaries or wages grades, and when we are modernising the capital structure I want to see the manpower structure modernised at the same time, and it is in that spirit I move this Amendment. I beg to move.

LORD CARRON

This is an interesting Amendment, and I agree with most of what the noble Lord, Lord Nugent, has just said; but I question whether this Amendment is the right way to do it. Productivity agreements, if they are bona fide, and if they fulfil the purpose for which they are intended, can produce the substantial results which have been referred to. I have experienced some which have produced results, to both management and work people, of a first-class order and in the process have improved efficiency out of all recognition.

The Amendment calls upon the Board by not later than January 1, 1970, to draw up an agreement with the railway trade unions. Having some small experience of negotiations I have learned that it takes two to make a bargain. If the Railways Board are conditioned by legislation to agree with the unions by January 1, 1970, I suggest that if I were the chief negotiator I would say "This is a superb encouragement to me", but I should not be quite sure that the results in efficiency, and the return to the Railways Board, would be what the noble Lord has in mind. In my opinion the people arranging these matters must be left with freedom of discussion and liberty to negotiate. I hope, with the noble Lord—and I assume everyone—that arrangements of this kind could be brought into being. Vast improvements could be made in British Railways, and in other undertakings in the United Kingdom, both public and private, if substantial productivity agreements were entered into. But it is the easiest thing in the world to enter into this Kind of agreement in which there is little to produce efficiency, and it can produce entirely the reverse result. I have seen this occur on many occasions.

While not disagreeing with the desire to bring into being a sensible and workable productivity agreement which would benefit the Railways Board, the work-people and the nation, I do not think that laying it down in those terms would necessarily achieve the object.

With regard to the latter part of the Amendment, I would fully agree that adequate and proper provision should be made for redundancy if such an agreement could be brought into being. If people are to be displaced I think it is our bounden responsibility that they should be provided for in the event of redundancy.

LORD BOWLES

I am grateful to my noble friend Lord Carron for his helpful speech. There is not much more I wish to say about this, except to point o at that the effect of the Amendment would be to require the Railways Board to draw up and agree with the railway unions a new labour productivity agreement by January 1, 1970.

I must resist this proposal because it is clearly unrealistic to impose a statutory requirement on two parties to reach an agreement by a particular date. What would happen if they could not reach agreement by that date? A statutory obligation on the British Railways Board would greatly weaken their negotiating position.

The second reason for resisting this proposal which I should like to put before this Committee is that British Railways already have an effective redundancy agreement with the unions and have achieved considerable increases in productivity in recent years. For example, as I am sure the noble Lord will know, the number of "traffic units", which means passenger miles combined with freight net ton miles, per employee, has risen by 28 per cent. during the period 1963 to 1967.

Far-reaching negotiations on pay and efficiency have followed the Prime Minister's meeting with the Railways Board and the unions in March, 1966. These talks have led to proposals from the British Railways Board for pay increases in return for greater productivity.

The effect of the financial re-structuring in the Bill is to remove the safety net of deficit financing with effect from January 1, 1969. The British Railways Board will be standing on their own feet, and will be faced with a tough financial remit. This gives them the strongest possible incentive to adopt an effective manpower policy, since, as the noble Lord said, about two-thirds of their total costs are related to manpower.

With regard to the question raised by the noble Lord about the Joint Steering Group, it was rather difficult on the spur of the moment to get all the information I wanted, but the Government do not want to become involved in any discussion about what the Joint Steering Group meant when they used the phrase "special help" in relation to redundancy costs. The Joint Steering Group did not look at this point in any detail and made no specific recommendation.

I take personal responsibility for suggesting that tonight we should not discuss in much detail this most unhappy rail situation. I had notes that I have ruled out and I am not using tonight, in the hope that no hard feelings might be raised by any unfortunate remark that might be made in this Committee.

I invite the Committee to resist this Amendment.

LORD NUGENT OF GUILDFORD

I thank the noble Lord, Lord Bowles, for his reply. Of course this is not the kind of Amendment that I intended to press in any event, but I thought in view of the importance of Clause 42 this was an occasion when a comment of this kind was apposite. In a moment I shall withdraw the Amendment.

The noble Lord, Lord Bowles, claimed that a good deal had already been done, but my comment would be that it is nothing like enough, and I believe we all know that. I think I have said enough to express my view, which I am sure would find a great deal of support throughout the country quite independently of any political view which we may hold. The railways belong to all of us; we want to see them succeeding and giving a good service. It is terribly demoralising to be constantly "in the red", and of course it is terrible to have a waste of manpower. I feel most strongly on this and I do not feel it in any sense of antagonism towards the railwaymen. I was fortunate in having something to do with them when I was in the Ministry of Transport and I like them very much, but I feel this is something which will need help from the Government. The Board alone will not be able to do it, and while I certainly take the point made by the noble Lord, Lord Carron, that one should not put a date on it, I put a date in my Amendment because I think the present state of affairs should not be allowed to go on for ever. Somebody has to try to do this one day, and I hope the Government may feel that in inviting us to write off this huge capital sum they have an obligation to try to crack this problem over the next year or two. It really is a major problem which desperately needs cracking. It is in that sense that I moved the Amendment and now ask leave to withdraw it.

Amendment, by leave, withdrawn.

On Question, Whether Clause 42 shall stand part of the Bill?

VISCOUNT SIMON

Before we agree that the clause stand part of the Bill, I would ask the noble Lord, Lord Bowles, two questions for elucidation. Unfortunately, I was unable to be in the House for the Second Reading of the Bill, but I read the OFFICIAL REPORT and I do not think these matters were dealt with in quite the manner in which I hoped. The noble Lord, Lord Nugent, has spoken of the very serious situation arising from the need to write off this enormous amount of capital. I want to ask the noble Lord whether he would agree that if £300 million is now assessed to be the realistic capital of the railways on which they can be expected to pay interest, does that not in fact mean that about two-thirds of the expenditure of the last 10 years has been an unsatisfactory investment, because the expenditure in that time has been something of the order of £1,000 million.

My second question is this. I think I am right in saying that the Minister in another place, in the course of the discussions on this Bill, said that there would be no continuing subsidy to the Railways Board. But is it not a fact that in so far as the interest which has to be paid on the outstanding Transport Stock exceeds the interest which the Exchequer will receive on this £300 million, there is in fact a continuing subsidy to the railways?

LORD BOWLES

I am grateful to the noble Viscount, Lord Simon, for raising these two points. They are to me very technical indeed, and I wonder whether he would allow me to send him the answers in writing? The noble Viscount indicates his assent, and I am much obliged.

Loup HAWKE

I should like to make one point on this clause, which I have constantly made before in this House, and that is that if the nation writes off enormous sums of capital from the railways, on the other side of the book the railways should hand over surplus lands to the nation. They have a tremendous amount of surplus lands, and they are still not doing very much with them.

Clause 42 agreed to.

Clauses 43 and 44 agreed to.

Clause 45 [Duty of Freight Corporation and Railways Board to review organisation]:

8.15 p.m.

LORD WINDLESHAM moved Amendment No. 127: Page 66, line 4, after ("require") insert ("but at least once every three years").

The noble Lord said: Under Clause 45 the British Railways Board and the National Freight Corporation have a duty to review their organisation and report to the Minister. They must make their first report within a year, and subsequent reports as and when they are felt to be necessary or if they are called for by the Minister; and copies are to be laid before Parliament. All this is praiseworthy, so far as it goes, but we feel that a review of the organisation not less than once every three years would introduce some systematic regularity and would give continuity to what could otherwise become rather a dead letter.

Obviously, the first review of the organisation will be carried out, as it must be, but the future practice which is envisaged, that further reviews will be made only when they seem to be necessary or when the Minister specifically calls for them—which will probably be because something had gone wrong—is, we feel, leaving it rather too open. Therefore, the three-years period is suggested only in order to introduce some period of time. If it were felt that the period should be five years or ten years, we should welcome it. It is for those reasons that we have tabled the words on the Order Paper and I beg to move Amendment No. 127.

