Lords Sitting of 8 February 1973

Preamble
The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Lincoln.

IMMIGRANTS' HUSBANDS: ADMISSION RULES
LORD BROCKWAY: 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 now permit male applicants to enter this country to join their wives on the same basis as women applicants are allowed to enter to join their husbands.
BARONESS YOUNG: My Lords, the rules governing the admission of husbands to join wives who are settled in this country are set out in the Statements of Immigration Rules for Control on Entry which were laid before Parliament on 25th January: HC 79 for Commonwealth citizens and HC 81 for European Economic Community and other non-Commonwealth nationals.
LORD BROCKWAY: My Lords, how can the noble Baroness, with her own distinguished record, justify in principle the treatment of wives as the property of their husbands who are to be their bread-winner—which is the principle behind this present legislation?
BARONESS YOUNG: My Lords, the position of husbands who wish to join their wives in this country is that if they have a grandparent born here they are entitled to do so. The Home Secretary has discretition to allow in husbands who wish to join their wives where there are special circumstances; but the general rule governing this matter was laid down in 1969, and it is that it is recognised that generally wives would live where their husbands live, and not the reverse.
LORD WADE: My Lords, on this point of special circumstances, where a
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man and wife have been married for a number of years and have a family and where the wife is here with the family and the husband wishes to join the wife and the family—the husband not being allowed at present Ito come into this country—should not that constitute a special circumstance which would justify favourable consideration of an application to join the family?
BARONESS YOUNG: My Lords, if the noble Lord, Lord Wade, has a particular case in mind he should make representations on that point; but the kind of special circumstances that the Home Secretary would consider are compassionate ones.
LORD BROCKWAY: My Lords, quite apart from the 19th century principle, is it not the case now that there are 300 husbands who are unable to join their wives in this country and that the wives have to bear the breadwinner's task of keeping the family together; while, if it were the other way about—the husband in this country—the wives would be allowed to join them? Can she possibly justify that?
BARONESS YOUNG: My Lords, if the noble Lord, Lord Brockway, is referring to the husbands who do not hold British passports of Uganda-Asian wives who do hold them and who are in this country, I should like to say that my right honourable friend the Home Secretary has had conversations with the United Nations High Commissioner for Refugees and is doing all he can to bring about the reunifying of these families.
LORD GARDINER: My Lords, is not this discrimination between the sexes simply a survival of the days when the wife was regarded as the property of the husband? Secondly, if a Jamaican nurse comes to work here and has a disabled husband, ought she not to have the legal right to have her husband with her and not be dependent upon the good will of the Home Secretary?
BARONESS YOUNG: My Lords, I should have thought that the answer to the second point of the noble and learned Lord, Lord Gardiner, is that this is the kind of case that the Home Secretary would wish to look at. I can only repeat what I said earlier: that the general

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principle governing this matter was laid down in 1969 because, as I understand it, the rules were subject to some abuse.
BARONESS SUMMERSKILL: My Lords, I wonder whether the noble Baroness will enlighten me. When she says that the rules were subject to some abuse, does she mean that there were certain men who contrived marriage in order to get into this country and who, after they had been here for a very short time, then sought to dissolve the marriage? Is that what the rule stems from?
BARONESS YOUNG: My Lords, my understanding is that there seemed to be a number of immigrants who contracted marriages and who thereby found a way of coming into this country by joining their wives. The number seemed to be increasing steadily and therefore the rules were introduced in 1969 to meet the circumstances.
BARONESS LLEWELYN-DAVIES OF HASTOE: My Lords, when the noble Baroness referred to the conversations that Her Majesty's Government are having with the United Nations Commissioner for Refugees, were the Government discussing reuniting these families of British-passport-holder wives in this country or in other countries?
BARONESS YOUNG: My Lords, I think I said that the Home Secretary was having conversations with the United Nations Commissioner. I should not want that to be misunderstood. He is discussing the whole question of reunifying these families. The United Nations Commissioner is also discussing this matter with other countries.

