Lords Sitting of 22 March 1971

Preamble
The House met at half past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Guildford.
The Lord Glentanar—Took the Oath.
The Lord Taylor—Took the Oath.

FAMILY PLANNING PAMPHLET: DISTRIBUTION TO SCHOOLS
BARONESS SUMMERSKILL: 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 approve the proposal of the Family Planning Association to distribute a pamphlet to schools regarding the availability of contraceptive advice with an added page on secrecy, thus by-passing the children's parents, their most trustworthy counsellors.]
THE PARLIAMENTARY UNDERSECRETARY OF STATE, DEPARTMENT OF EDUCATION AND SCIENCE (LORD BELSTEAD): My Lords, the Family Planning Association has made it clear that it has no intention of offering this pamphlet to individual children in schools. The Department of Education and Science was not consulted about the contents or distribution of the pamphlet. Decisions about distribution to schools will rest with local education authorities and head teachers.
BARONESS SUMMERSKILL: My Lords, while thanking the noble Lord, particularly for the first assurance that he gave me, may I ask him this question? In view of the alarming increase of venereal disease among young people, does he not think that the time has come when the Government should exercise more direction about the distribution of material of this kind?
LORD BELSTEAD: No, my Lords, the control of the matters which come into the curriculum is vested in the local education authorities and head teachers, and, in the case of aided schools, in the governors and managers. In this particular case, the Family Planning Association is an independent body.
BARONESS GAITSKELL: My Lords, it seems that in 1969 there were 22,000 teenagers who had illegitimate children and 10,000 teenagers who had abortions. In these circumstances, would not the noble Lord agree that the Family Planning Association and the Brook Advisory Centre are doing sterling work in dealing with this vast problem?
LORD BELSTEAD: My Lords, to the best of my knowledge successive Administrations have accepted the independence and value of the Family Planning Association.
BARONESS BIRK: My Lords, in view of the fact that my noble friend particularly mentioned venereal disease, would not the noble Lord agree that this leaflet of the Family Planning Association, which the Minister rightly said, is not distributed "ad lib." to school children, will presumably, where head teachers decide to use it, be distributed in consultation with the parents; and that any sort of discussion on sexual behaviour can only be helpful in the fight against this disease?
LORD BELSTEAD: Yes, my Lords. I think that the noble Baroness, speaking on behalf of the Health Education Council, is very right in the points she has put in the form of a question.
BARONESS SUMMERSKILL: My Lords, may I ask the noble Lord whether he has read the extra leaflet put in with the pamphlet, in which the boys or girls (the pamphlet mentions children) are assured that any information given them will be given in strictest privacy and that their doctors and their parents will not be told?
LORD BELSTEAD: My Lords, I would entirely agree with the noble Baroness, and it would be my hope, and I think the hope of noble Lords, that boys and girls of school age would normally enjoy a relation of mutual trust with their parents. But there are possibly

645
cases when this is not so. When a young girl has entered into sexual relationship, surely it would be better not to discourage her from receiving proper contraceptive advice.
LORD PLATT: My Lords, are Her Majesty's Government aware that I am President of the Family Planning Association; that that body has taken these responsibilities extremely seriously; that it does realise the seriousness of the situation about venereal disease, on the one hand, and the enormous number of illegitimate births, on the other; and that, furthermore, it realises that the teenager who is inclined to this kind of behaviour is the very one who will not go to the family doctor or to Mum and Dad?
LORD BELSTEAD: My Lords, the noble Lord, Lord Platt, has given me the opportunity to say that Her Majesty's Government clearly realise the worries which the noble Baroness, Lady Summerskill, has in putting her Question. At the same time, they also acknowledge the valuable work which is being done by the Family Planning Association. May I add that this is a question of balance, and I hone that I have answered questions in that light.
THE EARL OF LAUDERDALE: My Lords, is there not something to be said in this matter for the Christian teaching of restraint, and might not the right reverend Prelates support those who have families in trying to encourage restraint in this matter?
VISCOUNT MONCKTON OF BRENCHLEY: My Lords, is my noble friend aware that this is yet another example of the parents' obligations and duties being by-passed by third parties and that there are many of us who feel with the noble Baroness, Lady Summerskill?
LORD BELSTEAD: My Lords, there are certain old-fashioned virtues which are inherent in some of the answers I have been giving. If noble Lords would care to look back to 1943, to the Education Pamphlet No. 119 they will see that these words were said:
"The really important point is not where the problem is treated, but by whom."
BARONESS BIRK: My Lords, in view of the disquiet expressed in my noble friend's Question and the implication that anyone can get advice or help in con-
646
fidence, whatever their age, is it not a fact that under the F.P.A.'s own rules patients under 16 can have a general talk with an F.P.A. doctor, but are not given contraceptives without the consent of a parent or guardian? Would the Minister confirm this, and agree that it is important that this should be made known?
LORD BELSTEAD: My Lords, I would respectfully refer your Lordships to Section 8 of the Family I aw Reform Act 1969.

BRITISH HONDURAS: CITRUS EXPORTS
2.43 p.m.
LORD SHEPHERD: 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 will be the effect on citrus exports of British Honduras of the decision to stop the supply of orange juice concentrate through the National Health Service; whether they consider twelve months' notice as reasonable, bearing in mind the period of time British Honduras has supplied Her Majesty's Government; and whether they consider such a period of notice sets an example to E.E.C. countries when Her Majesty's Government is seeking long-term agreements for sugar in its E.E.C. negotiations.]
THE PARLIAMENTARY UNDERSECRETARY OF STATE, FOREIGN AND COMMONWEALTH OFFICE (THE MARQUESS OF LOTHIAN): My Lords, the main effect of Her Majesty's Government's decision on exports of orange juice concentrate from British Honduras will be the need to find alternative markets for some 600 tons of concentrate. I understand that the citrus growers expect to be able to do this. Her Majesty's Government have also offered to help the British Honduran Authorities in this context. As regards the notice given, the contracts with the suppliers of orange juice concentrate were negotiated annually. A year's notice would not, therefore, seem unreasonable.
The arrangements we are seeking to make with the E.E.C. for Commonwealth sugar are not comparable either in form or size with those that existed for orange

647
juice. The E.E.C. are well aware of our position on sugar and of the vital importance of sugar exports to Commonwealth producers.
LORD SHEPHERD: My Lords, would the noble Marquess not agree that it is not a question of size, but of principle, and that £150,000 is a considerable sum to the little British Colony of British Honduras? Would the noble Marquess not agree further that, in view of a contract of some 30 years, 12 months' notice would be regarded by most people as utterly unreasonable? Can the noble Marquess say what offer Her Majesty's Government have made in this matter to British Honduras?
THE MARQUESS OF LOTHIAN: My Lords, it is perfectly true that the economy of British Honduras will to some extent suffer as a result of this decision. It is for this reason that we have offered to assist in any way that we can. Two officers of Her Majesty's Government have already visited British Honduras and had talks with representatives of the citrus industry there. The British Honduras Government are considering at the moment how best to meet the situation, and we are hoping that they will put proposals to us in due course with a view to seeing in what way we can help them.
LORD SHEPHERD: My Lords, I am glad that officials have been in British Honduras, but would the noble Marquess not agree that to diversify this particular export will prove extremely difficult for British Honduras? Will the noble Lord consider seriously what help Her Majesty's Government can give in this matter, and perhaps relieve British Honduras of the 22½ per cent. (I think it is) purchase tax imposed on this particular concentrate if imported into this country?
THE MARQUESS OF LOTHIAN: My Lords, I take note of what the noble Lord has said with regard to purchase tax. As I said before, we are awaiting proposals from the British Honduras Government as to which way they think this difficult problem can best be solved.
LORD BROCKWAY: My Lords, in view of the difficult position of British Honduras now, will Her Majesty's Government seriously reconsider the decision they have made? Further, will
648
they display in the negotiations that are now going on a much more generous attitude towards British Honduras?
THE MARQUESS OF LOTHIAN: My Lords, obviously, I cannot undertake to give the noble Lord any assurance about reconsidering this decision, which was taken on medical grounds. Our concern at the moment is to do our best to help the British Honduras Government to meet the situation.
VISCOUNT ST. DAVIDS: My Lords, will the noble Marquess be able to take into account that, even if something is carried on on a 12-monthly basis, when it has gone on for 30 years it has set a complete pattern of life for a large number of people? Therefore will be take some special steps to make sure that the process of change is smoothed over as much as possible?
THE MARQUESS OF LOTHIAN: My Lords, I take note of the noble Viscount's question.

THE MIDDLE EAST: PEACE NEGOTIATIONS
LORD GEORGE-BROWN: 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 make a statement on the present state of negotiations on the Middle East.]
THE MARQUESS OF LOTHIAN: My Lords, in early February Dr. Jarring submitted proposals to the Governments of the United Arab Republic and Israel asking for conditional commitments from them on peace and withdrawal respectively. Her Majesty's Government welcomed this initiative. The United Arab Republic Government's reply gave the commitments for which Dr. Jarring had asked on the nature of the peace they would undertake to keep. Dr. Jarring still seeks from Israel a matching commitment on withdrawal within the terms of Security Council Resolution No. 242 of November, 1967.
Recent developments have made it more necessary than ever that the negotiations under Dr. Jarring's auspices

649
should be enabled to make progress in an atmosphere conducive to the achievement of a settlement. Her Majesty's Government will continue to do everything within their power to promote and assist efforts to reach a comprehensive settlement in accordance with the Security Council resolution. They are maintaining regular contact with the parties, and with other interested Governments, and with Dr. Jarring himself. They are also, of course, playing an active part in the Four Power discussions in New York on the subject of guarantees for a settlement.
LORD GEORGE-BROWN: My Lords, I thank the noble Marquess for that reply, and I should like to ask him a question on one particular point. As I understand it, mostly by reading what appears in the newspapers, the immediate problem seems to be narrowing itself down to an area known as Sharm el Sheikh. Would not the Government—and I speak as one who had something to do with Resolution No. 242—consider making it quite clear to the parties that the interpretation of Resolution No. 242 as applied to Sharm el Sheikh must provide not only for Egyptian sovereignty of that area, but also safeguards for Israeli security, and in particular security of passage of ships through those waters? As I understand it, the present publicly stated official position of Israel is different, but we all understand that there may be many reasons for publicly stated official reasons. Would it not be a very good thing if somebody made it quite plain that that is in fact the interpretation of Resolution 242 relating to Sharm el Sheikh? If that were done, might we not make some progress?
THE MARQUESS OF LOTHIAN: My Lords, as the noble Lord says, he had a great deal to do with the drafting of Resolution No. 242. I am quite certain that Her Majesty's Government will study what he has said with the very greatest interest. I also hope and have no doubt that both the Governments of Israel and the U.A.R. will also do so.
LORD GLADWYN: My Lords, in any future talks which the Government may have will they consider impressing on both sides the strong desirability, not the
650
necessity, of their accepting some kind of neutral force at Sharm el Sheikh? I do not know whether the Government will agree, but it seems to me that this would be the way, in the long run, to get over the difficulties on both sides.
THE MARQUESS OF LOTHIAN: My Lords, I do not think the noble Lord will expect a direct answer to that question to-day. I feel that in a matter of great delicacy such as that which is now going on the less we say at this stage in this House the better. I will take note of what the noble Lord has said.
LORD SHINWELL: My Lords, would it not be desirable to allow Dr. Jarring to continue his valiant efforts with patience and understanding, instead of allowing so-called "experts" to intervene with fantastic and bizarre ideas—in particular, those experts who believe that they know all about the situation in the Middle East, but when they had a responsibility failed to achieve anything useful? Is it not desirable that Dr. Jarring should continue his efforts in the hope that direct negotiations should develop which are the only chances of reaching a successful conclusion?
THE MARQUESS OF LOTHIAN: My Lords, of course I agree that we all hope that Dr. Jarring will be allowed to continue his efforts to achieve a lasting solution. It is comforting to feel that he has at least got off to a better start this time so far as the U.A.R. are concerned. It is certainly our hope that there will be a matching response from Israel.
LORD JANNER: My Lords, may I ask the noble Marquess to consider whether it is unrealistic to expect Israel to go to boundaries which are insecure? Is it not obvious to anybody that her previous experience will prevent her from accepting any terms unless she is in a position to defend herself? Is it not ridiculous at this stage for suggestions to come forward, without Israel being consulted, as to what those secure boundaries should be?
THE MARQUESS OF LOTHIAN: My Lords, I am quite sure that the Government of Israel will make their position perfectly plain to Dr. Jarring on these points.
LORD ST. HELENS: My Lords, may I ask my noble friend whether any coordinated military planning has yet started between the four Powers in order to preserve the peace if agreement is reached by Israel and the Arabs?
THE MARQUESS OF LOTHIAN: My Lords, I am afraid I could not answer that question without notice. At the moment, the thinking seems to be more on the lines of a possible United Nations' Force. I will certainly look into the matter.
LORD BARNBY: My Lords, can the noble Lord tell us whether we are to understand that the dominant intention of Her Majesty's Government is to get the two sides together round the conference table? Secondly, are we to understand that the situation is made much more difficult because of the constant changing and inconsistent attitudes of the four Powers—the difference between their own relationship and the main problem? Thirdly, is it not as unlikely that Russia will give up Egypt, the supervision of whose military forces she now controls, as it is that she will give up Berlin or the Eastern European countries that she dominates?
BARONESS STOCKS: My Lords, do Her Majesty's Government associate themselves with the statement which I believe was made at the beginning of this Session by our Foreign Secretary, requiring Israel to withdraw to the frontiers determined by the cease-fire in 1948? If the Government do not associate themselves with that—and it seems to many of us a rather irresponsible statement—is it not time publicly to say so?
THE MARQUESS OF LOTHIAN: My Lords, I would not dream of dissociating myself with anything that my right honourable friend the Foreign and Commonwealth Secretary has said. In reply to my noble friend Lord Barnby, I would agree with him that what we want to see are negotiations between the two parties concerned and Dr. Jarring.
BARONESS GAITSKELL: My Lords, may I ask the Government why some people expect the Israelis to behave in a way in which they themselves would
652
never behave in the same circumstances; that is, to withdraw before any terms are agreed, let alone any negotiations begun—withdrawal before guarantees?
THE MARQUESS OF LOTHIAN: My Lords, these are matters which I hope will be put to Dr. Jarring by the Israeli Government. I have no doubt that they will do so.
THE LORD PRIVY SEAL (EARL JELLICOE): My Lords, Lord George-Brown's Question was framed in very wide terms, and understandably so. The supplementary questioning has also been going wide—perhaps understandably so. I do not believe that this is the type of discussion which is really susceptible to answer by question and answer. I would suggest that after a pretty fair round of questioning we may leave it where it is at the present time and come back to it in debate, or in an Unstarred Question, if that is the wish of your Lordships.
LORD JANNER: My Lords, may I ask a question arising from that?
SEVERAL NOBLE LORDS: Order!
LORD JANNER: My Lords, will the noble Earl indicate whether, in view of the importance of this matter, we shall shortly have a debate on the subject of the Middle East?
EARL JELLICOE: My Lords, that is a very proper question and, of course, we shall be very glad to consider that suggestion through the usual channels. I should not for one second seek to minimise the great importance of the issues which we have just been discussing.

NORTHERN IRELAND
EARL ST. ALDWYN: My Lords, with the leave of the House, my noble friend Lord Carrington will be making a Statement on the situation in Northern Ireland at a convenient moment after 3.30.
MR. SPEAKER KING'S RETIREMENT BILL
Read 3a, and passed.

INDUSTRY BILL
3.0 p.m.
LORD DENHAM: My Lords, on behalf of my noble friend the Lord Privy Seal, I beg to move that this Bill be now read a second time. The Bill gives effect to the Government's decision, announced last October, to repeal the Industrial Reorganisation Corporation Act 1966 and to bring to an end the power to make industrial investment schemes under Sections 1 to 7 of the Industrial Expansion Act 1968. Both these measures conferred upon the Government, or Government-sponsored bodies, wide powers to intervene in industry. We have long opposed direct intervention of this sort as being contrary to industry's best interests. The White Papers which described the intentions of the two Acts claimed industrial expansion and improved competitiveness as their objectives. We are not surprised that these claims have been little realised and that on the evidence the contribution made by the measures to the promotion of industrial efficiency has been small. If, for example, the I.R.C.'s activity is assessed in terms of mergers, its contribution amounts to some 20 to 25 mergers per annum since 1966, compared with an average annual total of about 600. The dissolution of the Corporation can scarcely be represented as a body blow to the programme of restructuring and rationalisation of British industry. The indications are that established institutions were already responding adequately and effectively to present-day needs.
The decision to abolish the Corporation was taken only after a careful review of the possibilities open to us. Though it was not our original intention to take this step, it became clear that it was the only practical course. During the four years or so of its existence, the Corporation has spent or committed up to some £130 million. The statutory ceiling on its borrowing powers is £150 million, and to continue at the former rate of investment would obviously have required a sharp increase in this limit. It was the declared intention of the previous Government to make this increase. In the present atmosphere of financial stringency, however, such an increase would be contrary both to our general policy of reducing Govern-
654
ment expenditure and to our industrial policy of encouraging industry to finance its own investment. It would have been quite impracticable to settle for a level of I.R.C. investment within the existing ceiling. For instance, it would not have been possible in these circumstances to retain a high-calibre Board and Executive. The only realistic course was to repeal the Act and abolish the Corporation. I would stress that this decision does not reflect any criticism on either the Board or the Executive of the I.R.C. Their ability in tackling the job they were given, which they did with enthusiasm and great professionalism, is in no way in question. Indeed, I would express the thanks of Her Majesty's Government to Sir Joseph Lockwood and his colleagues and to past members of the I.R.C. for the way they applied themselves to the best interests of the Corporation.
We should not, however, allow the quality of the members of the I.R.C. to divert us from the issues involved. The decision to abolish the I.R.C. has been the subject of some criticism, but much of it has been based on a misconception of what the I.R.C. did or was intended to do. It has been suggested for example, that the I.R.C. had a role as an instrument of regional policy; as an assessor for Government in situations where Government financial support was being sought; as a means of achieving reflation in certain sectors of industry, in changing management, in creating employment, in promoting technological advance and so on. My Lords, these are exaggerations of the I.R.C.'s role. It is important to see the I.R.C. and the effects of this Bill in perspective. To this end I think it would be useful to say what the I.R.C. did and was empowered to do, in contrast to what some may think it did or might have done.
Primarily, the I.R.C. was charged with promoting or assisting in the reorganisation and development of industry in the United Kingdom. As an aside, one may perhaps observe that the money made available to the Corporation to accomplish this task, though measured in million of pounds, was in no way commensurate with the magnitude of the task itself. This credibility gap inevitably suggests that the architects of the scheme were not very clear about the problems they faced.

655
In carrying out its duties the I.R.C.'s activities fell broadly into two fields. Its first and primary role was to do with mergers; the second with selective investment in various industries. In neither activity were regional considerations of overriding importance; nor was the creation or maintenance of employment opportunities a prime objective. The concept of the I.R.C. as an assessor in situations where Government assistance was sought is superficially attractive but fundamentally it is at variance with the terms of reference of the I.R.C. In its activities it was expected to be independent of Government and commercial in its attitude to industry. Perhaps the most telling comment is that the Corporation was set up to promote mergers, yet within three years the Government which set it up were critical of the merger fever that appeared to have overtaken industry.
I should like to turn now to the second part of this Bill, which is concerned with the repeal of certain sections of the Industrial Expansion Act 1968. Because the Industrial Expansion Act (or those sections of it which we propose to repeal), is merely an enabling measure, the need to dispose of it has been questioned. My answer to that is that we are firmly opposed to what it enables Government to do, and do not intend to use it. In these circumstances we do not propose to leave it on the Statute Book or to leave it for others to use subsequently. The sections of the Act with which we are concerned—namely, Sections 1 to 7—contain provisions for financial support through industrial investment schemes designed, according to the Act, to improve efficiency and profitability in an industry. The provisions have been used to implement the computers merger and the two aluminium smelters schemes, schemes which were already in the final stages of negotiation before the Act was passed. Since they were introduced in 1968, no further schemes have been initiated. In these circumstances it can scarcely be argued that repeal of this part of the Act will be a great loss to industry. Commitments under the three schemes, which amount to £80 million altogether, will of course be met, and provision is made for this in the Bill.
656
My Lords, having outlined the philosophy behind the Government's decisions, I should like to explain briefly the contents of the Bill itself. Clause 1 provides for the repeal of the Industrial Reorganisation Corporation Act 1966 and the transfer of the Corporation's assets, rights and liabilities to the Government on a day to be appointed by order. After a further period of one month, in which the Corporation will carry out certain duties specified in the Schedule, the Corporation will be dissolved. Its duties during the period relate mainly to the preparation of final reports and accounts. The assets to be transferred will consist mainly of investments in the form of loans, convertible loans and equity shareholdings. All of these, with the exception of the loans made to Rolls-Royce and Joseph Lucas Limited, will be transferred to the Secretary of State for Trade and Industry. These two loans, because of the aviation supply interest, will be transferred to the Minister of Aviation Supply. Certain commitments entered into by the I.R.C. to make further loans will be outstanding at the time of transfer. These commitments will be honoured. It is the Government's intention to realise the investments in accordance with the loan agreements or, in the case of shareholdings, as soon as opportunity offers. In managing and disposing of the investments the Government will take expert financial advice. The Bill includes provisions to safeguard pension arrangements of members and executives, and as a precautionary measure provision has been made for the making of redundancy payments by the Secretary of State.
Clause 2 of the Bill brings to an end the power to make schemes under Sections 1 to 7 of the Industrial Expansion Act. Existing schemes are safeguarded. To date about £50 million of the total of £80 million committed to the three existing schemes has been advanced. We shall meet the commitments outstanding. The provisions of the Bill are not negative. They are positive steps towards a healthier industrial society. Our aim is to reduce the tax burden on industry and return to it the responsibility for investment and investment decisions, which is rightly its own. The Industrial Reorganisation Corporation Act and the Industrial Expansion Act embody a policy which is inconsistent with our philosophy. We are therefore

657
repealing them. Industry left to stand on its own feet will be the better for it. I commend this Bill to your Lordships' House.
Moved, that the Bill be now read 2a.— (Lord Denham.)
3.9 p.m.
LORD SHEPHERD: The noble Lord, Lord Denham, has moved the Second Reading of this Bill with his customary urbanity and reasonableness, and I thought, at the end of his speech, 'with a certain sense of mischief and subtle humour. I am bound to say to the noble Lord that I found his speech even less convincing than the one delivered by his right honourable friend the Secretary of State for Trade and Industry in another place. I can understand the noble Lord's difficulty, confronted, as he was, with a Bill which even he would regard as entirely destructive in nature. It removes two particularly useful instruments from the Statute Book but puts nothing in their place except, as the noble Lord said, his philosophy that industry should stand on its own feet. I am bound to say to the noble Lord that the Bill represents perhaps 19th or 18th century thought, rather than the realities of the 20th century.
From the noble Lord's speech, there is no doubt at all that this Bill was conceived in the Administration's first, heady days of office, when, as we know, the "lame ducks" were to be cast to the jackals and the Government were to disengage from business. But, clearly, events have had some effect. The Government appear to have been blown slightly off course, despite the renowned ability of the amateur helmsman, the Prime Minister. Rolls-Royce, of course, have been nationalised. In view of the delicate negotiations on the RB.211, one needs to be very careful what one says; but there is no doubt that there is considerable disquiet on the handling by Her Majesty's Government of the whole affair, and it will take years to recover the standing of honesty and fair dealing for which we have always been held in high regard in our export markets.
Then there have been the loans to Yarrow's from the Ministry of Defence, despite the doubts that they might throw on the Ministry's own policy of fair dealing in tendering. There is also, of course, the assistance to Harland and Wolff—
658
and here I think the decision taken was right in the light of circumstances in Northern Ireland. We on this side of the House support these last two interventions and are glad that the Government, as another famous sailor once did, closed their one good eye to proclaim policies and did what was right. I have a feeling that the Government will one day very much regret their decision to dissolve this important instrument of policy.
This afternoon I should like to consider some of the achievements of the Industrial Reorganisation Corporation, and to try to show to the House why such an organisation is needed, and why perhaps in future years, with the growth of international companies, such an organisation, perhaps of an international character, will prove vital. At the outset I would pay the highest possible tribute to the past and present Chairmen of the I.R.C. The fact that outstanding industrialists—and I stress "industrialists "—such as the noble Lord, Lord Kearton, and Sir Joseph Lockwood, with other distinguished directors, were prepared to serve and to give so generously of their time and knowledge is sufficient evidence of how important they regarded the role of the I.R.C., not only in the national sense but to industry in particular. I pay tribute to their service and notable achievements, and share with them the regret that this particular instrument is now to be dissolved.
Were economic conditions such that the I.R.C. was no longer necessary, or that a new instrument was being put in its place, there would be no need to dwell on the historical facts of this nation's decline in relation to other industrial countries, or on the present plight of this country in economic affairs. I do not think we need to be reminded of the present situation. Industrial and commercial morale has never been so low as it is now, since perhaps the 1920s. Bankruptcies are at a record level, and the full impact of the Rolls-Royce affair has not yet been felt. Prices everywhere are falling, and wages, as workers seek to improve their standards and to keep pace with inflation, outstrip productivity and correspondingly add to inflation. Investment is falling away. Companies increasingly face great difficulties in their own cash flow, and unemployment to-day is at its highest for some thirty years.

