Lords Sitting of 16 May 1968

Preamble
The House met at three of the clock, The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of St. Albans.

FUTURE OF SCOTTISH REGIMENTS
3.06 p.m.
LORD THURLOW: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government, in view of their proposals for reductions in the Army, to give any details of contemplated reductions or amalgamations in Scottish regiments.]
THE MINISTER OF STATE FOR FOREIGN AFFAIRS (LORD CHALFONT): My Lords, I have nothing to add to an Answer given on May 1 to a similar Question in another place which was:
"No further decisions on the future of any major Army units have yet been taken. Details of further reductions will be given in a statement on defence policy to be published later this year."—[OFFICIAL REPORT, Commons, 1/5/68; col. 1105.]
LORD THURLOW: My Lords, I am grateful to the noble Lord for that reply, but are the Government here in England aware of the special position occupied by each Scottish regiment in the national life of its own area—more so than is the case with their counterparts South of the Border? Is he further aware that Scotland has lost five of its old regiments in recent years, including last month the Cameronians, after 279 years of great service, which I submit is already too high a proportion for a nation of our size? And are the Government aware that there are other regiments which, unlike the Scottish regiments, have still two or three battalions without anything like such a high record of recruiting?
LORD CHALFONT: My Lords, the answer in all three cases is, Yes, the Government are aware of these matters, As
382
a member myself, like the noble Lord, of a warlike tribe, I have great sympathy with the points he has put, and I can assure him that the Government, in coming to their final decision, will bear in mind all these considerations.
BARONESS ELLIOT OF HARWOOD: My Lords, I gathered from the noble Lord that decisions have not yet been taken on the important point of the Scottish regiments. Do the Government want to add fuel to the flames of the Scottish National Party if they do away with regiments like the Royal Scots Greys, the Cameronians and others? I would ask the noble Lord to remember that. Furthermore, if the Royal Scots Greys are disbanded, what regiment will undertake the NATO contribution which is made to-clay by the Royal Scots Greys?
LORD CHALFONT: My Lords, the second part of the noble Lady's Question is based on a hypothesis and does not arise. So far as the first part of the question is concerned, we will bear in mind the political as well as the military implications.
LORD BALERNO: My Lords, may I ask whether the Government are aware that under their new system of divisional reorganisation of the infantry, the Highland Division now has the Lowest number of battalions?
LORD CHALFONT: Yes, my Lords, the Government are aware of that mathematical calculation, but I fear that infantry regiments and other units all over the country and indeed in Wales, have suffered and are suffering from these reorganisations. We are sorry for what has happened, but we have debated all this before and have agreed, I think, that the reorganisations themselves inevitably flow from the larger defence decisions.
LORD LEATHERLAND: My Lords, may I, as one who has not a drop of Scottish spirit in his veins, ask my noble friend to bear in mind in connection with this reorganisation that the most heartening message which any battle-tired unit can hear is, "The Jocks are coming!"?
LORD DRUMALBYN: My Lords, I believe that the noble Lord in his Answer used the word "major" in regard to decisions. Could he say what decisions have been reached already, and could he circulate those decisions?
LORD CHALFONT: My Lords, I think that there may have been a misunderstanding from the use of the term "major unit". "Major Unit" is simply a military expression for a battalion or equivalent unit in the Army and is generally used in Staff duties. When I said "major unit", I was referring to the infantry, cavalry, gunner and engineer regiments of the Army in general. No decisions have in fact been taken. When they are taken they will be announced when the Defence White Paper is published later this year.
LORD THURLOW: My Lords, will the Government bear in mind the fact that the infantry and the armoured regiments are the ones which have far the biggest percentage of casualties in any kind of fighting, be it a small or a large war, and that it is most important that we should have a very large reserve of fighting, regimental manpower?
LORD CHALFONT: Yes, my Lords, of course we shall bear that in mind; but I know that the noble Lord will not confuse reserves for units with the number of units in the order of battle.
BARONESS ELLIOT OF HARWOOD: My Lords, the noble Lord said that decisions had not been taken. Will there be a possibility of discussing this matter before decisions are taken?
LORD CHALFONT: My Lords, when the Government's Statement on this matter is published it can, of course, be debated in both Houses of Parliament, and will be.
LORD FERRIER: My Lords, as a resident of Lanarkshire, may I ask the noble Lord to give an assurance that, before taking these decisions, the Government will give due consideration to the fact that further disbandments or amalgamations will leave large areas without regimental loyalties or territorial backing (I mean territorial in terms of geography), which will have a serious effect on recruiting generally?
LORD CHALFONT: My Lords, I know that my right honourable friend has very much in mind the effect on recruiting, among other things, of the need to reorganise the infantry and Army as a whole, and he will certainly bear this in mind in reaching his decisions.
EARL JELLICOE: My Lords, can the noble Lord give any indication when the further statement on defence policy is likely to be published?
LORD CHALFONT: No, my Lords, I am afraid I cannot give any exact date. It will be later on in the Summer. My noble Leader tells me that it will be near the end of July. That is his guess, and his guesses are usually good ones.
LORD BALERNO: My Lords, could the noble Lord give me an assurance that before the Government come to a decision in this matter they will give full consideration to the fact that the Infantry of the Line are perfectly competent to perform all ceremonial duties which the Army may be called upon to do?
SEVERAL NOBLE LORDS: Hear, hear!
LORD CHALFONT: My Lords, in spite of the "Hear, hears!" which come from my own Front Bench, I think that is a contentious remark and I should not like to follow the noble Lord along that line.
EARL JELLICOE: My Lords, can the noble Lord assure us that the White Paper will, in fact, be published in time for it to be considered and debated in Parliament before the Recess?
LORD CHALFONT: My Lords, that is certainly the intention of Her Majesty's Government.

PRICE MARKINGS ON CONSUMER GOODS
3.13 p.m.
LORD BARNBY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they will take steps to prevent the misleading of the public by the practice (now widely resorted to) of indicating on packages of consumer goods that the selling price has been lowered by an "amount off" clearly printed on the package, thus showing that the revised selling price is the true price and that no discount "is being offered.]
LORD BOWLES: My Lords, the Trade Descriptions Bill includes provision to prohibit a trader from giving false or misleading indications that he is offering goods at less than the price that he has recently charged for such goods. These provisions should ensure that packets printed with indications of a price reduction are not offered unless the retailer does in fact cut his regular price by the stated amount. This Bill, when an Act, will come into force six months after it is passed.
LORD BARNBY: My Lords, it is to be assumed from the noble Lord's reply that the abuse to which I referred will be stopped by the Trade Descriptions Bill. If not, it would appear that the credulity of the community, which has hitherto been accepting such a palpable fraud on its purchases, is very much in need of correction. I had imagined that this practice would still continue, and I appreciate the noble Lord's assurance to the House that under the Bill this absurd fraud will be stopped.
LORD BOWLES: My Lords, if a trader commits a fraud then he commits a crime.
LORD DONALDSON OF KINGS-BRIDGE: My Lords, can my noble friend give me his reassurance that the Trade Descriptions Bill will catch simple variants of the example given by the noble Lord, Lord Barnby, such as "Price elsewhere 25s. Our price 19s. 11d."; or "Price in the West End 25s." The Consumer Council were worried that those evasions might get through, and we shall he glad of a reassurance.
LORD BOWLES: My Lords, the Common's Amendments to this Bill will be before this House next week, and I suggest that that would be the right time to go into the details.

DRUG ADDICTION TREATMENT IN NON-TEACHING HOSPITALS
3.15 p.m.
LORD SANDFORD: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what extra staff and finance they are going to allow to non-teaching hospitals that are being required to treat drug addicts.]
THE PARLIAMENTARY SECRETARY, MINISTRY OF HOUSING AND LOCAL GOVERNMENT (LORD KENNET): My Lords, the annual financial allocations to Regional Hospital Boards take account of expected developments in the hospital service and no special financial arrangements are necessary to meet the cost of staff engaged in the treatment of drug addiction or the running costs of the facilities provided.
LORD SANDFORD: My Lords, I thank the noble Lord for that reply. Is he saying that hospitals other than non-teaching hospitals have so much spare staff and so many spare premises that they can take in their stride this difficult treatment for these large numbers of heroin drug addicts that are coming to them, and give satisfactory service?
LORD KENNET: Not precisely that, my Lords. A sense of proportion should be kept. The annual financial allocations to the Regional Hospital Boards are now about £700 million. The problem of heroin addition is largely concentrated in London. My right honourable friend had provided facilities for about 1,000 heroin addicts, but only about 700 are at present using these. This is not a very big bite out of the moneys available.
LORD AUCKLAND: My Lords, would the noble Lord agree that there are some areas a very long way from a hospital, teaching or non-teaching? And would the Government ensure that staffing facilities are made available, particularly for rural areas where drug addiction could be a problem in the future?
LORD KENNET: My Lords, mercifully it is not at the moment.
LORD SANDFORD: My Lords, is the noble Lord aware that the service which it is possible to render in, for instance, the Queen Elizabeth II Hospital in Welwyn Garden City, amounts to little more than that of a maintenance centre? It is just possible to check that the dose which addicts are receiving is correct, and to give them their prescriptions. It is quite impossible in these circumstances to provide anything that really merits the term "treatment".
LORD KENNET: My Lords, I am not familiar with the conditions in the individual hospital which the noble Lord mentioned. But if he has evidence that my right honourable friend should do more to help the Regional Hospital Board to solve the problem, then I should be grateful if he would send it to me.
LORD SANDFORD: I shall do that.
VISCOUNT BRENTFORD: My Lords, did I understand the noble Lord to say that this problem was primarily concentrated in London? My understanding of the situation was that it was concentrated in most of the urban conurbations throughout the whole country. Is that not correct?
LORD KENNET: My Lords, it is a question of degree. I think the prime and most worrying concentration is in London, though there are subsidiary concentrations in other large cities.
LORD SEGAL: My Lords, can my noble friend give an assurance to the House that the additional work so far imposed on these hospitals through the treatment of drug addicts has not been sufficient to justify any additional recruiting?
LORD KENNET: My Lords, approval has been given for the appointment of staff such as to allow 22 sessions per week by consultants or senior registrars in Regional Hospital Board hospitals—that is, non-teaching hospitals—in the London area. This is all within the financial allocation, and at the moment my right honourable friend is not convinced that that is insufficient.

LONDON TRANSPORT BILL
Read 2a, and committed to the Committee on Unopposed Bills.
HOUNSLOW CORPORATION BILL [H.L.]
Read 3a, and passed, and sent to the Commons.
HOUSING (FINANCIAL PROVISIONS) (SCOTLAND) BILL [H.L.]
Read 3a, and passed, and sent to the Commons.

INDUSTRIAL EXPANSION BILL
3.21 p.m.
THE PAYMASTER GENERAL (LORD SHACKLETON): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Shackleton.)
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL OF LISTOWEL in the Chair.]
Clause 1:
Provision of money for industrial investment schemes
1.—
(2) An industrial investment scheme may be made by a competent authority with the approval of the Treasury: but no such scheme shall be made unless a draft of the scheme has been laid before Parliament and approved by resolution of the House of Commons.
LORD DRUMALBYNmoved, in subsection (2), to leave out "the House of Commons", and insert "each House of Parliament". The noble Lord said: This first Amendment deals with the treatment of industrial investment schemes which are laid before Parliament. The question that your Lordships will have to resolve is: should industrial investment schemes have to be approved by the House of Commons only, or by both Houses? The noble Lord, Lord Shackleton, on Second Reading, said:
"The scheme will take the form of a draft Statutory Instrument to be laid before both Houses of Parliament, being subject to Affirmative resolution of the House of Commons. I think I should mention that this particular procedure has been adopted as appropriate to