DANGEROUS LIQUIDS: MOVEMENT BY ROAD
3.13 p.m.
LORD DE CLIFFORD: 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, in view of the increasing number of movements of bulk loads of highly dangerous liquids, such as acids, by road, they will issue regulations to ensure that the police are notified of the details of the load and the route and timing of the journey, so that, in the event of an accident or leakage, appropriate neutralising and rescue equipment is readily available.
BARONESS YOUNG: My Lords, the volume of this traffic is so great that a comprehensive system of movement monitoring would not be practicable. The emergency services have, however, been advised how to deal with spillages of inflammable liquids and corrosive substances, and will have been able to establish where stocks of suitable neutralising agents can be obtained. Rescue equipment is kept by fire brigades.
LORD DE CLIFFORD: My Lords, I thank the noble Baroness for her reply. I am considerably alarmed at this because there have been numbers of cases of very dangerous and serious accidents. I feel that some form of control—
THE LORD PRIVY SEAL (EARL JELLICOE): My Lords, I do not dissent in any way from what my noble friend is saying, but I think that it would be more in order if he couched it in the interrogative form.
LORD DE CLIFFORD: I beg your Lordships' pardon. Would the noble Baroness consider, as an interim measure while looking further into this matter, whether these vehicles should be distinguished in some way when travelling on the road because at the moment, as I am sure she will agree, they are causing great danger to a large number of people?
BARONESS YOUNG: My Lords, the Home Secretary's Standing Advisory Committee on Dangerous Substances is considering additional controls and these

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could extend to movement monitoring. But among the proposals for next year will be included controls on the construction and operation of vehicles. I will certainly draw the suggestion made by the noble Lord to the notice of the Home Secretary.
LORD CHAMPION: My Lords, may I ask the noble Baroness whether she is aware that the P. and 0. Group, which is an extensive road service, has switched 500,000 gallons of this dangerous liquid from road transport to rail transport? Will she not do something to encourage this practice, particularly as special vehicles are now available?
BARONESS YOUNG: My Lords, I will certainly take note of that point, although I think I am right in saying that in fact matters of transport come under the Department of the Environment.
LORD DERWENT: My Lords, to return to the Question on the Order Paper, would it really be so difficult for the police to be informed when such a vehicle starts on a journey? Obviously, it would not be possible to have police all the way along the route, but it is possible to use a telephone. Would it really matter if the police were instructed to telephone to the next area through which the vehicle would be travelling?
BARONESS YOUNG: My Lords, as I said earlier, I understand that there are now so many movements of these dangerous liquids that it is not thought practicable for the police to be informed about every one of them. The Home Secretary's Standing Advisory Committee is considering whether it can monitor those which are especially dangerous.
LORD NUGENT OF GUILDFORD: My Lords, is my noble friend aware that there is a specific danger that when an accident occurs involving one of these vehicles the liquid may find its way into a river which provides a water supply? Is she aware that there is a need for urgent action and that if the volume of these vehicles is so great that it is impossible to monitor them, and therefore direct that they travel on routes which would be reasonably safe, it is vital that the structure of the vehicles carrying especially corrosive chemicals should be such as to give a far greater safeguard than is the case to-day?
BARONESS YOUNG: Yes, my Lords, we are aware of the urgency and importance of this subject, and I will take note of what the noble Lord has said.
THE EARL OF LAUDERDALE: My Lords, is the noble Baroness able to tell us whether the Committee to which she has referred will also study the question of other toxic liquids as well as those which are inflammable or corrosive, which may not only find their way into rivers but also into water underground and be a contaminant for many years to come?
BARONESS YOUNG: My Lords, it is proposed to introduce controls during 1973 over organic peroxide and other materials. I hope that this information will go some way to meeting the point raised by the noble Earl.
LORD KENNET: My Lords, is it possible for a driver to be sent off on a journey not knowing what is in his tank, so that if there is an accident he cannot tell the police what the tank contains so that they may wipe it up in the right way? Or is there now a regulation, having the force of law, that every driver must be told what he is carrying?
BARONESS YOUNG: My Lords, the Chemical Industries Association has produced a scheme consisting of a set of printed cards called "Tremcards" which give the particular substances and the kind of information that the driver would be required to know should there be an accident. Among the regulations will be one requiring that a copy of these instructions be carried on every vehicle.
LORD POPPLEWELL: My Lords, would the noble Baroness draw the attention of the Minister to the fact that many of these vehicles may contain anything up to twenty or thirty tons of a highly dangerous liquid? Will she inform the Minister that the railways have long experience of dealing with these substances, and will she impress upon her right honourable friend that there is considerable volume of opinion in the country which thinks that such liquid should be carried by rail and that it is a waste of the time of firemen and policemen to have to supervise road vehicles carrying these substances?
BARONESS YOUNG: My Lords, we are very well aware that extremely dangerous