659
To-day's problems stand out sharply, but they are not new. We have had them before; but their consequences to our social fabric were not so serious then as they may well prove to be now, since people's expectations are indeed higher than ever before. To-day's debate does not provide an opportunity to discuss the general causes of our economic difficulties. Many of those causes, as I have said, and as we said in 1963–64, are deeply embedded in our structure of industry and society and, if we are frank, in our general attitude to the world around us. The highest point of Britain's strength in industry and wealth probably occurred in 1890. Subsequent years have seen a slow but steady erosion of the liquid resources previously accumulated, and a deterioration of relative industrial performance. Throughout that period (perhaps the noble Lord, Lord Denham, would care to be reminded of it) our share of world trade has declined; although the decline was halted, perhaps temporarily, during 1969 and 1970.
For many years the urgent problem facing this country was to restore the international competitiveness of Britain's manufacturing industry; to promote exports; to contain imports, through competitive prices and prompt deliveries, in order to achieve and sustain a favourable balance of payments on the visible trading account. To this end was much of Labour's economic policy directed. Through investment grants, vast sums were provided to encourage and support urgent re-equipment of industry and rehabilitation of the regions. We sought the redeployment of workers with the aid of redundancy payments. These and other measures, coupled with unpalatable and, in many cases, undesirable measures for holding back imports, at least saw exports rising both in value and in volume. Devaluation played an important part. But there was real evidence that industry was proving more competitive and more willing to fight in the export markets. The noble Lord, Lord Denham, may care to be reminded that, apart from the visible trade balance of last year, the previous comparable occasions occurred in 1958 and 1956, and we have to go back to 1822 before such a situation previously arose.
We on this side of the House have long felt that the major reason for our debility
660
was the fragmentation and the largely incoherent structure of British industry. The steel industry was perhaps the most glaring example of lack of logic, and the creation of the British Steel Corporation was the first step, and only the first, towards rationalisation. To-day, the ports cry out for rationalisation and modernisation, but we have no words from the Government about the steps they propose in this connection. Public ownership is not always the proper solution. Shipbuilding remains in private hands, despite large sums of public funds being involved, but rationalisation has been brought about through the Shipbuilding Board. I very much regretted to see in yesterday's newspapers a rumour that this particular Board is to be dissolved.
Fragmentation of the private sector of industry needed a special stimulus to carry out mergers and to hive off those parts of companies which did not provide a proper relationship. The Labour Government in 1966 set up the I.R.C. as the main drive in introducing logic in the private industrial structure. We did not set up the I.R.C. because of some Socialist theory; it was set up because we believed in a mixed economy of private and public organisations, and that the private sector which held the keys to our economic and social development should be assisted in the national interest in their own development. We made it clear—and events have proved this—that it was not nationalisation by the backdoor; it was a recognition that many production units were far too small by comparison with the most successful companies in international trade. It was a recognition that without longer production runs, economies of scale, adequate research and development and the most modern equipment, companies would find it increasingly hard to compete in the international markets.
My Lords, I think, too, there was a recognition that while the State had a responsibility to assist in the private sector, so the private sector had a responsibility to the country. The I.R.C. had no power to enforce any merger or any "hive-off". It could do it only by persuasion and by showing the advantages of change and of bringing change about. But if the need for change was important in 1963–64, it is perhaps more

661
important to-day, and I have no doubt that with the passing of time it will become increasingly important. British and European industry has not yet met the full impact of American international corporations, or the effect of the giant Japanese companies, which I believe is only just being seen.
The I.R.C.—and here I share its view—accept that the major influences upon these objectives are the market forces and the Government's overall economic and industrial policy. But there is no evidence that market forces alone will bring about rationalisation in the key sectors in the time scale required without some external stimulus or expertise. The I.R.C. saw its position as
"at the micro-level with individual companies and at the interface between the public and the private sector"—
an area largely unknown. During the first three years the I.R.C. concentrated on bringing about mergers in the key areas of the private sector. Here I would say to the noble Lord that it is not a question of the numbers that are involved; it is the quality of the mergers that are undertaken. Those mergers have had far-reaching effects in the industries connected with motor vehicles, computers, electrical and electronic goods, scientific instruments and ballbearings.
My Lords, the purpose behind these mergers—and I would ask the noble Lord, Lord Denham, to consider this—was not just to create size for the sake of size but to establish units which could effectively compete in international trade. I accept that size in itself has no particular merit. Sometimes it can be a downright disadvantage if management is inadequate to cope with the problems that arise from increased size. I think the Government are right when they say that mergers take place all the time; but they take place for a variety of reasons. What we are concerned about, and I think the Government should be concerned about, is to encourage those mergers which have a special quality about them; that the real intention should be efficiency and growth, through plant utilisation and economies in research and development that will have a major impact on our balance of payments. We are concerned that they should occur in the key sectors of
662
industry, and it is in this direction that the I.R.C. directed its attention and—I accept—limited resources.
The noble Lord decried the merit of I.R.C. Let us consider the merger between British Leyland and British Motors. This merger was brought about by a loan of £25 million by I.R.C. This, perhaps more than anything, has meant that at least there is one organisation in this country, British owned, producing motor cars. Would the noble Lord have had all the motor car manufacturing industry in foreign hands? Of course he would not. Would this merger have come about if it had not been for the I.R.C.? I doubt it. If we take the question of ballbearings and if the noble Lord will only read the 1970 Report of the I.R.C., he will see that unless steps had been taken to bring about a substantial merger there would have been no British-owned viable ballbearing company in this country. And considerable assistance was given to the fishing industry by the bringing together of Associated Fisheries and the Ross Group.
I am not going to dwell in detail on these mergers, but in the light of what the noble Lord has said I am going to ask the noble Earl to answer a direct question when he winds up. Of those mergers undertaken with the support of I.R.C., will he tell us of any that were contrary to the national interests and that were not in the interests of the companies and the industries concerned? And would be not agree further that there is an overwhelming need in the machine tool industry for rationalisation, and not only rationalisation, indeed, but considerable and urgent new investment? With the disappearance of I.R.C., where will the stimulus come? Above all else, where will be the disinterested expertise which is so often vital when one is seeking to bring two organisations together?
We have spoken of investment. For all too long investment has been inadequate and thinly spread. I suspect that the total amount of finance available for investment for years to come will prove to be insufficient. There is therefore an overwhelming case for us to be far more selective in our investment programmes, and particularly in those industries and companies which again are the key to our economic strength. The I.R.C. view, in its 1970 Report, was that if we were

663
to keep our place in international trade we should have to do what others have done; namely, to review and extend our industrial apparatus selectively but on a scale larger than to-day. I have no doubt at all that there is a real need for a concerted effort by industry, finance and Government to catch up, with quite massive but, in particular, selective investment. The I.R.C. has already shown that, provided it had the resources and had been allowed to continue, it had the expertise for selective investment and for selective rationalisation.
My Lords, I do not intend to deal with the reasons given by the noble Lord today. I do not believe any of those reasons stand up to any form of examination. It is one thing to be angry that a useful instrument should be broken up, but what alarms me is that the Government, dedicated to the entry of the United Kingdom into the E.E.C., seems to be blind to the long-term implications of joining the Common Market. It is the belief of the Government and those who support entry that the wider Europe will see greater wealth and development among the participating countries. This is so for the United Kingdom, provided our companies in the key sector are geared and structured to meet the competition in Europe and in the United Kingdom.
But there is another factor which we should take into account. The potential for growth and the increase in purchasing power of Europe will attract overseas capital from America and, I believe, eventually from Japan. In recent years American capital has poured into Europe, but unlike European capital in the United States of America, their capital is concentrated in particular projects. I believe that if unchecked or unchallenged, Europe could well become a sort of satellite of American or American-Japanese capital through its eventual control of key industries and companies in Europe. We should welcome overseas capital, but it is essential that there should be European companies capable of competing with these American subsidiaries. United States companies based on the huge United States markets and with European subsidiaries can create huge productive runs and employ tremendous research and development resources, and
664
they are able to bring new products into the market very quickly. These companies, therefore, have a great advantage over our own national companies. I have no doubt at all that Europe will need many more large and powerful European corporations to match the American international organisations. I do not believe that this can be brought about by any sudden or rapid expansion of existing companies, but only through mergers of existing large and powerful European companies.
It is vital, if these mergers come about, that the United Kingdom contribution should be large and efficient enough not to be swamped by European contributions. It is natural that countries are fearful of losing control of key companies to foreign investment through merger. There is little knowledge of how international companies operate, and a real fear of how policy decisions could affect investment and overseas sales or agencies. Such fears and lack of knowledge will have to be overcome if we are to create European companies to challenge and match the American and the American-Japanese penetration of our industries. This is a subject worthy of a debate on its own. I have mentioned the subject solely to illustrate the imperative need for quality mergers in the United Kingdom, not only so that the United Kingdom can compete with the best in Europe, but so that when European corporations are formed United Kingdom companies shall play a dominant or a prominent part in their development. If we do not do this, I think our future will indeed be bleak.
But I suppose the question is really this: will market forces provide sufficient stimulus, both in United Kingdom mergers and eventually in European mergers? In the time scale I do not believe they will, unless side by side with them there is a stimulus or a catalyst which precipitates mergers. The experience of the I.R.C. in its four short years has proved its worth. The break-up of the I.R.C. to the United Kingdom will prove to be one of the greatest blunders of our time—a mistake based on outworn dogma and on a failure to understand the developing nature and character of industry and commerce. I regret the presenting of this Bill, but, much as we regret it, certainly we on this side of the House will not oppose it.

NORTHERN IRELAND: RESIGNATION OF MAJOR CHICHESTER-CLARK
3.35 p.m.
THE SECRETARY OF STATE FOR DEFENCE (LORD CARRINGTON): My Lords, with your Lordships' permission, I should like to repeat a Statement which my right honourable friend the Prime Minister has made in another place about Northern Ireland. It is as follows:
"The House will have shared the regret which the Government felt at the news that Major Chichester-Clark had decided to resign. This Government, and right honourable gentlemen opposite before us, have had a constructive working relationship with him, and we have all admired the determination with which he has pursued the policies which he and we believe to be right in Northern Ireland. There has been no basic difference of view between us about these policies, whether in the social, economic or security fields.
"Considerable progress has been made during his term of office in social and economic measures, and in institutional changes, designed to ensure equality and fairness between every citizen in Northern Ireland. This progress was already beginning to bring about an evident improvement in the relations between the two main communities in the Province. This improvement is now being deliberately put at risk by extremists who regard a reduction of communal tension as contrary to their purposes. These extremists have resorted to the tactics of urban guerrilla warfare and outright terrorism.
"The functions of the security forces in Northern Ireland remain twofold. First, to maintain law and order and to prevent communal strife. Second, to root out terrorism and to deal with extremists with the least possible damage to the progress that has been achieved and to the lives and welfare of innocent people. The Army will act in pursuance of this policy with the utmost vigour, and the British Government will continue to support the Army with all the authority which is needed to carry out the military
666
measures which are judged necessary for the purpose.
"Following Major Chichester-Clark's visit to London last Tuesday, the decision was taken to send an additional artillery regiment in an infantry role, an infantry battalion and an armoured reconnaissance squadron to Northern Ireland. The artillery regiment has now arrived, and the others will follow in the next day or two.
"I am sure that the House will wish to pay tribute to the character and bearing of the troops in the difficult circumstances in which they are operating.
"We well appreciate the gravity of the threat posed by the terrorists, the disruption which it inflicts upon the life and economy of the province and the continuing strain which it imposes upon the people of Northern Ireland. Northern Ireland is part of the United Kingdom, and it is our firm purpose to work for the same standards there as elsewhere in the United Kingdom, whether it be in economic and social progress or in the maintenance of law and order. That is the object of the policies pursued by right honourable gentlemen opposite and by my colleagues and myself. The United Kingdom Government, which has the ultimate authority and responsibility for Northern Ireland, will give its full support to any government there which cooperates in implementing the policies which we judge right for these purposes."
LORD SHACKLETON: My Lords, there is little that I can usefully say, beyond repeating again and pledging the support of the Opposition—and, I believe of the whole country—to the Government in their efforts in these matters. They are maintaining the policies of previous Governments, the policy that they supported in Opposition, and this is consistent with the Downing Street Declaration in 1969.
The noble Lord has paid tribute to the troops; we have done so already. There is, to my mind, no doubt about the extraordinary restraint they have shown. Perhaps the noble Lord could tell us—and it might as well go on the Record—whether they are, as I am sure they are, maintaining their complete neutrality.

667
They have an appalling task to perform. I would ask the noble Lord this question. There are always suggestions at moments like this that, somehow, the politicians are stopping the security forces from doing their job. The noble Lord has been over to Northern Ireland, and I wonder whether he could say a word on this point. I saw Mr. Maudling on television the other day, and he said that there was not a word of truth in this suggestion. But this rumour is always made, and it is apt to be used damagingly. I should like to be satisfied that the security forces themselves are favouring the policy which no doubt the noble Lord himself endorses. Beyond that, I believe there is nothing that I can add, beyond repeating that we cannot ignore our responsibilities in this matter and shall have to continue to discharge them.
LORD CARRINGTON: My Lords, I am very grateful to the noble Lord the Leader of the Opposition. As he says, this is not in any sense a Party matter: both Parties have been involved in this matter and both have come to the same conclusion, that this is the right policy to follow. And I do not think that there will be any dissent in any quarter of this House.
The noble Lord asked me two questions. I would confirm—if indeed it is necessary, as he himself said—that the Army is being totally neutral in this and is doing its job in what I believe to be a wholly proper and right way. I think that the continual sniping at it in some quarters (not here, but elsewhere; in the Press and so on), the suggestion that it is not doing the right job, is not helpful. People ought to understand the parameters within which the Army has necessarily to act in a situation of this kind. There is no truth whatever in the suggestion that the politicians are trying to tell the Army to adopt tactics that the Army does not think to be right. There is no disagreement between myself, or my Ministry, or Her Majesty's Government, and the General Officer Commanding or the Army. We believe that the tactics which the Army is pursuing are the only possible tactics in this particular case, and we believe them to be right; though I think it would be wrong to suppose when you are facing a number, a fairly small
668
number, of terrorists, who inevitably have the initiative and the advantage of geography on their side, that there is any very easy solution or any very quick one.
LORD BYERS: My Lords, we share the same regret as the Government and the official Opposition at the resignation of Major Chichester-Clark. I should like, on behalf of my colleagues, to be associated with what has been said about the Army. We think it is doing a first-class job of work in very difficult conditions. I want to ask the Minister whether he will resist any suggestion that the police should be armed, or that we should have a return of anything like the B Specials? Having said that, I would add that we should certainly support the Government in any measures they wish to take to recruit more people to work in the intelligence field, which is probably the most difficult one.
LORD CARRINGTON: My Lords, I am grateful, too, to the noble Lord, Lord Byers. I hope that the tributes which both noble Lords have paid to the Army will be published in the Northern Ireland newspapers, and seen by the troops on the ground who are doing this very unpleasant job. There is no question whatever of the revival of the B Specials or of the police being armed. I can assure the noble Lord that intelligence is one of the matters we are looking at very carefully, and have been for some time.
LORD BROCKWAY: My Lords, may I ask the noble Lord a question? Whilst I appreciate the gravity of the situation, and would not want to say a word that would make it worse, is it not the case that in these negotiations Her Majesty's Government are dealing only with the military situation, and that that can be no solution to the problem of Northern Ireland? Are Her Majesty's Government giving thought to a more longer-term political settlement of these issues, which alone can bring about the removal of grievances and the achievement of a reconciliation?
LORD CARRINGTON: My Lords, I think that both this Government and the last Government have given a good deal of thought to the questions of long-term settlements and long-term solutions. But if the noble Lord had been over to

669
Northern Ireland recently, and indeed had been reading the newspapers, I think, with great respect, that he would realise that the possibility of any long-term settlement is, in the climate in Northern Ireland at the present time, a little remote.
LORD STONHAM: My Lords, the noble Lord said that Her Majesty's Government would continue to support the Stormont Government while they pursued policies which seemed to us right. Will he confirm that those policies are exactly the same as those discussed in 1967, both in Downing Street and at Stormont, and to which the whole of the Stormont Cabinet were committed and fully supported? Will he also confirm that no leader of the Stormont Government who did not support those policies would be acceptable to Her Majesty's Government?
LORD CARRINGTON: My Lords, if the noble Lord will read very carefully the Statement which I have made, I think he will see that both those two points are covered.
LORD SHACKLETON: My Lords, I am afraid that I forgot to pay a tribute to the former Premier of Northern Ireland. I cannot imagine any more thankless task to-day—it must have been a tremendous ordeal—and one would wish his successor luck. It is, of course, quite clear, and I think apparent from the noble Lord's Statement, that the policy of the Government, and our support for the Northern Ireland Government, rest on the continuation of the policies of reform. There have been suggestions in a number of quarters that perhaps we ought to debate Northern Ireland. My own personal view is that at the moment there is nothing to be gained by this. It may be that at a certain stage we may have to do so, but I imagine that the noble Lord the Secretary of State would share my view on this.
LORD CARRINGTON: My Lords, I think your Lordships have always taken the view that if we have a debate in this House there should be some object in it, whether it is to air the subject or, if possible, to help matters along. If we had discussions through the usual channels as to whether or not there should be a debate, I should be very content, and so, I am sure, would my noble friend the Leader of the House.

INDUSTRY BILL
3.45 p.m.
Second Reading debate resumed.
LORD BYERS: My Lords, in continuing the Second Reading debate on the Industry Bill, I do not think that the noble Lord, Lord Shepherd, would expect me to follow him in every detail of the panegyric which he gave us of the Labour Party's industrial record in office. One of the major and, I think, justified criticisms of the Labour Administration was their inability, through inexperience, to understand the world of business. But I must say that after nearly a year of Conservative practice, I and many others are beginning to wonder whether the Conservative Party are going to be any better, particularly when they come forward with such a Bill as this. I am really referring only to the Industrial Reorganisation Corporation side of the Bill. I suppose I have an interest to declare in the Industrial Expansion Act, which is also covered by the Bill, because my company was, and is, involved in one of the aluminium smelters. I must say, in passing, on this question of industrial expansion, that I should be very surprised if this Government can get through without some means of providing selective assistance in areas where they want the economy to expand.
I think one is justified in asking what on earth does go on in the Conservative Cabinet to-day, so far as industrial matters are concerned. There are plenty of people in the Tory Cabinet, unlike the Labour Cabinet, who have actually been in industry and business and have had to earn their living in this way; but so far as one can see, either they have lost their voices recently or their influence is becoming more and more minimal. The Prime Minister, with the least business experience of the Cabinet, seems to have cowed the rest of his colleagues. It is the old story of the dictatorial chairman of the board whose favourite motion was, "All those against, will say, 'I resign'". They seem to be locked in.
I find it totally incomprehensible that the Government should come forward with a Bill such as this, whose aim is apparently to deprive them of an agency which has done very little harm and, I think, has done quite a lot of good. I cannot see where the abolition of the

671
I.R.C. fits into the Conservative Party industrial policy. There are, I suppose, two possible answers. One is that they are still tilting at windmills, or trying to fight the anti-Socialism battles of long ago—what was called the "dismantling of the Socialist legacy". That is "old hat", and I think we have all grown out of that sort of thing. Possibly the answer is that it does not fit into their industrial policy because they have not yet formulated one.
The argument that the I.R.C. was a weapon of the Socialists designed to further the extension of nationalisation just does not hold water on the record of the I.R.C., because it could not be used for this purpose while a Tory Government remains in office, and if there is a future Labour Government it would not be very difficult to revive the I.R.C. and to start it off again. I do not see the logic of this particular Bill. I think the answer is that the Government have not yet got a coherent policy for industry. In so far as one can detect a policy, it is something like this: first, those aspects of nationalised industry which are making, or could make, reasonable profits are to be hived off to private enterprise, leaving the loss-making side as a potential, or present, burden on the Exchequer. This is paralleled only by the Socialist policy of looking round to find a loss-making industry and nationalising it. Between the two, I must say that I am getting very confused. I think that both policies are absolutely daft. But if the Conservative Government are determined to sell off profitable nationalised assets, at least the I.R.C., with its commercial experience, would be a far better vehicle for that sale than Government Departments which are, rightly, a long way removed from commercial and industrial practice.
The second aspect of Government policy appears to be to condemn all companies or industries which are not currently making profits and to classify them as "lame ducks". Whether the "lame ducks" are to be fed to the jackals, as the noble Lord, Lord Shepherd suggested, I do not know; but this is a very odd one, too. I think it is far too glib a concept to say to one company, "You are a lame duck". and to another, "You are not a lame duck". In fact, in the case of Rolls-Royce the Government showed how farcical such a policy was.
672
The fact is that Rolls-Royce entered into a bad contract. Fixed price contracts in times of inflation are always very risky unless you have a good margin to play with. Fixed price contracts, when you have not completed your technological work, often mean the road to disaster. But the Government's first reaction was to treat Rolls-Royce as an exception to the "lame duck" philosophy, and to provide it with £40 million. When that proved insufficient, the Government reclassified Rolls-Royce as a lame duck and withdrew support. That is not leadership; that is pussy-footing, and it is certainly not an industrial policy.
This was surely a case where the I.R.C. should have been directly involved. In fact, I believe it was the I.R.C. which initially tipped off the Government many months ago that things were not as good at Rolls-Royce as they should have been. The I.R.C. had the ability to sort out the situation which had been created, instead of leaving it to the mercy of the Cabinet. What appalled so many of us was the total ineffectiveness of the Government and the lack of understanding of what it was all about, at the moment when the Rolls-Royce disaster struck. Since then, the Government have done what many of us would have expected a well-run business to do: they have sent a team over, they have sent people representing the Government, and they have got people over there really getting down to the job, getting out to California, going to the White House and so on. But I should have hoped, with all the experience that agencies such as the I.R.C. possess, that that sort of reaction would have been immediate and that the response would have been such as to enable the Rolls-Royce matter to be sorted out in a much quicker and more efficient way than appeared to be the case at the beginning.
Apart from that particular effort, why do we have to get rid of an organisation which was heralded with enthusiasm by noble Lords on the Tory Benches, such as the noble Lord, Lord Aldington, who I am glad to see is going to speak to-day. I do not know what he is going to say, but he has a great deal of business experience—a lot more than many in the present Cabinet. We had a very good speech from the noble Lord, Lord Shawcross, saying what a very good idea the I.R.C. was. These were not Socialists.