LORD HUGHES

This Amendment is identical to one which was negatived in another place last March, and I am afraid the way in which the noble Lord has moved it now indicates that he is suffering some of the same misapprehensions that Opposition Members felt in another place on that date about the purpose of these reviews. The reviews are intended to determine whether the direction of the Board's and the Corporation's activities is organised in the most efficient manner. The reviews are not intended to cover the efficiency of individual services, nor the internal management of individual units.

Subsection (1) gives the Board and the Corporation the duty of requiring them to carry out further reviews, as the noble Lord has said; and, as he also said, it gives the Minister the duty of requiring them to be carried out whenever this appears necessary. This might be in less than three years if a particular form of organisation proved unsatisfactory. We must bear in mind the diversion of effort which is involved particularly in the time of senior officers in undertaking a major review, and that a particular scheme of organisation will often take time to prove itself. So the reasonable thing—a thing which reasonable men would want to do —would be to give a promising form of organisation an undisturbed period of time to work itself out, and that might not be possible within a period of three years. The provision of this Bill is similar to that in respect of the British Steel Corporation in Section 4 of the Iron and Steel Act 1967, and no such limitation as this was made in that Act. I would go further and say that no such limitation as this was even suggested in relation to the activities of the British Steel Corporation. We feel that it is not sensible to fix a maximum interval for these reviews but that it is right they should take place either when the judgment of the Board or that of the Minister dictates that circumstances warrant a further study.

This does not mean that people do not need to know what is happening inside the railways, to some extent at any rate, because, after all, the annual reports of the Corporation and the Board are to be available and they will give a great deal of information—information similar to that which appeared to be sought in the debate in the Commons Standing Committee—and of course the information given in these annual reports can be debated. I would point out that the 1967 Report of the Railways Board was published on May 13, and that of the Transport Holding Company on June 11.

I invite the noble Lord, Lord Windlesham, to withdraw his Amendment, because the reviews which he seeks to have at such fixed intervals are not necessary for the purpose of seeking the sort of information which was debated in another place and which will be available, by and large, in the annual reports. It is desirable that so major an operation as a review of the kind contemplated in the clause should take place as and when required, whether it is at an interval of less than three years or of more than three years.

LORD WINDLESHAM

I did not use the argument that a regular review was needed every three years in order to produce information because I do not believe that is the point here. I think that what we were discussing earlier about the contents of the Annual Reports is much more relevant. I too had taken the point, although I may not have made it clear, that I do appreciate these are reviews of organisation and not just inquiries into some aspect of the operations of one of the Boards or the Authorities. But we come back really to what the noble Lord, Lord Nugent, was saying so persuasively on the last Amendment, that huge sums of public money, over £1,000 million, are being written off.

The noble Lord, Lord Robertson, told us that there had been too much chopping and changing and politicians should leave some of these things alone to try to get a really good organisation; and we wholeheartedly support that point of view. But why is this clause here at all? One can see the need for the initial review of the organisation, but why is the power put in the Bill? If this is just going to be used as and when it is thought necessary by the Board, they do not need this power. If a public authority wants to conduct an investigation to review the way in which it is organised it is perfectly free to do so. It does not need to take a special power.

I do think this is perhaps something that the noble Lord might look at, because he has introduced a number of arguments in reply which I had not actually raised. Leave out the three-year period; let us say a period of years, perhaps five, perhaps seven. Leave out the point about seeking further information, because I do not think that is really what lies behind this. It is just this: are the public going to be convinced that the Railways Board and the other authorities have their organisation set up in such a way that the public are going to get value for money? If the noble Lord can give us any sort of assurance on that, we will withdraw the Amendment. If not, I do not think we want to press it at the moment but we might want to come back to it at Report stage.

LORD HUGHES

It may well be that in looking at the merits or otherwise of the Amendments we have tended to concentrate too much on the period of three years. I do not know whether, if we substituted five, seven or ten years, it would necessarily make the Amendment any more acceptable. Certainly I would like to be certain in my own mind that I was not looking at the particular tree labelled "three years" and forgetting the rest of the wood. I will certainly undertake to have a look at this, and perhaps I could have a word with the noble Lord, Lord Windlesham, before the next stage.

LORD WINDLESHAM

I thank the noble Lord for that reply and beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD WINDLESHAM moved Amendment No. 128: Page 66, line 12, at end insert ("and also representatives of the users of the services provided by the Board and the Corporation.")

The noble Lord said: It has already been pointed out that there is very little reference in the Bill to the interests of users or consumers. In the debate on Amendment No 101 moved by the noble Lord, Lord Donaldson of Kingsbridge, he explained his desire to see consumers represented, not just in a consultative capacity, which he felt was ineffective, but in some instances by representatives of consumers going on to the boards of the new Authorities. I do not know if there are any fine distinctions. It has been said there are great difficulties in defining consumers. I do not see any distinction between consumers and users; to me they are the same people. And I think that although Lord Donaldson represents organised consumer interests, and we are talking about people who use the services, we are fundamentally talking about the same people. The two noble Baronesses, Lady Elliot and Lady Horsbrugh, added their very knowledgeable and authoritative voices against the proposition that it is just too difficult to pin down and decide who is a consumer or who is not. They, together with the noble Lord, Lord Donaldson, have been concerned with representing consumer interests and explaining exactly who are the sort of people to represent those interests. I believe that if the people who recommend appointments to the boards were to sit down and think about the sort of person they should appoint, if they needed to have a representative of users, they would be able to do so.

When the noble Lord, Lord Winter-bottom, replied to the earlier debate on Amendment No. 101 he was able to hint, although rather guardedly, that the Government might be sympathetic to what might be called the consumer or user line of reasoning. The object of this Amendment is a rather narrower one. It is to ensure that before reaching conclusions in consequence of a review of organisation the Railways Board and the Freight Corporation should consult. In the Bill as it was originally drafted I think the clause ended there. But as a result of discussions in Standing Com mittee in another place the additional line was tacked on saying that there should be consultation with staff and trade union representatives. We believe if there is to be consultation, which seems worthwhile, with trade union representatives, there should also be consultation at the same time with representatives of the users. It is for these reasons we have tabled this Amendment. I beg to move.

LORD HAWKE

I think this is a very important Amendment. I do not regard it as a sort of balancing act, that if you consult trade unions on the one side you must consult somebody else on the other. But anybody who has had anything to do with railways will know that they tend to segregate themselves into a sort of dream world of their own and their object becomes to run trains with the utmost of perfection. In fact, I know two general managers whose spare-time hobby when they came home in the evening was to play with toy trains. The result is that the golden mean of a real railwayman tends to be to achieve the greatest perfection in the running of the trains quite regardless of whether he is providing the type of transport his customers really want. I think this calling in of the customers on this review is a very important operation in order to give the railways some light on what people think of them.

LORD HANKEY

I would like to add my word to what the noble Lord, Lord Hawke, has said. I believe it is extremely important that the transport service should be in touch with the people they have to serve and that the people they serve must be able to give very valuable opinions on the services when these periodical reviews take place. I earnestly hope, therefore, that the Government will see their way to accepting this Amendment.

LORD BEAUMONT OF WHITIEY

Unlike the noble Lord, Lord Hawke, I do think there is some point in even a balancing act. More and more we should get to the stage where, as often as possible, employer and consumer and employee should consult over a great number of things. In principle, I am entire y in favour of this Amendment. I wonder, however, as it has been said that this is about the first time we are really getting the consumer into this Bill, whether he should come in at this particular moment on what appears to be a very high level, a very technical internal review, or whether we ought not to concentrate more on seeing that he is consulted in some of the more general and consumer-oriented facets before we tackle this particular one.