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substances are carried. I will pass on to my right honourable friend what the noble Lord, Lord Popplewell, has said.
LORD SEGAL: My Lords, can the noble Baroness say whether there are any special regulations covering the servicing of these vehicles, and also whether there are any restrictions upon the speed at which they may travel?
BARONESS YOUNG: My Lords, I do not have that information before me, but I will write to the noble Lord, Lord Segal, on the matter.
LORD SOMERS: My Lords, would the noble Baroness make clear one thing which I am not yet clear about? Now that we are part of the European Community, have we the right to forbid lorries over a certain size to come into our country?
BARONESS YOUNG: My Lords, I think that is rather wide of the Question.

E.E.C. DIRECTIVES AND UNITED KINGDOM
3.20 p.m.
LORD BESWICK: 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 directives have been adopted by the European Economic Community Council of Ministers in the last seven weeks on low voltage electrical equipment; agricultural and forestry tractors; dangerous preparations; cables, chains and hooks; non-automatic weighing instruments; length measurements; analysis of textile fibre ternary mixtures; and the biodegradibility of detergents; and what views have been expressed and what action is to be taken by the United Kingdom Government on these Directives.
THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN): My Lords, may I apologise for the length of this Answer, but it is intended to be helpful. All the topics mentioned by the noble Lord are covered by twelve directives. These were approved by the Council of Ministers at their meeting in Brussels on
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December 19, 1972. As the list is rather long, I will, with permission, arrange for it to be published in the OFFICIAL REPORT. Her Majesty's Government were consulted while these directives were still in draft and concurred in them. In some of them amendments were made to meet us. When the Directives have been fully implemented they will remove technical barriers over a wide area of trade within the Community.
These twelve directives will be formally adopted as soon as they have been translated into all the official languages of the Community, and will then be published in the Official Journal. Copies will be placed in the Library. For the most part, these Directives will come into force 18 months after their date of publication—that is to say, in the second half of 1974. However, in some cases it has been agreed that the date of application in the United Kingdom will be delayed for further periods. Directives of this type do not apply directly within the countries of the Community, but are addressed to the member States, who are responsible for taking such action as may be required to implement them within their territories. The Government are still studying what action, if any, will need to be taken to implement each of them.
In most cases the directives merely oblige the member States not to put obstacles in the way of the sale of goods which conform to the specifications laid down. Such legislative action as is needed can probably be taken by subordinate legislation within the ambit of existing law. To meet some of the requirements administrative action by the Government will suffice. An important example will be to nominate British testing and certifying organisations. Where British made products covered by the directives are certified to conform with the requirements laid down, they will have to be accepted by the other member States of the Community without further testing.
Following is the List referred to in Lord Drumalbyn's Answer:
LIST OF DIRECTIVES APPROVED BY THE COUNCIL OF MINISTERS UNDER ARTICLE 100 OF THE TREATY OF ROME ON DECEMBLR 19, 1972

1. Electrical equipment designed for use within certain voltage limits.

2. Non-automatic weighing machines.

3. Measures of length.

4. Analasis of ternary textile mixtures.

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5. Classification, packaging and labelling of dangerous substances.