673
The noble Lord, Lord Shawcross, has long repented of his neo-Socialist inclinations.
LORD ALDINGTON: My Lords, may I interrupt the noble Lord? I do not know whether he read the report of the speeches which were made then. If he did, he must have read a different version from that which I have read. I did not notice any great enthusiasm. There was a balanced acceptance by the noble Lord, Lord Shawcross, and by myself that this was worth trying, and I shall explain the matter further later.
LORD BYERS: My Lords, I am very grateful. I thought it was a first-class speech. If the noble Lord wants to retract any part of it now, the House is always very sympathetic to people who want to do that sort of thing. But it was a well-balanced speech and it came down on the side of the I.R.C.
The reason for dismantling the I.R.C. gives an equally disturbing insight into Tory industrial policy. It is that the I.R.C. cannot function without substantial funds—that is what the noble Lord, Lord Denham, said to-day—and this does not fit in with the Government's policy of cutting public expenditure. But the function of the I.R.C. was to use money to increase the national wealth and to improve our growth. They were to work on the basis of a long-term revolving fund, and that is the way to get growth. This is the positive side of the coin. Expenditure cuts may well he necessary, but not in an area which can promote growth.
I did not understand what the noble Lord, Lord Denham, was saying when he was denigrating the efforts and achievements of the I.R.C. He said that there were 600 mergers and the I.R.C. were responsible for only 20 or 30 of them. What is the charge—that they did too little, or that they did too much? We ought to know this. As the noble Lord, Lord Shepherd, said, it depends on the quality; it depends on whether you get growth. Of course you will make some mistakes, but I do not see what the alternative is going to be. Are the Government going to promote mergers themselves through the Department? I should have thought that that should give rise to some very difficult situations.
674
If one looks through the Press, I would say that, on the whole, one finds that on several grounds informed opinion condemns the Government's action to abolish the I.R.C. First, it removes from the Government's armoury a valuable and respected ally, which is a shortsighted policy. Secondly, it does so when other nations in Europe and the Commonwealth are introducing such agencies. Thirdly, it is bound to lead to more direct Government intervention in areas where the Government decide to reorganise. I think that, on the whole, this is an unfortunate measure and it reflects the Prime Minister's lack of understanding of industry, and the Government's determination to carry on this phoney battle of trying to put into Purdah anything that might lead to any form of Government intervention. I believe that the Government will have to intervene selectively in certain fields to get reflation and growth, and I think it is very shortsighted to get rid of this particular agency.
3.55 p.m.
LORD GOODMAN: My Lords, if I can contrive to do so, I must speak with circumspection and discretion this afternoon, because I am a member of the Board of the I.R.C. I am not sure at what stage my abolition takes place. There is a slightly disquieting remark in the Memorandum explaining the Bill, that
"the Board members will cease to hold office as such."
I am not sure whether that means that other delectable appointments are going to be offered to us. But I should utter a warning that neither I nor my colleagues will accept any such offer unless we have an assurance from Her Majesty's Opposition that they will not abolish us with the same unseemly speed as the Government did so.
The first remark I should like to make is that it would not be right for any member of the I.R.C. to suggest that there is the slightest resentment on the part of the Board at the action taken by the Government. There is not. The Board remains as good-humoured and good-tempered as before its abolition. The members of the Board will all find other things to do. It is absolutely right that a Government should pursue their

675
own policy and, contrary to the noble Lord, Lord Shepherd, who made a most effective and thoughtful speech, I regard the explanation as totally convincing. The explanation is that it is contrary to the Government's philosophy. If the Government pursue a policy of believing, for instance—I do not suggest that it is so—that the earth is fiat, then they are quite right to proceed on that basis. It would also be totally wrong that those of us who had been instruments of Government should seek to be joined in proposals which were designed to advance that belief.
It is not perhaps surprising that if there were a Government which believed that the earth was flat they should find themselves a little short of arguments, as was the noble Lord, Lord Denham, in the very best efforts he could make, to justify changes consistent with their philosophy. However, although we wholly accept that it would be wrong for any member of the I.R.C., or for that body itself, to complain about its abolition, it does not prevent us from suggesting in the mildest terms that the notions behind our abolition are misconceived, misguided and wrong. This is what I want to do in a few brief remarks.
This is a very big subject. I believe that the I.R.C. is an instrument of a mixed economy. The noble Lord, Lord Shepherd, remarked very much to this effect, but did not dilate upon the subject to the extent upon which it should be dilated. I believe that it deserves a debate on its own, because I believe passionately and fervently in a mixed economy. I think that a mixed economy is the answer to Karl Marx and the answer to Fascism. It is one of the most remarkable political developments that this country has demonstrated to the world, and I believe that if we pursue the philosophy of a mixed economy we shall avoid many of the problems, many of the abrasions and many of the conflicts that we are otherwise bound to encounter. I am terrified at the notion of our having a Government that may have rejected that conception, and it would be wrong if one did not say that there are very disquieting signs that this Government have rejected it.
The mixed economy is a means whereby we can contrive to maintain at
676
their fullest the notions of private enterprise, with a sensible understanding that there are areas where private enterprise needs the help of the society at large, and that there are other aspects of society activity that must be carried on by society alone. The extent to which a mixed economy is appropriate for a particular problem is one of the great problems of government that we have not yet resolved and to which we have not sufficiently turned our minds; and the dissolution of a Governmental instrument like the I.R.C. is, to my mind, an unhappy demonstration of a rejection of the whole notion of the mixed economy as a system of government.
It is too large a subject on which to dilate at the moment, but let me take a few illustrations culled from the speech of the noble Lord, Lord Denham. He said that out of 600-odd mergers that had taken place, the I.R.C. had participated in only 22—as though there were some virtue in mergers; as though if we had produced a large number of mergers we should have behaved virtuously and well. The noble Lord, Lord Byers, said that he was not quite sure of what we were being accused: whether we were being accused of being too inactive, or of being too diligent. My own belief is that the accusation, if made at all, would be that we were too diligent; that we had covered too much ground, having regard to the amount of money that we had and the opportunities available to us.
But what I would point out to the Government is that there is no area of financial activity more suspect, more questionable and more in need of constant review than the takeover and merger field. Here the I.R.C. was performing a most valuable function, because not only did we promote a number of valuable mergers but we prevented a large number of mergers which would not have been valuable and in our view were not in the public interest and not in industrial interest. It is the case that hardly a merger, hardly an approach, took place for the international acquisition of British assets without prior inquiry of the I.R.C.; and I believe we had contrived such a degree of influence that no one would have been foolish enough to attempt a major merger unless he was satisfied that we had no reasoned objections to it. That is not to say that

677
we had a stranglehold on this matter, but it is to say that we had developed a corpus of knowledge and of information in relation to this field that, in the short time we were in existence, was unique and was enormously of public benefit.
This, again, is too big a subject for this afternoon, but I would point out the extreme undesirability of our present takeover procedure, where the matter is dominated solely by financial considerations in the City. A merger, if it takes place, takes place at boardroom level and at no other level. It is rare in the extreme for the engineers or the technicians to be consulted, or for those people concerned with the process of manufacture to have any say in the matter. It is determined on balance sheet considerations. The injury to the national good, to the national economy, in pursuing this course cannot be exaggerated. I should like to see an investigation into the results of the amalgamations and mergers that have taken place over the last 15 years, to see to what extent they have resulted in national good and social good and to what extent they have resulted in social detriment. The idea that we continue to pursue a course where we have let loose the full powers of private enterprise, of commercial laissez-faire in this field, seems to me extremely unwise and injudicious, and I shall be astonished if another machinery has not shortly to be sought after to enable the regulation of mergers in some fashion.
LORD ROBBINS: My Lords, may I ask the noble Lord an entirely uncontroversial question? It would be deeply interesting to the House, I think, if at this moment he were to explain to us his conception of the functions of an ideal I.R.C. in relation to the functions of the Monopolies Commission. I think it is very germane to the last few sentences he uttered.
LORD GOODMAN: My Lords, that, if I may say so, is an exceptionally fast ball. What I shall say of it is that it is so wide of the off-stump that I intend to leave it alone. Because the members of the I.R.C. were not responsible for the Monopolies Commission, and there is plainly, and always was, a clear-cut conflict between the activities of the two
678
bodies. All I can say, however, is that the I.R.C. was an efficient and effective body; and, as to the Monopolies Commission, I think on the whole any assessment would be quite unworthy on the part of a member of the rival body.
I hope that that answer will satisfy the noble Lord; but it brings me back to the conclusion of my last remark: that I believe we shall have to search for a means of regulating takeovers, for a means of regulating mergers, that ensures that it is not totally a matter of so-called shareholder control; because one of the myths of the present generation of company lawyers is that the shareholder controls these situations. Of course the shareholder does not control them: some astute gentleman in a merchant bank or in a stockbroker's office controls them and creates the legend that there is a sort of company democracy arising from the fact that the shareholder has a vote. On a number of occasions I have travelled through the country with someone who has suddenly said to me, "Ah!, there is Bunce and Bunce Limited; I have a share in them. What do they do?" The notion that you can leave decisions of this importance, touching the employment ment of thousands of people, touching the financial interest of thousands of suppliers and thousands of customers, to shareholders whose purchases relate solely to the dividend they will get and who will change their loyalty to the company overnight on the recommendation of a stockbroker's circular is, if I may say so, a completely fanciful notion; and the I.R.C. was serving a most useful purpose in correcting this situation, if nothing else.
Then we come to the question of nationalisation. The idea that the I.R.C. was an instrument of Socialist policy is really a classic absurdity. If anyone had attended the meetings and seen the members of the board rubbing their hands with satisfaction at the way in which they were acting as a corrective to Socialist policies and the way in which they were ensuring that the end of nationalisation had come because they were the answer it would, I think, have caused the Government not to proceed with quite such unseemly haste. The haste, of course, is another matter. I am reminded of a supposed inscription on the tombstone of a small baby. It

679
was supposed to be an Elizabethan inscription, which read:
"If I was so soon to be done,
The wonder is I was ever begun."
This would seem to me an entirely suitable inscription on the tombstone of the I.R.C.
The other thing I should like to say is this—and I shall not keep your Lordships long because this is an enormous topic. The I.R.C. was an extremely interesting instrument of Government of a type which we were beginning to develop. It was an instrument of Government involving people who were nonpolitical. Although politicians may find this difficult to credit, there is a large range of very useful people who do not wish to associate themselves with political activity but are nevertheless prepared to serve the community on a nonpolitical basis. It behoves every patriotic citizen who believes that he can do something for a Government to do it regardless of political consideration. A means of doing this had been found by instruments like the I.R.C. and, if I may venture to say so, speaking with greater authority, by instruments like the Arts Council. Here, there can be devolved upon bodies of people totally free from political control the discharge of specialised duties.
This is an absolutely splendid thing; but, of course, you will find that it is not totally beloved by all bureaucrats. Governments like it, but there are areas of bureaucratic activity where no great affection for this dwells; and when you get a change of Government bureaucrats will crawl out from the holes that they occupy at given moments and seek to denounce the existence of any kind of Governmental organisation which is not open to their control and domination. If I may venture a word of advice to a new, fledgling Government: watch out very carefully for this. The moment you get a firm bureaucratic recommendation for the abolition or curtailment of the powers of any body, that is the moment to take the strongest action to suppress that recommendation. I believe that when history comes to be written we shall find that the end of the I.R.C. was by no means totally the fault of the extraordinary economic philosophy which may obtain at the moment. I think we shall find that it was also the fault of very
680
firm bureaucratic recommendation. This is something about which democrats should be extremely concerned.
I know that there are to follow me people who can speak with much greater authority on this subject. Lord Brown is to speak. I believe the whole of the I.R.C. conception arose from a memorandum he himself wrote when he was the adviser to the Ministry of Technology. Lord George-Brown is to speak (that happy hyphen prevents confusion between their identities), and his authority on this subject is second to none. But as a member of the I.R.C. it would be wrong if I did not deplore the fact that what I regard as an excellent non-political organisation which made some very good decisions, which made some wrong decisions and which was the forum for very free and open debate between its members, has been abolished too hastily, and without sufficient thought to the functions that it can usefully perform for this society of ours on a non-political basis.
My last word is this. I was grateful for the expression of appreciation that the noble Lord, Lord Denham, made, particularly to the staff of the I.R.C. We have in the Chairman, Sir Joseph Lockwood, and his predecessor Lord Kearton, very remarkable men who discharge duties in a remarkable fashion. We have in the managing director, Mr. Villiers, equally a most remarkable man with a degree of energy and determination which will undoubtedly find adequate expression in other fields. But, above all, someone had devised a method of recruiting young men of astonishing diligence, of astonishing talents and with a remarkable dedication to the function of the I.R.C. Anyone who believes that the I.R.C. was an unworthy political instrument need only come to speak to our staff. He would have to understand how it was possible that these young men saw in it an instrument of most effective and hopeful achievement in relation to future government. I would rather they spoke for the body than I—and I may say that they have all been snapped up by industry all over the place; and their careers, I hope and believe, are assured. When the history of the I.R.C. comes to be written, one of its outstanding features will be the way it found it possible to recruit these young men of great talent.

681
I believe that the existence of bodies like the I.R.C. and of similar bodies, free from Governmental control while remaining Governmental instruments, would go a long way towards smoothing the asperity of labour and employer relations that exists at the moment. It was the case that in no single I.R.C. investment, in no single matter in which they concerned themselves actively in reorganisation, did we find any union trouble or labour problems. This was due to the exceptional talent and dedication of that remarkable man who died so tragically, Mr. Les Cannon; but the fact remains that if you can demonstrate to the employees and to the employers in an organisation that there is an element within it which is not concerned solely with profit making, not concerned solely to ensure larger wages and shorter hours to employees, but is concerned with the prosperity of the institution as a whole, it will go a long way towards removing the problems with which we are confronted at the moment and with which, unhappily, we look likely to be confronted for years to come. I think that the abolition of the I.R.C. was on reflection a mistake, and I shall be surprised if we do not have to reinstate a body of this kind before very long.
4.12 p.m.
LORD GEORGE-BROWN: My Lords, I am delighted to have the chance to follow the non-political bureaucrat who has just spoken. I doubt very much that in this particular case it was the bureaucrats crawling out of their holes who induced the Government to carry out this particular piece of stupidity. The origins of the Bill are, I think, much more (a) political and (b) spiteful on the part of some merchant bankers in the City who thought that somebody else was getting into their act and was doing it better than they had with bureaucrats in the offices of the Departments of Whitehall. So much has been said that almost certainly one is going to repeat what has already been said even better. I intervene only because I had a good deal to do with this and I was in fact responsible for getting Parliament to accept it and my colleagues to provide the resources which it needed. I felt that I could not let this melancholy occasion pass without
682
adding my own little word to what has been said by others.
The arguments as they are put up for doing away with this body seem to me to be so trivial as to be really rather frightening as to what is going to happen so long as this Government last. Listening carefully to the noble Lord, Lord Denham, he really had only one argument. It was that this was using public funds (as the noble Lord, Lord Goodman, said) and that somehow this was wrong; although this Government are using public funds on such a vast scale to aid industry that I cannot think that the noble Lord, Lord Denham, really meant that. The Government are already responsible for expending far more public funds in non-selective, non-positive ways than the I.R.C. either did or will do from here on. But then he went on to say—and this seemed more his real argument—that there would need to be more public funds committed from here on if the instrument is not wound up.
It has been worked out—I have the quotations here if noble Lords wish to hear them—by people, not Socialists, not responsible for setting up this instrument, people who began by being very suspicious of it, that the order of funds from here on start at about £20 million in a year and would rise perhaps to double that if nothing else happened. But this is just the moment when the instrument, because of its past wise (if I may say so) policies is (a) getting a return on its funds, is now collecting the dividends and (b) beginning to get some of its funds repaid. This will go on at a faster rate. In this as in other things I think that the Government have an extraordinary form of accountancy in which they add up only one side of the ledger and forget to deduct what is on the other side and then come out with the original figures unaltered.
In fact from here on the I R.C. will be doing what we always saw it as doing: it will begin to embark on a period of self-financing where the returns will be coming in and payments going out and it will be using its past funds twice over—which, if noble Lords would do me the credit of reading what I said in the opening debate when moving the original Bill, was its original purpose. There was £150 million to get started. We did not put a time limit on it; but we could look to

683
see whether we needed more thereafter. What we expected was that it would not tie up those funds in a once-and-for-all operation but would use them so that they would reactivate themselves and would reactivate the return on themselves, which could be used again and again. This instrument is being wound up just as that was beginning to happen—and there is no dispute about this—without giving any opportunity to find out at what pace this regeneration of money would go on. Instead, it is just chopped. The excuse given is that we must save public expenditure and that £20 million is too much; we must just cut it out irrespective of what good it was doing, what its effectiveness was in British industry.
My Lords, I believe that it goes rather deeper. I do not believe that the noble Lords occupying the Treasury Benches at the moment are really as superficial as they are forced to appear by their masters down the road. There are two other factors. One is that when the idea was evolved and we introduced it, a number of Conservative politicians really did believe that this was an attempt by us to socialise by the back door. I well remember the instant reaction of the present Chancellor of the Exchequer on the occasion of the White Paper debate and that of the present Secretary of State for Social Services, Sir Keith Joseph, who dealt with it on Second Reading. They could not conceive that we had any other purpose in mind. This must be the reason that they both announced that they would dismiss it the moment they came to power. This was their instant reaction.
At that time quite a number of industrialists and commercial people had a reserved approach to it. They were suspicious, but they did not denounce it outright; they warned us that they would watch it carefully. Among those was the present Secretary of State for Trade and Industry, the then Director-General of the C.B.I., with whom I had discussed the setting up. His position was much more reserved. He wanted to see how it would work. Over a period, some of those who took that initial view retracted. Sir Keith Joseph, in the most recent debate in the other place, said just before the Election that if the I.R.C. was still doing a useful job if and when they came back into power they would look carefully at its
684
powers and its resources to see whether they needed narrowing, or redefining or limiting. That was a very sensible approach.
The noble Earl, Lord Jellicoe, speaking, I think, in this House on July 23 last year, said that his personal view (I am paraphrasing the noble Earl, but I do not think that I am doing him an injustice; he can read the quotation if he wishes) was that the Corporation had a very useful role to play if its function, its resources, its powers, were properly looked at again, and properly defined. No one on this side of the House could complain if any Government, theirs or ours, looked again at the definition we had applied at the beginning, when we had little experience on which to go. I might or might not agree with any decision to which they came, but it would be a sensible thing for an incoming Government, of either Party, to do. But not go back to the beginning and just dismiss it, once having said, "We now think it is doing a useful job and in many ways it has been efficient, but we are not sure that all its resources and powers are needed". The first course would have been sensible; the other course really is not.
This causes me to ask myself, "Now what?" Is all this because—as I think the noble Lord, Lord Byers, said—the dictatorial Chairman of what passes for a Cabinet nowadays said, "I committed myself to this view at Bexley Heath and I am the sort of chap who never goes back on a view I once committed myself to at Bexley Heath."? We encountered the same problem over the Rolls Royce question; we should not be in our present situation had he not taken up that attitude. That is possible, my Lords. It is possible that a lot of sensible, more progressive and constructive members of the Administration were prevented from being progressive and constructive, because the gentleman from Bexley Heath said that he could not go back. I could well believe that that is exactly what happened.
There is a supporting point. I see that the noble Lord, Lord Aldington, is in the Chamber. Reference has been made to him, and we shall hear him in this debate. It is quite true, as I well remember, that the noble Lord, Lord Aldington, was one who—contrary to the instant

685
reaction of the present Prime Minister, the present Chancellor of the Exchequer and the present Secretary of State for Social Services—took a restrained attitude at the beginning. It is true that he did not go out on a limb in support of it. But then the noble Lord has never been that kind of a chap; he has always been a little reserved when it comes to committing himself in the end. But—fair play!— he did take a restrained and constructive, "I'll have a look", sort of attitude.
LORD SHEPHERD: My Lords, may I remind the noble Lord, Lord George-Brown, that the noble Lord, Lord Aldington, moved two Amendments which not only improved the Bill but also even strengthened it?
LORD GEORGE-BROWN: In which case, my Lords, the noble Lord, Lord Aldington, is going to occupy an interesting position this afternoon. Because I understand, from what I have heard from my spies in the City, that Lord Aldington no longer takes quite the same view.
This brings me to the interesting question: what in fact has changed the views of some people on to whom the Government have been able to latch? One thing that people could argue, and do argue—I am not in a position really to challenge the argument; I do not know enough about it—is that the I.R.C. made a couple of mistaken decisions. One that is hotly contested is the Kent-Rank issue. So far as I can understand it, I think that on the whole the I.R.C. were probably right, but it is a point of argument whether they were or not. If anyone in this world is going to get all ten decisions right, it will not be the present Government; and, with great respect, to the noble Lord, Lord Aldington, neither is it the present collection of merchant banks in the City.
I would draw the noble Lord's attention to a fascinating article which appeared in one of the Sunday newspapers—either the Sunday Times or the Observer. I forget which—in which the writer asked which shares of which merchant banks would you buy on their record for the last year or so. I must say that what with the Metropolitan Estates, Hill Samuel and what not, the writer came to
686
the conclusion that there were really only two in the league. One was Schroder Wagg and one was Warburgs. So far as I know, those were the two merchant banks which provided the most distinguished members of the board and the staff of the I.R.C. The problem here is that the I.R.C. turned out to be a rather more successful merchant bank than some of the merchant banks have themselves turned out to be. They burnt their fingers and lost vast sums of money—I do not know whose money it was—and the idea of this other body in the field did not appeal to them very much. That has played a part in supporting the decision of the Government to get rid of what was an effective instrument.
After all, nothing can be more interesting than to see oneself copied. It is interesting to see that the Common Market countries, whom we are, as I understand it and if the Government are to be believed, seeking earnestly to join, have equipped themselves with this very instrument since we had it—and they have accorded parenthood to us—so that they could meet us when we came in, because we had this instrument. So now, my Lords, we throw this instrument away, so that we can meet them when we go in without it—when they have got it. Really, my Lords, whichever way you look at it, it is, with respect, just about as barmy a way to behave as any Government could conceive. There has been a tremendous retreat here, as better Ministers know very well. Whether the noble Earl, Lord Jellicoe, will tell us which of these various suggestions is the right one, or which combination is right, I rather doubt. It would be interesting to hear it. The noble Earl may know, though I am not sure that he does; because I gather that the Government have a Cabinet, and lesser cabinets, and lesser cabinets beneath them; so he may not have been told.
I should like to take up a point made by the noble Lords, Lord Goodman and Lord Byers, about the Press attitude to this matter. I have collected a few cuttings, going back as far as July last year and including one from the Observer of November last, where the heading is, "Davies was wrong on I.R.C." Then I turn to the Financial Times—that great "Socialist institution", headed by that