389
proposals which essentially involve requests for authority to spend money out of Votes."—[OFFICIAL REPORT, 2/5/68; col. 1207.]
The total amounts provided by the Bill are laid down by Clause 4. Within and up to that amount—that is to say, initially £100 million, capable of being raised to £150 million—the Government will estimate from year to year, I assume, what amounts are likely to be required by particular Departments. Incidentally, may I ask the noble Lord whether the amount required annually will be lumped together in one Vote, presumably the Vote of the Ministry of Technology, or will it be divided up between the Votes of the various competent authorities?
The approval that is required, however, is not simply or mainly approval to spend money out of a Vote; it is surely approval of the industrial investment scheme itself. For example, by Clause 2 a scheme may be made where, in the opinion of the authority, that scheme
"is likely to benefit the economy of the United Kingdom, or any part or area of the United Kingdom …".
That opinion has to be tested and debated by Parliament. If it is only a part of the economy of the United Kingdom, then the question whether it will be of benefit to the economy as a whole will have to be discussed, because it is always possible that a scheme might benefit a part of the economy without benefiting the whole. Noble Lords will no doubt remember that this was the kind of thing that was discussed when the Cotton Industry Scheme was going through your Lordships' House.
Then the question will have to be asked: given that a particular industry should be helped, or that a particular undertaking should be helped, is this the best way to help it? Are the kind of measures proposed in the scheme the right ones? Do they go too far, or do they not go far enough? All these things should be debated in both Houses. There may be more time to debate them in your Lordships' House; and, indeed, there may be more expert knowledge available to debate them here than in another place. I recognise that any such scheme will be laid before both Houses and that both Houses will be able to debate it, but it is the scheme which has to be approved. It is not just
390
the spending of the money but the scheme which has to be approved; therefore it seems to me perfectly logical that the scheme should be approved by both Houses and not simply by the House of Commons. I beg to move.
Amendment moved—
Page 1, line 13 leave out ("the House of Commons") and insert ("each House of Parliament").—(Lord Drumalbyn.)
LORD SHACKLETON: I start off by having very considerable sympathy for what the noble Lord, Lord Drumalbyn, has said, and the matters which will need to be considered in deciding whether to proceed with a scheme of this kind are precisely the ones which, depending to some extent on the size of the scheme and on the particular type of help required, it is in the public interest should be considered. I do not quarrel with the noble Lord at all on that; and he moved this Amendment in his usual reasonable and, if I may say so, convincing way. We really are in a bit of difficulty on this one. It is, of course, arguable that schemes dealing with industrial projects of this kind should require the approval of both Houses of Parliament, but I should like to ask the Committee to consider what is the purpose behind the Bill. To be absolutely fair to the noble Lord, it is quite clear that if one had proceeded by Bill it would have come before your Lordships' House, and the noble Lord did not seek to take advantage of that as an argument against the purpose of the Bill. But there may be quite a number of different kinds of investments, small or large, and the object behind the Bill is to provide a workable and quick machinery for giving support to industry—and, as we have emphasised on earlier occasions, there is no compulsion about it; it will be for industry itself to decide whether it wishes to have the particular help. Therefore I am not seriously concerned—and I do not think anyone would be in this particular context—about the recipient of the aid. The fact remains, however, that there is a great public interest involved, and on a big investment that public interest could be considerable; and it is the sort of matter that should be debated.
However, there is an essential difference between Bills and industrial investment schemes, and we are caught—and I freely acknowledge this—by the limitations of

391
the system we have of delegated legislation. There is no doubt in my own mind —and I went very carefully into this question—that this measure is of a kind that traditionally is not subject to rejection by your Lordships' House. If I may digress for a little to show that I have given real thought to the noble Lord's point, I would point out that there may even be criticism (although this is not the time to express it) as to the extent to which the Commons privilege operates to restrict our consideration, not merely of this but of other matters; and without anticipating possible developments in the future constitution of your Lordships' House, a time may be due when your Lordships' House, which does an extremely good job in regard to Orders, and so on, can play a bigger part. But with the procedure we have now, I am afraid I am bound to ask the Committee to reject this Amendment, although I want to make it clear that the Government are not at all unaware of the contribution that your Lordships' House can make.
We do not as a rule vote against Orders; I do not know when we have voted against an Order in this House. This again is a handicap. It is one of those powers which sound very great but of which we are not able to make much use. This is something which might be the subject of more rational arrangements in future. But if there is a scheme to which there may be serious objections, it would be possible, not to amend the Order, but to try to persuade the Minister to withdraw it altogether and perhaps to produce a different one.
In order to enable your Lordships, if you so wish, to play your part in this process, the Orders will be laid before this House as well as before another place and it will be open to your Lordships to debate them and to bring to their consideration that experience and expertise which is so marked a feature of this House. I have considerable sympathy with the noble Lord, Lord Drumalbyn, in this matter. If I could have found a satisfactory way to meet him, a way that was consistent with practice in regard to such measures, I should have liked to do so. I have gone into it thoroughly—I took a considerable time on it—to see whether I could find such a way; but I cannot. The only suggestion I can offer
392
is that the Government will be only too willing to expedite any such debates. Apart from the pressure on our time-table we have unlimited opportunity to debate anything. I consider this course to be as satisfactory as any. I hope that the noble Lord will not press his Amendment.
LORD ERROLL OF HALE: I should like to add something to what my noble friend Lord Drumalbyn said in proposing the Amendment. We are not proposing anything new; we are not trying to establish a new precedent. Under the provisions of the Industrial Organisation and Development Act 1947, these Orders are to be approved by each House of Parliament. It is one thing to have Orders laid before your Lordships' House; but surely it would be of advantage to the Government to be able to say subsequently that the Orders had been approved by both Houses of Parliament. The noble Lord is concerned that your Lordships might reject an Order and put this House in conflict with another place. I should like to put a more constructive note on our proposal; namely, that Government actions would be enormously enhanced if they were made with the authority of an approval of each House of Parliament and not only of the House of Commons.
The noble Lord rightly referred to the experience and expertise that your Lordships can bring to bear on different aspects of our national life. I think the public will be glad to know that your Lordships have had the opportunity to debate such Orders and, in fact, had positively approved them. We offer this Amendment in a constructive frame of mind, and that is why we hope very much that the Government will see their way to accepting it.
LORD SHACKLETON: I take the noble Lord's point. I hope I made my attitude clear on this. I do not agree with him that the effectiveness of an Order and the authority with which it is put into effect will necessarily be strengthened by the fact that it has received the formal approval of your Lordships' House. I am not very concerned about the danger of your Lordships rejecting such Orders; because in fact this House never does reject them. The theoretical power to do so is there; but this House behaves responsibly. I am not very concerned about that. In any case, I prefer

393
not to bring in the constitutional argument over such a rejection.
My concern is with the financial argument. I admit that there is a certain dilemma here. I think that important issues of procedure are involved; but we cannot, in this Bill, change the procedure. In my investigations I took the trouble to consult Parliamentary Counsel. Although, obviously, I am responsible and not he for what I have to say, the procedure laid down in the Bill is consistent with the best advice that we have and with what we regard as appropriate precedents. On the other hand, I am willing to acknowledge that this is a rather unusual situation. But I do not see how I could agree to this Amendment. If it would help the noble Lord, I would certainly have further consultations on this. I would not want to say this just in order to get the Government out of a difficult spot at the moment; my offer would be a genuine one. But I should be surprised in the extreme if it were possible to make any concession on this point.
May I answer a point raised by the noble Lord, Lord Drumalbyn, earlier? Each scheme will be borne on the Vote, and shown on the Vote, of the Department concerned. It will be itemised. If the noble Lord requires any further explanations I should be glad to give them now or write to him later.
LORD HAWKE: May I make some comment on my noble friend's reference to an Act passed in 1947 which he quoted as a precedent? I should have liked to hear whether the noble Lord the Leader of the House rejected that as a precedent.
LORD SHACKLETON: Like the noble Lord, Lord Erroll of Hale, I happen to be interested in that particular Act of Parliament. I played a part in helping it through another place. There is an element of precedent in it; but it is not a complete precedent. We are dealing with a quite different kind of legislation. Here we are proposing to have Orders which are primarily intended to provide money and it is on the financial side that we get caught. It is not a precise precedent.
LORD DRUMALBYN: I am bound to say that I find the procedure here a little puzzling. I would agree with the noble Lord that it is not a precise
394
precedent; but the fact remains that if the Government had wanted schemes to be approved by both Houses this clause could have been so drafted as to permit it. If it is anything, it is the drafting of the clause that prevents it and nothing else. In principle there can be no reason why this House should not be asked to approve schemes of this type in exactly the same way as they were asked to approve schemes under the industrial Organisation and Development Act The noble Lord, Lord Rhodes, is not in his place, but he will remember having introduced several extensions of the schemes during his period of office, and I remember introducing them in this House.
I may be wrong, but if my memory is correct even the Cotton Reorganisation Scheme came before both Houses. This Bill is doing exactly the same kind of thing, but in the form of an Order instead of an Act of Parliament. As the noble Lord will recall, I mentioned on Second Reading the argument that this Bill is replacing the procedure under which each scheme would have to come before both Houses in the normal form of legislation. That being so, it seems derogatory to this House that such schemes should not come before this House as well. Far my part, I find it difficult to see how it would be possible conveniently to discuss the schemes in this House, even though they are to be laid before this House, for it would mean in every case that we should have to make arrangements to discuss every scheme before it was discussed in the House of Commons—for it would be too late to obtain approval afterwards. I think we ought to press this point. If we press it, the Government will have to take more note of it than even if we abide by the noble Lord's assurance. I must therefore invite my noble friends on this side of the House to support me in this Amendment.
3.40 p.m.
LORD SHACKLETON: Before the noble Lord presses this Amendment to a Division, as I think he is determined to do, may I put this general point? I hope that the techniques of Government, based on experience, advance. When the question of the cotton industry arose I was representing a cotton constituency, and was therefore deeply interested in the problems of the industry, the setting

395
up of the Cotton Board, its operations and so on. These measures went very much further than anything that is provided for in relation to the Industry Boards in most or any of the schemes contemplated in this Bill. To that extent, I would say to the noble Lord, Lord Hawke, that the Industrial Organisation and Development Act is not a precedent. We have learnt from experience of what has taken place before, but the object is to give support to industry as quickly as possible.
When a scheme is negotiated—it may be quite a small one—and is agreed by the firm concerned, it is not likely to be easily susceptible of amendment. If it has to be amended, the whole scheme has to be brought back. What Parliament is doing basically, is deciding whether this is the proper use for the money, whether the money should be provided. It is control over money which is involved and this is why it is so clearly the responsibility of another place. I cannot accept the argument that because we do not have an opportunity to vote on the Order we are thereby deprived of the opportunity to discuss it. The Opposition of the day will, I trust, be alert. This Order will be published, and undoubtedly, if it is a major scheme, there will be quite a lot of information appearing in the Press. The Order will be laid and be open for debate, as soon as possible.
If, when an Order is laid, your Lordships feel strongly on the subject, there is a good deal to be said for this House seeking to debate it before another place deals with it, so that another place will have the benefit of our views without our actually having formally to vote. In certain circumstances we might be handicapped if we decided crudely to reject an Order, because our action might be misinterpreted. But we could put down a Motion which would indicate the ways in which the scheme was thought to be deficient. I think that in many ways this procedure is more attractive for your Lordships' House. I have offered to consider the matter again I admit that I did not offer much in the way of hope, and therefore the noble Lord, Lord Drumalbyn, is perfectly entitled to divide the Committee. But, with the best will in the world, I cannot agree to the Amendment without defeating the whole purpose of the Bill.
LORD CONESFORD: It is with some hesitation that I express a doubt about the views expressed by my own Front Bench. But I feel that doubt, and the reasons are simple. I do not agree with the proposition that, if a modern Statute says that something requires the assent of both Houses of Parliament, it is improper for this House to express its genuine view. I am entirely unable to accept the view so frequently put forward that where a Statute, as many modern Statutes do, give powers to this House by its vote to prevent something from being effected, there is no occasion when this House can properly use that power. If it is not possible for this House to insist on using its power. I should very much prefer that power not to be provided. I think it much more damaging to your Lordships' House to provide in a Statute that your Lordships' House shall have power to reject something, and then to say, when the time comes, that it must not because that would produce some constitutional crisis. I do not agree that it would do so.
The whole question seems to me to be this: is the provision sufficiently bound up with finance to make the Government's choice in the matter a proper one? Frankly, I have not studied this Bill sufficiently to be able to express a confident view, but it seems to me certainly arguable that the view expressed, I gather, to the noble Leader of the House by the Parliamentary draftsman and other experts whom he has consulted is a view which will command a great deal of respect among lawyers. If there is a Division I shall be unable to support the Opposition.
LORD GRANVILLE OF EYE: Following the constitutional argument of the noble Lord, Lord Conesford, may I say that I think my noble friend the Leader of the House has indicated that an Order could be debated in both Houses but could be voted on only in another place. I think we should bear in mind that the practice up to now has been that a Minister has been able to give some sort of undertaking to an industrial concern which has come to the Government with a proposal and has then had to go to get authority for the money before it is passed over. I think that this Bill establishes the ground-lines. The delaying factor is important. Do the noble