LORD HUGHES

I hope that the last thing I would succeed in doing would be to persuade any of your Lordships that I was not concerned about looking after the interests of consumers, whether of railway services or anything else. As the noble Lord, Lord Beaumont, has suspected, this is not the place at which this should be done. I must say in advance to the noble Lord, Lord Windlesham, that having regard to the most friendly and conciliatory way he is putting all of his Amendments, I regret that I cannot be at all helpful on this one, simply because I think that the Amendment embodies totally the wrong thing to do. This would be the equivalent of inviting the customers of a large public company to be consulted as to how many directors there should be on the board, or how many divisions and what divisions should be directly responsible to the board, because the purpose of this review and the purpose of the consultation is, as the words imply, "so far as regards the direction thereof".

There is a reason for distinguishing between the consumer and the trade unionist in this case, because the trade unionist has a quite direct interest in the way in which the industry from which he is getting his livelihood is organised. It is because of the acceptance of the modern concept that more and more the workman should at least know, or have some idea of, what is going on in the organisation or reorganisation of the business in which he is employed, that this is imported into this particular clause.

Users as a class have the protection of the duty which the National Freight Corporation and the British Railways Board have imposed upon them to have due regard to efficiency, economy and safety in the provision of their services. Moreover, as has been said time and time again, the boards are under the financial duty of at least breaking even, and it must be obvious that unless they can satisfy their customers they will not be able to meet either their statutory finan- cial duty or their financial target. Detailed complaints by the user about either passenger or freight services will be able to be referred to the T.U.C.C.s, and Clause 45(4) provides for all reports under subsection (1) to be laid before Parliament. Thus, there is reasonably adequate safeguard of user interests in a more practical way than by arranging for the boards to consult them about organisational reviews.

After all, at the end of the day, what the customer is interested in is in the service or lack of service that he is getting from the railways, not who are the directors, nor who are on the Board, nor what their responsibilities are, nor who is responsible for looking after this division or that division. It is the results which come from these boards.

In the Bill the necessary opportunity is given for the consumer to be represented and to be in a position to make known his point of view in these matters. I most sincerely suggest to your Lordships that, to seek to give the consumer an interest in the way in which the board of directors is constituted, or how it purports to carry out its job, is a mistaken concept.

LORD WINDLESHAM

I think the noble Lord, Lord Hughes, following on what the noble Lord, Lord Beaumont, said, has a point in saying that perhaps this is not the best moment at which to pursue our argument on the safeguarding of user interests. Nevertheless, we feel that this is a matter which has been worth again drawing to the attention of the Government. It was discussed extensively in Committee in another place, and I think one of the reasons why it has continued to run is that the Minister, who was a junior Minister, speaking for the Government at that time is thought to have given some encouragement in a reply. I think, therefore, that some members of the Committee on subsequent stages thought that there might be a softening of attitude here. The noble Lord, Lord Hughes, has been extremely clear and frank in his reply. I do not think that this is the time to press the interests that we have of consumer and user, and I therefore beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 45 agreed to.

Clauses 46 and 47 agreed to.

Clause 48 [Manufacture, repair and supply]:

8.33 p.m.

LORD BESWICK

Before we move on, I wonder whether we might consider the situation so far as time is concerned. As I understand it, the convenience of the Committee would best be suited if we took the whole of the Amendments on Clause 48 together. At the beginning of to-day's Sitting, I said that in view of the transport situation outside it would not be convenient to go beyond 10 o'clock. I wonder whether the noble Lord, Lord Nugent, and other noble Lords opposite, can give some indication as to whether in their judgment we shall be able to complete the debate on Clause 48 in the time within which I undertook that we should do?

LORD NUGENT OF GUILDFORD

Parliamentary time is always unpredictable, but I should have thought that the answer was, Yes. Our Amendments are all linked together on a single point which really goes to the heart of the clause itself, and does in fact give the basis for a debate on the Question, That the clause stand part. I believe that a debate of that kind would suit noble Lords on the Liberal Benches as well. No doubt the Liberal Benches will make plain their view, but the view we took was that this clause was debated at great length in another place on a whole series of Amendments in regard to all kinds of industries that were interested. But in view of the limited time we have here, we felt the right thing to do was not to go into a long series of Amendments but simply to have one debate on the principle of the clause and to be satisfied with that. We felt that this would be for the convenience of the House. So we are quite willing to co-operate.

LORD BESWICK

I am obliged to the noble Lord. I hope that we can have the understanding that if, for reasons not immediately apparent, the debate appears to be going on much longer, nevertheless we should accept that 10 o'clock should be the time at which the House be resumed.

THE DEPUTY CHAIRMAN OF COMMITTEES

My difficulty is that I have to put Amendments Nos. 131 to 139A inclusive, unless I am told that they will not be moved. Is it the case that the Amendments of the noble Lord will not be moved?

LORD NUGENT OF GUILDFORD

If I may, my Lord Chairman, I will move Amendment No. 131 and at the same time discuss all the other Amendments in the names of my noble friends and myself. Then, when that has been done, if the Government accept them all, of course we shall be delighted; but if they do not, then we may perhaps not pursue them and move to leave out the clause as a whole, which will be the correct procedure.

LORD BEAUMONT OF WHITLEY

We shall be quite happy to have a general debate on Amendment No. 131 and then, after the general debate, to decide whether or not we should seek to remove the clause.

8.38 p.m.

LORD NUGENT OF GUILDFORD moved Amendment No. 131: Page 68, line 24, after ("power") insert ("subject to the Minister's approval").

The noble Lord said: In the circumstances, I beg to move Amendment No. 131. I hope that it is convenient for your Lordships that we should proceed in the way suggested. I shall not spend much time in describing exactly what our Amendments do, but they would have the effect of requiring that an authority or a board mentioned in this Bill which was contemplating engaging in manufacturing or selling under Clause 48 would first have to establish that there is a lack of such capacity in private industry.

As I say, this really goes to the heart of the clause. This clause (it was Clause 45 in the original Bill and is now Clause 48) has aroused, as noble Lords opposite know, universal opposition throughout both industry and trade, because it allows these boards and authorities to go into manufacture or trade in almost anything they like. The qualifications of subsection (2)(a) are almost unlimited. This is in line with the words spoken by the Minister of Transport last autumn, in promising a major extension of public ownership. Clause 48 provides the power to do just that. I must make it quite plain to the noble Lord, Lord Shepherd, and his noble friends that we on these Benches are completely opposed to this.

First, we consider that it is unnecessary for these authorities in carrying out their main business of transport; and, secondly, we consider that for the national economy as a whole a further extension of state trading is dangerously weakening. At the present time, with the vulnerability of our economy, and when we are desperately concerned to pay our way, anything dangerously weakening is something we simply cannot afford to do.

Let me deal first with the trading needs of the boards and authorities. The present position rests on the 1962 Act, Section 13. This allows all boards and authorities to manufacture anything they like either for their own requirements or for any other board or subsidiary, but not to manufacture for sale to outside customers. I should be the first to recognise that there are marginal problems that arise, and in the interests of authorities and boards I should be willing to consider a carefully and very limited power to meet them. The sort of problems I have in mind are that there may be seasonable troughs of demand within an industry when there is spare capacity which could be sold outside; but I would make the caveat that this could be linked to faulty demand projection or faulty management.

But before power was taken to meet either of these problems, the most stringent inquiry would be needed to ensure that the spare capacity had not arisen simply through faulty management. After all, in private business if there is faulty management, and therefore surplus capacity, this suffers the penalty that it must be declared at a loss or carried unproductively. But there might be a small residual problem remaining to be catered for here in very circumscribed circumstances.