687
great socialist Lord who intervened just now. The Financial Times refers to
"The usefulness of the I.R.C."
and we are told that
"… it is undeniable that the I.R.C.—small, expertly staffed, with a wide range of contacts was able to do certain things …"
The article ends by saying that Mr. Davies would have to find some other instrument with which to do them.
I move on to the Sunday Telegraph and Mr. Patrick Hutber's column on November 8. Patrick Hutber tells us, not surprisingly, that he had some trouble making up his mind. Those who read his column understand that this is a weekly problem for him. He says:
"I think again on free market principles there is a good case for an I.R.C. type body …"
Then I go to the Daily Telegraph of November 9, the piece headed "Institutions will need an I.R.C. of their own". It goes on for a whole column telling us how good the I.R.C. operation was, and that, since the Governmnet got rid of it, the institutions will have to set one up for themselves—this time, of course, with no public accountability and with no prospect by which we can check the purposes of its operations. There is a further cutting from the Financial Times, headed, "I.R.C.: 'New problems for the City'." There is a cutting from the New Scientist, "Bring back the I.R.C."
The fact of the matter, my Lords, is that the Government—they may, or may not, regret it; and they may think it relevant or irrelevant—have no support at all from outside a small area of the City—which is jealous of its own prerogatives as it sees them—and some politicians on the Government side of the House who think they have given political pledges to which they must stick. There was no ideology in setting up the I.R.C. The noble Lord, Lord Goodman, has made that plain. I remember so well being attacked as violently by Members behind me, because there was no ideology in it, as from the other side because they thought there was.
This Corporation was set up for no other purpose than to give British industry a chance to conduct a revolution in restructuring in a desperately short space of time. It was not to take private enterprise out of business but to make private enterprise more capable of operating
688
successfully. It was not set up (I say this with respect to the noble Lord who preceded me) merely to encourage mergers. It was designed to encourage mergers where they were relevant in getting a better structure in industry and making industry more competitive, but it was designed also to avoid mergers where they would be obstructive to development and where they would have led to a monopoly situation that would have run counter to the doctrine against which the Monopolies Commission was there to guard. But it was there to do other things, too: to provide for particular industries resources which they could not easily get through the market. This is a problem which many medium-sized businesses know. I think that we can do it by merging the I.R.C. with I.C.F.C., and this may be well worth looking at. But there is no case for throwing one of them away.
I think I can finish by asking the noble Earl, when he replies, to address himself to the question already put to him: have the Government a positive industrial policy? It is helping lame ducks, heaven alone knows! with large sums of money, but helping them for no identifiable purpose or reason, or just because somebody puts on the pressure and they cannot stand up to the strain. I believe that the I.R.C. was doing this very job and doing it in a positive, selective and considered way. We need to have cooperation between the Government and industry and the financial and commercial areas if we are to develop our resources and opportunities. Do the Government deny that? Or is it really, as the noble Lord, Lord Goodman, said, that they want to get rid of the public sector in a mixed economy? Like every other nation in the Western World, we need a degree of co-operation between Government and industry. No country denies itself this. And this is what the I.R.C. was doing. What is wrong about it?
The Prime Minister and his Ministers keep telling us about the one-day and other strikes that diminish our capacity to earn a living abroad. I do not dispute that many of them do. I have repeatedly said that many of these strikes are unreasonable and irresponsible. But what about all the internecine competition between British companies against each other in the export market; all the inefficient management; the forcing of

689
bankruptcies and the climate they produce, and the timid attitude towards investment which they give to our economic climate?
The I.R.C. worked, I think, moderately well to improve the structure of industry, to promote better management in industry and a growing degree of investment in industry. I think that it did very well, though the Government Front Bench may be more reserved and may say that it did not do so well, though obviously it had some achievements to its credit. In that case, review it. It became unpopular because it was challenging inefficient managements, and inefficient and unsatisfactory financial areas in the City, and because some people did not have the courage to say that, despite what they said at the General Election, having had a better look at it, they are now not sure there is a better way of doing it.
I agree with the noble Lord, Lord Goodman, and other noble Lords, that we shall as a nation regret its abolition. We shall have to bring the I.R.C. back in some form. It seems silly, therefore, to go through this misery, and then bring it back again in some other form, after having destroyed what existed, lost the expertise built up, lost the tiny staff (there were just over 30) and lost the momentum in a job which I think in our hearts all of us know needs doing.
4.35 p.m.
LORD ALDINGTON: My Lords, I think your Lordships enjoy listening, as I do, to the noble Lord, Lord George-Brown; and when speaking of one of his offspring he is entitled to claim your Lordships' attention. He has many charming attributes, if I may say so, among them his almost unfathomable ability to lead with his chin from time to time. In the course of his remarks he took a side glance at the present running of the Cabinet and the present Prime Minister. He must have forgotten for the moment those pungent remarks that he made about his own Prime Minister at the moment when he resigned.
LORD GEORGE-BROWN: No, no, my Lords; I recognise it more clearly.
LORD ALDINGTON: My Lords, the noble Lord has made my next remark for me. He is assuming that his right
690
honourable friend Mr. Wilson is still in office.
So much of what he and other noble Lords have said from the opposite side of the House has been on the assumption that a change of Government did not take place in June of last year, and that we are continuing now with the kind of economic climate to which we have grown accustomed in the last six years. If I may refer to what the noble Lord, Lord Goodman, said (I will say some words of admiration later on), he said that in this country we have a mixed economy. Most certainly we have; and I do not detect in what has been said by my noble friends any intention of removing the mixed nature of that economy. But it does not follow from that that the only way the private sector of the mixed economy is to be efficient and responsive to the needs of national industry is to have the I.R.C. or something like it. I think it true that in the kind of economic climate the Socialist Government like to see—they think it good for us—something like an I.R.C. is very good, but it does not follow that in a different climate we must have an I.R.C. to ensure the efficiency of the private sector.
I think that I ought to state my position clearly. I am in favour of both parts of this Bill, that part which terminates the Industrial Expansion Act and that part which terminates the Industrial Reorganisation Corporation Act. I have always opposed the Industrial Expansion Act, and I do not think it necessary to detain the House by arguing why. However, for the reason hinted at by the noble Lord, Lord Byers, and other noble Lords, I should say something about the I.R.C. And may I ask the House to excuse me if I do not remain until the end of the debate. I have some important discussions with some gentlemen who have flown here from the other side of the Atlantic. I have left them to come to this debate; they have to go back tomorrow, and I should like to finish my discussions. So I hope that the noble Earl will forgive me if I am not here to listen to all that he has to say.
My Lords, I admit that I have had mixed feelings about the ending of the I.R.C. and about its capacity, even in this new climate, to do something useful.

691
I have had mixed feelings about that ever since it started, and so have many others. I do not think that the noble Lord, Lord George-Brown, is right in saying that the reason for its ending is related to the vested interests in the City or to the jealousy of those vested interests. There are much more rational—almost balancing—considerations which have been borne in mind. But in trying to explain my attitude to this decision I should like to give a little of the background to my approach to this problem, starting, as the noble Lord rightly said, with the measure of support that I gave to the Bill in this House on December 1, 1966.
Perhaps it might help your Lordships to remove from your minds some of the myths and prejudices about this not unimportant Corporation that have arisen really out of political discussion by people who, for one reason or another, did not have the full facts. The noble Lord, Lord Denham, gave us some of the facts this afternoon; the noble Lord, Lord Shepherd, in his valuable speech, gave us some others, and other noble Lords have also helped. I hope to carry this process one step further.
I gave the idea of the Corporation my support. I realised that its principal aim was to help the country to make effective use of its resources, both human and material. I gave my support, as those who read my speech again will see, following a serious balancing of the various arguments. But I gave it with an explicit regret that public money was to be used rather than City money: and I said so at the time. I remember having in mind those two organisations which the noble Lord who preceded me mentioned, the F.C.I. and the I.C.F.C., as better precedents, and again I said so.
I did not think it was the back door to nationalisation. I did not think it was an instrument of Socialist policy. I did think it was necessary, on the other hand, because of the interventionist climate in which noble Lords opposite believed and to which many of us had grown accustomed, and which was generally accepted as continuing at least for the time being. I felt that, in that interventionist climate, a body like this would be a good way of achieving the ends of making more effective use of the nations'
692
resources both human and material. I thought, too, that those who expressed the feelings—by no means only belonging to the Party opposite, or to the Liberals—that both the structure of industry and its management needed a shake-up were correct. I thought it was also correct to say that the size of many parts of British industry was not large enough to compete with the multi-national corn-panics of America, or even some of the larger companies in Europe. I thought this was as urgent as noble Lords opposite did, in view of our hope that we should get into Europe. It seemed to me that a Corporation composed, as was proposed, independently of Ministers would offer some hope of improvement.
But, my Lords, I expressed some fears then—and I have always felt those fears since—of the real danger to the efficient running of industry and commerce in a mixed economy that might result from any substantial interference with market forces. I do not think your Lordships will want me to re-state the theory behind that proposition. But do not let us forget that market forces may allow for some individuals making mistakes, including the mistakes of sloth and delay, as they allow for some individuals' succeeding. If Government subjection of those forces may prevent those mistakes, including sloth and delay, it may also lead to gigantic error, with no counterbalancing forces to correct it.
What was the history of I.R.C. in this matter? I think that, in the main, it sought not to override market forces, but rather to help them and to hurry them on. In the main, the Corporation did that. But sometimes it quite deliberately—so, at least, it appeared to others outside—felt that it had to override those forces. Was the Corporation right? We have it from Lord Goodman's own mouth that, at least on some occasions, it made mistakes. I think that is bound to have been so. If it was aiming at growth, it certainly has not always achieved growth. Mistakes there were bound to be.
How did the Corporation work? When it started, it started as it said it would, with surveys, discussions and interchange of ideas, relying mainly on persuasion; and important things were done in that way. Then the Corporation moved to a

693
second stage, including all the factors of the first stage, but added to them a driving sense of urgency, a dedicated sense that it was the duty of the Corporation to force through the changes that seemed good, and, if necessary, to make full use of the power given to it by the availability of public funds. I make no criticism of that: in fact, I admire the courage and persistence with which many of its ideas were pushed through. It is sometimes forgotten that that change from stage one to stage two did take place. It is also important, I think, to emphasise that even in the second stage there were a number of ventures with which the was associated that were successful without the employment of public money.
The working of this Corporation centred on the two chief executives, Mr. Grierson and Mr. Villiers, both of whom are respected friends of many of us here, and to both of whom, in my belief, the I.R.C., industry and the nation owe a great deal. That any of us may feel that we should have done things differently from either of them on one or more things that they tackled does not in any way reduce the sense of admiration that I am now expressing. I should like to follow others in coupling with my tribute to them a tribute to the board, including the noble Lord, Lord Goodman, who must on many occasions have enlivened the Board meetings with his wit, as he enlivens meetings with his clients, as I well know. I would also pay tribute particularly to the two Chairmen, the noble Lord, Lord Kearton, whose vigour and courage, and ability to handle Ministers, is almost unbelievable, and Sir Joseph Lockwood, who succeeded him and led the Board well in the last period.
My Lords, it is my opinion that if a Government want to see intervention of this kind, it is better for them to set up an agency like this Corporation, staffed and led by people who are expert in the business of financing industry and understand management problems, than to distort the functions of civil servants, and place directly on Ministers and highly gifted civil servants a burden which they have neither the experience nor temperament, training or staff, to carry. I believe that to be a highly controversial statement. Nevertheless, I hold to my view that this is a better way of doing
694
things than having direct intervention by Ministers.
Many of your Lordships will know that the company of which I was then chairman, the General Electric Company, was closely involved with the I.R.C. over a number of years—in fact, over the whole of its life. I think it is worth while placing on record certain points because of the misunderstanding of the position of that company that has come from the mouths of many people talking in another place, and of some people writing letters to the newspapers. Of the two mergers accomplished during this period, the I.R.C. raised the idea of doing the first merger, that is the merger of G.E.C./A.E.I. in May, 1967. It discussed the pros and cons with us, and we discussed the pros and cons among ourselves. I hope that the noble Lord, Lord Goodman, knows that in our mergers manufacturing and export considerations were very much to the fore at all times. It was only after quite lengthy discussion among ourselves that we came to the view that this was a merger which was good. It was only after further discussions with the I.R.C. that we came to the view that the integration involved was not only desirable on economic grounds, but that it was practicable to be achieved at that time. It was the idea of the timing rather than the idea of the merger for which the then I.R.C. should take credit. We had, of course, been thinking for several years of links in the electrical industry.
After the decision—which was our decision—had been taken the I.R.C. gave support, acted between us and the Government in explaining the facts, and in ensuring that Government policy and proper legislative requirements were followed by us. In particular, it acted for us in explaining the facts to the Monopolies Commission. We had to involve ourselves in that explanation as well. No one will ever know what would have happened had the I.R.C. not acted as I have described. It is very doubtful if its intervention actually helped in the take-over bid; by supporting us it created as much bow wave as helping us.
In the second merger, that with the English Electric Company, the proposal for the merger was made by the companies concerned, and its timing was brought forward by the intervention of

695
a third party. The I.R.C. did not take part at that time, but it most certainly took part following our decision. It discussed the matter with us; it examined the proposition. It then gave that merger its support and acted in the same way between us and the Government. In neither of those mergers did the I.R.C. provide any money. Indeed, if any noble Lord thinks that my attachment to the I.R.C. may be due to the fact that I have had some money from it, this is far from correct, for since these mergers G.E.C., far from taking money from the I.R.C., has repaid to it £12½ million borrowed by others. Those are facts. There is also the story that by bowing to the "dictate" (as it is called) of the I.R.C. the management and board of the General Electric Company did their shareholders harm. That is entirely untrue. One only has to look at the rise in earnings for the G.E.C. shareholder between 1966–67 and 1969–70 to see how untrue that is. The rise in earnings has been substantially above the rise in the retail price index. If one thinks that it has damaged exports or production efficiency one only has to look at the figures. This merger has undoubtedly been a success. It was not just a boardroom merger; it was a merger very carefully worked out with management.
So much for the G.E.C. This is only interesting to your Lordships because it gives a background to how these things happen. Following those mergers there was continued close discussion to ensure that there could not be further rationalisation, or improvements in the position. That was good; it gave an exchange of ideas and it led to some minor, but important, changes. Sensible restructuring of industry seems to me to be an essential part of sensible change in our country's life. In that interventionist climate the I.R.C. performed an essential role in that regard. It worked effectively and efficiently without fear or favour. In doing that work it sometimes performed a function which shareholders were not fully performing, of shaking up management, and even leading to changes in management. It was able to do this because its staff was of an exceptional quality, splendidly led and imbued with a selfless purpose. Their skills and attitudes are well worth study, and that they
696
are now dispersed in many other places is not a disadvantage to our national life. It may be a great advantage.
So much for what happened in the interventionist climate. The climate has changed since June. One may say "Thank Heaven for that!", if one believes as I do; or one may thank the British electorate for it—it does not matter. The climate has now changed from an interventionist climate into a climate where, in our economic life, individual responsibility is being encouraged and, I would say, almost forced upon us. A strong sense of discipline is being restored both to individuals and individual companies in industry and commerce.
Noble Lords may not agree that that climate is right, but I beseech them to accept that the change has taken place. When I listened to the noble Lord, Lord Shepherd, suggesting that we had switched back to the 19th century, I did not think that was quite right. As he went on to say in a rather inconsistent part of his speech, we certainly enjoyed in the 19th century a greater national wealth than we had every enjoyed before. It is an odd comment to accuse us of going backwards to that. But I do not want to digress on this. I do not think that we are going back to the fine old days of the attitude of the Party of the noble Lord, Lord Byers, in the 19th century. We are not doing that, but we are going back to the restoration of discipline and individual responsibility.
Frankly, I do not think that this restoration of discipline and individual responsibility will be achieved if you leave with a Government agency the power to override the decision taken by people whom you are trying to discipline and get to accept individual responsibility. That is the problem. It is quite right of the noble Lord, Lord George-Brown, to remind the House that the Conservative Party did not in their Manifesto, or in their immediate post-election speeches, promise to remove the I.R.C. straight off. They said that they would review it. That, surely, was the right decision, to see if there was a place for the I.R.C. without the use of massive public funds.
The Secretary of State in another place has told us what happened. There was that review, there was an attempt to see whether the I.R.C. could be fitted in either

697
to a new City institution, or to one of the existing F.C.I.s—the I.C.F.C.—and I would hope, too, that there was a study as to whether it might not even fit into the Bank of England. It was eventually found that none of those courses was practicable. I accept that. It is no secret to noble Lords opposite that in a way I rather regret it, but I accept that that is the position as it is. I accept it particularly because I welcome, and everyone with whom I work welcomes, the drastic alteration in attitude and climate which this Government are rightly bringing about. I believe that other forces are at work to bring greater efficiency now, to compel desirable change and adapt industrial structure. Other institutions can and will fill the place of much that I.R.C. did.
LORD BROWN: My Lords—
LORD ALDINGTON: I am just finishing, if the noble Lord will sit down. Other institutions are already fully in action in Europe, and for British industry in Europe. To those noble Lords whose judgment in these matters I have followed very carefully, and with whom I have shown myself to be in sympathy in their climate, I say that if they feel that that neither industry, nor its financial resources, can be fully efficient without the I.R.C., there is a simple answer to that—I think that they are being ostriches. Things are different now. If it were true that under a Socialist economic direction of our affairs I.R.C. was necessary—and the noble Lord, Lord George-Brown, has told us that it always will be necessary—under a different economic climate that need not be true, and in my view will prove not to be true.
LORD BROWN: Before the noble Lord sits down—and I can understand his reluctance not to allow me to have a say when he is speaking—can he tell me why, in this non-interventionist atmosphere which the Government are generating, the I.R.C. is no longer necessary, and why efforts were made to fit it into the Bank of England, and so on? He seems to want to have it and not have it.
LORD ALDINGTON: I thought I spent a lot of your Lordships' time explaining that; perhaps the noble Lord will read what I said.
5.2 p.m.
LORD HOY: My Lords, I am delighted to follow Lord Aldington in his speech. I do not know that it had very much to do with the Bill that is before your Lordships' House. It seemed to me that the noble Lord's speech was an apologia for what had happened as betwixt the G.E.C. of which he is Chairman and the I.R.C., followed by a peroration that had absolutely nothing to do with this Bill. That part of his speech did not surprise me. The noble Lord and I entered another place at about the same time. He in fact entered as a brigadier, and I entered the House as a corporal, so we were very much apart. It was not until I heard the noble Lord speak in another place that I realised how difficult it had been for the corporals to win the war.
I also did not quite appreciate his stricture about what you would require if you were going to be a businessman in this country. I remember the noble Lord when he held two Ministries—first, if my memory serves me correctly, the Ministry of Supply, and later the Board of Trade; and I do not recollect him excelling in these particular functions. In fact, I think he found it so unprofitable to be in politics that he decided that a much easier way to earn a living was to get out to the City and into business. So those who failed the Ministry became chairmen of the G.E.C. and other authorities of that kind.
To-day I want to say one or two words in support of the Industrial Reorganisation Corporation, and I want to say two words in support of the noble Lord, Lord Byers, because his word was brought into question as to who did and who did not support the I.R.C. when it was introduced in 1966. Reading the Report of the debate of that date, one sees that the noble Lord, Lord Aldington, and later the noble Lord, Lord Shawcross, took part, and the noble Lord, Lord Shawcross, in his concluding sentences, said this:
"As I have said, this Bill is no doubt loosely drawn, and I daresay many improvements can be made to it in Committee."—[OFFICIAL REPORT, 1/12/66; col. 849.]
The noble Lord, Lord Aldington, said that he got two Amendments carried, so that statement was obviously true.

699
The noble Lord, Lord Shawcross, went on to say (col. 849):
"That is one of the useful functions of your Lordships' House, but in broad principle, and in so far as this Bill will encourage a change in climate and promote bigness and rationalisation in industry, I commend it to your Lordships."
These were the words of the noble Lord, Lord Shawcross. He was immediately followed by the noble Lord, Lord Aldington, who said (col. 850):
"My Lords, I find myself in such almost complete agreement with the noble Lord, Lord Shawcross, that in the last few minutes I have been wondering whether it would be right for me to detain your Lordships further …"
With all due respect, the noble Lord cannot come along at this time of day and speak as he did. He may get away with it in the City, and in the G.E.C.: but not in your Lordships' House. Some of us have memories; indeed, we have only to read the written word. I have read to your Lordships the written words. The noble Lord's quarrel, if he had a quarrel at all, was with the noble Lord, Lord Drumalbyn. Noble Lords will remember that the noble Lord, Lord Drumalbyn, in summing up for the Opposition at the time, did not reject the Bill. He said that he had a few doubts about the Bill, and expressed three doubts on behalf of the noble Lords then sitting on this side of your Lordships' House.
First of all, he said there was a danger that if we passed the Bill—if we made the I.R.C. a reality—the temptation would be for the I.R.C. to become obsessive rather than discriminating. If ever that argument was destroyed, it was destroyed by the noble Lord, Lord Goodman this afternoon. What the Government, in Lord Denham's speech, were accusing the I.R.C. of was this. They said, "We have had 300 amalgamations but you, the I.R.C. took part in only 22". That destroys the noble Lord's argument about the I.R.C. being obsessive. The noble Lord cannot advance that argument in 1966 and then come along in 1971 and say that the Corporation has interfered so little that it should not have been brought into existence. That surely destroys the noble Lord's argument completely, and indeed the great trouble with the noble Lord's speech was that it was written by Mr. Davies in his pre-"lame duck" days, and delivered only this afternoon.
700
The second accusation made by the noble Lord, Lord Drumalbyn, was that there was a danger that setting up the I.R.C. would mean departing from voluntary co-operation, and would end in compulsion. But the I.R.C. never had the power to compel anyone to do anything; I.R.C. could amalgamate only if it could get agreement beween the parties, and I defy Government, or any noble Lord opposite, to quote one instance of compulsion by I.R.C. No noble Lord can do it; the Government cannot do it. So on these two counts the argument falls completely. Thirdly, we had the usual old canard introduced by the noble Lord, Lord Drumalbyn, about the systematic intrusion of the State into the area of private enterprise, and all that sort of nonsense. That has not happened at all. No noble Lord can give an instance of it. So the three reasons they gave in 1966 for having doubts about the I.R.C. have proved completely false in 1971. Indeed, the Government have had only one speech in support this afternoon, and that was the appalling speech just delivered by the noble Lord, Lord Aldington.
I do not want to detain your Lordships, but there are two specific points I want to raise. One of them concerns the work of the I.R.C. As many of your Lordships know, I was for six years Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food, and in the course of my work we had to face the problem of the fishing industry of this country. Perhaps it is an exaggeration to say we could not make sense of it; but we were having difficulty with its organisation. The object was to provide the best and freshest fish in the world—the best food we ever get and the one that is uncontaminated, even to-day, for no fertilisers are involved in its production. This we had, but difficulty arose because of the finances involved. We thought that there was little more that could be done and so we introduced the I.R.C. The I.R.C. took over the job of amalgamating and bringing economic co-operation into that industry, and it was as a result of the action of I.R.C. that Associated Fisheries and the Ross Group joined together in an economic unit to provide not only food for the country but employment for