397
Lords, Lord Erroll of Hale and Lord Drumalbyn, want to see the affairs of a company like Beach Aircraft, which is asking for over a million pounds, debated in both Houses? In his first speech the noble Lord indicated that everything would have to be discussed—balance sheets, assets, credit worthiness and so on. This could be interpreted only as a delaying factor. Few companies would want to have the whole of their business debated in both Houses and voted on. When the Committee appointed by the Minister has gone carefully into the viability and creditworthiness of the company concerned, I should have thought it important to try to get the matter debated in your Lordships' House and through another place as soon as possible.
LORD DRUMALBYN: I do not follow the noble Lord, Lord Granville of Eye, about the question of delay. That would be within the control of the Government, if approval were required in both Houses, and generally it is more easy to find time in this House than in another place for Affirmative Resolutions of this kind to be brought forward. I do not understand the argument of the noble Lord, and I do not think it is a valid argument. Where the noble Lord has a point, perhaps, is that if every one of these Orders were required to be debated at length, it would be an absurdity.
The point is that there should be the possibility of a debate, and there is always the possibility of our dealing with a scheme in this way. This is a question of investment schemes and it is the schemes which are important, just as much as the amount of money involved. I think that my noble friend has been unduly influenced by the rubric, rather than by the content, of Clause 1. But whatever may be said about schemes under Clause 2, there can be no doubt that schemes under Clause 3, affecting whole industries, are very much more like the Cotton Scheme. Whether or not we say that schemes under Clause 2 should be subject to Affirmative Resolution in this House, I am certain that schemes under Clause 3
should be subject to Affirmative Resolution here.
I hope that the noble Lord will look at this matter again. I should be prepared to concede that schemes under Clause 2 should have a certain level only beyond which they should come before your Lordships' House, but I am certain that schemes under Clause 3 should be debated. If the noble Lord would undertake to examine that point with some hope of success, we could avoid a Division, because this is something that we should press, if not on this occasion certainly on Report.
LORD GRANVILLE OF EYE: I understand that the noble Lord's Amendment provides that no scheme should be sanctioned unless it has been approved by both Houses, whereas the Bill does not require that.
LORD DRUMALBYN: No: that has to be approved by both Houses, and there is no reason why we should not approve it on the same day or before another place. There is no difficulty about timing and there need be no delay in bringing a scheme into operation.
LORD SHACKLETON: I am afraid that I cannot give the assurance for which the noble Lord asks. I was attracted by and looked at this proposal. But, as the noble Lord knows, there is a Schedule which lays down the type of procedure and constitution if an industry board is set up. In the last resort, it comes back to providing money. I have here a long list, if the noble Lord wants to hear it, of the stream of Orders, some of a far-reaching kind, which were introduced by the previous Conservative Government and which were not subject to Affirmative Resolution in your Lordships' House. Much as I should like to look at this again, I have to stand on the financial principle.
3.54 p.m.
On Question, Whether the said Amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 57; Not-Contents, 69.

CONTENTS

Aberdare, L.

Ashbourne, L.

Berkeley, Bs.

Aberdeen and Temair, M.

Auckland, L.

Bessborough, E.

Allerton, L.

Balerno, L.

Brentford, V.

Alport, L.

Barnby, L.

Brooke of Cumnor, L.

Ampthill, L.

Beauchamp, E.

Brooke of Ystradfellte, Bs.

Buckton, L.

Fortescue, E.

Mowbray and Stourton, L

Carrington, L.

Fraser of Lonsdale, L.

Nugent of Guildford, L.

Colville of Culross, V.

Goschen, V. [Teller.]

Ogmore, L.

Colyton, L.

Grenfell, L.

Rankeillour, L.

Craigavon, V.

Gridley, L.

Ruthven of Freeland, Ly.

Daventry, V.

Grimston of Westbury, L.

St. Aldwyn, E. [Teller.]

Denham, L.

Howard of Glossop, L.

St. Helens, L.

Devonport, V.

Ilford, L.

Sandford, L.

Drumalbyn, L.

Ironside, L.

Somers, L.

Dundonald, E.

Lucas of Chilworth, L.

Templemore, L.

Effingham, E.

MacAndrew, L.

Thurlow, L.

Erroll of Hale, L.

Massereene and Ferrard, V.

Trefgarne, L.

Falkland, V.

Milverton, L.

Windlesham, L.

Ferrers, E.

Monsell, V.

Wolverton, L.

NOT-CONTENTS

Addison, V.

Garnsworthy, L.

Phillips, Bs.

Archibald, L.

Granville of Eye, L.

Platt, L.

Beswick, L.

Granville-West, L.

Plummer, Bs.

Birk, Bs.

Greenway, L.

Ritchie-Calder, L.

Bowden, L.

Hilton of Upton, L. [Teller.]

Robertson of Oakridge, L

Bowles, L. [Teller.]

Hirshfield, L.

Rowley, L.

Brockway, L.

Hunt, L.

Sainsbury, L.

Buckinghamshire, E.

Hylton-Foster, Bs.

St. Davids, V.

Burden, L.

Iddesleigh, E.

Samuel, V.

Burton of Coventry, Bs.

Kennet, L.

Segal, L.

Champion, L.

Kinloss, Ly.

Serota, Bs.

Chorley, L.

Latham, L.

Shackleton, L.

Citrine, L.

Leatherland, L.

Shannon, E.

Clwyd, L.

Lindgren, L.

Shepherd, L.

Crook, L.

Llewelyn-Davies of Hastoe, Bs.

Snow, L.

Darwen, L.

Longford, E.

Sorensen, L.

Donaldson of Kingsbridge, L.

Loudoun, C.

Strang, L.

Douglas of Barloch, L.

McLeavy, L.

Summcrskill, Bs.

Douglass of Cleveland, L.

Mais, L.

Taylor of Mansfield, L.

Fiske, L.

Morrison, L.

Walston, L.

Fulton, L.

Moyle, L.

Wells-Pestell, L.

Gaitskell, Bs.

Noel-Buxton, L.

Willis, L.

Gardiner, L. (L. Chancellor.)

Pargiter, L.

Wootton of Abinger, Bs.

Resolved in the negative, and Amendment disagreed to accordingly.

3.59 p.m.
LORD DRUMALBYNmoved, in subsection (3), after "State" to insert "the President of". The noble Lord said: This Amendment deals with a relatively small point compared to the previous Amendment. In every other case where a competent authority is referred to, it is a person—
"the Minister of Technology, a Secretary of State … the Minister of Public Building and Works, the Minister of Transport, the Minister of Power, the Minister of Agriculture, Fisheries and Food and the Minister of Health."
The nigger in the woodpile is the Board of Trade. This Amendment would make the clause read, "the President of the Board of Trade". Sir Alec Douglas-Home did away with this archaic version of the Board of Trade and appointed a person to be President of the Board of Trade, a Secretary of State. The present reactionary Government went back to the old mumbo-jumbo of a Board, on which
400
the Archbishop of Canterbury and the Speaker of the House of Commons sat, and a Board which, so far as I know, never meets.
I concede that the Government are taking a step forward in Clause 14, which gets rid of the need for the President alone, on behalf of the Board of Trade or in his own name, to be able to do certain things and to be the only person to be able to do them. I am simply urging the Government to take this further step, which seems common sense, so that all these authorities should be on an equal footing. May I add one minor reason to assist drafting? I have looked carefully at the Bill and, so far as I can see, the poor draftsman has had to use the word "authority" every time, as he could not substitute "he", "she" or "it". I beg to move.
Amendment moved—
Page 2, line 2, after ("State") insert ("the President of").—(Lord Drumalbyn.)
LORD CONESFORD: With great reluctance, I think again that my noble friend is wrong. This is an entirely legal matter, and I am speaking from memory, but my impression is that the learned draftsman is right. The reason why the other Ministers are named as individuals is that in every case the Statute concerned makes them the competent authority to do this, that or the other. As I say, I am speaking from memory (I was once a Junior Minister in the Board of Trade), but I think the Board of Trade can act as such, and in its own name; and if it is an authority that can act in its own name, that is a sufficient reason for the distinction that is made in this clause. So far as I know, there is no point of principle; it is purely a matter of drafting, and my impression is that the draftsman is right.
LORD SHACKLETON: With this galaxy of ex-Board of Trade Ministers, an ex-President of the Board of Trade, an ex-Parliamentary Secretary and another ex-Parliamentary Secretary, I felt rather nervous about this matter. But, of course, the noble Lord, Lord Conesford, is right, and of course the noble Lord, Lord Drumalbyn, knows it. What I think the noble Lord is suggesting is that we should now change what he regards as an archaic procedure. The previous Government got round this difficulty by appointing a Secretary of State, We, with our great love of tradition, and adapting it to modern sense, are merely removing an intolerable burden from Presidents of the Board of Trade by Clause 14, dealing with this obligation to sign any number of authorities. I do not know whether it was a burden or not. I should be sorry to see the Board of Trade, with its distinguished membership, among whom I am happy to say is the Paymaster General, disappear. It is rather like the National Debt Commissioners. I do not see why the noble Lord should try to deprive me of this important post. I do not think there is any need to do anything about it. We have now arrived at a sensible solution. Clause 14 is an important tidying-up operation.
I do not complain that the noble Lord has raised the matter. It is an interesting point—just a little bit more than a tease, I might even say—if only that it enables one to explain the position. I am sure he does not intend to force this Amendment to a Division, and I hope that he
402
is content with the explanation of the constitutional position which I have not gone into nearly as fully as I might have done, thanks to the explanations given by the noble Lord, Lord Conesford. I think we should do well to stick to this term, being conscious of the fact that we now have an all-embracing Board of Trade powers clause which will tidy the matter up for the future.
LORD DRUMALBYN: I should not like to deprive the noble Lord of the possibility of being described as "a competent authority". Therefore I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
Clause 2:
Contents of schemes
2.—
(2) An industrial investment scheme may authorise a competent authority to provide financial support in any form for the purposes of a project to which the scheme relates, and in particular (but without prejudice to the generality of the foregoing provision) may authorise that authority for those purposes—
(a) to make loans or grants to such persons or bodies as may be determined by or under the scheme;
(e) to subscribe for or purchase by agreement shares in any company specified or described in the scheme or to be formed pursuant thereto;
(3) Financial support shall not be provided under an industrial investment scheme to any of the bodies specified in Schedule 1 to this Act nor, until the dissolution of the Shipbuilding Industry Board, to any person for tae purpose of a shipbuilding undertaking within the meaning of the Shipbuilding Industry Act 1967, and no such scheme shall authorise the subscription for or purchase of shares in any company (other than a company to be formed pursuant to the scheme) without the consent of the company.
4.9 p.m.
LORD ERROLL OF HALEmoved, in subsection (2), after "form" to insert "other than the provision of equity capital". The noble Lord said: It might be for the convenience of the Committee if we took Amendments Nos. 3 and 5 together. If that is agreeable to the noble Lord, I will do so.
LORD SHACKLETON: We may even have to touch a little on Amendment No.

403
6, too. But let us see how we go. I am agreeable to taking Nos. 3 and 5 together.
LORD ERROLL OF HALE: I am most grateful. Noble Lords may remember that in the Second Reading debate upon this Bill the noble Lord the Paymaster General, in introducing it in a most felicitous manner, nevertheless failed to make any mention whatsoever of what is, after all, one of the most controversial features of this Bill; namely, the power which the Government seek to obtain to acquire equity shareholdings in private companies. In my own speech I drew the attention of your Lordships to this matter, and I would not burden your Lordships with a repetition of the arguments to-clay, were it not for the fact that we have not as yet heard the case from Her Majesty's Government why they seek to have this power. Therefore, I will recapitulate briefly.
First of all, there are political objections. We on this side of your Lordships' House see the Government's desire to obtain equity shareholdings in private companies as a form of backdoor nationalisation. By looking at a number of pronouncements by the Party opposite, both when they were in Opposition and since they came into office, we see they have on a number of occasions referred to the desirability of other forms of nationalisation than the traditional forms of the 1945–51 period which made them so unpopular during the ensuing 13 years. One of the alternative methods proposed was that of acquiring equity shares in companies. We have the Bill which would give them the power to acquire these shares. The Government in another place have said, however, that this is not their intention. But it is a very extraodinary feature that they have previously announced that this is what they intended to do; they now bring in a Bill to do it, and yet they say this is not the purpose. So we see in the Bill a scheme for (to use a colloquial phrase) backdoor nationalisation, and we are therefore against the proposal.
I mention this first, because whether the Government admit it or not—indeed, I should prefer them to admit it, because it would be more honourable and more honest if it is their intention—neverthe-less the fact remains that there are very severe practical objections to a Govern-
404
ment, of whatever political complexion, acquiring equity holdings in private companies in this country. So whether the reason behind the Government's decision to seek this power is a political one, or is, as they may well aver later on this afternoon, a purely practical method, the fact is that there are a number of practical objections, which I shall try to put before your Lordships.
All through the Second Reading debate we were assured by the Minister and by other spokesmen on the other side of your Lordships' House that there was to be no compulsion in this Bill. That is superficially extremely attractive. It sounds as though each company will be able to say, "No, we don't want to let you have a share in our equity. No, thank you very much, we don't want it". But of course the Government will retain powers of coercion. They will be able to put forward an offer based on a loan arrangement which will be very much more attractive if they get a share in the equity. While I agree that that is not compulsion, it means a most undesirable form of coercion whereby the Executive can simply get their way by making more attractive offers when equity is proffered in return.
The practical disadvantages of Government owning equities in private companies have perhaps not been properly shown in the past, and I think it needs to be re-stated that a Government holding in a private company in the form of equities is the taxpayers' money virtually lost for ever. If a private individual chooses to invest money by buying equity shares in a company, that private individual can always get his money back, perhaps in greater value or lesser value, by selling shares on the open market and taking a chance on whether the company is successful or unsuccessful. That is what equity is all about. But Government cannot do that for several reasons. A Government shareholding will probably be a fairly large one, and it would seriously disrupt the market if their shares were placed on the market. Secondly, the news that the Government were disposing of equity in a given company would have a very adverse effect on the fortunes of the company. It would be asked, "Why are the Government selling their shares in A.B. Manufacturing Company?" Rumours would fly