The third possibility is that spare capacity may arise of a chronic large-scale nature—for instance, as it is in the railways now—which can be dealt with only by a specific investigation to consider whether resources should be switched into some new development. That kind of investigation should be done with the authority of Parliament and, if there is to be such a switch, with the specific approval of Parliament. Here I think it is worth making a point which has been made before: that diversification confers no automatic salvation, and development into unfamiliar fields does not necessarily mean that profits will be made comparable with what the experts there are already making. You have only to look at the experiences in a field like Shorts, of Belfast, with their unhappy results, to see what may happen when diversification is wrongly made. There is a great tendency for everyone to think that the further fields look greener. There is a further point which has been made before here by the noble Lord, Lord Robertson of Oakridge: that British Railways, for instance, would be very reluctant to open up some new line of trade, in competition with their customers, for their main business of providing rail transport. The obvious result would be the maximum loss of good will.

However, I would make the general point to the noble Lord, Lord Shepherd, that if the Government were willing to remove Clause 48 and come back to a clause of a strictly limited nature, with effective safeguards to deal with the kind of marginal problems I have mentioned, I should be prepared to advise my noble friends to give such a clause a fair consideration on its merits. I acknowledge that the Government have made a small concession in subsection (7), but it falls very far short of the kind of provision I am thinking of. But our general position on these Benches is that, having accepted the existence of the previous nationalised industries, and indeed lived with them and helped them to develop over our thirteen years of Government, we want them to have every chance of trading success and to make the maximum contribution to the national economy.

This brings me to my second point. We consider that a further extension of state trading is weakening to the national economy. The post-war record of nationalised industries gives ground for this anxiety. The total investment by taxpayers is of the order of £12,000 million, and the record over these twenty odd years of written-off capital and revenue deficits amounts to over £3,000 million, against interest paid to the Exchequer of about £2,100 million, so that the accumulated net loss over the twenty years on this huge capital sum of £12,000 million of the taxpayers' money is £900 million. This is the reverse of a good investment for our people, and no-one would say that people generally feel that they have a service which is at a particularly low price or at a particularly high efficiency.

This is really not a record which justifies a further plunge in the same direction which the Government now imply or take the power for in Clause 48. A few months ago we debated the general problems of running the nationalised industries. In a very interesting and, I think, objective debate—and I certainly do not propose to traverse that broad and fascinating subject to-night—we observed the inherent difficulty of devising a financial discipline which would take the place of the consequence of making a loss and ultimate insolvency which is the spur for every private business. As every private business lives with the trading risk of the market and successfully trades at a profit or goes under, so each private business is bearing its share of the nation's trading risk. This is the basis of a healthy economy, but neither at the national level nor at industry level can anyone for long go on spending more than he earns. Sooner or later we are all bound to suffer, and indeed as a nation we are now going through this painful process following our default of last year.

The weakness of the nationalised industry sector in this context is that it is shielded from these ultimate disciplines by the Government of the day, whether it is the Party of noble Lords opposite or the Party to which I belong who are in Government. The Government of the day cannot let the industry go, they must make the taxpayer pay the losses as well as providing annual capital. Do not let us forget that we pay between us some £800 or £900 million a year in providing capital for the nationalised industries. We pay that out of our taxes and it amounts to just about the equivalent of the whole of the capital formation of private industry of the whole country. It is a very heavy burden for the economy to carry.

Here is a sector of the economy which, however good the performance of some of its members—and they are good—is continuously in danger of being a passenger in the national economy, carried on the back of the private sector. Whichever side of this Chamber we sit on, we have to face that we have not yet found effective safeguards against this danger. The record of the last 20 years shows I this. There may be cogent political, social or economic reasons for maintaining certain nationalised industries, cogent both to noble Lords opposite and to ourselves. But it really is self-evident that there are overwhelmingly cogent reasons for keeping the nationalised sector within strictly limited bounds, and in my opinion this Government has already been most unwise in the major nationalisation measures it has followed.

The private sector is the sector which makes our exports and bears the risks of the markets of the world. I am not one to plead for individual industrial interests. I am concerned here with the national economy. I am convinced that the private sector is the goose which lays the golden eggs on which the nation lives. It is in the interests of all that this should not be further diminished by a further increase in nationalised trading by Government action, and it is in that spirit that I beg to move the Amendment.

8.50 p.m.

LORD BEAUMONT OF WHITLEY

This is another clause on which we in our Party would appeal to the Committee very strongly, since it opens the way to a large degree of creeping, petty nationalisation. We are not opposed to nationalisation as such—we probably started it. But we think it should be applied only to very special situations and under very tight control. In dealing with controls, I associate myself with the remarks of the noble Lord, Lord Nugent. If the Government had given way rather more on Clause 41, we should be feeling a little happier about this. We feel that it is the questions of under-cutting, loss-making, cross-subsidisation and not very clear accounting that are the real dangers.

Unless anybody should suspect that this is just a bogy thought up on the Conservative and Liberal Benches, let me raise briefly a case which I have already quoted in your Lordships' House. This involved tree transplanting by the National Coal Board. I complained that the National Coal Board had transplanted trees for local authorities at what they called cost price, which ignored overheads and was in danger of putting out of business a great many private firms that had put a great deal of capital into this socially valuable business. The noble Lord, Lord Beswick, replying to the debate said—and I quote from Hansard of January 31, 1968, Volume 288, column 854: As another example of unfair competition, the noble Lord made complaint of the National Coal Board's tree-transplanting unit. I am sorry he raised this matter, because I must say that I thought this was an example of public-spiritedness on the part of the National Coal Board, and certainly what they have done has, I understand, met with the approval of the Civic Trust, who have encouraged local authorities to plant more trees. They are able to plant more because they are able to plant them more cheaply by using this machine which the National Coal Board has at its disposal; and as this means that the machine is being used more fully, the N.C.B. is able to spread its charges. This was said in the middle of replying to a lengthy debate. I am not saying anything personal about Lord Beswick's reply, but I think that the reply is symptomatic of the kind of attitude which can apply to nationalised industries. Of course it is a good thing to transplant trees; of course it is a good thing, if people want it, to sell harmoniums on the banks of canals. And of course the National Coal Board can do the first more cheaply if they disregard the overheads; and of course the Waterways can do the second more cheaply if they disregard the overheads. Noble Lords on the Benches opposite want to see that this does not happen, but it is one of the things which tend to happen in this kind of situation.

I do not see any reason why a great number of these powers should not be let out to private enterprise. There are enormous advantages which public enterprise has, even if the tightest financial controls are applied, particularly when it is a question of garages, newspaper kiosks or sweet shops, or whatever it may happen to be, at places where passengers get on the trains or the boats, which are owned by the public. I do not see why the boards and authorities should have this particular advantage. As the noble Lord, Lord Nugent, said earlier in the debates on this Bill, it is simply committing further money and resources in a field where the financial disciplines which operate on private enterprise do not exist. We believe that this is sheer empire-building on behalf of the nationalised industries. We think that it ought to be resisted. We very much hope that the Government will give considerable con- cessions on this point, and we very much hope that they will do as Lord Nugent has suggested; that is, to take this clause away and come back with one on the rather narrower lines which he outlined.

LORD BALFOUR OF INCHRYE

My noble friend Lord Nugent of Guildford has deployed clearly and powerfully the viewpoint which we on this side of the Committee hold. He has made an offer which I hope Her Majesty's Government will consider. There is only one point that I should like to raise. I refer to the danger inherent in the phraseology of subsection (2)(a) which says: …to repair for outside persons, anything which the authority consider can advantageously be so manufactured… The word "advantageously", if it is not more closely defined, is full of dangers. An advantage can be an economic advantage; it could also be a social advantage.

As I foresee the matter, if a board is carrying out some activity in a difficult area with heavy unemployment, and is under heavy pressure to interpret the word "advantageously" in the social sense and irrespective of the economic results of its operations, it may feel entitled, and indeed obligated, to continue something which is uneconomic in itself and would certainly bring distress to others in the private sector who are engaged in the same type of operation. That is one particular danger I see. Had Her Majesty's Government come forward with other words instead of "advantageous"—for instance, "to commerical advantage"— I should have been somewhat happier in my mind. But I am extremely worried at the looseness of the words as at present put forward in the Bill.