701
thousands of people; and they have done a first-class job. If noble Lords opposite want to know what other members of the Government think about that action, let the noble Earl who is to reply to this debate remember that the man who was then chairman of Associated Fisheries is now President of the Board of Trade in the present Conservative Government. He had no objection to the assistance of I.R.C.—none at all. And so far as my personal association with them was concerned, I have nothing but praise.
My Lords, I come to my final point. I am sorry to trouble your Lordships with it once more, but I was interested in the question put by my noble friend Lord George-Brown: "If not I.R.C., then what?" What do we have in its place? I do not want to claim too much credit for it, but three weeks ago I was putting the same question in your Lordships' House. We were debating on March 3, and I received a note in which the noble Earl, Lord Jellicoe, kindly invited me to let his office know whether I had any point to which I wanted a reply. I accepted the invitation and asked for information, but he did not give it to me when the debate was replied to. I am bound to say, in fairness, however, that I had a letter from the noble Lord, Lord Aberdare, apologising for the tact that the point was not mentioned in the reply. However, I want to raise it again to-day because it is so important to the economic life of Great Britain.
I raised particularly the question of the British machine tool industry. I pointed out that when I was a member of the Public Accounts Committee that Committee always used this particular industry as one of their guides to the economic well-being, or otherwise, of the country.. I said that, so far as I knew, the industry had got into a pretty bad way; and I quoted the report of the industry itself, because it thought that it was in difficulty and that something required to be done. Before the Labour Government went cut of office they appointed a special Committee, under the chairmanship of Sir Richard Wainwright, to examine this industry and to make a report. This Committee found that if the machine tool industry was to make a real contribution to the economic stability of Britain, reorganisation must take place,
702
because the outlook for that industry, on which the future of so many other industries depended, was not good enough. The position of the machine tool industry was so important that it called for action. And the Wainwright Committee said, "There is one organisation that can do this job successfully and that is the Industrial Reorganisation Corporation".
However, unfortunately, before this Report could be formally presented the present Government had decided to get rid of the I.R.C. So I was asking the noble Earl three weeks ago, "If no I.R.C., what then?" What answer have the Government? Have they in mind some other organisation that they can advance to take over this job? Or is it sufficient for the Government simply to say, "We believe in private enterprise, and industry can go to the wall if it likes"?
When I hear the noble Lord, Lord Aldington (and I do not want to become Party political in this debate) say that we shall come to an independence, I ask, "An independence of what?". The Government have an inflation rate greater than we have had previously this century; they have an unemployment total of nearly 800,000 people who are signing at the labour exchange. That is not independence; that is poverty for a tremendous section of our community. What we are entitled to ask the Government to-day is this. If for merely Party political purposes they want to get rid of the I.R.C., what are they going to do to fit out, or help to fit out, British industry to play its part in the future of our country? Certainly on this particular issue which I have raised lastly I shall expect a pretty specific answer from the noble Earl when he comes to reply.
5.16 p.m.
LORD BROWN: My Lords, this Bill clearly is almost completely destructive. We have not heard so far any cogent argument in defence of the act of destroying the I.R.C. We ought to be a little kind to the noble Lord, Lord Aldington, who unfortunately has had to leave us, because it is quite clear that somebody, besides the Ministers on the Front Bench, had to speak from the opposite side, and he was dragooned into it. He did an amazing acrobatic act, on which I think he ought to be congratulated for the

703
facility with which he developed two completely contrary lines of argument.
EARL JELLICOE: My Lords, I am sorry to interrupt the noble Lord, Lord Brown, at this early stage in his speech, and I will do so for only a second. But if he had tried his hand at dragooning my noble friend Lord Aldington he would realise that it is a contradiction in terms.
LORD BROWN: Yes, my Lords; I suppose that is correct. The noble Earl must have used some other means. In any event, I am going to make a rather attacking speech. I feel reluctant to do so, because when I look at the noble Earl, Lord Jellicoe, on the opposite Bench I recall that I have great respect for him as a man, and for his intelligence, and for him as a merchant banker. I cannot believe that he is going to rise to his feet in a few minutes' time and defend this particular Bill with much relish.
We are an increasingly complex society; we are a highly populated island. We are going to need, whether the present Conservative Government or other Conservative Governments we may unfortunately have in the future realise it, more and more institutions. They are necessary to co-ordinate the affairs of our society as indeed society itself becomes more complex. All Governments recognise that additional institutions have to be brought into being—as indeed this Government realise, involved as they are in the Industrial Relations Bill at this moment. What worries me is where this destructiveness is going to stop. Is it going to travel to the Council of Industrial Design, or the Central Office of Information, the Export Credits Guarantee Department or the Board of Trade Advisory Committee, to name organisations I happen to be familiar with? Poor as the arguments that could be advanced to abolish those institutions are, they would certainly be no less impoverished than the arguments which have so far been advanced this afternoon in support of this Bill to abolish the I.R.C.
We have had—the noble Lord, Lord Byers, referred to it—the incident (if I may refer to it in those terms) of Rolls-
704
Royce. Had the I.R.C. been in existence, I have little doubt that the experienced team which constituted that institution would have been able to deal with the Rolls-Royce affair much more discreetly and effectively than the scratch team which the Government had to get together at the last moment, led by the noble Lord, Lord Carrington—an able man, dragged from his proper job and thrust into a welter of commercial and technical detail, with which I have no doubt he is as unfamiliar as the rest of the team who had to deal with this affair. The fact is that this Government, in their doctrinaire enthusiasm for this catchword "non-intervention", prefer destruction to any form of cogent thinking about what is going to happen in the future.
May I make one other point in this connection. The I.R.C. was not an institution which was revenue spending; it was an investment institution. Its funds, once voted, were going to revolve through various investments in industry; and this has been made quite clear from the very start of I.R.C. The money which it actually received from the Government has not been spent; it has been invested in industry. I am reminded of the argument so often used in the United States of America, which seems to be one which is now being endorsed by this Government; that is, that private investment, however large, is always good and public investment apparently in the eyes of this Government is bad. That is one of the reasons why I.R.C. is to be abolished, because it was public investment rather than private investment; and this despite the fact that currently one of the greatest menaces to our future prosperity is the lack of general investment in industry.
The noble Lord, Lord Robbins, asked a question of the noble Lord, Lord Goodman, about the Monopolies Commission. I have never seen any conflict between the I.R.C. and the Monopolies Commission because the Monopolies Commission was always wrongly named; it is an industrial efficiency Commission which looks into the affairs of individual companies to make sure that they are not perverting the interests of the consumers. But they cannot invest. The I.R.C. could invest, and that is what differentiated them. As I saw it, the role of the I.R.C., as my noble friend Lord Shepherd has already mentioned, was to inhibit unwise foreign takeovers of key industries; to

705
rescue essential companies like I.C.L., so that we have a computer industry in this country; to build up bigger units, not on the grounds that "bigness" is good but because bigness is sometimes necessary and it presents an opportunity—
EARL JELLICOE: My Lords, I am sorry to interrupt the noble Lord, but did he say that the I.R.C. "rescued" I.C.L.?
LORD BROWN: What I intended to say was that if we had not had I.R.C. I doubt whether we should have I.C.L. today.
EARL JELLICOE: My Lords, I do not wish to catch the noble Lord out on a small point of fact, but I think it was under the Industrial Expansion Act that the loan was extended to I.C.L. So far as I know, it was not anything to do with the I.R.C.
LORD BROWN: My Lords, I am grateful for the correction. The noble Earl is right, but the point is that the Industrial Expansion Act and the I.R.C. are one of a piece so far as philosophy towards industry goes, and the Government are about to destroy both of them. So we will not quibble over it. There is a need to sort out problems of apparent inefficiency leading to vast imports and unsatisfactory exports, such as, for example, the boot and shoe industry, which I know a little about, in which there are to-day still nearly 400 factories employing an average of 200 people each. It may be a craft industry, but one cannot run industries on that basis and something should be done about it. But, of course, it will not happen now.
Here we have this body just learning how to help; just getting down to the job and with a successful record developing. One looks at the last statement of accounts published by the I.R.C.—and I think these facts should be brought out. In the year ending March, 1970, they paid interest on the money they had borrowed from the Government; in terms of corporation tax they made payments total-ling over £3 ½ million; they paid a dividend of £500,000, and they carried forward a balance of some £70,000. In the year they initiated 32 projects, 15 of which required no investment by them but in which they were lending a helping hand, and in 17 of which they invested money in the form of rolling investments
706
which have been extracted later by sale and ready for investment elsewhere.
One may assume that the Government expect the merchant banks to fulfil the role that has been carried out successfully by I.R.C. I have every respect for our merchant banks; I think the country generally benefits very much from their existence, but one thing that they cannot do is to fulfil the role of I.R.C., because they cannot take the initiative when they see a national necessity for, perhaps, two firms to be brought together. They must follow the course which in the long run will yield them a profit—not that there is anything disgraceful in that, but if clients do not take their advice then they will have to help them follow a course that is against their advice. It is for these reasons that the merchant banking community, in a different, private role, cannot substitute the work that has been done by the I.R.C.
Turning to the question of management, inevitably in British industry there are companies which are led by men who should not be leading them. We all know that. From time to time we face the fact that large corporations are on the downgrade, and this is very detrimental to our national interests. At the present moment, without I.R.C. we have absolutely no weapon for doing anything about this situation. On the boards of these companies there are internal executive directors whose manager is the managing director or chairman of the company, who cannot be expected to suggest that he should retire; and there are external directors who largely are unable to spend sufficient time on the affairs of the company to propose that the managing director is getting a bit "mossy" and should perhaps be asked to retire. This is a situation that can develop. I am not making a general attack on the management of British industry; I certainly do not feel that is warranted. But I am pointing to the fact that these situations emerge and that the I.R.C. has dealt with some of these situations. I will not mention any names, because I do not think there is any point in pouring scorn on people who are in jobs which are too large for them.
The only recourse left to Government in cases like this is to watch an industry employing thousands of people gradually

707
go down the hill into liquidation. This is an appalling way of dealing with a company which is simply badly led. The hardship imposed on people is only part of the trouble. The damage done to the economy by large corporations being allowed to "go west" in this way can be intolerable, and the manner in which our economy is moving at the present time, with a continuation of current Government economic policies, will mean an increasing number of large companies going into liquidation when in fact some move towards the management might have prevented this happening. Amalgamation, advice and rationalisation by members of the I.R.C. have been able to avoid some of these situations and now we are flinging away the only instrument we have for dealing with such situations.
My Lords, we are faced with a Government who are steadily committed to the pursuit of a laissez-faire doctrine to an extent which I think might have shocked even previous Conservative Administrations. We are following a course which the United States of America used to follow. I have just come back from that country, in which I find the attitude is now one of deep thinking, and I should expect to see some departures from the laissez-faire doctrine which used to inhibit their thoughts in the past. We go to a country like America, we see the ghost towns of New England rotting because industries have removed themselves from one part of the United States to another.
We see all sorts of things being done in America in the name of efficiency which I hope we shall never see done in this country. Indeed, in looking back to past deeds of the Conservative Government, I have always admired them for the fact that they faced up to the problems of our own textile industry, provided funds and rescued the industry from an excess of capacity on the part of individual producers which really saved Lancashire from disaster, and then helped to introduce new industries. And yet these are the sort of acts which to-day are described as intervention and, therefore, taboo to this Government. These are the sort of acts which require an institution like the I.R.C., and this is the institution which you are now about to destroy.
708
I would make one last point. When I was a Minister at the Board of Trade it was my duty to see a large number of visiting foreign trade ministers and members of overseas chambers of commerce. Most of them had high on the agenda of matters that they wished to raise when they saw me or the President of the Board of Trade some information about the I.R.C. This was one of the new institutions in this country which really excited their interest. We know now that the French based an institution very like I.R.C. on our experience of that body and that Signor Colonna of the E.E.C. Council has recommended an institution in the form of I.R.C. to the European Investment Bank. There are many other countries where our experience with I.R.C. is being investigated, and yet we are going to destroy it.
I deplore this Bill. I wish that the decision could be reversed. I am quite certain that this type of institution will be revived in the future. I think the best epitaph that I can give it is to thank the team of people who served on the I.R.C., not only its directors but its staff, for setting a magnificent pattern on which future experience can be based. We thank them for what they have done.
5.32 p.m.
EARL JELLICOE: My Lords, I think that there has been, despite some surface appearances, a certain measure of agreement in your Lordships' House this afternoon on at least three issues. The first, which I should like to take up straight away, formed the conclusion of the speech of the noble Lord, Lord Brown, and was the general agreement in your Lordships' House that, whatever may be our feelings, philosophically or practically, about the I.R.C., this organisation has been quite remarkably distinguished by the quality of the people who served on it and were attracted into it. I should like to add my tribute to those remarkable people. Its two chairmen, Lord Kearton and Sir Joseph Lockwood, are amongst the most distinguished industrialists in this country. There are on its present Board two most notable Members of your Lordships' House, the noble Lords, Lord Stokes and Lord Goodman. I was glad, parenthetically, that the noble Lord, Lord Goodman, found time from his multifarious activities

709
to come here and speak this afternoon, although at times I felt I could have done without some of the things he was saving. In Ronnie Grierson and Charles Villiers, it has had two managing directors of quite outstanding ability, both known to many Members of your Lordships' House. Whatever else any of us may feel about the I.R.C. I do not think any of us can question the quite extraordinarily high quality of both its Board and its small but elite staff. I say this gladly and I say it sincerely.
The second issue on which I think there would seem to be a certain amount of implicit agreement in your Lordships' House this afternoon is that, while we have heard a great deal about Clause 1 of the Bill, there has been an almost total conspiracy of silence about Clause 2, the clause which deals with the Industrial Expansion Act. I have not been surprised that this has been the case, because despite the fanfare of trumpets with which this Act was announced by the last Government they made little or no use of it. Only three projects fell within its scope—admittedly big ones: the two great smelter projects and I.C.L. But the fact remains that all three of those projects were deep in the pipeline before that Bill became law, and since then this child of the last Government has been a neglected one. Therefore, I am not entirely surprised that its demise has been virtually ignored in your Lordships' House this afternoon.
The third issue on which there has been a certain measure of agreement has been the clear agreement in your Lordships' House this afternoon to disagree on the merits of the I.R.C. case. To judge from some of their speeches this afternoon, the I.R.C. would seem to be, to many noble Lords opposite, the touchstone of all that is virtuous. For them it seems to have represented not only the key to the restructuring of industry and a channel for selective investment, which, as I understood it, were the two primary tasks of the I.R.C., but it has also been synonymous with higher investment in our key industries, support of our technologically most advanced industries, success in our export markets, successful defence against possible predators from abroad, and some sort of manifesto for management efficiency; that is quite apart from having appeared to them to constitute some sort of automatic crutch for
710
lame industrial ducks. Quite apart from that, some noble Lords have portrayed the I.R.C. as the root of any sane and progressive regional policy; and to deny all these virtues would appear to be a sin against George Brown.
I should like to ask your Lordships to look upon this issue in less manichaean, less black and white terms. I would remind your Lordships that performance here has been far less than promised. For example, we all want higher investment in industry. We all know that it is here above all that we have been falling, year after year and decade after decade, behind our industrial competitors; but we also know that after five years we are still continuing to trail behind in that respect. The I.R.C., if it has helped us, certainly has not helped us much. We all know, too, and we know it from very recent experience, that when we come to our front runners, the really advanced technological industries of this country, we still have our problems, and we have had the I.R.C. for four years. And we know, too—and this is surely the crucial point—that it is not the I.R.C. but it is the Government of the day, right or wrong, which is the trend-setter, the pace-maker, the decider, certainly so far as regional social policies are concerned. I think it is a gross exaggeration to credit the I.R.C. with that key central role which a number of noble Lords would appear to have credited it with this afternoon.
I believe it is important that we should come down to earth, because we are not discussing macro economic policies here. These are the concern of Government as a whole, and it is them and their impact upon our life to which the Chancellor of the Exchequer will be addressing himself in his Budget Statement in a few days' time. We are not discussing the economic wood here, we are discussing the economic trees, albeit some very important industrial and economic trees, and it is on them that the axe of this Bill is intended to fall. I therefore suggest to your Lordships that it is a mistake to look upon this Bill, and to have conducted this debate, in such black and white terms, and also I believe that it would be a mistake not to keep things in proportion here.
In order to bring the debate back to a reasonable sense of proportion and to quantify things, I should like to re-present

711
the statistics which my noble friend Lord Denham, presented to your Lordships earlier this afternoon in moving the Second Reading of this Bill. I will do this in a slightly different way. It is merely to remind your Lordships that in the period 1967 to 1970 something between 2,500 and 3,000 mergers took place in this country, involving a total consideration of something like £5,000 million. I think it would help us to keep a sense of proportion here if we were to remember that the contribution of the I.R.C. in this period to that wave of mergers was no more than a mere 100 or so, 4 per cent. at the most.
LORD BYERS: My Lords, forgive me for interrupting, but is the noble Earl saying it should have done more?
EARL JELLICOE: My Lords, I had realised that the noble Lord was about to ask me that question. I am not arguing whether it should have done more or less, I am merely repeating these facts in order to quantify the contribution it has made. I am not saying whether it is good or bad, or whether it could have been better or worse. These are the facts.
LORD BYERS: My Lords, when the Government took this decision what had they in mind? Was it that the I.R.C. ought to have done many more of those mergers, or that it was so dangerous that they did not want it to do any more at all?
EARL JELLICOE: My Lords, I think since we are abolishing the I.R.C. it is rather evident that it should have done less, in our view, at that time. That was the quantitative side. May I come to the qualitative side of this? On the qualitative side, again I think a great mistake is made in thinking that in every merger that has taken place where the I.R.C. has played a part—it has played a useful part, and I am the first to acknowledge this having seen some of these mergers at fairly close hand—that part has been the decisive element. I think, here again, that the noble Lord, Lord Aldington, in telling us something of the facts behind the G.E.C. merger, put the debate in perspective.
Having said that, I should only like to say that I agree with a great number of
712
noble Lords who have voiced the view in your Lordships' House this afternoon that there is no particular mystique about mergers: some may be good, some may be bad; some are successes, and some create more problems than they solve. I think the Pennsylvania and New York Central merger probably created more problems than it solved. Another one which has been quoted in another place—a very indigestible one—has been Montecatini Eddison; and we have seen the difficulty which some of our own merged companies have met with in recent years.
LORD SHEPHERD: My Lords, the noble Earl is going very wide afield. Perhaps he would be able to tell us whether the mergers in which the I.R.C. has been involved, or any of them, have run into the sort of problems to which the noble Earl is drawing attention?
EARL JELLICOE: My Lords, I think probably some of them have.
LORD SHEPHERD: Which?
EARL JELLICOE: My Lords, I think it would be much better not to be too precise here. We all know that our motor industry is faced with great problems at the present time. I am not saying that that is as a result of the mergers, but there are some considerable problems facing our motor manufacturing companies at the present time.
LORD GEORGE-BROWN: My Lords, I do not want to interrupt, but this will not do, I suggest to your Lordships, when the noble Earl says that mergers sometimes create more problems than they solve. That sounds an unexceptionable statement. But the noble Earl mentions the Pennsylvania Railroad, which clearly the I.R.C., by definition, have nothing to do with; he mentions Montecatini Eddison, which clearly the I.R.C. had nothing to do with. When asked which one the I.R.C. had to do with that created these problems, he says it is better not to be precise. Is that because the noble Earl is afraid of naming the merger, or because he does not really know of one that happened in this country?
EARL JELLICOE: My Lords, I was making a perfectly general point about mergers, and I think when one is dealing with prominent companies it is often

713
much better not to be too specific. That was the precise reason. I would have thought that the noble Lord, Lord George-Brown, with his experience, would have recognised that. Having said that, I should like briefly to run over some of the reasons why we have had doubts about the good sense of continuing the I.R.C. I should like to make it perfectly clear that these doubts have not been the result of doctrine. It is quite absurd for the noble Lord, Lord George-Brown, to suggest that the Government have danced to some obscure City tune, and I do not think he really believes it himself. At the same time, I would suggest that our reasons, although not doctrinaire, have been perfectly definite. We have had doubts, and I make no bones about this. Some noble Lords have criticised this decision on the grounds of public expenditure, and it is no secret that this Government believe in reining in public expenditure. It has been estimated that if the I.R.C. was to continue effectively (and there is very little point in it continuing other than effectively), it would have made a demand of something like a further £40 million a year on public funds.
LORD BROWN: My Lords, I have already made the point that this is revolving investment. It really is exaggerating grossly to suggest that there is a continuing need for the I.R.C. to receive £40 million each year. The terms of the Act are quite clear. I have made the point myself. This is tending to distort the facts.
EARL JELLICOE: My Lords, I do not wish to bandy words with the noble Lord on whether it is investment or expenditure of public funds; I merely point out that, so far as I know, those funds have not yet revolved. But of course this may be because most of the investment—call it investment—was on a five to seven year term, and this may be the reason. However, it has not yet revolved, as the noble Lord, Lord George-Brown, anticipated, I hope correctly, that it would when he introduced a White Paper on this four or five years ago.
LORD BROWN: My Lords, I do not want to interrupt too often, but is it not clear that the Government could have left the institution in being and simply
714
said, "You are an institution dealing with a revolving fund, and until you get your money back you will not have any more to invest". At least this would have been a half-measure which would have continued the Corporation in existence.
EARL JELLICOE: My Lords, this Government are not necessarily wedded or addicted to half-measures.
The question of public expenditure is not the only doubt. There is a much more serious doubt behind this. What has worried the Government has been the clear evidence that the I.R.C., especially in its more recent manifestations, has tended to work increasingly not with but against the grain of market forces. I would not suggest for one moment that the market, the City, are always right; but, by the same token, I find it hard to persuade myself that 15 or 20 very bright people in the I.R.C., however talented, are necessarily the best judge of whether, in a contested situation (and that is using the phraseology of the last Report of the I.R.C.), there is a compelling, identifiable national interest which should lead the I.R.C. to put its shoulder behind one party to a bid rather than another. I would not for one moment argue that in certain circumstances discrimination may be right in the national interest, but I ask myself whether it is right for a virtually autonomous agency of the Government to be permitted this discretion to discriminate.
LORD GOODMAN: My Lords, I hesitate to intervene, but I think it would be of value if, the noble Earl would tell us, in the absence of the I.R.C's. judgment in this matter, what forces would otherwise resolve the situation?
EARL JELLICOE: My Lords, first, of course, there are the market forces. Secondly, behind them there is always the ability of the Government to intervene in a specific situation if they judge it right and appropriate to do so.
LORD GOODMAN: My Lords, does the noble Earl suggest that intervention by the I.R.C., a carefully selected instrument of Government, is not intervention by the Government? Why should any other form of Governmental intervention be any better?
EARL JELLICOE: My Lords, it has always been my understanding that the I.R.C. has operated with a high degree of autonomy. Certainly that is what the I.R.C. has prided itself on in its Reports, and this is certainly my understanding of the position.
I should like to make it clear, since my own position on this matter has been mentioned, not least by the noble Lord, Lord George-Brown—quite fairly, may I say—that I felt some years ago that there might be a place in our system for the sort of industrial midwife which, as I understood it, the I.R.C. was originally conceived to be. My right honourable friend the Secretary of State for Social Services was expressing a rather similar view when he said three years ago in another place:
"A facilitating I.R.C.—that is, facilitating the market mechanism—is one thing and may be useful. But a fighting I.R.C. is another animal altogether, because it uses the taxpayers' purse to back its judgment on what, in almost every case, can only be a hypothetical and marginal difference in national interest."
That is precisely my own position.
I personally do not see any objection, I have not seen any objection—indeed, I have seen some advantage—in what I termed in a previous debate, last July, "I.R.C. Mark 1". But I have seen, and I do see, grave and serious disadvantages in I.R.C. Mark 2—the sort of animal which the I.R.C. was increasingly becoming and which was evident in its actions, right or wrong, in the Kent-Cambridge case. As the I.R.C. moved increasingly in this discriminatory and intervening direction, its role became increasingly unacceptable to the present Government. Again, I would entirely agree with those noble Lords (my noble friend Lord Aldington mentioned this) who pointed out that when we came to power we were not committed to the repeal of this Act. In explaining why we have now come round to repeal, I can only repeat what my right honourable friend the Secretary of State for Trade and Industry said in another place; namely, that we have come down in favour of repeal only after the most careful investigation.
LORD GEORGE-BROWN: My Lords, I have one short question. I apologise to the noble Earl, but this is important. He said, in explanation of his speech of July last year, that I.R.C. Mark 1 was
716
not too bad. But it was different when it became an aggressive animal, Mark 2 —and he cited the case of Kent-Cambridge as evidence that it had become an aggressive animal. Has he forgotten that that was before July, 1970?
EARL JELLICOE: My Lords, the noble Lord, Lord George-Brown, occasionally bowls very easy long hops or full tosses. If he had done me the credit of reading with care my speech of last July, he would have realised that I was saying then, as I am saying now, that I had no objection to I.R.C. Mark 1—
LORD GEORGE-BROWN: Which included the Kent-Cambridge case.
EARL JELLICOE: My Lords, I was perfectly well aware of the date of the Kent-Cambridge deal, and I was perfectly well aware that it preceded my speech in July by a year or so. Really! It is ludicrous of the noble Lord, Lord George-Brown, to bowl these long hops.
LORD GEORGE-BROWN: I am sorry, my Lords. If the noble Earl takes that line, then O.K. But I submit it cannot possibly be ludicrous, because he said that he had changed his mind on the evidence of Kent-Cambridge from July, 1970. Since it happened before 1970, how can that explain why he changed his mind?
SEVERAL NOBLE LORDS: Order!
EARL JELLICOE: My Lords, I find it rather difficult to give way all the time to the noble Lord, Lord George-Brown, but I should like painstakingly to try to explain my position here. I said in July, that, so long as the I.R.C. remained in its Mark 1 guise, I had no great personal quarrel with it. I was perfectly well aware, when I was speaking in July last year, that it was no longer in that guise. I was not saying that I approved of it in July last year. I was merely saying that if it had remained in Mark 1 guise I should have had no great quarrel. Is that clear to the noble Lord, Lord George-Brown?
LORD GEORGE-BROWN: Anything but.
EARL JELLICOE: My Lords, after this debate I shall endeavour to explain my position with even greater precision to the noble Lord.