405
around; the share price would drop, and that in turn would make it impossible for the Government to realise their money. So the taxpayers' money, once invested in equities, is lost for ever.
I know that your Lordships may well refer to the Government shareholding in British Petroleum (as it is now called). It is a large shareholding, a very large investment, but it is not really of use to the Government or the public because they cannot realise the investment. All the Government get is the dividend declared by the directors of B.P. and nothing more. If, on the other hand, the Government choose to help a private firm by making a term loan, which was the method developed by the former Administration, then the Government get the money back at the end of the term, and that money is then made available for further investment in other companies.
LORD SHACKLETON: May I interrupt the noble Lord, before he leaves B.P.? What more does he think the Government should get? It may have been just a slip of the tongue, but he implied that there was perhaps something more they ought to get.
LORD ERROLL OF HALE: Perhaps I could develop it in this way. It seems as though the Government are much richer by virtue of the capital value of the equity holding, but they are not in fact any richer, because they could not, if they wished to, turn that holding into cash and use it for any other purpose. Whereas a private individual, an ordinary small shareholder, in B.P. could at any time dispose of his holding in B.P. and get the cash instead—in other words, realise in terms of cash the result of wise investment in a successful company —a Government cannot do this. Certainly they cannot in the case of B.P., except perhaps by selling off one or two hundred shares a year.
LORD GRANVILLE OF EYE: Is the noble Lord saying that at no time, after having acquired equity shares in a concern, can the Government sell those shares?
LORD ERROLL OF HALE: It is very difficult for me to be categorical because the Paymaster General has been so remarkably silent on the whole subject. I have had to work on such data as are
406
available to me. But if the Government intend to take a sizeable share in the equity of a company—say 30 per cent. in a public company—that would be, I submit, a shareholding not normally saleable on the open market by Her Majesty's Government's brokers without the sale causing considerable disruption to the affairs of the company. If the Government were going to take only a few shares they would be disposable, but in that case I would say there is no point in taking such a small shareholding. I am assuming that the Government have it in mind to take a relatively substantial shareholding in the equities of the companies in which they invest.
LORD PARGITER: May I intervene? The noble Lord refers to the Government's having a very large holding. So might a private individual have a very large holding. Frequently one does; and also one frequently disposes of a part of it. Could not the Government dispose of a part of their holding if they wished to?
LORD ERROLL OF HALE: I should be very happy to detain your Lordships on this discussion, but I did not want to be long. But if an individual has a large holding it is often difficult to dispose of it. Admittedly he can dispose of one or two hundred shares at a time, but in the case of half a million shares it is going to take half a century to get rid of them in that way. This is a problem particularly for insurance companies with very large equity holdings. Sometimes a company will have such a holding and would like to get out, but it cannot do so because it would get round the market that the insurance company was selling its holding. If that happens in the case of insurance, or of individuals with large holdings, then it will be far more difficult for Her Majesty's Government to start a steady trickle of sale when a company is in slight difficulties, because it would be all round the City of London that the Government were getting out while the going was good.
So no responsible Government—and I am sure that a Labour Government would be particularly responsible in a matter of this sort—could possibly start offloading shares, since they would be accused of having prior knowledge and unloading shares because they probably knew what was happening. So the

407
Government of the day would be stuck with the shares, by and large, although I admit that there are circumstances where a few shares could be disposed of at odd times. Generally speaking, however, Government could not dispose of equity holdings on the open market. The right way, in our belief, is the term loan. The Government get their money back when the term is up, and the money can be used for investment in other companies.
There is another argument that is often used, and that is why, if public money is invested in a company, cannot it have a share in its successes. It cannot participate in the success of the company by the increase in value of the equity, for reasons which I have already given, but of course it could participate in the ordinary dividend. But this is a relatively small matter, and it is a quite different thing from the profits of the company. It might be that the directors have pursued a conservative dividend policy, in which case the Government shareholder might well prove to be less well off than if a term loan had been accepted. Furthermore, Her Majesty's Government are a substantial shareholder in all companies in this country, fortunately without having to own any of the shares, because the Government automatically receive 42½ per cent. of all the profits of all companies without having to put a single penny of equity or other capital into the businesses, through the incidence of corporation tax. So the Government receive that and now apparently they wish to have a dividend on their own shareholding in addition to the 42½, per cent. on all profits, whether or not they have contributed to the capital structure of the company.
Then we are told—and I think the noble Lord the Paymaster General said this in his winding up speech on the Second Reading—that some companies wanted the Government to take a share in the equity. But of course that is no reason why the companies who wanted it should get it. Naturally, some of the (shall I say?) less reputable companies would probably prefer the Government to put the taxpayers' money into the company in the form of equity, because then there would be no need for the company ever to have to return it; and,
408
of course, if the company was not going very well they could pass the dividend and they would not even have to pay interest on the money which had been invested. So it is no argument for this case to say that some companies would like it. I can quite understand that there are some who would, and who would be glad to be relieved of their obligations which they otherwise have at present, of having to pay interest on a loan and having to provide for its redemption in due course.
LORD SHACKLETON: I am sorry to interrupt the noble Lord again, but did he say that all the companies would have to do would be to pay a dividend to the Government? Why is that not satisfactory, as opposed to interest?
LORD ERROLL OF HALE: I was saying that in the event of the company not doing very well they would not in fact have to pay a dividend: they could pass the dividend and the Government could do nothing about it. Not only would the Government not get their money back, because it was an equity investment, but they may never get any dividend either; whereas the advantage of a term loan is that there is little security for the loan, which is repayable at the end of its period, and there is interest to be paid throughout the life of the loan, which is a much better deal for the Government than investing equity money in doubtful ventures.
LORD SHACKLETON: So the noble Lord looks with equanimity on the situation of the company that never pays a dividend? He does not think that the other shareholders might also be interested?
LORD ERROLL OF HALE: It depends, of course, on the size of the Government's equity holding. The Government might end up by being a 90 per cent. holder of all the equity. That is another feature which in a later Amendment we shall hope to discuss in your Lordships' House this afternoon. This is all part of the unsatisfactory nature of the powers which her Majesty's Government are seeking to acquire. I am not suggesting that making firm loans to individual companies is an easy matter. When my noble friend and I were at the

409
Board of Trade we had some very difficult decisions to make on which companies should receive term loans and which should not. I can remember one or two instances where, on the best advice, we made the final decisions and they did not prove successful; others proved successful. These are not easy matters for a Government Department and Ministers to decide, but at least with a term loan one has some form of security (short of the company completely "folding up", and even then one probably would be a preferred creditor), and if the company is successful one not only gets the money back but also a fixed and regular rate of interest.
These are the immediate problems, but the problems of the future are far greater because, regardless of the composition of any future Administration, whether it be of Conservative or Socialist persuasion, the competent authorities will find that willy-nilly they are shareholders in a strange diversity of enterprises and they will have to exercise the responsibilities of a shareholder. I know it is often said that shareholders in this country do not exercise their responsibilities. If they are small shareholders in large enterprises, the shareholders may feel that their particular proxy Notes will not make much difference; there is not much for them to do but sit back and leave it to the big shareholders. But Her Majesty's Government cannot take such a supine attitude. Her Majesty's Government of to-day will have to decide how to exercise their proxy rights if the competent authority concerned does not choose to go, for example, to the annual general meeting in person.
The question of take-over bids will arise from time to time. The competent authority concerned will have to decide whether to support the take-over or to join in the resistance to it. These will be difficult decisions to make. Is it really the job of Government Departments or competent authorities, to use the new collective noun; is it really a task that Parliament should put on Whitehall for the rest of this century, to have to make these very difficult decisions over and over again and in ever growing quantity?—because once you are in, you have to go on getting in more. For example, the company may pay a rights issue. The competent authority will have to decide
410
whether to take up the rights and pay up or to renounce the rights. The competent authority has a 30 per cent. holding. Well, it would not be easy to "flog" rights amounting to 30 per cent. of the equity on the Stock Exchange and hope to get much out of them. There will be anxious debates in Whitehall as to whether the Treasury will provide the funds to take up the rights issue, and all sorts of complications which I do not believe should be thrust on Ministers, competent authorities and officials in Whitehall. For what? Merely so that the public can get a share in the dividends? Or because some companies say they would rather that it was an equity holding?
This is an issue of great and vital principle, and the Confederation of British Industry and the Institute of Directors both saw clearly to the heart of this principle when they expressed their utter and complete objection to this principle in the Bill. I suggest that your Lordships should reject the provision for the acquisition of equity which is contained in Amendments Nos. 3 and 5, and thus clean up the Bill and save Whitehall from many a serious headache in the future.
LORD GRANVILLE OF EYE: I have been trying to follow the noble Lord's argument with great interest. As I understand it, there is nothing compulsory in this. They are not compelled to do some-thing. The form in which Government assistance, if it is granted, is obtained, is a matter of negotiation between the Committee or the Minister and the company concerned. There is nothing to prevent them going to the market to get their ordinary capital somewhere else. But why preclude this? They may want the Government to have some equity in their company; they may want the Government to be shareholders in their company. The case of Beagle Aircraft is one example. Why preclude it?
LORD ERROLL OF HALE: I do not blame the noble Lord for not listening to my speech, because I very rarely listen to his, but I dealt with both those points in my speech. I beg to move.
Amendment moved—
Page 2, line 21, after ("form") insert ("(other than the provision of equity capital)"), —(Lard Erroll of Hale.)
VISCOUNT MASSEREENE AND FERRARD: I should like strongly to support this Amendment. In my opinion it is utterly wrong that the Government should gamble with the taxpayers' money to buy equity shares. Why do the Government want these shares, when through the existing tax structure they get 42 per cent. of the profits anyway? In actual fact they get more than this, because after the dividends have been paid to the shareholders, they in turn have to pay their tax, so the Government really get about two-thirds of the profit in taxation, with no risk at all. Why should they buy equity shares? It is only a form of backdoor nationalisation. It is, "Slowly slowly, catchee monkey". I think it is a rather disreputable form of nationalisation. It would be far better to come out in the open and say, "We are going to nationalise you". It is perfectly all right for a Government to give loans to a company or have a debenture or buy preference shares, but it is not really the job of a Government to use the taxpayers' money in buying equity shares.
4.30 p.m.
LORD HIRSHFIELD: I have been listening to a most extraordinary diatribe, and I hope at least that noble Lords opposite will listen to me. I do not like jobbing backwards, but the fact is—and noble Lords all know this—that if the Government of the day some 15 to 20 years ago had produced this kind of Bill two things would have happened: research and development in this country would have gone ahead much faster and the general assets of the nation, of the taxpayers, of the people up there in the Gallery, would have been greater than they are to-day. What is the purpose of the two Amendments we are discussing? It is to deprive the Government of the power under the Bill to take equity shares in firms in which they invest funds. There are considerable grounds for the rejection of these Amendments. Those grounds include first of all fairness to the taxpayer, and, secondly, public accountability.
On this subject of fairness to the taxpayer, there is really no supportable reason why a public investment should not have the same right to an adequate rate of return from equity holdings as a private investment made by an individual
412
in the same company. The only objection which members of the Party opposite have made is that it means, as we are hearing ad nauseam, back-door nationalisation. The Government have made it perfectly clear that they do not intend this Bill as general enabling legislation for wholesale nationalisation, and their practice over the past three years, when they have provided funds to certain firms and taken equity shares without exercising control over the company concerned, ought to be, and surely is, sufficient evidence of their intentions with this Bill, too. We should be clear that if this Amendment is passed, in deference to the ideological fantasy which it embodies, it is ultimately the taxpayer who will suffer. I see no grounds for this kind of discrimination between public and private money, and when they are both invested in the same firm both surely have a right to the same return.
I heard it said that if the Government put money into equity investment it is lost for ever. I hardly believe that experts in finance on the opposite Benches could really believe that, but just in case they do may I say that it happened that a Government in the Middle East, the Government of Israel, did just this; and had it not done it, industrial expansion and industrial development in that country would not have gone anything like so far and so rapidly as it has. Indeed, it was the trade union movement there and the Government, in a joint effort, that proceeded to put industry into those areas —something like our development areas, if you like—where private enterprise would never have gone because there was not a sufficient profit motive at the beginning. And what is the position now, some years later, in those instances? It is in fact that the Government and the trade union movement in that particular country are now offering to private enterprise some of the equity investment at a profit, and private enterprise is delighted to take it up.
It is a fantasy, and noble Lords opposite know it, to suggest that if a Government hold equity interests, even large ones, they will never be able to sell them. Of course, if the conditions initially are such, they can sell equity investments; indeed a Government can sell equity investments without anybody knowing that it is the Government who are disposing of