LORD ST. HELENS

In the acceptance or rejection of this particular clause is a basic principle which demonstrates the deep cleavage between the two sides of the Committee. I can speak only for myself, but personally I do not wish to see the extension of the public ownership sector. I think that it is already too big; and already it imposes unfair competition against the private sector of commerce. Already to-day the private enterprise sector is dependent on the State for coal, electricity, gas, steel; and when this Bill becomes law it will be dependent also for its transport. Frankly, I think it is too much. We are, after all, "a nation of shopkeepers." If we wish to survive, we have to make a profit in the world overseas. If the Government are to introduce such a revolutionary innovation as is enshrined in this clause, they should either justify the case on economic grounds or require each undertaking, before branching into a new venture, to demonstrate to the Minister and to the public that it can manufacture more cheaply and to a higher standard than can the private supplier.

I do not believe that we on this side of the Committee are against reasonable powers. For instance, we believe that the railway workshops perform an admirable service to the country. But there is this difficulty. If the railway workshops are allowed to buy a very expensive piece of equipment and to use it for a different purpose, in order to compete with private enterprise, this becomes most unfair competition. Yet that is what the clause which we are debating would allow.

LORD SHEPHERD

Could the noble Lord tell me why it is unfair competition, if it is on a commercial basis?

9.0 p.m.

LORD ST. HELENS

Because the railway workshops use the taxpayers' money, which is yours and mine, to buy a piece of equipment for a specific job and then use it for a different job. That is wholly unfair and I should have thought any fair-minded person would have realised that.

We do not object to the ancillary and reasonable jobs that are done. For instance, the restaurant and catering services of British Railways are obviously necessary, and so are the ancillary and emergency facilities in the road transport sector. It is the trading powers beyond the ancillary and emergency facilities to which we object. If the Minister, as I am sure he will, makes light of this, I shall only say to him that I am not fussed about the immediate future. Indeed, as I said earlier, it is very easy to make light of a piece of legislation by saying, "Of course, the intentions of the Minister are not to use it in a drastic way". But we are legislating for 10 or 15 years ahead, and the present intentions of the Minister do not matter. What we have to worry about is how these powers are going to be used in the future.

I suggest that your Lordships go down the High Street and try to pick out which shop will not be affected by the powers given under this clause to the nationalised industries and to their subsidiaries, which are most important because whatever powers are not directly given to the various Boards are given to the subsidiaries. Petrol, oil, spare parts, secondhand cars, all motor accessories, newspapers, books, stationery, whisky, gin, wine, minerals, tobacco, coal and other fuels, electrical appliances, television and wireless are all included within the powers given under this clause.

We do not believe that the present vague proposals in relation to accountancy will allay the fears of the private sector of industry. We want to know—and we are not going to be told—how much capital at current value is employed in each separate undertaking, and how much of the nation's resources is going to be employed in these nationalised industries, particularly under Clause 48. We also want to know the basis on which the capital value of land, property and other assets is going to be employed, because there is no indication of this in the Bill. Yet all this is desperately important, because until we have this knowledge it is quite impossible to make a judgment as to what is unfair and what is fair competition against private industry.

We want to have a vastly greater amount of information. We want to know the detailed accounts of the direct labour forces. This has hardly been mentioned at all and yet there are large direct labour forces employed. We want to know how these forces fit into the accounts of the nationalised industries. It is only through knowing these factors, particularly about the direct labour forces, that we and the country will be able to assess whether or not in any particular sphere there is wasteful competition.

In short, we believe that the railways should concentrate on running the railways. Goodness knows, they have enough on their plate at the moment. We believe that they should provide the necessary facilities for passenger and freight transport. It seems to me that we come down to an argument in which each side is saying, "Anything you can do, we can do better". We say, "Fair enough, but we believe this is not the moment to decide this most important issue". What we are saying to the Government is, "Prove it, or put it to the vote".

LORD POPPLEWELL

I agree wholeheartedly with the opening remarks of the last speaker, the noble Lord, Lord St. Helens, when he said that this clause represents the cleavage of opinions on both sides of the House. The rest of his speech indicated the difference between us. I was extremely interested to hear the noble Lord, Lord Nugent of Guildford, say, "We have lived with and helped to develop the nationalised transport industry". I think the noble Lord, Lord St. Helens, gave a complete answer to that, by the number of items which he, with his very vivid imagination, felt this clause would enable the Railways Board and the transport undertakings to produce. If that is the type of help and development that has been given to the nationalised transport undertakings in the past, one can understand the deficit of £12,000 million referred to by the noble Lord, Lord Nugent of Guildford.

That is the type of help that the Tory Party gave during the whole time they were in office. They changed what was a profitable undertaking paying all interest charges, meeting all working costs, and showing a profit up to 1953. I think the House will be getting a little tired of my repeating these figures, but I do not think I can repeat them too often because that type of help and development has turned a profit into the huge deficit to which the noble Lord, Lord Nugent, referred.

I was very impressed when at this late stage, after opposing all development of the nationalised transport industry, the noble Lord asked—is it really death-bed repentance?—for the clause to be taken back, and for a limited clause giving the Board and the Authorities some right to produce. Is this action sincere? Why did they not do this in the past? When the Opposition were in power for so long, why did they deliberately curtail the powers of the transport industry to develop? They closed down railway workshops galore and at the same time put railway work out to private enterprise, making railwaymen, who were pro ducing these goods at a fair economic price, redundant in the interests of private enterprise. This is the type of development that Lord Nugent referred to as taking place in these 13 years.

I was very interested, too, in the suggestion (I think from Lord Nugent and also Lord St. Helens) that there probably is a case for utilising the spare capacity in railway workshops. That does not quite tie up with what has been happening. Indeed, it does not tie up at all with what has been happening because, as I have said previously, railway workshops have been closed down. Those railway workshops which have been allowed to remain have seen spare capacity arise in their workshops and the work that they were doing has gone outside. Is this the type of development that we have to pay any attention to? It was suggested, I think it was by the noble Lord, Lord Balfour, that there was objection to the "advantageous" terms in this particular clause, and the noble Lord wanted to introduce the phrase "commercially advantageous". In the past, the railway workshops have been able to produce everything on a commercial basis, but have not been allowed so to do.

The noble Lord, Lord Balfour, of course, envisaged that in a time of difficulty it would be possible for railway workshops to be utilised with a view to helping towards the solution of the problem of unemployment that might arise in a given area. In other words, he thought that this nationalised undertaking should accept some social obligation. Here again, of course, this represents a complete difference between both Parties on this particular point. We look to private enterprise to accept some social obligation, but one knows very well the type of people involved and what has happened in times gone by. They are hard-headed businessmen, and when they embark upon any particular project the economic scrutiny that takes place with regard to feasibility goes very deep indeed and is very searching.

One knows the type of development that there was under the Tory Party. One remembers that they refused to allow the railways to produce their own diesel motive power unit, and the electric motive power unit is produced by outside firms. In the past the railways have always produced their own motive power unit—the steam locomotive. The railways provided the jigs, they carried out the experiments and they provided the prototype of the diesel locomotive, and then, under the auspices of the Conservative Party, that was handed out to private enterprise. It was the railways themselves which had conducted the research in these particular directions. It was the railways themselves which had produced the prototype for the electric locomotive. Yes, the railways themselves produced the prototype of the electric locomotive; and the old British Transport Commission, before it was changed, authorised development for electric traction, but that was delayed for many years. The prototype was in their workshops in the first instance, and then that again was handed out to private enterprise. This is the type of encouragement and development that we hear the noble Lord, Lord Nugent, talk about.

VISCOUNT BRIDGEMAN

May I interrupt the noble Lord for a moment? Is he suggesting that the electric equipment was designed in British Railways workshops?