717
In any event, I was saying before I was interrupted that my right honourable friend came to the decision in favour of repeal only after very careful and prolonged investigation. We looked at the possibility of the I.R.C. reverting to a purely advisory role, but I think the Corporation made it clear that that was not "on". We looked at the possibility of the I.R.C. reverting to its Mark 1 role—and I hope that the noble Lord, Lord George-Brown is not going to interrupt me—but I very much doubt whether the Corporation, having tasted blood would have been willing to revert to a more vegetarian diet. We also looked at the possibility of its attracting private financing; but that, too, proved impracticable. It was only after that careful investigation that we came to the conclusion that the best course was to wind up the I.R.C.—what is implicit in Clause I of the present Bill.
I have taken rather a lot of your Lordships' time, not entirely due to my own volition. But I should like to deal with one or two questions which have been posed in this debate, and if your Lordships' forbearance will last I will do so fairly quickly. Some noble Lords have suggested that by abolishing the I.R.C. we are here setting our faces Canute-wise against an international tide. They have pointed out that there may be a tendency abroad to model institutions after the fashion of the I.R.C. I would merely suggest that a closer examination of some of these organisations reveals that none of them is a real counterpart to the I.R.C.
For example, the in France, which is I think the closest, depends to a considerable extent on private funds. The I.R.I. in Italy is an organisation quite dissimilar from the I.R.C. It is essentially—and I am sure that noble Lords opposite who know about these matters will not dissent from this—a giant State-controlled holding company, with a board composed entirely of Government officials; a very different animal indeed. I do not question the fact that the I.R I. may work quite well in Italian circumstances, but it is worth remembering that the Italian capital market is a very under-developed one compared with the City.
718
There is V.I.A.G. in Germany—again a different body; and finally there is the proposal to widen the scope of the European Investment Bank—the proposal to which the noble Lord, Lord George-Brown, referred. That proposal to promote industrial restructuring within the European Economic Community falls well short of a European I.R.C., as I understand it, and it is a proposal which has by no means yet received the unanimous approval of the member governments. What is clear beyond dispute is that the I.R.C., as constituted, could not have played a major role in Community restructuring, as I think was implicit in what some noble Lords opposite have suggested.
Another suggestion which was made—and I find it an odd one, coming from so revered a quarter—was that of the noble Lord, Lord Goodman: that by our action in abolishing the I.R.C. this Government are in some way showing that we are against a mixed economy. I cannot see how the abolition of the I.R.C. and opposition to a mixed economy can be synonymous. Again—and I think it is a thread which has run through much of the comments from the Benches opposite—there has been the suggestion that we have been activated here by pure doctrine. We all have our philosophies in politics. On the whole, we favour individualism while noble Lords opposite favour a more collective approach. But, from time to time, we all have to bend to the harsh winds of fact and circumstance, and I would merely point out that this Government, like all Governments, have bent to that wind to show that this accusation of being activated by sheer doctrine is sheer nonsense.
There has been the Rolls-Royce case; there has been the Yarrow case. I was surprised to hear the noble Lord, Lord George-Brown, say that he could see no identifiable reason for either of those two cases—or it may have been the Yarrow case to which he was referring. In both cases the primary reason was the defence interest of this country. Again, we have bent, as all Parties do, in the case of Harland and Wolff, and I was glad to have the approval of the noble Lord, Lord Shepherd, for the action taken there, for obvious social and political reasons which I think were overriding.

719
My Lords, other noble Lords have asked: what about this type of activity, now that the I.R.C. will be departing? Quite clearly, however much we should wish to disengage from industry there is no question of being disinterested and this Government, like any Government, must bear in mind the need to improve management and industrial performance. I would remind noble Lords that this point was touched upon by my right honourable friend the Secretary of State for Trade and Industry when he addressed the I.C.F.C., the institution to which my noble friend Lord Aldington referred, last November, and, as on most valid points, I do not think that what he said will suffer from being repeated. He spoke of the need—and I quote his words—
"to place as much reliance as possible on the free working of the market and on the independent decisions of responsible management in industry, commerce and the institutions",
and he went on to say that he had no doubt that the resources of the City would be equal to this task.
I would only say that I have rather more faith in City institutions than perhaps some noble Lords opposite. I also have a belief that the City is not a static animal: it is capable of development, and if there is a need to develop there, or elsewhere, some institution to do some of the work which the I.R.C. has been doing, if this cannot be taken up through the normal City mechanisms, I see no reason at all why the City should not be equal to that task. I personally should not wish to turn my face against that, although I should hope very much that any precondition would be that this would be done by private funds.
LORD SHEPHERD: My Lords, would the noble Earl not agree that any merchant bank or organisation in the City would be bound to be motivated by its own personal profit and basically would not be taking the national interest into account? Is that not one of the weaknesses in the noble Earl's case: that the City can provide the sort of service and expertise that has been provided by the I.R.C.?
EARL JELLICOE: My Lords, I do not think that a profit, properly pursued, is necessarily a bad criterion, and all I would again point out is that the Govern-
720
ment have reserve powers in any case. But I think it is now a little late to pursue that matter in too much detail.
There were some further questions which I rather wanted to answer. I have in mind the machine tool industry, and on this occasion I can assure the noble Lord, Lord Hoy, that he will hear from me personally. I apologise for the fact that I did not write but that my noble friend Lord Aberdare, who happened to be winding up the debate, wrote; but the noble Lord got a much better letter from Lord Aberdare than he would have had from me.
LORD HOY: My Lords, if the noble Earl will allow me to interrupt, may I say that I have no doubt about that; but what I was about to say, if the noble Earl will forgive me, was that it might not be a had thing if what the noble Lord, Lord Aberdare, had to say was said publicly, so that the machine tool industry could then understand what the Government's views were about it.
EARL JELLICOE: My Lords, I will gladly accept the invitation of the noble Lord, Lord Hoy, at the risk of detaining your Lordships for a minute or two longer. It is arguable, and indeed debatable, whether the particular problems of our machine tool industry arise from its fragmentation. There is certainly no evidence so far as I know that increased unit size is a necessary precondition of efficiency in this particular industry. I point, for instance, to the example of Germany, where the performance of the machine tool industry judged by most criteria is a high one; yet the size of the units in the German machine tool industry is no different, broadly speaking, from the size of the units in our own industry. So far as the future is concerned, it is my belief that the only satisfactory long-term solution to the problems of the machine tool industry lies in developing an increased and sustained demand for its products—and "sustained" is clearly important in an industry which is by its very nature very sensitive and to a large degree cyclical. To this end, I should like to assure noble Lords that we must have growth in the economy, and this growth the Government intend to promote as soon as our more immediate and pressing economic problems have been overcome.
LORD HOY: My Lords, if the noble Earl will allow me to say so, I am grateful for what he has said so far, but even now he has not gone quite so far as his noble friend Lord Aberdare. I hope that I do not misquote him but I thought the noble Lord was saying to me that the machine tool industry would in fact have a preference over certain other industries.
EARL JELLICOE: My Lords, I will quote the words of my noble friend Lord Aberdare in order to have them enshrined in the sanctity of Hansard. The sentence in the letter of the noble Lord, Lord Aberdare, which I think Lord Hoy would like me to quote—and I do so gladly—is:
"The machine tool industry would of course be amongst the earliest to benefit from a change in trends towards increasing investment, even though in the meantime individual firms may experience difficulties."
My Lords, I think it is really time that I concluded, and I should like to do so by quoting some words from the last Report of the Industrial Reorganisation Corporation—the 1969–70 Report. They concluded their Report with these words:
"Some British managements have flair, courage and commercial application which make them world beaters sonic trade unions have led their members with responsibility and success; some investment programmes offer the prospect of sharp increases in exports, productivity and profit. But until alt come up towards the performance of the best, we shall not break out and recreate the wealth needed to pay for the social programmes and the higher living standards which all political Parties profess."
My Lords, I would not dissent for one moment from that as a statement of general principle. Like noble Lords opposite, neither would I dissent for one moment from the proposition that in industry today, be it in the public or be it in the private sector, there is too great a difference between the performance of most of our industry and that of the best of it.
Where we differ from noble Lords opposite is in our belief that it is not primarily through the creation of more Government-sponsored organisations, it is not primarily through more direct Government aid, it is not primarily through more Whitehall arm-twisting, direct or indirect, that the breakthrough will come. We believe, rather, my Lords, that it is through giving freer play to
722
the forces of competition, incentive and initiative, both individual and corporate, that we shall breathe fresh air into our industry and release the innate dynamism in our economy. That belief, my Lords, quite apart from the practical considerations which I have sought to underline, lies behind this Bill.
LORD GOODMAN: My Lords, before we allow the noble Earl to escape, I wonder whether I might, at the risk of prolonging the debate—but I think fairly, because he introduced a count in the indictment against the I.R.C. which I had never heard before—ask him a little about that. As I understand it, one of the major reasons why he supports the abolition is that the I.R.C. changed its character. It had been a nice, peaceful, law-abiding, milk-drinking body which, because it had tasted blood, was prowling all over the place, liable to attack innocent companies at the drop of a hat. If I may say so, that would be the most astonishing, the most amazing, revelation to every member of the board of the I.R.C., and I should be grateful indeed if the noble Earl could tell me whether a single intimation of that suspected change was ever conveyed to any member of the board of the I.R.C., either by the previous Government or by the present Government; because, if so, it was certainly not drawn to my notice or to the notice of any of my colleagues.
EARL JELLICOE: My Lords. I cannot speak for the previous Government on what correspondence they may have had with the noble Lord and his fellow board members on this matter, but I am surprised that the views of the then Opposition, which were certainly not confined to Jellicoe personally, as the noble Lord will have realised from the words of my right honourable friend the present Secretary of State for Social Security, were not communicated to the noble Lord and his colleagues. They were communicated by Sir Keith Joseph in the speech from which I quoted.
LORD GOODMAN: My Lords, obviously we were conscious of political polemics being uttered in various directions, but the difference between that and a serious and sober intimation to a Government Board is one with which the noble Earl ought to be well acquainted.
EARL JELLICOE: My Lords, I think that the noble Lord is trespassing on the outer frontiers of order at the present time, so I shall refrain from further polemics, whether of a political or other nature, with him.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

INTEREST ON DAMAGES (SCOTLAND) BILL
Brought from the Commons; read 1a, and to be printed.
UNSOLICITED GOODS AND SERVICES BILL
Brought from the Commons; read 1a, and to be printed.

MINES AND QUARRIES (VALUATION) ORDER 1971
6.12 p.m.
THE PARLIAMENTARY UNDERSECRETARY OF STATE, DEPARTMENT OF THE ENVIRONMENT (LORD SANDFORD): My Lords, I beg to move, That the Mines and Quarries (Valuation) Order 1971 be approved. The purpose of this Order is to give effect, in relation to valuation for rating, to the changed view which is now taken of what a mineral royalty represents. Until recently, these royalties were regarded as being wholly in the nature of a rent. Thus for taxation purposes they were regarded wholly as an income receipt of the mineral owner. For rating purposes, noble Lords will know that the rateable value of a property is based on the rent at which it may be expected to be let. For mineral hereditaments, this hypothetical rent has been equated with the full amount of the hypothetical royalty which might be expected to be obtained—a practice which has been upheld in the courts.
Those concerned with mineral extraction have for some time contended that it is unfair to regard the royalty as wholly a rent. They have Pointed out that when someone lets a building for a rent, he gets the building back at the end of the lease in more or less its
724
original state, and can re-let it. But when a piece of mineral-bearing land is let for the extraction of the mineral, the position is different: at the end of the lease the lessee will have extracted the mineral and sold it, and the owner will be left with a hole in the ground. In some cases, a profitable use may be found for the hole; but, be that as it may, the owner can never re-let the land for mineral extraction because the mineral has gone. It was therefore argued that a mineral royalty should be regarded, in part, as a capital payment by the tenant for the material extracted.
Our predecessors accepted this argument, and they introduced provisions in the Finance Act 1970 whereby, for the purpose of income tax, surtax and corporation tax, mineral royalties were to be treated as being half a rent and half a capital payment. They also announced that it was their intention to make similar provision in relation to rating valuation by means of an Order under Section 35 of the General Rate Act 1967. When the present Government came into office the matter was looked at again, and the view was taken that it would be right to continue with the proposed rating Order. Last autumn my right honourable friend the Secretary of State for the Environment began consultations on this basis with all those concerned on both the local authority and mining sides.
Our proposals were, naturally enough, welcomed by the mine operators whose rate bills were going to be reduced, but were received with less enthusiasm by the local authorities because of the potential loss of rateable value. My right honourable friend re-examined the matter very carefully in the light of the local authorities' views, but he concluded that there could be no going back on the principle. He was satisfied that it is right to regard mineral royalties as being partly a capital payment, and it would obviously have been quite illogical to take one view of a payment when levying income tax and quite another view of the same payment when making an assessment for rates.
The Government were, however, impressed by the fact that some local authorities will lose quite a lot of rateable value as a result of the proposals, and that although most of these authorities will be compensated for their losses

725
by the resources element of the rate support grant, a few of them will not. In order to give these authorities time to adjust to the new situation, we therefore decided not to give effect to the full 50 per cent. reduction in royalty-based assessments straightaway, but instead to provide for a 25 per cent. reduction only in the first year—1971–72—bringing in the full 50 per cent. reduction for 1972–73 and later years. One cannot expect this decision to be popular with the mining industry, but we clearly must take into account the effect of the changes to be made by the Order on the local authority side as much as on the side of the ratepayers. Transitional arrangements where significant changes are made in rating are not unusual, and in fact the next Order which I shall be bringing before your Lordships in a moment, has a transitional period up to five years.
I do not think I need say very much about how the Order achieves the desired effect. For the generality of mines and quarries it is, in fact, achieved very simply and briefly in Article 4. The bulk of the Order deals with special cases; namely, the National Coal Board and tin, lead and copper mines. The National Coal Board is now rated by formula in an Order of 1963, and the Order before your Lordships' House provides for appropriate adjustments to the assessments under the formula and for consequential amendments to ensure that the adjustment at the general revaluation in 1973 produces the right answer. Tin, lead and copper mines are rated by special provisions in Section 36 of the General Rate Act, and because this section provides for its own demise when an Order affecting these mines is made under Section 35, this Order, in Article 7, has to restate Section 36, but with the appropriate amendments to give the mines the benefit of the reduced assessments.
My Lords, I think the only other thing I should say which may be helpful to your Lordships is that the Order affects only the rateable value of land at mines and quarries. The rateable value of buildings, plant and other works is not affected. I beg to move.
Moved, That the Mines and Quarries (Valuation) Order 1971 be approved.—(Lord Sandford.)
6.18 p.m.
LORD GARNSWORTHY: My Lords, I am sure that we all appreciate the exposition of the Order given by the noble Lord, Lord Sandford. As he stated, the previous Government gave an undertaking in May last year that rate relief would be afforded to mineral hereditaments, including colliery spoilheaps. In July of this year the present Secretary of State for the Environment indicated, as the noble Lord has already said, that he had in mind the making of an Order along these lines. I believe in fact that the Paper which was sent out from the Department of the Environment on October 15 clearly confirmed that the new Administration had endorsed the policy of their predecessors. There is little reason then for surprise that there is concern on the part of a number of the operators or undertakings that the matter is now being dealt with by way of having at least two bites at the cherry.
The continuity of policy, in principle at any rate, is welcomed from this side, and we shall not oppose the Order. But it would seem proper to raise one or two points to get some further clarification. As the noble Lord has said, the industrial interests concerned welcome the Order, so far as it goes. But their welcome would have been much warmer if the rate relief at 50 per cent. had been fixed to start from April 1 this year, instead of starting at 25 per cent. Those whose welcome is less warm than it might have been feel that this matter was raised, and an undertaking was given, sufficiently long ago for the 50 per cent. to have come into operation as from April 1 this year.
My Lords, it is right and proper that in the matter of rating the same principle should apply as in regard to national taxation. May I say that the local authorities are concerned, not only about the effect on their incomes, but also about the procedure adopted by the Government for dealing with this matter. The Order is being made under Section 35(2) of the General Rate Act 1967, which reenacted Section 3 of the Rating and Valuation Act 1961. It is not the view of the A.M.C., at any rate, that this is appropriate, in the light of assurances given by the Minister of Housing and Local Government at that time as

727
reported in Hansard for May 10, 1961. If I may, I will quote one of the relevant passages:
"Here let me emphasise, what I said repeatedly in Standing Committee, that this clause is not designed either to increase or diminish the overall liability to rates. That overall liability will be left substantially unchanged. The only question is whether a valuation can better be done by a formula than on the basis of the profits method. That applies throughout."—[OFFICIAL REPORT, Commons, 10/5/61, col. 442.]
The Minister of Housing and Local Government at that time—I have no doubt that he meant what he then said—was Mr. Henry Brooke, now the noble Lord, Lord Brooke of Cumnor, and a Member of your Lordships' House. What he said would appear not to be quite in line with the claim which he so often makes in your Lordships' House, that he was never wrong.
My Lords, as has already been indicated by the noble Lord, Lord Sandford, this relief for mineral hereditaments must have some impact on the rate income of the local authorities in whose areas the undertakings are located. I think their position merits some consideration. It is no secret that the Local Authorities' Association, and certainly the County Councils' Association, would have preferred the matter to be deferred until after the expected Green Paper on local government finance had been discussed. But one accepts that this is not to be. So far as the operators are concerned, and for good reasons, the matter has been expedited, but there will be some local authorities who will be badly hit by this Order.
So far as I can see, the only way in which they may be helped will be by way of the resources element of the rate support grant. Since the national total for that grant is fixed, it would seem that any additional aid that these badly hit authorities may receive will be at the expense of other local authorities. I should like to ask the Minister whether the Government have in mind to increase the national total available to local authorities under this heading to cover this and to avoid other authorities suffering a loss. Perhaps some attention may be given to this matter; if not now, at least when the future of local government finance is under consideration. I would ask the Minister that at least we
728
may have some assurance that the Green Paper on the future of local government finance will pay some attention to it.
I should like now, my Lords, to come to the question of spoil heaps. On March 10 I addressed a Question to the noble Lord; I asked whether he could give an assurance that the Order would apply to all spoil heaps. I was delighted when he indicated that it would. I confess that I should have been disappointed if all the spoil heaps had not been covered by this Order. The Minister indicated that this debate would provide an appropriate occasion to discuss the matter further, and I must say that I am disappointed that, as from April 1 this year, only a 25 per cent, reduction may be anticipated; and for next year and the following years only 50 per cent. I believe that there is a strong case to be made for the complete derating of these spoil heaps, and I regret that the derating is not 100 per cent.
I am disappointed that the Order does not indicate that there will be any relief given for past years. It seems to me that it would be such a sensible thing to derate these workings; for if we can put this waste material to constructive use we could save local authority expenditure, and the Exchequer the cost of grants, for recontouring or relandscaping, of up to 85 per cent. If we used this material constructively, we could restore good agricultural land. Charging the rates even 50 per cent. makes that much more expensive material which could be used for road filling and civil engineering. The best possible way to use it would be to bury it. To use the material in that way would be infinitely better than recontouring or relandscaping. Perhaps the Minister will indicate that further thought may be given to this matter.
6.28 p.m.
LORD SANDFORD: My Lords, I am most grateful to the noble Lord, Lord Garnsworthy, for his acceptance of, and welcome for, the Order, and I shall be glad to deal with the questions which he has raised. Perhaps I may start with the one with which he began and concluded; namely, the effect on the workings of those operators who extract shale from spoil heaps. I would confirm that it is not, of course, the wish or intention

729
of the Government to do anything that would seriously inhibit the removal of these unsightly tips, and the putting of a substantial part of the material into effective use, such as utilising it for road-filling for the motorway programme.
The fact is that the impact of rates on these operations is only of the order of 1p to 2p out of a total delivered cost of between 30p and 35p per ton. Although one can understand the reluctance of the operators to incur any additional expenditure that they might, by negotiation, be able to avoid, I cannot agree that a figure of 1p or even 2p in 30p to 35p would seriously slow down a programme which we are all very glad to see in operation.
The noble Lord also asked me whether I could give some reassurances about the impact of losses felt by local authorities. It is because these would have been serious and would have involved considerable increases in the resources element of the rate support grant paid by the central Government to nearly 200 local authorities that it was decided to stage the increases and have only a 25 per cent. figure this year. By doing that, only eight authorities are put into an embarrassing situation this year and it will be possible to make special arrangements to help them to get over their difficulties.
The noble Lord also went back to May 10, 1961. He is perfectly right in drawing the attention of the House to what was said by my noble friend Lord Brooke of Cumnor (when, as Mr. Henry Brooke, he was Minister) in introducing the Rating and Valuation Act 1961. It was his intention then, and it is our understanding now, that Section 35 should be used only for changing the method and not the level of rates. I think everybody is agreed—our predecessors in Government certainly agreed—that it was necessary to make a change in this case, the change already having been made in the field of assessment of tax. We were faced with the alternative of introducing a special Bill in order to do this or to use this section. I think your Lordships will agree that we have chosen the simpler and more appropriate method. I hope that these remarks have answered the questions put to me.
LORD GARNSWORTHY: My Lords, the noble Lord stated that by making it 25 per cent. this year only eight authorities are going to be placed in a difficult position. But what about next year when, on the figures he has just given us, most people would conclude that 200 authorities are going to feel the effect of this?
LORD SANDFORD: My Lords, by next year we shall have some experience of the way this operates and shall have time to make our calculations of the resources element of rates for grant and we shall be in a much better position to make adjustments
LORD GARNSWORTHY: My Lords, certainly it would be reassuring to local authority associations if this is an indication that the Government, if necessary, will rethink the position of the resources element in rates for grant.
LORD SANDFORD: My Lords, as the noble Lord knows, the whole question of the resources element is renegotiated every year and this is a new factor which we shall now have time to take into account.
On Question, Motion agreed to.