413
them. We have all heard of the big nominee organisations in the City that are used, not only by private individuals and companies but also by Governments, potentates and so forth. In this context the Government of the day can be likened to a group of directors. They run the business of the country, and the country is the people and the taxpayer, so they represent the taxpayers, and they, the taxpayers are here the shareholders in the future fortunes and prosperity of Britain.
We have not yet in this short debate heard anything about the vast pension funds, about the vast insurance company funds, about the merchant banks, about the Church Commissioners, the local authorities, and, if I dare to include my own pet charity, the Trade Union Unit Trust.
LORD PEDDIE: It is not a charity.
LORD HIRSHFIELD: What are those pension funds and insurance funds and some of the other funds I have mentioned —for example, the superannuation funds of the municipal authorities? They represent moneys that ultimately belong to a wide section of the community, the working community. And we all know what has been the result of a prudent and wise investment of those funds over the years. I see no difference whatever between the prudent investment of the taxpayers' funds, via the Government, and the taxpayers' and the pensioners' funds via these organisations. In fact it would do a great deal of good.
The other aspect I was mentioning was public accountability. The Amendments would also deprive the Government of the ability to strengthen the control over public accountability of firms which receive public moneys. I welcome the equity provisions precisely because they do that. In recent years the scale of Government assistance to the private section has increased very substantially indeed, and I, along with others, have felt for some time that there is a need to strengthen the means which the Government have at their disposal to scrutinise the use that is made of this money. Indeed, though I do not wish to take up the time of the Committee unduly, I should like to state my conviction that whenever a major investment is made under the provisions of this Bill not only should there he an equity holding but the Government should also use their
414
powers under Clause 3 to constitute a board for the industry concerned, so that the use which is made of public money provided through this legislation can be subject to continuous scrutiny and review.
At present, as we are constantly reminded, the Government have a considerable holding of equity shares in a number of private firms, including British Petroleum, and I should need to be greatly influenced before believing that the body of this country does not believe that that particular investment was a sound one; that quite apart from the capital value, it has brought great prestige to this country in many parts of the world and has brought an attractive income, and indeed some of the investments, some of the shares, could be sold from time to time if we wanted to do this, and might even be bought back again at some other time.
The responsibility for appointing public directors to the boards of these companies lies with the Treasury, who, so far as I have been able to discern, make little use of these powers and leave these directors with no guidance as to what they are supposed to say and do on the boards on behalf of the Government. I believe, therefore, that new machinery is needed where the State takes an equity holding in a firm, and for that reason I welcome the proposed industrial boards.
4.41 p.m.
LORD ALPORT: I am very glad that the noble Lord, Lord Hirshfield, has taken part in this debate on the Committee stage, and I listened with the same care and attention to what he has just said as I did to his speech on Second Reading. I think I am right in saying that on Second Reading he described the seven (I think it was) functions which would be carried out by this scheme in relation to industrial development. I think I am right in saying that one was in relation to the bearing of the risk —that is, risk investment in enterprise.
I look upon this particular problem slightly differently from my noble friend Lord Erroll of Hale, because it seems to me that the Government, by intending to take up equity holdings in companies, are placing themselves not at an advantage but at a serious disadvantage. If noble Lords look at the last two lines

415
of the previous subsection, they will see that an investment of this sort which is undertaken by a competent authority would be undertaken only in those things where it
"would not be undertaken without such financial support as is authorised by this section";
that is to say, they will invest in various industries or companies which would not get financial support in the normal way from private enterprise. In these circumstances, it seems to me quite clear that the type of companies in which this investment will take place will be those in which the risk element is necessarily greater than would normally be accepted by private investment through the City of London or elsewhere. Therefore, not only are the Government saddling themselves with the obligation under this scheme to invest in the riskier sections of industrial development, but they are ensuring that they take a risk investment in these by taking an equity share.
The noble Lord has referred to the investments undertaken by investment managers of pensions funds. I do not think that any investment manager of any pensions fund that I have ever come across would use as criteria for his investment in any company the three criteria which are outlined in Clause 2(1):

"(a) to improve the efficiency and profitability of an industry or section of an industry;

"(b) to create, expand or sustain productive capacity in an industry or section of an industry; or

"(c) to promote or support technological improvements in the processes or products of an industry or section of an industry."

These matters may have a somewhat secondary bearing on the decision taken when investment managers consider the possibilities ahead of a particular company. But I think I am right in saying that they are certainly not the major criteria which an investment manager of any pensions fund would use in deciding on a particular company in which to invest in the interests of the fund, by taking an equity interest.
LORD HIRSHFIELD: Might I say that indeed these criteria might be taken into account by the managers of pensions funds where they are being offered the chance of shares on a new issue? They will consider at that stage certainly for
416
what purposes the money will be used, why the organisations need the money, and whether they are going to use it effectively.
LORD ALPORT: They would certainly be considering it in relation to the return which they expect to get on the money invested. But it is the return on the money invested, the profitability of their investment, that is necessarily the criterion they would use. Therefore I think I may say, with respect, that the parallel which the noble Lord has drawn between this particular proposal and the operation of investments in pension funds or unit trusts, or whatever it may be, is not strictly accurate.
I should like to ask the noble Lord the Leader of the House one or two questions. First, if the Government take a minority interest in a company, is that interest to be subject to the same disadvantages which minority interests suffer when they are held by private investors, or do they always intend that the Government will have a majority interest in the companies in which they invest and take an equity investment? Do the provisions of the Companies Act with regard to investments held by private people apply also to Government Departments when they take an investment in the equity interest of a company? Are the Government going to be on exactly the same terms in relation to other shareholders as a private shareholder with a majority or a minority interest in a company? These seem to me to be important points.
But I should like to stress to the Committee that I really think that by deciding to invest in the equity in the sort of companies which the Government intend or envisage investing in, in accordance with this scheme, the Government themselves are placed at a disadvantage and not at an advantage. May I say that, from my knowledge of the operation of companies, the holder of an equity investment would not always come out best, or even satisfactorily, in regard to the return on the money he has invested. I should have thought it logical and proper for the Government to take some form of preferred share or to proceed on some sort of loan basis rather than take an equity investment in a company which they want to support.

417
It is surely quite wrong for the noble Lord, Lord Hirshfield, to say that unless the Government take an equity investment in a company they may not be able to advance its technological progress. They can do exactly the same thing by making an investment in the form of a loan or a debenture. In those circumstances, I hope that the Government will consider my noble friend's point carefully, because I think that this proposal is based upon a fallacy which in the long run will redound to the disadvantage of a scheme which might otherwise be of great advantage to industry.
4.48 p.m.
LORD PEDDIE: Listening to the comments of the noble Lord opposite, it would seem that he has no objection to the Government's providing capital to private industry so long as it is not of a character that will permit the Government or nation to derive some benefit from growth; no objection at all to providing loan capital, but equity capital must of necessity he the complete preserve of private interests. I thought that the noble Lord, Lord Alport, in commenting upon my noble friend's speech, seemed to be using for his advocacy the proposals within this Bill. He seemed to find in paragraphs (a), (b) and (c), some objection to the idea behind the taking up of equity capital. I should have thought that in those paragraphs, which are designed
"to improve the efficiency and profitability of an industry…;
to create, expand or sustain productive capacity….; or
to promote or support technological improvements…"
There lies the greatest justification for Government participation in equity.
From the noble Lord's own remarks, it would appear that where there is some measure of doubt or some element of risk, private investors will not be likely to invest because there is no certainty of return. From the comments of the noble Lord opposite, there appears to have been a conflict between the ultimate national interest and the immediate private benefit. The Government, in the propositions which are incorporated in the Bill, recognise that the whole nation depends upon the development of industry. Government can participate, and
418
if Government gives assistance it can give assistance in the form of loan capital. The Bill also makes the suggestion that it should give assistance and help through the provision of equity capital, and by that process the Government, the nation, will be able to share in the growth.
I was frankly amazed at the comments that were made by the noble Lord, Lord Erroll of Hale, in his opposition to this Bill. Apparently, his greatest objection was, "Do not take up a large amount of equity because you may not be, able to get rid of it." I should have thought that it would not he the ultimate objective of the Government to get rid of the equity, otherwise why go in at all? The purpose is to retain the equity. I would hope that there would be an increase in the equity and not a diminution.
LORD ERROLL OF HALE: It is very good of the noble Lord to give way. This is the other leg of my argument. If the Government always retain the equity they will always have an increasing amount of equity in British industry, and that will be back-door nationalisation.
LORD PEDDIE: I will deal with the other leg of the noble Lord's argument—that there was no objection to loans, but only to equity. In other words, the noble Lord has no objection at all to Government giving assistance to industry because there is a limitation on the return that will come from such loan, and private interest, in consequence, will get a better return on their equity. The noble Lord wants it both ways: he wants Government to give assistance and to make investment provided it is of a character where there is some limitation on the return. I think it is about time, as indicated by my noble friend Lord Hirshfield, that Government and the nation had its participation. I know that my noble friend, like myself, is interested not in a charity but in a unit trust which has the responsibility of investment of trade union funds. I wish to goodness Lord Hirshfield had been listened to many years earlier, and that the trade unions had invested their funds in equities many long years ago. They would be much stronger to-day.
The proposals contained in the Bill are common sense and calculated to be in the best short-term and long-term interests

419
of the nation as a whole; and all the arguments that I have listened to from noble Lords opposite have been calculated solely to seek the preservation of private interests. In other words, they believe that their own possession of rights with regard to equity investment is good. Obviously—they have said so. We recognise that that is so, and if it is as good as all that surely the Government and, through the Government, the nation as a whole, should be able to participate. Far from categories (a), (b) and (c) being a deterrent, rather is there an indication that the Government have the intention of using such funds not merely for the purpose of securing return, but also to be able to inject investment in those areas where often private enterprise, because of its seeking of immediate return, is not likely to indulge in such investment.
VISCOUNT MASSEREENE AND FERRARD: Can the noble Lord tell me of any industry which the Government control that has made a profit for the good of the people? So far as I am aware, every industry that the Government have nationalised has been in the red, which can hardly help the people.
LORD PEDDIE: That is all nonsense, and is not worthy of reply.
VISCOUNT MASSEREENE AND FERRARD: It is not nonsense at all; it is a question of fact.
LORD HAWKE: I apologise for not hearing my noble friend Lord Erroll's speech, but it has been repeated by many people so I have some idea of the gist of it. I suggest that noble Lords opposite are suffering under some sort of illusion about equity investment. There are equities and equities. The noble Lord, Lord Peddie, quite rightly said that if the trade unions had put their money into blue chips ten years ago they would have made a lot of money. But we are not talking about blue chips; we are talking about investments which would not be undertaken without such financial support as is authorised in this clause. At the moment, the financial institutions of this country are searching busily the highways and byways for some promising industries, rising industries, in which they can put their money and from which they think in five or six years' time they will have been able to make a profit. The
420
competition to find such industries is quite intense. The result is that I am fairly certain that the industries (or the schemes, shall we say?) which are to be undertaken under Clause 2 are those which are so unpromising, or so long-range, that nobody will look at them at the moment, not even the trade union unit trust who, I am sure, would be very sympathetic to anything coming under categories (a), (b) and (c).
Our argument is that if the Government enter into this sort of thing it is a much riskier undertaking than if they provide loan capital, because the loan capital becomes repayable if the industry flourishes. Mind you, they will lose a great deal of the loan capital because many of these things will not be viable in the end; they will flop, as many of the enterprises undertaken by the old Colonial Development Corporation flopped. For that reason, we believe that it is safer for the Government to take a loan capital that can be turned over quickly after ten years from one industry to the next. Whether they would ever take anything that could be converted into an equity in the event of a thing coming right is a totally different thing. But I beseech noble Lords opposite not to be under any illusions; these are not potential goldmines that are going to pay; these are potential losers, every one of them.
4.56 p.m.
LORD SHACKLETON: Perhaps at this moment it may be useful if I were to express the Government's attitude on this particular proposal. If the debate has been somewhat heated, and arguments have taken on a rather more obviously Party political tinge than one might have hoped for, it is entirely due to the way in which the noble Lord, Lord Erroll of Hale, moved this Amendment. He began by using words like "coercion". I must say that this is a most peculiar form of coercion. If somebody offers you more money for doing a thing one way rather than doing it in another this, apparently, is coercion. I am surprised that he did not call it "blackmail". Of course, this type of argument is based on a misconception of the purpose of the Bill.
The noble Lord, Lord Hawke, was absolutely right to bring us back to the