LORD POPPLEWELL

What I am suggesting is that the prototype of the type of motive power unit required was largely developed there. "Fully developed" is not quite the right way of putting it; I accept the correction. The research—I think that is a better word—took place there. I stand corrected. The research that took place was done by the railways people. The development was handed over to private enterprise—and that is the whole background story of what took place.

The need for some strict financial discipline in publicly-owned undertakings was referred to particularly by Lord St. Helens and also by Lord Nugent. This is most interesting. The so-called strict financial discipline imposed by the Tory Party in their years of office led to the Railways Board having to go on the open market to borrow money at 6⅞ per cent. to pay interest on money already borrowed at 3½ per cent. This was the financial discipline of the Tory Party. These are not fairy tales; these are facts. All this talk of so-called financial discipline when it comes to publicly-owned undertakings is merely to cloak attempts to work the publicly-owned undertakings competitively and then to hand over any opportunity of making a profit to private enterprise. Here again we come back to where we started. This is the heart of the difference.

When the old British Transport Commission wanted to go into electrification to produce their own power, either through coal-fired or other generating stations, the influence of the Conservative Party was used to stop or to hold up for years any such development. In the interests of what? In the interests of oil—oil from the Far East; oil that put us to the double trouble, consequent on the blockade of Suez, first, of having to be transported the long way home and, second, of pinning our economy—as far as railways traction was concerned—on a material that we had to import. Common sense commercial prudence would have dictated that the Board be given the green light to use electric traction, to utilise their own resources and so to save the nation many millions of pounds on our balance of payments. This is the story. I sincerely hope that when my noble friend replies, he will not be beguiled into promising the noble Lord, Lord Nugent, to corn e back with a much more limited clause— although, as I have said, it indicates some sort of death-bed repentance on the other side that they are prepared at least to envisage some type of commercial viability in the limited number of railway shops that are now available. They do not envisage giving them full scope; but they now are prepared to go part of the way. Can we really put trust in this in view of what has been said? I think one must take the lessons of past history. History has taught us just how much reliance we can place in this direction.

One Amendment says that before any development should take place the consent of the Minister must be obtained. If this is put into the Bill we are back to where we were. I think that, generally one must leave it to the Board, and allow them to utilise their own commercial judgment instead of being subjected to the political control. This has been exercised in the past to the degree I have indicated. Now I think it should be left entirely to those who are appointed to run our transport industry. Of course these may be directives that require political judgments at the highest level, for example, in connection with economic circumstances. But these are the only kind of political directives that I should like to see imposed on the Board.

VISCOUNT MASSEREENE AND FERRARD

Is the noble Lord, Lord Popplewell, telling the Committee that the Swindon railway workshops could have made diesel traction engines cheaper than private enterprise? The Swindon workshops were not tooled up for that. There were shops in the country that were tooled up. If British Railways were going to make them themselves they would have had to have new factories.

LORD POPPLEWELL

I did not refer to the Swindon railway workshops. The Derby workshops provided the diesel prototype. I did not complete my story when I was referring to dieselisation and electrification and to pinning our transport economy on oil. The cost of a diesel motive power unit in 1963, according to the then Dr. Beeching, was £24,000 more than an electric locomotive of a similar horsepower. If we consider the capital needed for overhead lines and think of saving £24,000 on each motive power unit, that would have gone a long way to paying for the overhead lines.

VISCOUNT MASSEREENE AND FERRARD

We have written off £1,200 million of capital on the railways, and my opinion is that if they had made their own engines it would have been more like £2,000 million. To get back to the Amendment, which I strongly support, there are two great objections to Clause 48. The first is that this is the largest extension of nationalisation that this country has seen. It is an extension through many diverse activities and it is being brought in through this Bill in a rather underhanded way. Subsection (2)(a) gives authority to manufacture anything. Paragraph (b) gives authority to enter into the retail trade. It would even be possible to set up a hairdresser's shop and sell Brylcreem.

The authority appears to be unlimited. We all know that a large part of the present financial difficulties of the economy is due to Government expenditure. If the Government propose to embark on this extension of nationalisation, people abroad who have lent us £3,000 million, are not going to be very happy. It seems to me to be madness in the present state of the British economy. The Government appear to have a fetish about public ownership at any cost, irrespective of whether it may completely ruin the economy and destroy the standard of living of the people. As I have often said before in your Lordships' Chamber, I object to the Government's entering into the various aspects of private industry and doing so at the expense of the taxpayer.

What on earth is the point? I have said ad nauseam that the Government get the major part of the profit of private industry by taxation, without taking any risk—road taxation is an example. Why should they go into the garage business, the petrol business, the machine shop business or any other such form of activity? The noble Lord, Lord Balfour of Inchrye, referred to the word in subsection (2)(a), that the authority could do anything which might be done "advantageously". Why "advantageously"? The point is profitability. It may be advantageously no doubt to the authority, but the word I should like to see is "profitably"—with profit and efficiency. I cannot condemn this clause too strongly, because it is unfair competition. If nationalisation is to be extended so largely, it ought to be by a special Bill. I do not believe the public really understand what is happening about this clause. With these words I will sit down, but I must say that I deplore the whole procedure regarding this clause.

LORD SHEPHERD

I wonder whether I could intervene for a moment? Perhaps I may help to put the Committee out of their misery. I am not sure how far the last speech helped the case of the noble Lord, Lord Nugent of Guildford, who made a cogent and in some ways philosophical speech. I am bound to say that some of the other speeches have tended to take us into cloud cuckoo-land. Certainly the noble Viscount seems to have nationalisation as a permanent midnight dream—if the noble Viscount dreams.

In view of the lateness of the hour, I should like to bring the Committee back to a sense of reality. I do not think that there is any dispute, at least between the two Front Benches, about the fact that we have a mixed economy. I would agree with the noble Lord, Lord Nugent of Guildford, when he said that private industry is the key to our industrial future. However, I am sure he would agree that private industry depends and must continue to depend on the nationalised industries. It might well be that some of the nationalised industries have not done so well in terms of profit and loss account as some of us would have expected, but it is true that the major nationalised industries took over industries which were in a very bad way, and in a bad way throughout the world. But they are essential to our economy.

I am sure that the noble Lord, Lord Nugent of Guildford, would agree, having taken the greatest interest in the railways, that the railways can show a higher increase in productivity than perhaps any other industry in this country. It has seen a remarkable reduction in manpower, yet carries about the same amount of freight. I agree with the noble Lord that we need to see a greater increase in productivity but that takes time as we are dealing with human nature. I decry the noble Lord's "snide" remarks about the nationalised industries in general. I think he should consider what has been done in the coal industry, where we have seen a major change. Only a nationalised industry could have done this. I am sure that the Committee would commend all those who have been in command of the coal industry on what has been done in recent years.

I think that the noble Lord, Lord St. Helens, was right. This clause shows a fundamental cleavage between the two Parties. We fought about it in 1964, and I am prepared to read what we said in our 1964 Manifesto. I am prepared, also, to read the 1966 Manifesto, when we said we should seek to find a greater diversification among the nationalised industries so that they should have a greater share in the national activity. But could we no' now consider the situation that arose from Section 13 of the 1962 Act? That allows the authorities to manufacture for their own business or for that of any other nationalised transport undertaking; but they may not manufacture for outside customers. Just consider what I can only call the stupidity which arises because of that limitation. First of all, the Boards are unable to do many things that they are equipped to do and which it would be perfectly sen- sible to allow them to do. For example, they cannot manufacture replacement parts for equipment which they have previously disposed of. In other words, if they have. surplus equipment and they sell it—and nobody has said that they should not sell it—even though they manufacture the replacement part, they are not permitted to sell it to the person who bought the equipment front them. Surely, that is the height of stupidity.