DOCKS AND HARBOURS (VALUATION) ORDER 1971
6.34 p.m.
LORD SANDFORD: My Lords, I beg to move that the Docks and Harbours (Valuation) Order 1971 be approved. The purpose of this Order is to provide for all statutory clock and harbour undertakings, with a few exceptions to which I will refer later, to be assessed for rates by a formula related to gross receipts. Statutory docks and harbours are for the most part assessed on what is known as the profits method. This method has for some time been producing unsatisfactory results ill the case of many undertakings; in particular it tends to produce very low or even nil assessments for the older undertakings, and very high assessments for undertakings in which there has been recent heavy capital investment. The profits basis also produces unduly low assessments for port authorities which do not own the bed of the river or harbour, because their income, in the form of what are known as "tolls in gross" and river dues, does not count for the purposes of

731
the profits calculation for rating. It was because the profits basis was generally recognised to be unsatisfactory that Parliament gave power in the Rating and Valuation Act 1961 for provision to be made by order for the assessment of docks and harbours by formula. This power has since been consolidated in Section 35 of the General Rate Act 1967 under which the Order now before your Lordships' House has been made. Consultations about a formula for assessing all statutory docks and harbours have been proceeding for some considerable time under Governments of both Parties, and a wide measure of agreement in principle was eventually reached in 1969 to a formula whereby an undertaking's rateable value for any year would be a percentage of its gross receipts in the year.
The Order provides for the rateable values of docks and harbours covered by the formula to be 4 per cent. of gross receipts. This is the percentage which, we estimate, will produce roughly the same total rateable value as at present for the ports which now have positive assessments. The formula assessments of the ports now assessed at nil will provide some additional rateable value, but the main effect of the formula will be to redistribute roughly the present total of rateable values. In some cases the formula assessment will be very different from the existing one, and in order to ease the transition both for port authorities faced with large increases in their assessments, and for local authorities facing large losses of rateable value, Article 8 of the Order provides for these large changes to be phased in over a period of up to 5 years.
I mentioned earlier that the formula will not apply to all statutory dock or harbour undertakings. There are two classes of undertakings which are excepted. First, there are the very small ports with receipts of less than £1,500 per year. Most of these have nil assessments at present. Under the formula they might have assessments of up to £60, which is not very much. Many of them would be troublesome to deal with under the formula, and we have therefore decided to ignore them for the purpose of the formula. The second category is that of undertakers dealing wholly or mainly in goods belonging to them or to their
732
associated company. The formula would not operate satisfactorily in this sort of case because the harbour undertaking's receipts, if any, would be unlikely to be a proper reflection of its trade. Any assessments of these two classes of ports would be determined under the general rating law. My Lords, I beg to move.
Moved, That the Docks and Harbours (Valuation) Order 1971, be approved.—(Lord Sandford.)
6.37 p.m.
LORD GARNSWORTHY: My Lords, again may I thank the noble Lord for the clear exposition he has given of this Order. This equally is a matter with which local government would have dealt. We on this side of the House certainly will not oppose the Order. Clearly there is need for remedying the present position where in some cases, by showing unprofitability, there could be no liability for rates. I think there was a case at Immingham, where the British Transport Docks Board won an appeal and established a position of no liability for rates at least for a period.
The noble Lord has explained how it comes about that 4 per cent. was decided on by the Government. I think it is no secret that the A.M.C. is dissatisfied with this figure and thinks that it should have been somewhere about 6 per cent. I ought to say that there is a hope that when local government finance is the subject of a Green Paper, there may be some further thought on this matter.
There is one point which I should like the Minister to clarify. Under the heading of "Interpretation" on the second page of the Order, in Section 3(2) receipts are so defined as to exclude charges for cargo handling but to include rents received, even though rented properties may be separately assessed. Under the formula set out, therefore, it would seem that such properties would be rated twice. I understand that, taking the undertakings as a whole, the rents received amount to only 3 to 4 per cent. and that it may be claimed that this figure is trivial in regard to the total. But not all installations enjoy rent income, and it would seem that in cases where they do the percentage of receipts accounted for by rents will be a great deal higher than 3 or 4 per cent. I wonder whether it is possible that some

733
further thought could be given to this matter and, if it is accepted that an injustice is being done under this heading, that at some future time the matter might be remedied.
LORD SANDFORD: My Lords, once again I should like to thank the noble Lord for his acceptance of this Order. If he asks me, as he does, to look into this question of rents again I will do so. But I can assure the noble Lord that the point he has raised was looked into most carefully. The anomaly was recognised, but no satisfactory way of isolating it from other forms of income was arrived at, and in the end it was decided to leave it as it is now. But I will certainly have a look at it again, and if I feel that I can enlarge on the point the noble Lord has raised—as I may well feel that I can—I will write to him and explain more fully why matters have been left as they have been left.
On Question, Motion agreed to.

BRITISH OVERSEAS AIRWAYS CORPORATION (GOVERNMENT INVESTMENT) ORDER 1971
6.41 p.m.
LORD DENHAM: My Lords, I beg to move that the British Overseas Airways Corporation (Government Investment) Order 1971, a draft of which was laid before this House on 4th March, be approved. I believe that noble Lords will welcome this Order, which concerns B.O.A.C.—whose fine financial performance over the last five years is well-known to this House—and enables the Corporation's capital structure to remain in its present form for a further five years. B.O.A.C.'s capital structure was established in its present form in 1965. Then, under provisions of the Air Corporations Act 1966, the Corporation was allowed an element of non-redeemable capital, which has come to be known as public dividend capital. Like most other nationalised industries, until 1965 the whole of B.O.A.C.'s capital finance had taken the form of loan capital. Whereas loan capital bears a fixed rate of interest and is redeemable, public dividend capital is non-redeemable and is remunerated by variable dividends payable out of net profits and reserves and these more
734
closely reflect each year's trading results. Public dividend capital is, therefore, similar in those respects to equity capital in the commercial world. When public dividend capital was introduced, it was in the nature of an experiment, and Section 4 of the 1966 Act (since consolidated in Section 19 of the Air Corporations Act 1967) provided that the arrangements should expire on March 31, 1971, unless extended by Order permanently or for a further period. The draft Order now before this House extends the relevant provisions until March 31, 1976.
Noble Lords will expect me to give some account of how the experiment has worked with B.O.A.C. and to explain why the Government have decided to extend the arrangements for a further five years. I will try to deal with both points briefly. B.O.A.C. started with £35 million of public dividend capital in April 1965. Since then the Corporation has needed no cash issues because it has been able to finance all its sterling investment from internal resources. However, the £35 million has been increased to £65 million by the conversion to public dividend capital in March, 1968, of £15 million in B.O.A.C.'s reserves and of a further £15 million in March, 1970. On this investment, B.O.A.C. has paid £44¼ million in dividends over the five-year period from April, 1965, to March, 1970. This amount is equivalent to an average rate of almost 19 per cent. on average annual investment, and far exceeds the sum which would have been payable by way of interest on a corresponding amount of loan capital over this period. In the light of this successful experience, the Government have decided to allow the arrangements to continue for a further period, and this accords with the wishes of the Corporation, because public dividend capital puts B.O.A.C.'s capital structure broadly in line with that of its main competitors and so enables B.O.A.C.'s financial performance to be more readily and directly related to theirs.
As noble Lords will be aware, a Civil Aviation Bill was introduced by the Government last week. One of the purposes of the Bill is to set up an Airways Board to take strategic control of and financial responsibility for both B.O.A.C. and B.E.A. The Bill provides for the Airways Board to take over B.O.A.C.'s

735
public dividend capital on vesting date. It follows that the public dividend capital arrangements covered by this Order will expire on the Airways Board's vesting date. The Order, however, prepared under the existing legislation, provides for the extension of the arrangements for the further five-year period that would be appropriate if the structure of the industry remained unchanged, since the new Bill has yet to be considered by Parliament. My Lords, I commend this Order.
Moved, That the Draft British Overseas Airways Corporation (Government Investment) Order 1971, laid before the House on March 4, be approved.—(Lord Denham.)
6.46 p.m.
LORD BESWICK: My Lords, we are grateful to the noble Lord for explaining this Order so clearly. I rather suspect that the explanation which he has given clarifies a situation which is a little more complicated than he indicated. However, we are grateful to the noble Lord, and we shall of course approve the Order. The noble Lord referred to the background of this holding of public dividend capital, but I am not sure that he gave us all the facts. It belongs, I think, to that unhappy period when B.O.A.C. were less than enthusiastic about British aircraft. If I recall aright, this arrangement was made when they wished to cancel the VC 10 on the ground that it was an uneconomic aircraft. In the event, as noble Lords will know, B.O.A.C. were wrong about that aircraft. It proved to be one of the most attractive aircraft that B.O.A.C. have ever operated, and its passenger appeal was such that it was indeed financially successful. I am glad to think that the success of that aircraft is, in part, responsible for the sound financial picture which the noble Lord was able to paint.
But there was in this period a writing off of certain of B.O.A.C.'s financial liabilities. I do not believe the noble Lord indicated what that figure was. Can he tell me what proportion of the amount eventually appeared as public dividend capital, and what proportion has been written off entirely? I wonder whether the noble Lord can give me a little more information about the success of this technique in public or Government in-
736
vestment. To what extent has it proved to be something of an incentive to the Corporation? To what extent has it been proven superior to the ordinary loan capital that we see in other public corporations? As the noble Lord said, it was by way of an experiment. Are we to be given any more details as to how the experiment has worked out? Will there be something in the nature of a considered statement? I doubt whether a White Paper would be justified, but this was quite an important departure from previous practice, and I think it would be useful to have a little more information about it.
There are three other questions of which I have not given the noble Lord any prior notice and I do not expect an answer to them this evening, but possibly he will be good enough to consider them and, if he sees fit, write to me about them. Has there been any agreement with the Corporation about the return to be paid on this capital during the current year and over the next financial year? If there has been an agreement, to what extent does that agreement take into account the possible surrender of any of the B.O.A.C. routes to any other organisation? Finally, there was some talk at one time of making a similar arrangement of public dividend capital in relation to the B.E.A. financial structure. Has any more thought been given to that, and are we likely to hear anything more about it?
6.50 p.m.
LORD DENHAM: My Lords, I am happy to accept very gratefully the suggestion by the noble Lord, Lord Beswick, of writing to him about the last two questions that he has put to me. If I may answer the question of which the noble Lord was kind enough to give me notice, the position about the capital structure of B.O.A.C. is as follows. In March, 1965, the total capital borrowings of B.O.A.C. were £176 million. Of this sum they were relieved of liability for £110 million, leaving residual borrowings of £66 million. Of the £110 million, £82½ million was written off, leaving a reserve of £30 million. Of the £66 million residual borrowings, £31 million became loan capital and £35 million became public dividend capital.
The noble Lord asked whether the experiment in public dividend capital

737
had been successful. I think the main answer is to be seen in the results over this time. B.O.A.C. have paid dividends totalling £44,250,000 over the past five years from April, 1965, to March, 1970. This represents an average of almost 19 per cent. on average public dividend capital invested, and far exceeds the sum which would have been payable in interest on loan capital. That is from the Government's point of view. B.O.A.C. were most anxious for this experiment, to begin with, because they felt it would give them a certain amount of parity with their main competitors in world airlines, in that it gave them flexibility. They could vary their dividend to reflect the peaks and troughs in earnings, instead of being obliged to pay fixed interest the whole time. This was why they wanted it. So far as they are concerned, this has proved a great success, and so Her Majesty's Government have recommended its carrying on.
LORD BESWICK: My Lords, I am grateful to the noble Lord. I am sure he will understand me when I say that it does not follow that the fact that the financial results have been good is necessarily a consequence of this particular form of capital holding. I wonder why it was thought that this P.D.C., by its very nature, had contributed to the success. I do not ask for an answer now, but possibly the noble Lord will think about that. Could he also look into the figure of £86 million which was written off entirely—
LORD DENHAM: £82½ million.
LORD BESWICK: —the £82½ million which was written off entirely? The Corporation claim that they have returned, by way of interest on the public dividend capital, an amount equal to the amount that was written off. Can this be justified on the basis of the figures which the noble Lord gives?
LORD DENHAM: My Lords, when I write to the noble Lord on the other points I will, if I may, give him that answer, too.
LORD FERRIER: My Lords, before my noble friend sits down I wonder if it would be agreeable to him if the noble Lord puts the questions about which my noble friend is going to write in the form of a Question for a Written
738
Answer, so that the replies can go on the Record.
LORD BESWICK: My Lords, I have no objection to that, but it would be a rather wordy Question and Answer.
LORD DENHAM: My Lords, perhaps the happiest solution would be if I sent my noble friend a copy of the letter that I will send to the noble Lord, Lord Beswick.
LORD FERRIER: My Lords, I am much obliged.
On Question, Motion agreed to.

TELEVISION LICENCES
6.56 p.m.
THE EARL OF KINNOULL THE EARL OF KINNOULL rose to ask Her Majesty's Government whether they will reconsider the case for introducing a two-tier television licence system for those areas throughout Britain which can receive only B.B.C.1. The noble Earl said: My Lords, the subject I wish to raise this evening on television licence fees is one which I believe there is now a very strong case for the Government to look at again and reconsider their departmental policy—a policy which I believe it would be fair to say they inherited from the previous Administration. To-night is, I think, the first occasion that the Government have had an opportunity to state their view on this subject, and I particularly look forward to my noble friend's reply, despite his already very heavy day to-day.
The issue which I should like to draw attention to concerns mostly those people who live in the more isolated areas of our country—the Highlands of Scotland, West Wales, parts of Northern Ireland and, of course, South-West England. In all it concerns some 3,500,000 people who at present are served with only a partial television service and do not receive B.B.C.2 channels. That is half of what the B.B.C. television service offers—and some people may think the better half of the network. Perhaps one could also add a tribute to B.B.C.2 in that in the past seven years, as it has been expanding, it has increased its popularity to a point where we saw only a few weeks ago it was awarded a special award—the Desmond Davies award for outstanding television services.
It is, as the B.B.C. Year Handbook states, a complementary service to B.B.C.1. It offers a choice of viewing, and it provides some 33 hours of television a week. In all, I suggest that it makes the £7 licence fee a little more palatable. And yet this service at present is denied to 25 per cent. of Scotland, 25 per cent. of Northern Ireland and 33 per cent. of Wales. My Question tonight is simply this: should those who receive only a limited television service be asked to pay exactly the same £7 licence fee as those who receive a full service? Should there be some form of differential licence, until the network of B.B.C.2 covers the entire country? Or should one regard the licence fee in a narrow legal context as being a fee in payment for being allowed to install a television set, irrespective as to whether or not any service can be received?
From my research into the past I have found that the case for a differential television licence was raised in another place some three years ago by a Member who was concerned for the South-West of England. The purpose of this short debate to-night is to include all the areas affected, and I am particularly grateful to my noble friends who have taken the trouble to come down, especially from Scotland, to take part to-night. The departmental answer given in another place some three years ago appeared, I suggest, somewhat unsympathetic and, indeed, if one was to be uncharitable, it could be claimed that those who were involved with the policy showed a singular lack of grasp and understanding of the problem facing the more isolated areas of the country, and their attitude appeared to conflict with the Government's determination to try to halt the depopulation of the more isolated areas.
The departmental argument against any differential at that time appeared to be based on two themes: first, that a differential licence fee would be impossible to implement and quite hopeless for the Post Office, as collectors of fees for the B.B.C., to administer. Secondly, that the areas of high population density, such as London and Birmingham, in practice subsidised the more isolated areas if one considered the cost of providing relay stations and services, and any variation of fee would benefit the isolated
740
areas. If these are the arguments that my noble friend intends to put forward to-night, I hope that he will listen very carefully to what I am sure other noble Lords will say and will be convinced, as I am convinced, that there is a case worthy of a fresh look, despite any departmental frowns.
If one examines the difficulties of administering a differential licence system, there are obviously many cases outside the more isolated areas who cannot receive B.B.C.2 for one reason or another. There are people we know in Surrey, Suffolk and the Home Counties who perhaps live under the cover of a hill or woodland and cannot receive this service. One could well ask how would they be treated? How would the Post Office know who could or could not receive the B.B.C.2 channel? Would this not lead to an increase in wide-scale evasions and an increase in Post Office supervision?
The answer to such questions is that it is perfectly possible for the Government to devise a policy which would overcome these difficulties, a policy which would not overtax the Post Office administration yet would bring considerable relief to the more isolated areas while their services remain restricted. Such a policy, I would suggest, could be tackled in two stages: first, the Government could declare certain clearly defined areas of the country where it was known that for the present B.B.C.2 channels could not be received. Within those areas a reduced licence fee could be automatically issued. For those people not included in these areas but who also could not receive B.B.C.2, the benefit of a reduced fee could be made available on submitting a declaration, supported possibly by an engineer's report, and such a declaration could be subject to severe penalties for any false statements. If such a policy were adopted—and there must be many other forms of doing it—I would suggest to my noble friend that the problem of administration, which apparently the Post Office view with such apprehension, would really be minimal.
My Lords, as to introducing a differential licence fee, it is a fact, as we know, that the Minister has power to make such a regulation under the Act. His Department has already done so, and has had experience in dual television fees or

741
variable fees in the matter of colour television. We know also that the Minister has made regulations for hospitals and old people's homes. This I welcome. It would, therefore, not be creating a precedent. It would be of interest if perhaps my noble friend could tell us at the end how, in practice, the colour television variable fee has worked out. Has is proved an exhausting and expensive task for the administration of the Post Office?
The second argument used some three years ago against a differential licence—the argument that the communities of isolated areas are subsidised by the communities of towns and cities over their costs of television services—is one, I believe, that has very little merit. If one were to accept this argument one would then look to telephone costs, postal costs, road costs which could all be shown in an unfavourable light. If such an argument were to be accepted, it must in practice mean the possibility of the Government abandoning the isolated areas of the country.
My Lords, if I may turn briefly to the Act governing television licences, Section of the Wireless Telegraphy Act 1949 sets out the present law governing television licences. The first part of subsection (1) reads:
"No person shall establish or use any station for wireless telegraphy or install or use any apparatus for wireless telegraphy except under the authority of a licence in that behalf granted by the Postmaster General …"
Then, Section 19 says that if one can devise an apparatus of electro-magnetic energy exceeding 3 million megacycles a second one would not have to apply for a licence.
I suggest that this section which controls the television licence is one of the most extraordinarily ambiguous sections that any lawyer—and I am not a lawyer myself—has to try to grapple with. Take, for example, the word "installation". It would seem from this section, that it is an offence to install a television set without a licence. I should like to ask my noble friend what happens if a television set has been broken down for a number of years yet is still installed. Should one legally have a licence during this period?
The second question I should like to ask under Section 1 concerns the word
742
"use". Again, is the burden of proof on the prosecution to show the court that the defendant was caught actually using a television set without a licence? The law governing the present licensing system is, I believe, both vague and ambiguous and as it can involve a criminal charge I would suggest that it is time that the law was spelt out with greater clarity.
In raising this Question to-day there is one aspect I should particularly like to draw to the attention of my noble friend. In such districts as the Highlands there is now a rapidly growing disenchantment amongst individuals, parish councils, rural councils and even county councils at the seeming present injustice of the case. To ask a Scotsman to pay the same fee for an inferior television service to that which is received in England is understandably resented. Recent cases have occurred where, on a matter of principle, individuals have refused to pay a licence fee. There is a mounting feeling that if the Government really mean to look after the communities in isolated areas, then any such cases should be very sympathetically considered where communication in the form of television could add much to the quality of life and remove some of the penalties of isolation.
My Lords, for this reason it is, I believe, the duty of both the Government and indeed of the B.B.C. to give priority to extending B.B.C.2 services to these areas, even before contemplating embarking on other capital ventures such as local radios. But while areas wait to receive B.B.C.2—which in some cases could, I believe, take up to 10 years—surely there is a good case for a differential licence and a chance to show that this Government care.
7.8 p.m.
VISCOUNT THURSO: My Lords, I am grateful to the noble Earl, Lord Kinnoull, for raising this Question, and your Lordships may tell how keen I am to speak on the matter, one which Her Majesty's Government have flouted, because this is the second time that I have set out from Thurso to come down to discuss the subject. The last time I was already airborne when the message came to say that the Question had been taken off the Order Paper. So I am extremely grateful for having this opportunity now.

743
My Lords, on the whole, if we feel in any transaction that we are getting value for money we pay up cheerfully; if not, we consider that we are being cheated. The test is not so much absolute as comparative; it is comparative as between one commodity and another and as between what we are being charged and what others are being charged for a similar service.
Therefore, what we really object to above all else is being asked to pay for something which we do not get. That is why there is a strong feeling that they are being cheated in the minds of many people who are asked to pay a full television licence and who receive only half the television programme. Several times a night this feeling of resentment can boil up inside one as the B.B.C. blandly announce, "And now your viewing choice on B.B.C.2, in colour"—when you know you can only receive B.B.C.1, you can only receive black and white and that you will receive neither B.B.C.2 nor colour for several years to come. Meanwhile, you have been paying for B.B.C.2 at the same rate as everyone else and, so far as can be seen, will go on doing so for many years.
This feeling of resentment is not in any way assuaged by the other reception difficulties in remote areas. In the North of Scotland we have never—I repeat never—received the whole of the ordinary wireless programmes on an ordinary average wireless set. In my own house we can still get only two out of the four available channels on "steam" radio with any certainty or clarity. Yet ever since I was a child we have been paying the same as someone who gets the lot. The fact that we can get the U.S. Forces programme from Germany, or news bulletins in English from Radio Moscow, is cold comfort. Indeed, at certain times of the year reception of foreign stations adds to our frustration by ruining our only B.B.C. television channel reception. It is a somewhat bizarre experience to try watching Wimbledon to the strains of Spanish Flamenco dances or French news bulletins, instead of the soothing tones of Dan Maskell and Jack Kramer. It is even worse when, from time to time, the screen takes on the appearance of a sheet of herringbone tweed.
It is argued that a TV or radio licence is merely a licence to operate a wireless
744
receiving station, and that payment should not be taken as implying any guarantee of what it is possible to receive. This may have been a fair enough conception in the days of 2LO, but it is obviously all wrong to-day. Clearly, the B.B.C. relate their demands for contributions from the licence fee to their costs of providing their total service. It is they who have established a relationship between licence fee and service. A licence fee can, after all, be one of two things. As in the case of, say, a firearms certificate, it may be primarily a method of control with a fee to pay for the cost of exercising that control. Alternatively, as in the case of the road fund licence, the fee may be primarily designed to collect the cost of providing certain services. A firearms certificate costs the same to renew whether it is for a 22 rifle or for enough rifles to arm a whole platoon of soldiery; and this we regard as fair. A road fund licence, on the other hand, varies not only with the number of vehicles which one owns and operates, but also with the type and size of those vehicles. It would be particularly unfair if we were charged as much for operating, say, a two-stroke motor scooter as a 20-ton articulated lorry.
To a certain extent, as the noble Earl, Lord Kinnoull, has pointed out, this principle has already been recognised by the creation of different levels of charge for sound radio, black and white television, and colour television. But I maintain that this recognition has not gone far enough for it to be either fair or generally acceptable. What is clearly established, however, is the principle of a multi-tier wireless receiving licence. It exists; it is not something new or revolutionary. We are asking only that it should be extended, logically and fairly, so as to give the public what they consider reasonable value for money, and so as to let it be seen that justice is being done.
Granted, therefore, that the principle of paying only for what one gets has already been accepted—and, I think one cannot deny that it has been accepted—the problem is merely to devise a way in which this principle can be applied as fairly as possible to the whole of the viewing public. Simply to say that it cannot be done, or that it is too expensive to do, is not good enough. There