421
purposes of the Bill, and the purposes of the type of investment as outlined in Clause 2. It is quite clear that the purpose of these provisions is to make available money for industry where it will not be forthcoming from the more usual sources, whether they be any of the financial institutions or the City generally. There would be a number of reasons why this may be so. The noble Lord, Lord Hawke, is perfectly right when he says that a straightforward scheme which people adjudge to be profitable will normally, though not always—there are occasions where it is not always so easy to obtain the sort of money you want at the right time—attract the money. But we have found on the whole—and I was very careful not to reflect, when I spoke on the Second Reading, on the financial institutions—that there are potentialities which, under the normal market processes, are not perhaps being as fully realised, or as quickly, as the national need requires. This, of course, involves difficult areas of judgment, judgment of a kind which it might not be appropriate for a particular institution to feel that it should take.
I would address some of my remarks to the noble Lord, Lord Alport, because he considered this proposition and put forward certain arguments. I should like to try to meet these. It is true that in my opening speech on Second Reading I did not refer to equity partly because I was anxious to shorten the proceedings, and I reserved that part for my winding-up speech. However, I should like to deploy a few more of the arguments, although they have been deployed very adequately by my noble friends.
If one looks at the circumstances in which a Government may wish to take an equity investment, one could find no better example than the new computer company. It may suit a company to have certain of the money which is provided for it in the form of equity; it would not then, at least immediately, be burdened with the obligation to meet certain loan charges. Equally, if there is a possibility of considerable profit, I do not see why the taxpayer should not benefit. I must remind the noble Viscount, Lord Massereene and Ferrard, whatever he may think of this Government or any other Government, that we are here talking about the taxpayers'
422
interest, and it is rather absurd to say that the Government, having provided money, ought to be content with the taxes which are paid by the firm. Would the noble Viscount apply the same argument to loan capital?
The word "equity" seems to have a rather peculiar significance to some noble Lords. Why should not the taxpayer also benefit from the provision of money when the taxpayer will have taken a risk? I agree with the noble Lord, Lord Hawke, that it will be a considerable risk, but it will depend on the particular investment—it could even be a sure-fire investment. The Government will have to form their own opinion on the best advice which is available to them as to the form which this investment should take. If there is a real prospect of high profits, I do not see why there should not be a return to the Exchequer on the taxpayers' money, as has happened in the past in the case of other investments. When there have been these large investments in British Petroleum from which the taxpayer has benefited, both by the tax paid by the company and by the returns on the investment, why should we boggle at doing this in other cases?
I want to cut this controversy down to size. It is almost nonsense to talk about when an investment is lost, or whether or not it can be disposed of, or how it will be disposed of through the market. The noble Lord would have to specify the particular circumstances. Of course, it may be desirable at a certain moment for a Government to get out—indeed, if there is a Conservative Government in power it is very likely that they will try to dispose of equity holdings, as they have done in the past. The object is to help industry, and I cannot see why some of this help should not be ii the form of equity.
The noble Lord, Lord Alport, asked me some specific questions. Do the Government visualise taking a minority interest? In my view, it will nearly always be a minority interest. There is an Amendment a little later seeking to stop the Government taking a majority interest. I shall be dealing with that point later, but on the present picture it is likely to be a minority interest. Of course, the Government as a shareholder are bound to conform with the Companies Acts and company legislation—there can be no

423
question of any other answer. As for the terms of their investment, this will depend on what they may negotiate with the other shareholders. If it is a new issue of shares, it is possible that the Government may seek certain rights, but those rights will have to be in accordance with the articles of association and memorandum of the company, in which case they would have to be referred to a meeting of shareholders. But I see no reason why they should ask for anything other than the sort of thing that any other shareholder might ask. They may ask to have a director on the board.
This brings me to the point to which the noble Lord, Lord Erroll of Hale, referred as to how the Government would exercise their responsibilities as a shareholder. Here again it is important that I should try to get this right. Let me make clear that the Government are not seeking to take over and run the firm. This is not intended to be back-door nationalisation, but is intended to give support to and speed up desirable development in British industry where money might otherwise not be available. This cannot be repeated too often. Any acquisition of shares will be a consequence of an agreement with the parties concerned as to the type and the most appropriate way of financing a particular project. The Government will not he acquiring the investment—it is important to make this clear—simply for the purposes of earning income or for capital appreciation. Therefore, the position is undoubtedly different from that of the institutional investor. The machinery for investment management in those circumstances would not, therefore, be appropriate for the Government.
The Government's investment is in a project covered by a scheme which will have to be approved under this Bill; it will be for the purpose of forwarding the national interest. But the Government's interest in the success of the company will not be all that different from the interest of any other shareholder, except that they will be more directly concerned with the national interest and not merely with protecting their interest. If they are an equity shareholder, the Government would exercise their rights as a shareholder in a reasonable way. I see no difficulty for a Government Department,
424
if it is properly staffed, in deciding what to do about rights issues. I do not see that it is more difficult for a Government Department, which has plenty of advice at its disposal, than for an ordinary shareholder who suddenly finds himself confronted with the prospect of a rights issue. It is not the intention of the Government under the Bill to use the existence of the shareholding, whatever size it may be, to interfere in a company's day-to-day business. We do not want to take over and run the whole of British industry—one knows the limitation on Government in this respect—but we want to see private enterprise in partnership, if necessary with financial support from the Government. Depending on the size of the investment, there may be certain rights and powers attached to the shareholding, but again they will have to be agreed with the company.
Here again the purpose is the same as that of any other director who is appointed. It is necessary to emphasise that it is not possible to appoint a director whose job is solely to look after the public interest. If you are a director of a company, you must have regard to the prospects of that particular company. It is the obligation of the board of every company to pay due regard to the public interest. It may well be that in some cases—we have had examples of this when noble Lords opposite were in power in government— we are confronted with problems in industry where management is not as good as it might be and certain pressures have to be brought to bear, by some means of persuasion, to improve that management. Of course, if a Government Department or a Minister had reason to believe that a company's management could be improved, then it would be possible to make representations and bring the appropriate pressure, which one would expect a responsible shareholder with a great responsibility for the national interest to bring. The Government's interest in the efficiency and profitability of an industrial investment scheme is no less in a case where the investment is in the form of a loan or grant than in a case where the financial contribution is in the form of equity capital. Having received Parliamentary approval for such an investment, it will be the duty of the

425
competent authority to have due regard to that responsibility.
I hope that I have made a case for this. There really is no case for distinguishing between equity and loan capital. It may be appropriate for it to be in the form of equity, but it is much more likely to be in the form of loan capital, with a small proportion in the form of equity. I have a list of a number of firms in which in the past the Government have held an equity shareholding, and it seems to have gone satisfactorily. I am not sure whether the noble Lord is primarily concerned with the problem of voting rights—namely, the ordinary share which carries voting rights—or the participating preference share, but we focused on the most normal form of equity.
I hope, therefore, that your Lordships will not accept this Amendment. I do not believe that a case has been made out for it. I think the noble Lord can be thanked for raising an interesting issue and allowing us to discuss it. and for allowing me to put the case. But, quite seriously, I do not think this is the sort of limitation which ought to be imposed on the Government, either in the interests of the companies to whom the money may be provided or in the interests of the taxpayer. There is a necessary balance in these matters, and I hope that the Committee will therefore reject the Amendment.
5.14 p.m.
LORD DRUMALBYN: May I just say one or two words on this matter? I rather regretted that at one part of the debate it looked as if it was developing into a political wrangle as to whether this Amendment was designed to protect private interests. That is not the reason why it was moved, because we on this side believe that it is in the interests of industry and the economy as a whole that Government and industry should be in partnership, should play their respective proper roles in partnership, and should not cross over the boundary between those roles. It is for that reason, principally, that I ask the House to support this Amendment. But I also ask the Committee to support it for another reason which has been mentioned.
In his winding-up speech on the Second Reading the noble Lord, Lord Shackleton, placed great emphasis on the need for
426
partnership between industry and the Government, but the fact is that industry is wholly opposed to this, as my noble friend said on Second Reading. It is surely wrong to force on one of the partners in this way a solution which they do not wish, and the Government ought to pay attention to this. It is very doubtful indeed whether anything could be gained to the taxpayer by taking equity shareholdings. In the past, the view in almost every case—and I think it was a strong Treasury view— was that any money advanced should come back in the shortest possible time, because not to do that is in itself inflationary. The money has to be borrowed, and if it remains outstanding indefinitely that is inflationary. But if it is brought back and it is possible to redeem the loan, then it is no longer inflationary as the money used to pay back the loan is taken out of the economy, and that holds the economy much better in balance. So there is also that consideration, which I think has been the general view taken.
There is also the experience of the past. There is always one major exception to every case and, as we all know, there is the exception of B.P. Bit the experience of the past has been that the taking of shareholdings and equity interests in firms has not paid off. For that reason, too, we think it is unwise to pursue this course. We see no reason why the Government should take a power to acquire shareholdings in an industry where the money for that purpose cannot be raised on the market; and it is only if, in the opinion of the Minister, the money cannot be raised on the market that he is empowered to take shareholdings. We see no reason why that should be done in a case of this sort, because we think there is every chance that the money will not come back to the taxpayer who is the shareholder. It is for those reasons, and, above all, because of the need for real co-operation between industry and the Government in their respective spheres, that we think this is an undesirable course and that the Government should not have the power to take equity shareholdings.
LORD SHACKLETON: I must correct the noble Lord on two points. First of all, this is not being forced on industry. I wish noble Lords would not use those expressions, because they have precisely

427
the effect which we do not want to create. It may be that there is a feeling in industry about this—and the C.B.I. has shown anxiety—but I hope we have made clear that it will be up to the individual company to accept—and they have accepted such an arrangement in the computer case. There is no question here of forcing industry.
Secondly, it is precisely because of the rather more restricted view of the Treasury in the past, that such investment would be inflationary, that we have not made the particular progress which
Resolved in the affirmative, and Amendment agreed to accordingly.
LORD DRUMALBYNmoved, in subsection (2)(a), after "grants" to insert
428
we think can now be made. This is a new concept, but if the noble Lord does not think that an investment, whether in the form of loan capital or equity, may not equally be lost and to that extent have to be written off, he is mistaken. This is a modest and sensible compromise.
5.23 p.m.
On Question, Whether the said Amendment (No. 3) shall be agreed to?
Their Lordships divided: Contents, 67; Not-Contents, 63.

CONTENTS

Aberdeen and Temair, M.

Drumalbyn, L.

Lucas of Chilworth, L.

Allerton, L.

Dundonald, E.

Mancroft, L.

Alport, L.

Ebbisham, L.

Massereene and Ferrard, V

Amherst of Hackney, L.

Elliot of Harwood, Bs.

Merrivale, L.

Ampthill, L.

Emmet of Amberley, Bs.

Mills, V.

Ashbourne, L.

Erroll of Hale, L.

Milverton, L.

Auckland, L.

Falkland, V.

Monsell, V.

Audley, Bs.

Falmouth, V.

Mowbray and Stourton, L.

Balerno, L.

Ferrers, E.

Nugent of Guildford, L.

Balfour of Inchrye, L.

Ferrier, L.

Ogmore, L.

Berkeley, Bs.

Fortescue, E.

Rankeillour, L.

Bessborough, E

Goschen, V. [Teller.]

St. Aldwyn, E. [Teller.]

Brooke of Cumnor, L.

Greenway, L.

St. Helens, L.

Brooke of Ystradfellte, Bs.

Grenfell, L.

Sandford, L.

Clwyd, L.

Grimston of Westbury, L.

Somers, L.

Conesford, L.

Hacking, L.

Strang, L.

Cottesloe, L.

Hawke, L.

Swansea, L.

Craigavon, V.

Horsbrugh, Bs.

Teviot, L.

Croft, L.

Howe, E.

Teynham, L.

Daventry, V.

Hylton-Foster, Bs.

Thurlow, L.

Denham, L.

Ilford, L.

Trefgarne, L.

Dilhorne, V.

Lindsey and Abingdon, E.

Vivian, L.

Wolverton, L.

NOT-CONTENTS

Addison, V.

Gardiner, L. (L. Chancellor.)

Pargiter, L.

Archibald, L.

Garnsworthy, L.

Peddie, L.

Beswick, L.

Granville-West, L.

Phillips, Bs. [Teller.]

Birk, Bs.

Hall, V.

Plummer, Bs.

Bowden, L.

Hilton of Upton, L. [Teller.]

Raglan, L.

Bowles, L.

Hirshfield, L.

Ritchie-Calder, L.

Brockway, L.

Hunt, L.

Rowley, L.

Burden, L.

Iddesleigh, E.

Sainsbury, L.

Burton of Coventry, Bs.

Kennet, L.

St. Davids, V.

Chalfont, L.

Kilbracken, L.

Samuel, V.

Champion, L.

Kirkwood, L.

Serota, Bs.

Chorley, L.

Latham, L.

Shackleton, L.

Citrine, L.

Leatherland, L.

Shepherd, L.

Crook, L.

Lindgren, L.

Snow, L.

Darwen, L.

Llewelyn-Davies of Hastoe, Bs.

Sorensen, L.

Delacourt-Smith, L.

Longford, E.

Stonham, L.

Donaldson of Kingsbridge, L.

McLeavy, L.