They cannot refuel, wash or provide any services for any outside vehicle which calls at one of their establishments on business. That is not particularly efficient. They cannot supply food which they have processed in their own canteens to any other person's business. The Railways Board cannot enter new or expanding outside markets for containers. And we know that the British Railways Board is one of the leading manufacturers, one of the major developers, in this new exciting method of transport. At the moment, they can manufacture for themselves, but all that they know and all that they can do is not to be available for the nation as a whole. That is the present position.

Arising out of the Act which the noble Viscount, Lord Mills, took through this House, we have spent some £16 million in the British Railway workshops on extensive facilities for the production of a wide range of castings, stampings, pressings and machine components. I suggest that it would be unrealistic, having invested that large sum of money, that we should not use those assets to the maximum. Surely, this is the issue: that if we have invested public money (and I do not see any difference between public money that has arisen through the collection of taxes or by savings and the personal savings put into what is called the private sector; it is all capital; it is all savings that have arisen from the national activity) we should utilise it to the maximum. If we have these assets is it not right and sensible that we should use them to the full?

I would say the reverse. Would it not be utterly scandalous if we had assets standing by completely idle for weeks and months, with men who are skilled in a particular operation being put into the unemployment queue, merely because we have a statutory provision on State capital and the method in which that State capital can be used? I suspect that there are many more businessmen sitting on the Benches opposite than on this side, but I cannot believe that any noble Lords who are in business would accept the philosophy of what is being put to us this evening: that you have assets and do not use those assets to the full. I do not believe that that case stands up.

But I do accept the matter that exercises many noble Lords and the Conservative Party directly: that these assets of these very large organisations could be used to the detriment of some small private company. I do not deny that certain provisions in this Bill may have an effect on some small private organisation. But in terms of the national wellbeing and national development this happens from time to time. It was noble Lords opposite—and they take a great pride in this—who brought the Resale Price Maintenance Bill through your Lordships' House and through another place. It caused great difficulty within the political Party opposite. In fact, I believe that on one occasion in the Committee stage they had a majority of one, but here was an effort to bring about greater competition in the country and anyone who has any knowledge (shall we say?) of the small shop that sells confectionery and cigarettes knows the effect of the competitive strength of the bigger stores and the chain stores upon the small shopkeeper, which is most marked. But in terms of increased efficiency, is it to be said that noble Lords opposite were wrong to bring in resale price maintenance? I think noble Lords opposite were quite right in what they did; my only objection was that they did not do it many years earlier.

I accept that there must be some safeguards in this matter, and I would commend to the noble Viscount, Lord Massereene and Ferrard—I do not know whether he has read anything other than Clause 48 of the Bill—to read subsection (3), which says that an authority shall not engage in new activities unless they are satisfied that they can do so without detriment to their main duties. In other words, the authority cannot undertake any form of activity that is to the detriment of their main duties. Subsection (4) requires the authorities to submit to the Minister for approval from time to time proposals as to the manner in which activities are to be carried out under existing manufacturing powers authorised by Section 13 of the 1962 Act or under the new powers of Clause 48(2), for manufacture, repair and sale to outside customers.

Subsection (5) says that the Minister shall approve proposals, subject to modifications and conditions. In giving his approval the Minister may make modifications or conditions, and he may direct a discontinuance of activities. Subsection (5) also requires the Minister to publish proposals approved by him and to send these to the Confederation of British Industry and to the Trades Union Congress. In other words, proposals that have been approved will be made available to the C.B.I. and the T.U.C. and any other interested party, and if there is any suspicion of unfair trading, action can be taken. Subsection (7) requires that the authorities shall act as if they were a company engaged in a commercial enterprise when carrying on activities under the new powers of subsection (2). All those activities of the Boards in their new field, whatever it may be, must be carried on as commercial enterprises.

The main development on the passage of this Bill into an Act will be the railway workshops. Here that part of the Railways Board is to be set up as a separate company with separate accounts. It will be treated as any other public company, and therefore there will be no question of this company's being able to operate unfairly. Subsection (8) empowers the Minister to direct disclosure of information in annual reports. I think the noble Lord, Lord Nugent, and also the noble Lord, Lord Windlesham, would agree that the report and accounts of the public bodies make infinitely greater disclosures than the type of reports that I see in the financial Press or any of the accounts which I receive from those companies in which I am lucky enough to have some shares. A great deal of information is contained in these reports, and in the case of the railway workshops I have not the slightest shadow of doubt that the same amount of information will be made available.

Therefore, I hope the Committee will accept that we are not embarking here on a major nationalisation Act, because that is not so. We believe that the State organisations have assets, which from time to time are not fully used. We believe also that there are assets which could be developed. The organisations have new skills available. I think it would be wrong to deny this opportunity to any company that has knowledge, skills, and something to exploit from some development and research that it has done. This country can advance only if we develop these skills. Clearly the noble Lords opposite will say, "The private sector can do it"—but can we really afford to say that, if the State sector has something to offer, some skill or some new knowledge from research, it should not play its part, not only in terms of our industrial development but also particularly in the field of exports?

There is a balance. We want to see the development of the whole of our industry, a greater use of our assets, whether private or public. You cannot get this by putting some statutory and rigid curb either upon one sector or upon the other. On the other hand, we have sought to meet, and I believe we have met, most of the, fears that were expressed in the other place—at least the fears that could be met by the various provisions which are in the Bill and which ensure that the State industries should not have an unfair advantage and that they should operate commercially. I say to the noble Lord, Lord Nugent, that of all the Amendments before us there is one—Amendment 137, which was discussed in another place—where we certainly can meet the principle that lies behind it. This Amendment certainly would reduce some of the fears of the noble Lord, Lord Nugent, but it would need to be redrafted in terms of the clause as a whole. All the Amendments we have here, except Amendment 137, are too restrictive; they all seek an end which ultimately cannot help the national well being or the development of our State industries. I hope this House, for once, will cease to regard the State industries as being beyond the Pale. They are an essential part of our economy, and I wish to heaven we could get some support and some encouragement from noble Lords opposite.

VISCOUNT DE L'ISLE

Listening to the noble Lord I had the sense that I was back in the House twenty years ago and I woke up and found Lord Shepherd still speaking. By first of all Providence and, secondly, heredity, he is the second Lord Shepherd, and he speaks with the same facility as his revered father. 'There are some differences in the arguments he advances. I think there is less primitive faith in the power of nationalisation per se and perhaps a greater understanding of the problems facing the nationalised industries. But surely, trying to divorce it from too partisan a view on either side, this is to a certain extent a matter of accounting. We are not adopting in our arguments the same methods of accounting. I have had some experience of private industry.

It is always a bore to talk about one's experience. Perhaps in this House one is allowed to do so if one is not too long, and I see the noble Lord looking at the clock. There is always a tendency in industrial endeavours of all kinds to build up empires. It takes place in private enterprise and it takes place in nationalised industry.

In private industry, the profit and loss account, or a percipient manager, looks through the whole organisation and sees upon which part there is not a profit yield. Sometimes there are a great many concealed losses in these organisations. They are concealed because departmental managers, the chairmen of subsidiary companies, use exactly the same arguments the noble Lord has employed—we have got the assets and we must use them. It ignores how we got the assets, whether they were properly acquired, whether they might be sold with advantage. Sometimes, rather than use the asset it is better to sell it because that means that the rest of the assets can be more economically employed.

I have not the capacity, knowledge, or memory to quote, as the noble Lord, Lord Popplewell, did so fluently, the losses and gains of the nationalised industries. I think it is a matter of common knowledge among all Parties that they have not been singularly successful. I would advance one reason for that, and that is that the assets which they own have not been properly exploited. Before nationalised industries have a right to claim on the national finances. I think they should certainly prove that they would use what they have got more profitably.