745
are many ways in which it could be done; all that is lacking is the will.
I recognise that we shall be told that it is immensely expensive to take programmes to remote areas. The costs per head of even the limited service which we receive in Thurso will no doubt be shown to be ten, or even more, times the costs of providing the same service in London. Nevertheless, the principle here, which seems already to have been accepted as fair, is that one averages out such costs. Clearly, we do not say that only those areas to which TV can go cheaply shall have it—any more than we say that only areas where water, roads, sewers, education, libraries, or the National Health Service, can be provided cheaply shall have them.
What we have to accept is that radio and TV are now regarded as part of our way of life, and people demand that these services shall be available in any part of these Islands where people are expected to live. They are prepared to accept an averaging out of the costs, but they are not willing to pay the full price for a diminished service. This should apply to radio licences as well as to TV licences. For too long the licence fee has been swindling the listening public of the remoter areas, every hit as much as the people who do not pay their licence fee but nevertheless listen swindle the B.B.C.
But this question of what one pays for what one hears or sees is not the only question which justice demands we should look at. The B.B.C. provide specialist services for a Government Department which are paid for by those of us who take out licences—not, your Lordships will note, by everybody—on the grounds of being a public service; nor, your Lordships will note, only by those who directly benefit. But, capriciously, those of us who take out a licence hoping to buy ourselves some entertainment have a large slice of our money spent on schools broadcasts. Schools broadcasting must be costing nearly £3 million a year, and all of this has always come out of licence fee revenue. Yet when the University of the Air was instituted the B.B.C. and the Government of the day must have decided that it would be more than the listening and viewing public would stand
746
for to put that cost, too, on to the licence fee. The University of the Air is therefore separately paid for, thereby establishing a precedent which could, and should, be applied to schools broadcasts.
The noble Lord, Lord Denham, will, I am sure, see how very reasonable I am being. I am not asking for immediate B.B.C.2 reception; nor for colour on B.B.C.1; nor for a wireless programme with light music on it—none of which I can receive at present. I will wait until, in the B.B.C.'s own good time, they can get around to offering us these services. But what I am asking is that we shall not be required to pay for all these things until we get them. While I am in such a reasonable frame of mind, I will also give the noble Lord a suggestion on how we, the viewing public, could be fairer to the B.B.C. than we are now in the matter of licence fees.
We have—and I must humbly confess it—unfairly used the principle of a radio licence being a licence for a wireless receiving station. We have filled our houses with radio and television sets, and unashamedly different members of a family will be listening to different programmes in different rooms all at the same time, all on the same licence fee. We take our portable sets on picnics, and set up al fresco wireless receiving stations without any thought that we are doing so unfairly. So I suggest that Her Majesty's Government should consider a compounded licence fee on all portable radio or television receiving sets, payable at the time of first purchase. This could be in the form of an increase in purchase lax on portable sets. Just as a piped water supply is nowadays considered a necessity but hot and cold water in every room is still considered a luxury, so a receiving set in the home is expected to be within the reach of all but a set for each member of the family can hardly be said to be a dire social need.
May I therefore ask Her Majesty's Government not merely to listen attentively to the Question being raised this evening and then politely but firmly to tell us that nothing can be done, but rather to undertake to ponder these things in their hearts. I hope they will then see that old conceptions have become outdated, that new precedents have been set and that now is the time to review the whole of the wireless licensing system.
7.20 p.m.
LORD BURTON: My Lords, I should like to support my noble friend Lord Kinnoull, though perhaps from my own personal point of view as an "old square" I am quite happy with only' one channel, for at least there can be no disputes among the family as to which programme should be switched on and there is less temptation to waste one's time watching the "goggle-box". However, I am sure your Lordships will apreciate how galling it is when the B.B.C.1 announcer proclaims, "And now a choice of viewing"—I will not go on, because the noble Viscount would make a much better commentator than I would. May there not be some doubt as to the legality of those statements? They are quite untrue so far as we are concerned—there is not a choice of viewing—and I wonder if they are not a misrepresentation of the description of merchandise.
That it is possible to make these announcements shows what a minority of sufferers there are. The country as a whole would not stand for it. Comparatively few householders can be affected, and therefore there would be a comparatively small financial effect if my noble friend's suggestion were implemented. It may well be that we shall be told that differential licence fees are not possible, that they would be too complicated, or some other excuse, but such a statement must be unacceptable. Such a scheme would be perfectly feasible, and indeed more equitable than the separate price zones for petrol, separate zones for S.E.T., differential grants for development areas, different subsidies for farmers as opposed to crofters, and so on.
In the Highland area there are places which would not get any "telly" at all if the inhabitants had left matters to the B.B.C. It is therefore difficult to swallow the statement that London is subsidising the remote areas. However, the people in these areas have taken the initiative and have formed themselves into associations. I have with me the accounts of one such group. There are about 100 subscribers. Initially they each had to pay about £20 as a capital contribution to get the television aerial and piping installed. Now, running on a shoe string, they have an annual maintenance charge of £3 each per year. This would not cover their costs if they had not got voluntary, unpaid labour, or indeed if they had a
748
severe gale which would blow down the equipment, nor does it give them colour, nor B.B.C.2 nor University of the Air. They are having to pay £3 per year in addition to their licence fee to get a part service. The noble Viscount, Lord Thurso, suggested that there was a feeling in these remote areas that they were being cheated because they were getting only a part service. It is not a question of getting only a part service; in some areas we are having to pay extra to get any service at all.
Your Lordships may wonder why there is a maintenance charge of £3 a year. Last year these people had to pay the Electricity Board over £34 for power for the boosters and for hanging their cables on the electricity poles; repairs amounted to approximately £30, and then, for some extraordinary reason, they had to pay rates for their extra equipment, and those rates amounted to over £25. Finally, of all iniquities and injustices, and adding insult to injury, there is a telecommunications fee of £15 which has to be paid to the Post Office for a licence for the mast. I know my noble friend on the Front Bench is a fair man and should be prepared to take a gamble that he has a brief which says "Resist; do not give way". I hope I am wrong. Whatever his brief, however, I am sure that, having heard our pleas, he will at least say that there are aspects of this matter which are unfair, and that he will take the information back and have another look at it. Having had another look and consultation, how can he come to any conclusion other than that there are injustices here which must be rectified?
7.25 p.m.
THE EARL OF CROMARTIE: My Lords, I am indebted to my noble friend Lord Kinnoull for bringing to your Lordships' notice the unfair burden placed on thousands of people who live in the Central and Western Highlands of Scotland as well as others who dwell in the mountainous regions of the United Kingdom. My Lords, if you had ordered a ton of coal, received half a ton and were then charged for the full ton you would corn-plain, and unless the bill was amended you would report the matter to the weights and measures authority, whereupon the offending coal merchant would, in all probability, be prosecuted. Yet apparently this conduct is quite in order

749
for the B.B.C., who, like the delinquent coal merchant, produce half a commodity while charging the consumer—that is, the viewer—for the whole. I refer to B.B.C.1 and B.B.C.2, the latter not being obtainable by the viewing public in the areas I have mentioned.
Over and above this, it is recognised by most intelligent people (which of course applies to all Highlanders) that the B.B.C.2 programme is a much better one than B.B.C.1, which often has little to commend it, having minimal interest for the Highland viewer and consisting to a great extent of second-rate American films. We have heard the old bureaucratic excuse which is used to justify the blanket charge on all viewers, whatever the merits of the case, that the licence must be the same for all; yet there is already a two-tier charge for old people. Another excuse is that the B.B.C. are doing all they can to improve the service, but to those of us who are realists it is obvious that it will be many years before sufficient relay stations 'can be built to serve the mountainous areas of Britain.
In this connection, with your Lordships' permission, I will read out a paragraph of a letter from the Controller, B.B.C. Glasgow. I quote:
"I am, of course, acutely aware of the need to provide improved reception of our television services throughout the North of Scotland, but the development of our new U.H.F. 625-line colour services, providing both B.B.C.1 and B.B.C.2, is a lengthy and costly process, placing considerable strain on both manufacturers and our own engineering staff resources."
I hope that the Minister who will be answering at the end of this Unstarred Question will give some assurance that a two-tier system of licences will be considered, and, if not, explain why there should be one code of commercial morality for the B.B.C. and another for the private trader.
7.29 p.m.
LORD FERRIER: My Lords, I should like to join my voice with that of the noble Earl who has asked this Question, but your Lordships will be happy to know that much of what has been said will save me the trouble of using all my notes. May I say that I have agreed with everything I have heard so far and inevitably, as I think was pointed out with the utmost strength by the noble Viscount, Lord Thurso, there is a sense
750
of frustration and indeed a sense of resentment at the paying of a full fee for only a fraction of a service which that fee secures in full measure in other parts of the country.
I had intended to expand the question of additional costs which fall upon people in mountainous areas but I will not do so because the noble Lord, Lord Burton, has just illustrated this fact in the most vivid way. There are other costs beside the licence fee and the ordinary aerial which fall upon people in awkward parts of the country. On the other hand, to my mind there is no doubt that the authorities will say that because of the sparse nature of the population and the consequent fewness of the receivers, and so on, the cost of providing a service on even one channel is unremunerative. Further, of course, it can be contended, and has been contended, that account should be taken of the fact that no licence fee at all is payable for radio sound service. The noble Viscount opposite has pointed out that, although there may not be a licence fee, it is not as though you can get all the channels even on the sound service.
While leaving out another portion of my notes, may I reinforce what has been said by other noble Lords; that in broad terms of social amenity, although the particular service in an area may not per se be financially viable, nevertheless it may well make economic sense, and I think there is force in the argument that the broadcasting media should take the rough with the smooth. Incidentally—and this has been touched on—some of us would be much happier if greater powers were taken to recover the large sums lost to the Government by evasion of licence fees. I propose to develop that point. Indeed, the noble Viscount, Lord Thurso, mentioned the fact that there are differentials in other matters. It is possible (I think the noble Earl brought this out in his speech) to find various ways of checking on the question of who receives what and recovering the licence fee.
It has always defeated me why powers cannot be taken to insist that the supplier of a receiving set or the repairer of a receiving set should be required to see the licence applying to the set before he undertakes the work or makes the sale, as in the case of a gunmaker. If that power were given, then of course the set which is only capable of receiving the 425

751
lines in black and white and only one channel would obviously be entitled to have a differentially reduced licence fee if it is within one of those areas which can be so readily defined.
The noble Lord, Lord Burton, referred to the question of prosecutions and so on, and I felt immediately that we were getting into deep water because of the necessity under Scottish law of having corroboration for any evidence in respect of a criminal offence. However, be that as it may, it is manifest that only one channel will be available for vast areas for a long time to come, and whether the reply to my noble friend's Question is favourable or not, I suggest that the B.B.C. Scotland should take a good look at the programme that goes out on the channel that the Highlands can receive. I do not mean take a good look as a viewer; I mean, if I may use the word to the noble Viscount, to ponder these things in their hearts, This debate hitherto has produced a number of most interesting angles of view on the situation, and I would suggest that the B.B.C. might see to it that a copy of the debate goes to all members of the regional boards as well as the governors.
I for one would be less inclined to think that the B.B.C. gives insufficient consideration to the regions if the place of the chairman of the Scottish Board had not remained vacant since November last. This may not be the B.B.C.'s fault; the appointment might well be in other hands; also the General Advisory Council may be the body primarily concerned. But can the noble Lord say, when he replies, when there is going to be a new chairman? Meanwhile, has the Scottish chairman's place on the Board of Governors been vacant for four months? I feel that these are important matters. As we have all suggested, a good look must be taken at programmes on this single reduced channel.
The point I have to make in supporting my noble friend is that the B.B.C. must face up to the inevitable discontent unless there is a graded licence. Whether there is a graded licence or not, there is going to be only one channel, and the B.B.C. should grasp that those programmes which go out on that channel from London consequently require special consideration for the areas in Scotland to which my noble friend's Question
752
refers. A single channel to a sensible, highly intelligent, if remote, public should cut out trivia, such as, shall we say, that dreary programme the other day about the presentation of awards—another noble Lord mentioned those American films—and should substitute more substantial fare, either of entertainment value or more especially of value in terms of current affairs. Your Lordships know that I am not alone in lamenting that the proceedings of Parliament receive such limited reporting by the mass media. If the viewers in the areas to which this Question refers are to continue to pay the full fee, the B.B.C.1 in Scotland should carry more features of Parliament, such as the programme "Westminster" on B.B.C.2. I pause, because hitherto it has gone on at 7.10 on Saturday night, and "Dixon of Dock Green" goes on at 7. I have asked various noble Lords which they turn on and the answer is "Dixon every time". However "Dixon" is taking a summer holiday now. Meanwhile, that slot will be empty, and although I do not suggest that "Westminster" should necessarily be in that slot at 7 p.m. on Saturday, I do say that it should be in some slot.
In general terms then, here indeed is the opportunity for the National Broadcasting Council for Scotland to make its weight felt and use the power it possesses under paragraph 10 of the Charter, Section 4(b), the power which they have, whether the licence fee is graded or not, to press for special particular attention to the single channel that goes to these remote regions.
LORD RANKEILLOUR: My Lords, I wonder whether I may intervene for just a moment to say that I hope something quick and positive can be done by Her Majesty's Government for these unfortunate people in the Highlands who have been so patient in accepting second best in the field of wireless and television reception and very expensive licences. Unlike my noble friend Lord Burton, I have no statistics for the House, only experience of this continuing calamity. The time for talk is over; now we must have action, please.
7.40 p.m.
LORD DENHAM: My Lords, I cannot ever remember a more concerted request on the Government to change

753
the present situation, nor a more Scottish one all at once. But I am afraid that I may have to disappoint noble Lords with the answer that I am going to give. The noble Viscount, Lord Thurso, said it was not good enough to say that what your Lordships are asking cannot be done. My Lords, that may be so; but I may have to say it none the less.
My noble friend Lord Kinnoull seemed to suggest that if the policy of Her Majesty's Government over this was to be the same as it was a few years ago, we should have new arguments and not rely on the old ones. However, I am afraid I must say that the policy is the same, and the arguments which justify that policy are still the same. At the present time, around 90 per cent. of the population of the United Kingdom can receive the programmes of B.B.C.2 on suitable sets and aerials. In Scotland, the coverage obtained is less—something below 80 per cent.
LORD FERRIER: My Lords, may I interrupt? Is the 80 per cent. in terms of licensed holders, not of areas?
LORD DENHAM: My Lords, the numbers of licensed holders. So in the United Kingdom as a whole some 6 million people, of whom just over 1 million live in Scotland, cannot yet get B.B.C.2. These figures suggest that complete coverage is not far off, but regrettably this is not so. With the best deployment of the financial and technical resources available to the B.B.C., many years will be needed to reach the stage of complete coverage.
In order to provide B.B.C.2 television to the whole of the United Kingdom, the B.B.C. will have to build., or have built, 58 high-power television stations and between 400 and 500 low-power ones. They have started by building stations in places where each station will serve very large numbers of people. They have completed 30 high-power stations and 37 low-power stations, and these together provide a service for the 90 per cent. of the population who may now enjoy it. But the balance of the stations, 28 high-power stations and some 450 low-power stations, are needed to provide a service for the remaining 10 per cent.
754
In the particular case of Scotland there are five high-power stations in operation. These cover nearly 80 per cent. of the population. To serve the remaining 20 per cent. in Scotland, a further 11 high-power stations and over 100 low-power stations are needed. This is a very big programme, which will take at least the rest of the current decade to complete. It is impossible to be more precise than this because until the high-power stations are opened the low-power stations cannot be established.
It will be seen from these figures that the further development of the B.B.C.2 television service will involve opening very large numbers of stations, each of which will service a relatively small area and a correspondingly small population. As each station is opened, the total area served will increase very slightly. The proportion of people with B.B.C.2 service will also increase very slightly. For the rest of the present decade, the coverage will increase steadily and slowly in very small increments. The cost of doing this will be very considerable indeed. Because the present B.B.C.2 audience is served by a comparatively small number of stations, the total capital cost to provide the stations is quite modest. In terms of capital cost involved, the cost is about 65p per household served. For those areas remaining to be served, the average capital cost per household served will have risen to around £8 per household.
The suggestion made is that until people are able to receive the B.B.C.2 service they should pay less than those who can. Apart from the arguments relevant to the practical problems of running the broadcast licence fee system, there is one point which follows from the facts that have been explained above. One has to consider the costs involved. As the B.B.C.2 service is extended, the number of additional people who will benefit each year will steadily diminish, but the money spent on extending the service will remain at much the same level. So it will most much more per household served. The minority in difficult areas—with B.B.C.1 only—cost far more to serve than those in the larger centres with two services.
If the licence fee payable differed according to the number of services the

755
licence holder could receive, there would be no evident argument of principle for not allowing the licence fee to be different according to other different circumstances of the particular licence holder. For people for whom it had cost a great deal more to provide the service, the very much larger numbers of other licence holders might equally well argue that there should be a bigger charge. The noble Viscount, Lord Thurso, tried to demonstrate how reasonable he was being in his demand. He said that he would accept one fee, whatever the cost of getting that particular programme to that particular set, but he would not accept one fee if there was a slightly worse service brought to that particular set. His reasonablenes in this seemed to be that he would accept what was to his advantage but would not accept what was not to his advantage.
VISCOUNT THURSO: My Lords, I said that I was being reasonable because I was not pressing the Government to hurry on with the provision of these services which at present we do not get. I was merely asking that, in the circumstances, the Government should be reasonable and not charge us for what we have not yet received but have in fact been paying for for years.
LORD DENHAM: My Lords, I think this is a matter of opinion, and somebody who has a set where it has cost 65p to provide the programme might well think it a bit unreasonable that somebody for whom it cost £8 to provide the programme should pay exactly the same. There are different ways of looking at these matters, according to the place at which people happen to be viewing.
VISCOUNT THURSO: My Lords, surely at the moment, according to the figures which the noble Lord has already given us, it costs only 65p to bring the programme to us in Thurso. Is that not so?
LORD DENHAM: My Lords, I am sorry to say that I am not quite certain whether the noble Viscount can get B.B.C.2 in Thurso now. The figure of 65p is the cost of getting B.B.C.2 to the areas at present served by it.
VISCOUNT THURSO: My Lords, we cannot get it, but we do not cost any more on the other programmes on B.B.C.1.
LORD DENHAM: My Lords, I think it is very difficult to work out exactly what the cost of getting B.B.C.1 to this particular place would be. In many cases where it has not yet been possible to provide the B.B.C.2 service, the cost of getting the B.B.C.1 service there is often as much as getting both services to somewhere else. I am afraid I cannot give the noble Viscount any further information than that.
I turn now to the administrative difficulties—this is the second argument which I am afraid my noble friend has heard, but the argument is here and I am afraid I must repeat it—and to the practicalities of introducing a two-tier licensing system. My noble friend asked whether the Government consider that "administrative difficulties" is the fundamental reason for no differential in licence fees. I would not say that it was the fundamental reason, but it is certainly one of the main reasons. Even without the arguments of principle which I have just been expanding, the "administrative difficulties" would be sufficient objection to the proposal. The present legal framework of licensing is that a viewer must have a licence to install or use a television set. How many services he gets, what may be the quality of reception, whether he likes the programmes, is his problem; it does not make any difference to his need for a standard licence or the price he has to pay for it. The fee is paid in return for the Minister's permission to install or use the set. He does not need a licence if the set does not work, but if the set is operated, whatever its performance he must have a licence.
LORD BURTON: My Lords, if the set would not work and they did not have this complicated apparatus for piped television, would the Minister agree that they should not have to pay for a licence?
LORD DENHAM: My Lords, if the complicated apparatus works and they receive television, they will have to pay for the licence. If the complicated apparatus does not work, they will not have to pay for the licence, but they will have lost the cost of the complicated apparatus.
THE EARL OF KINNOULL: My Lords, the licence fees, amounting to something

757
like £96 million a year, go largely towards the production of services which we receive. Is it not reasonable for those who pay for the licence to expect a service, and not the simple, narrow legal argument to which my noble friend has just referred?
LORD DENHAM: My Lords, the simple, legal, narrow argument is, I am afraid, the law as it stands to-day; and whether or not this law is right is the question that I am trying to decide in your Lordships' minds. The quality of reception can vary over very short distances by very slight amounts. No neat line can be drawn between the viewer who receives B.B.C.2 satisfactorily, the viewer who has an unsatisfactory but just acceptable service of B.B.C.2, and the man whose B.B.C.2 service is virtually non-existent. To makes things even more difficult, the quality of reception can, and often does, change with the time of year, and even with the time of day. Also, had reception is not always a result of the strength of the transmissions of the broadcasting service. The viewer's receiver can be at fault. Often it can be a mixture of both causes.
It is not a simple question such as what kind of television set a viewer has—whether it is a black and white set or a colour set. That is a readily ascertainable question of fact; there can be no argument about it. But it would be a matter of judgment whether B.B.C.2 was received well enough in a particular household to require a full rate licence. The task of running a system in which an individual judgment had to be made to apply to a considerable number of cases would be insuperable. The cost of running this system could well absorb all the licence revenue, even if staff could be found to do it.
I ask your Lordships not to forget that there are nearly 16 million television licences. That gives the measure of the scale of the problem of trying to make such a system work. There is a further practical point. Because future extensions of coverage of B.B.C.2 will occur on frequent occasions but affecting only very small numbers of people, the areas in which a licence concession of the type suggested would be applicable would constantly be eroded and the boundaries of satisfactory reception—given good receiving equipment—would constantly be
758
shifting. It would be necessary to keep the position of individual licensees constantly under review, in order to ensure that they took out full-rate licences as soon as they were able to receive B.B.C.2. This would be prohibitively expensive to administer, even if any practical test could be established for deciding who now had to pay.
The noble Earl, Lord Cromartie, asked me whether people who sold or repaired television sets could ask to see a licence. There is a rule of this type in an Act which was passed not very long ago and which states that anybody who sells a television set to a customer must inform the Post Office of that fact. That provision has been of great help in tracing licence evaders.
The noble Lord, Lord Ferrier, and my noble friend Lord Kinnoull asked why no Scottish representative has been appointed to the B.B.C.'s Board of Governors since Lady Baird's resignation in November. Her Majesty's Government regret the delay in filling this appointment. It is a particularly important one, since the National Governor for Scotland is charged with presiding over the Broadcasting Council for Scotland, as well as with representing Scotland on the United Kingdom Board of Governors. I hope that an announcement will be possible very shortly. I cannot at the moment say more than that.
I was asked whether one should have a licence when the set is out of repair, and I think I dealt with that point in the course of my speech. No licence is needed for a set that does not work at all. One of my noble friends asked me on whom lay the burden of proof for ascertaining whether or not a licence was needed. The answer is that the burden of proof lies on the side of the prosecution. My noble friend Lord Burton, who I am sorry to see is not now here, put what seemed to be a particularly hard case of the relay service, where B.B.C.1 television was not obtainable in the normal course of events. The hardest part of the case seemed to be the fee which the relay service was charged by the Post Office, under its telecommunications monopoly. This is a matter for the Post Office and not for Her Majesty's Government, but I can assure my noble friend that what he has

759
said will be drawn to the attention of the Post Office.
To conclude, I will sum up some of the points that I have made. The licence fee in the United Kingdom is one of the lowest in Europe, yet viewers in the United Kingdom get better value for their money than most other licence holders in Europe. The licence fee system is a rough-and-ready way of doing justice. People who can be served quite cheaply contribute towards the high costs in places that are most difficult to serve. People who have to wait for service are themselves contributing towards extending the service into the more remote areas. The present licence fee system is fairly easy to operate, because its requirements are universal. If they were particularised to each licence, there would still be cases which disappointed many licensees, and all at a much higher cost.
BARONESS LLEWELYN-DAVIES OF HASTOE: My Lords, before the noble Lord sits down, may I say that, as he himself said, we on this side do not expect the present Administration to think up better arguments than the previous ones. But we should like to congratulate him on the gallant and single-handed fight which he has put up, especially as he has had to turn his back on a lot of wild and angry Highlanders.
LORD FERRIER: My Lords, before the noble Lord sits down, may I say, on
760
the question of a vacancy, that it is very satisfactory that the Government regret the delay. I would draw the attention of your Lordships to Section 6(4) of the Charter—
VISCOUNT GOSCHEN: My Lords, when the noble Lord, Lord Ferrier, asks permission to speak before the noble Lord sits down, he must ask him a question, and he is not really entitled to make another speech.
LORD DENHAM: My Lords, if I may continue my speech, I am most grateful to the noble Baroness, Lady Llewelyn-Davies of Hastoe, for coming to my rescue, even from Wales, against the cohorts from Scotland.

CONSUMER PROTECTION BILL
Returned from the Commons agreed to, with an Amendment; the said Amendment to be printed.
IPSWICH DOCK BILL [H.L.] TEESSIDE CORPORATION (GENERAL POWERS) BILL [H.L.]
Returned from the Commons agreed to, with Amendments; the said Amendments considered and agreed to.