Strabolgi, L.

Douglass of Cleveland, L.

Milner of Leeds, L.

Summerskill, Bs.

Faringdon, L.

Mitchison, L.

Walston, L.

Fiske, L.

Morrison, L.

Willis, L.

Gaitskell, Bs.

Moyle, L.

Wootton of Abinger, Bs.

"or both". The noble Lord said: This is an Amendment which I put down simply to make the position clear. Paragraph (a) of subsection (2) says that a

429
scheme may authorize a competent authority
"to make loans or grants to such persons or bodies as may be determined by or under the scheme;…"
Since I put the Amendment down I have looked up one or two precedents on this, and I find that they vary, curiously enough. In some cases it is "loans or grants", and in others "loans or grants, or both". I do not know whether, where it says "loans or grants" it has in fact been interpreted in the past as meaning "loans and grants". I always thought that "or" was the opposite to "and"; but the noble Lord, Lord Shackleton, was good enough to write to me after Second Reading and say that the word "or" included "and", which seems a most extraordinary monstrosity in logic. However, it may be a legislative practice. In any case, I am quite certain that the noble Lord would wish, in appropriate cases, both loans and grants to be made available, and I hope that this is the purpose of the provision. I beg to move.
Amendment moved—
Page 2, line 26, after ("grants") insert ("or both").—(Lord Drumalbyn.)
LORD SHACKLETON: It is of course one of the glories of the English language that its flexibility is liable to cause confusion to well-meaning members of the Opposition and subsequent profit to lawyers. However, I am given an absolute, categorical assurance (though I myself shared the anxieties of the noble Lord) that in this case, even without the addition of the words "or both", the purpose of allowing both grant and a loan is achieved by the clause as it is drafted. This brings us, of course, to the meaning of words in Statutes, but in this case "or" includes "and", so that both forms of support can be given.
Knowing that one would have to look at previous Statutes, I consulted the Treasury Solicitor's Department on this, and I shall be very happy privately to show the noble Lord this letter, which explains that in certain circumstances "or" can have a disjunctive effect. This is particularly so when it comes to interpreting a Statute which imposes a penalty of "so much or' so much", as in the case of a fine or imprisonment. But in this case, we should if this Amendment were accepted need to make similar Amendments throughout the Bill, and I am
430
assured that they are unnecessary to achieve the purpose of the noble Lord.
LORD DRUMALBYN: I am very much obliged to the noble Lord for that explanation. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
5.30 p.m.
LORD ERROLL OF HALE: This Amendment is consequential on Amendment No. 3. I beg to move.
Amendment moved—
Page 2, line 38, leave out paragraph (e).—(Lord Erroll of Hale.)
LORD SHACKLETON: May I speak to this Amendment? I am not absolutely sure that it is consequential on No. 3; nor does it really affect the issue very much. I should have thought that it went a little further than just equity capital. But perhaps we can let it go, and if we run into any difficulty we can look at it again on Report stage. It does cohere to some extent.
LORD ERROLL OF HALE: I am grateful to the noble Lord for his accommodating posture on this occasion and I appreciate what he has to say.
On Question, Amendment agreed to.
LORD ERROLL OF HALE: I understand that No. 6 is also consequential. I beg to move.
Amendment moved—
Page 3, line 4, leave out from first ("company") to end of line 7.—(Lord Erroll of Hale.)
LORD SHACKLETON: I really do not think that Amendment No. 6 is consequential. It goes much further than equity shareholdings. I did not worry very much about Amendment No. 5, because it does not really affect the clause, but No. 6 would prevent any Government shareholding under industrial investments schemes. I would point out that the second part of this subsection was introduced by the Government in another place because without such a provision it was thought by the Opposition that there would be a loophole in the Bill which would allow the Government to subscribe for shares in a company against the wishes of that company. I have already put the arguments against that; but this particular Amendment goes much farther than the equity

431
one. It raises the whole question of shares. Is the noble Lord now concerned with non-equity shares? If so, I think it ought to be more specifically referred to. We are talking here about subscription for the purchase of shares and not just equity.
LORD ERROLL OF HALE: Is there such a thing as a non-equity share?
LORD SHACKLETON: There are preference shares.
LORD HAWKE: Are we dealing entirely with shipbuilding? If we are not dealing with shipbuilding, I would agree with the noble Lord that it will include the Government purchase of preference shares which I should have thought was an eminently suitable method of participation. They do not carry heavy fixed interest obligations and, at the same time, they do not gather an unlimited dividend.
LORD SHACKLETON: I think the noble Lord is right. I think this Amendment goes further. Frankly, I cannot just agree to it as a consequential Amendment. If the noble Lord wishes to press it, then we shall have to divide; but I am not sure that the noble Lord understands his own Amendment.
LORD ERROLL OF HALE: It will interest the noble Lord to know that I do understand my own Amendment. It was drafted by my noble friend, who always drafts good Amendments. It is fair to say that when one says "shares" one means ordinary shares. When one means preference shares one usually says "preference shares". If one wants to refer to both categories then one says "ordinary shares and preference shares ". In general usage, "shares" means ordinary shares. But my noble friend and I have looked at the matter again. We find that it will not really upset the acceptance of Amendments 3 or 5 if No. 6 is not accepted. I suggest that the best course would be for me to beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
LORD DRUMALBYN: This Amendment has a very narrow purpose. It is really a probing Amendment to enquire what is proposed in the case of the purchase of shares in a company which is
432
formed pursuant to a scheme. One knows that such companies are likely to be formed in conjunction with other companies; that is to say, participation between other companies and the Government. It would seem in such a case that it is only proper that the other companies that are going to participate in the new company which is to be formed pursuant to the scheme should be required to give their consent also. It is difficult to see why it is excluded in such a case. I do not know whether the noble Lord can explain this. It might be different if a company were being formed completely ab initio, with Government participation. In that case there would be no company to obtain the consent of; but where the Government are proposing to form a new company in conjunction with other companies surely the consent of the other companies should be obtained. I beg to move.
Amendment moved—
Page 3, line 4, leave out from first ("company") to ("without") in line 5.—(Lord Drumalbyn.)
LORD SHACKLETON: I should have thought that this Amendment was misconceived. I do not see how you can form a joint company with another company unless it consents. I was in some slight confusion myself and have a certain sympathy with the noble Lord. I think it is rather important to try to probe this matter. Could I make this clear? The original provision in Clause 2(2)(e) contained a condition that the purchase of shares should be used as a means of financial support under a scheme only with the consent of the company concerned. The subscription for shares was not so qualified because it was believed that subscribing for shares in an existing company would be virtually impossible as a means of financial support without the company's foreknowledge and agreement. It was argued in another place, however, that subscription might be made for shares in an existing company without its consent.
Although I think that this is extremely unlikely, it is conceivable, and it is a fair point to make that this could arise. It was, therefore, decided to amend the original provision to ensure that neither form of acquiring shares, purchase or subscription, in an existing company could proceed without the company's consent.

433
This decision left still to be considered the case where a company was formed pursuant to a scheme and where a Minister subscribes shares for it. For example, a joint company may be formed —this was what the noble Lord had in mind—between the Government and a company in the private sector as an instrument for pursuing a scheme, and it would seem rather odd to require that joint company's consent to be one of the "founding fathers" of the company which it had already decided to found. Therefore it was decided to make an exception in such cases and the words:
"other than a company to be formed pursuant to the scheme"
were introduced, and were found generally acceptable. I will look at what the noble Lord has said and will check very carefully that the answer I have given meets his point, but I do not think there is much to be gained by pursuing this Amendment. If the noble Lord wishes, I will undertake to look at it again but I am pretty satisfied that there is no need for this Amendment.
LORD DRUMALBYN: I agree that, looked at by itself, the Amendment is misconceived. I said that I would not press it. The Amendment was put down merely to elicit this information: whether where a new company is to be formed the consent of the companies in conjunction with which the Government are forming it will he obtained. As the clause stands it is not apparent that such consent would have to be obtained. I am still not clear about whether it would or would not have to be obtained.
LORD SHACKLETON: I thought that I had answered it, but I will look at it again. I think the better way would be to look at it rather carefully to see whether we can agree, if necessary behind the Woolsack, on what we mean.
LORD DRUMALBYN: I am obliged. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
5.43 p.m.
LORD ERROLL OF HALEhad given Notice of his intention to move to add to the clause:
"() Shares acquired by a competent authority shall not confer any voting powers in the competent authority.
() A competent authority shall in no circumstances obtain a controlling interest in
434
any person or body through acquiring shares, or in any other way."
The noble Lord said: I am in a little difficulty and would seek guidance. Because Amendments Nos. 3 and 5 have been accepted by the Committee, Amendment No. 8 is no longer relevant and therefore should not be moved. On the other hand, if Amendments Nos. 3 and 5 are reversed in another place, it will be very valuable to have a discussion on Amendment. No. 8, and perhaps include it in the final text of the Bill. I think I am right in saying that when Amendments are returned from another place the procedure in your Lordships' House does not permit us to add further Amendments consequential upon their changes. I should be most grateful for any guidance that I could have on this rather difficult and complex matter.
THE DEPUTY CHAIRMAN OF COMMITTEES: I cannot give the noble Lord any guidance on this matter because Amendments Nos. 3 and 5 do not preempt Amendment No. 8. It is therefore for the Committee to take a decision on this point.
LORD SHACKLETON: I also am somewhat mystified. First of all, to which Amendment is the noble Lord referring? is it Amendment No. 8.
LORD ERROLL OF HALE: Yes.
LORD SHACKLETON: It seems to me that in any case these proposed subsections should form two separate Amendments and I am wondering whether they were put down as one Amendment by mistake. It may be that the first, which says:
"Shares acquired by a competent authority shall not confer any voting powers in the competent authority."
has a declaratory value. I find it a somewhat imprecise phrase, and I am doubtful whether it is worth proceeding with, but if the noble Lord would like to have a short debate on the Amendment he could then decide whether he feels it worth pursuing. My own advice would be not to do so, but to leave it. The noble Lord could then reserve his light to move the Amendment on Report. On the whole, I think my advice would be not to proceed with the Amendment to-day, but I should be very sorry to mislead the noble Lord. It seems to me that he has, for the moment at any rate,

435
achieved all he wants. On the other hand, I take the point that obviously, if another place put another Amendment and defeated his earlier Amendments, he would like to have this Amendment in; but, I think that another place would be very likely to reject this Amendment also. Suppose we leave this to discussion, and I will certainly co-operate with the noble Lord if he wishes to do something on Report.
LORD ERROLL OF HALE: I am grateful to the noble Lord, Lord Shackleton. I think that an important point has emerged almost without previous thought. I suggest that the second of the two subsections in Amendment No. 8 is probably the more important and the one more likely to be accepted by another place if Amendments Nos. 3 and 5 are reversed. In any case, I should have thought that on the Question, That the clause stand part of the Bill, we might have the benefit of a few remarks from the noble Lord, Lord Shackleton, on this general topic and about what the Government proposed to do with regard to the new powers, and also whether they would in any circumstances seek to obtain a controlling interest, in the event of Amendments Nos. 3 and 5 being reversed.
LORD HAWKE: My noble friend has voted out the power to acquire an equity holding. At the same time there are in existence preference shares which, in certain circumstances, carry voting rights. So it does not seem to me that his voting out of one thing renders absolutely this particular provision unnecessary.
LORD SHACKLETON: Has the noble Lord, Lord Erroll of Hale, moved his Amendment? If he moves the Amendment we can have a general debate and cover the subject. I think it might be better to relate the debate more directly to the Amendment than to the question whether the clause stand part of the Bill.
LORD ERROLL OF HALE: With the agreement of your Lordships I beg to move Amendment No. 8.
Perhaps I may now make a proper speech in connection with this matter, rather than my earlier, rather ragged, comments. The question whether the Government of the day would use their
436
powers in connection with the acquisition of shares is one of very considerable concern to all those interested in this Bill. As the Government have made no reference, either in another place, or, so far as I know, in your Lordships' House, as to how they would use their powers, I thought that this Amendment would bring out clearly and precisely what the Government intend to do with their powers.
The essential power is the voting power. With their voting power the Government can materially influence the affairs of the company: alter the composition of the board, or do any other thing. The first subsection in the Amendment is designed to secure from the Government an explanation of their intentions. The second subsection is designed to elicit from the Government whether they intend to acquire at any time a majority holding or controlling interest in the company. The noble Lord said earlier that in the majority of cases it would be a minority holding; and that, of course, means that there will be some cases where it would be a majority holding or controlling interest. In our view a controlling interest would alter the very nature of the company because the Government, by being the principal and main shareholder, would become the owner of the company. In a sense the company would become a Government Department owned and controlled by, and at the dictate of, the Government Department concerned as the majority shareholder. We feel that such a situation would be very undesirable, because the Government could, if they wished, become a holder in perpetuity and there would tend to be a one-way traffic. Were we to divide on this Amendment, I might at a later stage of the Bill separate these two subsections, so that we could have a separate expression of opinion on each; but for the purpose of elucidation to-day I put the two together and look forward to what the noble Lord has to say.
Amendment moved—
Page 3, line 7, at end insert the said subsections.—(Lord Erroll of Hale.)
LORD SHACKLETON: I found difficulty over this Amendment, partly because there were two separate points. I do not want to go over the arguments I have already given because it seems to me the objection to the equity shareholding raised the sort of arguments and