I would join issue with the noble Lord on one point. There is a very great difference between capital subscribed individually and voluntarily to an enterprise, and capital provided by the State from the taxpayer. The reason is that those who get the compulsory capital are not usually those who have to find a profit on it, and the discipline, as the noble Lord, Lord Nugent has so amply pointed out, is not the same. I am afraid the subsections which the noble Lord has quoted in order to reassure us that all the people of good will and knowledge, from the Minister downwards, will see that the compulsorily levied capital will be properly and fully employed, do not reassure me. Without wishing to be partisan, I will support Lord Nugent in his Amendment, because I believe that in the national interest all our national assets should be used to the maximum, and I do not think this clause will produce that effect.

LORD NUGENT OF GUILDFORD

May I thank the noble Lord, Lord Shepherd, for answering the debate from his side of the Committee. I think this is his maiden speech on the Committee stage and he seems to be making a habit of coming in for Second Reading. We enjoyed his speech, and as my noble friend has just said, it must have been reminiscent of many in the past. May I say this to the noble Lord, Lord Shepherd, who, had a "crack" at my noble friends behind me, saying that they seemed to be in Cloud Cuckoo-land. I rather wondered whether he had heard his noble friend Lord Popplewell. If he did not, I suggest he reads his speech to-morrow and he will find it is a fairyland few other people live in.

The noble Lord in answering the debate dealt effectively with the problem of marginal production. There is a point there, and the 1962 Act probably did not completely solve it. But this Clause 48 goes miles beyond that and it is completely unacceptable. I would be willing to look at something on the lines I indicated to start with, but that is the absolute maximum, and the safeguards the noble Lord mentioned really are not effective. They are all in the hands of the Minister and their implementation depends on who the Minister is. If it is a Minister who wants a big extension of public ownership, as the previous Minister did, no doubt we shall get it. We feel this should not be done unless there is some very special reason.

The noble Lord referred to the Tory's belief in competition and R.P.M. This does not work both ways. Speaking of the rail workshops, this is what happens: there has not been an order to the one remaining firm of coach and loco builders, Metropolitan Cammell, Laird, since 1961. They have tendered regularly for both locos and for carriages, but in the whole of that time they have not had one single order from British Railways. This simply is not competition, and when noble Lords say that there ought to be free competition with the spare resources of the nationalised industries' subsidiaries in the outside world, it is not the competition that they themselves allow when private industry tries to compete back. The noble Lord is not on good ground there.

But to come to the final point with which my noble friend Lord De L'Isle dealt, I thought, so effectively, the question of financial discipline, this is the major problem of the nationalised industries. It is a problem for noble Lords opposite when they are governing and a problem for noble Lords on this side when they are governing. This is the particular problem for which we simply have no answer. But the answer that we have for the time being is, for heaven's sake! do not have any more nationalised industries until we do know the answer. We simply cannot afford to expand further in this respect. The noble Lord has really failed to answer that point. I gather from the noble Lord that he is not willing to accept our whole range of Amendments, which hang together, though I am glad to hear that there was one little bit that he liked. In the circumstances, I think the simplest thing to do is, by leave of the Committee, to withdraw my Amendments and then to move that we leave out Clause 48.

LORD BEAUMONT OF WHITLEY

To suit the convenience of the Committee we have put all our Amendments together in this debate. My noble friends and I have some Amendments. What I wish to say is that we also are not satisfied with the reply of the Government. We were pleased that they were prepared to accept Amendment No. 137, which I think I am right in saying was a Liberal Amendment in another place. But it does not go far enough, and we also intend not to persist in our Amendments on this clause and to vote with the Conservative Party.

Amendment, by leave, withdrawn.

Resolved in the negative, and Clause 48 disagreed to accordingly.

House resumed.

9.54 p.m.

On Question, Whether Clause 48 shall stand part of the Bill?

Their Lordships divided: Contents, 44; Not-Contents, 135.

CONTENTS
Addison, V.	Hankey, L.	Raglan, L.
Beswick, L.	Henderson, L.	Ritchie-Calder, L.
Blyton, L.	Hill of Wivenhoe, L.	Rowley, L.
Bowles, L.	Hilton of Upton, L. [Teller.]	St. Davids, V.
Brockway, L.	Hirshfield, L.	Samuel, V.
Caradon, L.	Hughes, L.	Serota, Bs.
Carron, L.	Iddesleigh, E.	Shackleton, L.
Chalfont, L.	Kennet, L.	Shepherd, L.
Champion, L.	Longford, E.	Sorensen, L.
Collison, L.	Maelor, L.	Strabolgi, L.
Crook, L.	Milner of Leeds, L.	Taylor of Mansfield, L.
Gardiner, L. (L. Chancellor.)	Peddie, L.	Walston, L.
Garnsworthy, L.	Phillips, Bs. [Teller.]	Wells-Pestell, L.
Hall, V.	Plummer, Bs.	Winterbottom, L.
	Popplewell, L.	Wootton of Abinger, Bs.

NOT-CONTENTS
Aberdare, L.	Denham, L.	Mountevans, L.
Aberdeen and Temair, M.	Dilhorne, V.	Mowbray and Stourton, L.
Abinger, L.	Drumalbyn, L.	Newton, L.
Ailwyn, L.	Eccles, V.	Nugent of Guildford, L.
Albemarle, E.	Ellenborough, L.	Oakshott, L.
Alport, L.	Erroll of Hale, L.	Penrhyn, L.
Amherst of Hackney, L.	Falkland, V.	Poole, L.
Amory, V.	Falmouth, V.	Powis, E.
Atholl, D.	Ferrers, E.	Rankeillour, L.
Auckland, L.	Ferrier, L.	Rathcavan, L.
Audley, Bs.	Fisher, L.	Redesdale, L.
Balfour of Inchrye, L.	Foley, L.	Redmayne, L.
Barnard, L.	Fraser of Lonsdale, L.	Rockley, L.
Barnby, L.	Glentanar, L.	Rootes, L.
Beauchamp, E.	Goschen, V. [Teller.]	St. Aldwyn, E.
Beaumont of Whilley, L. [Teller.]	Gray, L.	St. Helens, L.
	Greenway, L.	St. Oswald, L.
Belstead, L.	Grenfell, L.	Salisbury, M.
Bethell, L.	Grimston of Westbury, L.	Sandford, L.
Bledisloe, V.	Hanworth, V.	Sandys, L.
Bolton, L.	Hawke, L.	Savile, L.
Boston, L.	Horsbrugh, Bs.	Sempill, Ly.
Boyd of Merton, V.	Howe, E.	Simon, V.
Bradford, E.	Ilford, L.	Sinclair of Cleeve, L.
Bridgeman, V.	Inglewood, L.	Somerleyton, L.
Brooke of Cumnor, L.	Jessel, L.	Somers, L.
Brooke of Ystradfellte, Bs.	Killearn, L.	Stamp, L.
Buckton, L.	Kilmany, L.	Strange of Knokin, Bs.
Burnham, L.	Kinnoull, E.	Strathclyde, L.
Burton, L.	Latymer, L.	Stuart of Findhorn, V.
Carrington, L.	Lindsey and Abingdon, E.	Swinton, E.
Chelmer, L.	Lloyd, L.	Templemore, L.
Coleraine, L.	Lothian, M.	Terrington, L.
Colgrain, L.	Lucas of Chilworth, L.	Teviot, L.
Conesford, L.	McCorquodale of Newton, L.	Teynham, L.
Cork and Orrery, E.	Margadale, L.	Thurlow, L.
Cottesloe, L.	Massereene and Ferrard, V.	Trefgarne, L.
Craigavon, V.	Merrivale, L.	Verulam, E.
Craigmyle, L.	Mersey, V.	Vestey, L.
Cranbrook, E.	Mills, V.	Vivian, L.
Cromartie, E.	Milverton, L.	Wade, L.
Cullen of Ashbourne, L.	Molson, L.	Wakefield of Kendal, L.
Daventry, V.	Monckton of Brenchley, V.	Ward of Witley, V.
De La Warr, E.	Monk Bretton, L.	Watkinson, V.
De L'Isle, V.	Mottistone, L.	Windlesham, L.
		Wolverton, L.