437
issues that the noble Lord was referring to in respect of the first part of the Amendment. I think that this is an imperfect Amendment. It is difficult to establish when a particular shareholding will acquire powers. We are in a difficult field and in an equal difficulty when we come on to the question of what is a controlling interest. Obviously, I must resist any proposal that any shares which the Government or any competent authority acquire should not attract to them such rights and powers as would be attracted to any other shares that had been acquired by anybody else. For example, in certain circumstances preference shareholders are able to establish certain rights—I do not know whether "powers" is the right word. It is one of those mystic words, rather like the "powers" of your Lordships' House. I think that this Amendment, although useful for probing, would not be useful or satisfactory from the drafting point of view for what the Opposition wish to achieve.
I do not need to repeat that the Government have no intention of forcing these proposals on anyone. I have already dealt with the way in which the Government intend to act in their capacity as shareholder, in a balance between the proper action of a responsible shareholder as opposed to the fear of an oppressive Government. I hope that goes some way to meet the noble Lord's question.
When it comes to defining a controlling interest, I am again in some difficulty. If it is to be defined as any amount exceeding 50 per cent., we have not shrunk from allowing that to happen in the past —for instance, in the case of British Petroleum. I do not think that there is a particular purpose in achieving this. If it is in everybody's interest and the company is willing, I do not see why the Government should never be allowed to acquire a controlling interest, though in most cases the Government would be rather averse to doing so. It seems to me that at that point they get a lot of the blame and responsibility and at that point they might as well go for 100 per cent. ownership. I do not think that we can anticipate the situation. The purpose is not to provide profit, for reasons which the noble Lord, Lord Hawke, explained, but to ensure that a project goes ahead so that the nation benefits thereby. If it seems
438
to be right that the Government should have a controlling interest and the company is willing, I would be against restricting the Government in the way proposed. In any case, the Amendment is detective, apart from the fact that the noble Lord has already carried an Amendment which makes it unnecessary.
LORD ERROLL OF HALE: I am most grateful to the noble Lord for what he has said. I will study it most carefully, reserving the right, with your Lordships' permission, to return to it on Report stage, when I shall be dealing with other matters of some difficulty in connection with this clause. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 2, as amended, shall stand part of the Bill?
LORD HAWKE: I am not happy about the drafting of subsection (3). It says:
"Financial support shall not be provided…until the dissolution of the Shipbuilding Industry Board,…
and it goes on to say—
"and no such scheme shall authorize…"
I am not clear whether "no such scheme" refers to any general scheme under the Bill or to one which can come into existence only after the dissolution of the Shipbuilding Industry Board. I should have thought it better, for the sake of clarity, that the subsection should be split into two.
LORD SHACKLETON: I must say, perhaps because I am simpler than the noble Lord, that I do not see the difficulty. It seems to me that "no such scheme" is not determined only by the reference to the Shipbuilding Industry Act but refers back to an earlier part of the subsection, but I will certainly look at it, and if there is any difficulty, I will come back to your Lordships' House. Perhaps I will communicate with the noble Lord before that.
LORD HAWKE: I do not wish to he communicated with, but I should have thought it better not to mix up the two motives.
LORD DRUMALBYN: I would say that exactly the same thought occurred to me. It means that one has to look carefully at this clause. If it were

439
separated into two parts, the meaning would be clear.
LORD SHACKLETON: I must say that I find it cavalier about myself to criticise this clause when (a) I think I understand it and (b) I find so much in the rest of the Bill intelligible; but there is certainly a point here and I will look at it.
Clause 2, as amended, agreed to.
Clause 3 [General schemes and industry boards]:
5.58 p.m.
LORD DRUMALBYNmoved, in subsection (1), to leave out "after such inquiry as the authority considers appropriate as to the conditions prevailing in any industry or section of an industry". The noble Lord said: This is a paving Amendment for No. 10. I say at once that I agree with what the noble Lord said about the drafting of the Bill. I think that it is intelligible and concise, but in this case, perhaps by its mere conciseness, it may have given an impression of abruptness, possibly even, as I said on Second Reading, of arrogance, though I did not mean arrogance on the part of the draftsmen.
The point here is simple. Subsection (1) of the clause says:
"The power of a competent authority to make industrial investment schemes shall include power to make, after such inquiry as the authority considers appropriate as to the conditions prevailing in any industry or section of an industry, a general scheme…"
The words "after such inquiry" give the impression that in some cases not much inquiry would be required into the conditions of an industry. It may be that a "Neddy" might have already been inquiring into an industry, or it may be even that a scheme arises as the result of the normal work of a "Neddy". On the other hand, I feel it desirable to spell out how this may be done.
This is one of those fortunate cases where one does not have to make a speech at all because the whole of what I want to say is in the Amendment. It simply provides two things: first of all, for an inquiry before a draft scheme is made and, secondly, for the authority to consult interested organisations before the scheme is laid before Parliament. I
440
recognise that there are occasions when an inquiry might not be necessary in the circumstances that I have indicated, but Amendment No. 10 itself says:
"and may appoint a committee to conduct the inquiry."
It seems to me that the inquiry could quite easily be made by a standing committee of "Neddy", and might be an inquiry that took place over quite a long period of time. I believe that an inquiry of some sort ought to be made; and then, the inquiry having been made, I think that consultation is necessary, not least with the suppliers and customers of the industry. The inquiry tends normally to concentrate mainly on the industry itself, rather than on the customers and suppliers, and I think that this kind of consultation would be generally desirable. I beg to move.
Amendment moved—
Page 3, line 9, leave out from ("make") to ("a") in line 11.—(Lord Drumalbyn.)
LORD GRANVILLE OF EYE: It seems to me that in this Amendment the noble Lord is proposing that in addition to having this debate in both Houses of Parliament, it is to be obligatory on the Minister to submit every single application to the committee referred to before it can be approved. I understood from the Second Reading speeches and from what my noble friend has said to-day that it is the intention of the Minister to appoint boards and committees for the purpose of advising on the very matters to which the noble Lord has referred in this Amendment. I should have thought that the Amendment was completely unnecessary, and that it could be left to those committees who, presumably, will be appointed by the Minister and will be competent people, able to advise the Minister, instead of having a roving inquiry over the suppliers of the material, so that people in the end will say: "This is not worth bothering about". I should have thought that this was adequately covered in the Bill. This Amendment merely makes it obligatory, and in the circumstances it is far better to leave it to the Minister.
6.4 p.m.
LORD SHACKLETON: I admire the noble Lord's perseverence and thoroughness. Let me make it clear that, even though I would not wish to accept the

441
Amendment, it serves a useful purpose, and I have a great deal of sympathy for the noble Lord's decision to put it down. The effect of his Amendment will be to remove from Clause 3(1) the existing provision for inquiries preliminary to general schemes, and to add the new subsection, which amends the existing provision of such inquiry. It also introduces a provision for consulting producers and workers and all the suppliers and consumers of an industry for which it has been decided to make a general scheme.
Basically, these Amendments amount to a recognition of the great importance of the preparatory work that has to be done before the need for a general scheme can be assessed, and the need for the fullest possible consultation in the interests of all concerned. I am, therefore, at one with the noble Lord in the purpose that he wants to pursue. Nevertheless, I hope the noble Lord will not pursue these Amendments. We are all agreed on the need for a preliminary inquiry before a decision to go for a general scheme is undertaken. The existing provision states that the competent authority—that is to say, the Minister concerned—will have power to make general schemes after such inquiry as the authority considers appropriate as to the conditions prevailing in any industry or section of an industry.
The Amendments seek to change this provision in the following respects. First of all, the specific ministerial discretion as to the nature of the inquiry would be removed; the Minister would have to cause the inquiry to be conducted, and he would be given the specific power to appoint a committee to conduct the inquiry. In my view, and in the view of the Government, these changes do not really add anything of real value. They also detract a little by restricting the nature of the preliminary inquiry. I think that we need the maximum flexibility in a preliminary inquiry.
The noble Lord will remember that paragraph 15 of the White Paper on Industrial Expansion says:
"Inquiries into the needs of particular industries, normally by a committee specially appointed by the Government, but possibly carried out"—
the noble Lord referred to this—
"by other bodies, such as the economic development committees, may lead on occasion to recommendations that general schemes of
442
support for the industry concerned, as distinct from support of individual projects…"
The White Paper makes it clear that the inquiry would normally be carried out by a committee independent of the Government, like the Geddes Committee in the shipbuilding industry. This may not always be the case. What is required of an inquiry is that it should carry weight and command the acceptance of the industry. Unless you get that, it simply is no good setting up an industry board. One could not have carried forward the shipbuilding industry unless that industry had been willing to co-operate; and even now this will depend for its success on that continued co-operation.
There may be occasions when the most authoritative source is not necessarily outside the Government sphere. It may even be some technical body like the Atomic Energy Authority in its own field. Therefore, the establishment of this sort of formal, fully-fledged inquiry ally be unnecessary. It may be quite clear in the industry, especially if there is good co-operation, what is required, and the Government may be able to draw up a draft programme of action for informal consultations with the industry, and particularly through an economic development committee.
These considerations led to the existing provision for an inquiry. It does not prescribe the form that an inquiry should take, whereas the Amendments give a different impression. They tend to give the idea that there must be a full-scale comprehensive inquiry and, as I have said, this is not the case, and the Minister should have discretion. If the Minister behaves foolishly, he will pay the price that most foolish Ministers pay. Obviously, it would be folly to pursue proposals which the industry concerned thought had not been properly thought out. In this connection, I would remind noble Lords that this discretion cannot be used as an excuse to ram any scheme down an industry's throat. There are no compulsory powers, and again Ministers do not require legislative cover in any way to establish committees to carry out preliminary inquiries.
Let me now look at the other part, which is concerned with the provision for the mandatory consultation. Here, on presentational grounds, I go rather further along the road with the noble

443
Lord. We have sought for a long time to put into Statutes the need to take account of the views of workers and producers and suppliers and consumers; and quite recently, even on the Steel Bill, I was pressed, I remember, by one of my noble friends because he was not quite clear whether the ritual gesture was in the Bill. I am happy to say that it was in the Bill. I use the word "ritual" not in any way in a condemnatory sense, but because I should hope that now this is such an essential requirement it is not necessary for this particular purpose to lay these points down.
With regard to schemes for industries, like schemes for particular projects, there must be a regard for the views of those most immediately involved, including workers and producers, suppliers and consumers, in the industry; and it is very difficult to envisage an inquiry that did not take account of the needs and interests of those parties. While those conducting the inquiry must normally be left to determine exactly how they come by the information, they would usually be expected to have such consultations.
To sum up what I am saying, this Amendment is not necessary, and indeed to apply too rigid a provision and to lay this down in too precise terms would be undesirable. But I should like, in the light of the arguments the noble Lord has advanced, to see whether there is any weakness in this Bill, because certain obligations in relation particularly to workers and consumers and others must be taken into account, and I should like to consider whether there is some need for this to be put in. But I think that probably, again, we have gone rather further along in this field and it is not necessary. I certainly make no promise. However, I am grateful to the noble Lord for giving me this opportunity to explain how the Government view this matter, and I hope that in the light of that explanation he will decide not to pursue his Amendment.
LORD DRUMALBYN: I am most grateful to the noble Lord for his very courteous and full reply, with which I am entirely satisfied. I am grateful to him for saying that he will have a look
444
at this question again to make quite certain that any omission would not have results which were not previously anticipated, and with that I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 3 agreed to.
Remaining clauses and Schedules agreed to.
House resumed: Bill reported, with Amendments.

INTERNATIONAL ORGANISATIONS BILL [H.L.]
6.13 p.m.
THE MINISTER OF STATE FOR COMMONWEALTH AFFAIRS (LORD SHEPHERD): My Lords, I beg to move that this Report be now received.
Moved, That the Report be now received.—(Lord Shepherd.)
On Question, Motion agreed to.
Then, Standing Order No. 41 having been dispensed with (pursuant to the Resolution of May 15, 1968); Bill read 3a
LORD SHEPHERD: My Lords, I beg to move that the privilege Amendment be agreed to.
Moved, That the privilege Amendment be agreed to.—(Lord Shepherd.)
On Question, Motion agreed to.
Bill passed, and sent to the Commons.

ROYAL COLLEGE OF ART BILL
THAMES VALLEY WATER BILL
Reported, with Amendments.

EXPORT GUARANTEES BILL [H.L.]
FIREARMS BILL [H.L.]
Returned from the Commons, agreed to.
House adjourned at a quarter past six o'clock.