6. Classification, packaging and labelling of dangerous preparations (solvents).

7. Certification and marking of wire ropes, chains and hooks.

8. Agricultural tractors—type approval.

9. Agricultural tractors—maximum design speed and load platforms.

10. Agricultural tractors—certain elements and characteristics.

11. Detergents.

12. Biodegradability of anionic surface-active agents.

The above directives come into force 18 months after they are formally adopted except that for the following items the period is extended for the United Kingdom as follows:
Item 2, 5 years.
Items 5 and 6, 3 years.
LORD BESWICK: My Lords, I am genuinely grateful to the noble Lord for that information, but is he aware that I was not concerned so much with the merits of the individual directives as with the mechanics involved here? I feel it is important that we should know what is happening. Do I understand the noble Lord aright when he says that there have not been as yet any conversations or discussions with the trading interests involved and that there will be no opportunity for amending the directives, now that they have been adopted by the Council of Ministers? Is there any mechanism at all within the United Kingdom Parliament for considering these directives before they are adopted by the Council?
LORD DRUMALBYN: My Lords, I am grateful to the noble Lord for what he has said. With regard to the discussion with the trade interests concerned, these interests were fully consulted and were glad to have these directives. As to amendment now, I do not think the noble Lord quite understood what I said in my Answer. These proposals were amended before they were approved, and in some cases the amendments were made to meet points that we had raised. They cannot be amended now, except in the sense that they have to be adjusted as between the different official languages so that they mean exactly the same in all the languages. So far as consideration in this House is concerned, now that they have reached the stage of approval, the next thing is for them to be formally adopted by the Council. When that has been done it will be possible to consider them in this House. The noble Lord will be aware of course that the Select Committee
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was only set up on December 20, which was the day after these directives were approved, and therefore there was no possibility of using whatever procedures the Select Committee may recommend in order to deal with these particular directives.
LORD BURNTWOOD: My Lords, may I ask the noble Lord whether he is aware that many of us appreciate very much the co-operation and kindness that we received from our delegation to the Community prior to our accession. May I also ask the noble Lord, in the matter of mechanics, since the subjects which are embodied in this Question and which will be in other directives which may follow are always preceded by draft directives, whether he is satisfied that adequate publicity is given to submissions which may be made by our own representatives before those draft directives are transmitted from the Commission to the Council of Ministers?
LORD DRUMALBYN: My Lords, I think we have to divide this particular case from future cases. As I have said, in this particular case the relevant interests were consulted—and I am grateful to the noble Lord for the tribute which he has paid to our representatives in Brussels. In so far as was possible, amendments were made to the proposals to meet the very points that were put up by the business interests. As I have said, when the whole process is complete these directives will be published in the Official Journal, and copies will be in the Library. For the future, we shall know of any proposals and the manner of their publication to Parliament is exactly what the Select Committee is considering.
THE EARL OF LAUDERDALE: My Lords, can the noble Lord say, following that statement, whether these directives are not yet available in the Official Journal, at any rate in English, to this Parliament?
LORD DRUMALBYN: My Lords, that is the position. I believe that they were originally agreed in French and that they have subsequently to be translated into the several official languages. The noble Lord, Lord Shepherd, shakes his head, but he will remember that there were at this time special circumstances in the European Community which made the

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handling of these directives rather difficult from the staff point of view.
LORD BESWICK: My Lords, clearly we shall have to read rather more carefully what the noble Lord has said. But is he aware that he appears to be departing a little from Article 100 of the Treaty of Rome when he says that amendments can be made to these directives before they are approved? Is it not a fact that they have already been adopted by the Council of Ministers; that if there are amendments, they were made entirely within the ambit of the Commission itself, and that by the time they get to any Parliamentary processes, if at all, it will not be possible to amend them.
LORD DRUMALBYN: My Lords, I am trying to make clear a special position as opposed to the general position. The special position in this case was that the discussion took place and the drafting was done in one language only. It has to be seen whether what was done in that language represented a real agreement by all the parties concerned. It may be that some minor language adjustments will be needed to represent the consensus that was arrived at.
LORD WIGG: My Lords, would the noble Lord not agree that, leaving aside the question whether the language in which they were drafted was English or Esperanto, the fundamental principle of the corporate State has been adhered to; that is to say, the special interests have been consulted and they have been given an opportunity to amend, but the general public will not be consulted: they can take it or leave it, and nobody can do anything about it?
LORD DRUMALBYN: My Lords, again I must say to the noble Lord, with respect, that this was a situation which arose before we actually joined the E.E.C. Now that we have joined the E.E.C. we have to see how the proposals can receive publicity and the public can know about them before they are adopted by the Council of Ministers.
LORD SHINWELL: My Lords, can the noble Lord say, if these Directives are formally adopted by the Commission and referred to the United Kingdom Government, and the United Kingdom Government for some reason—probably a valid
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reason—refuse to implement them, what kind of penalties are likely to be imposed? Will there be fines, or is there danger of Ministers being sent to prison? Can we be enlightened on this matter?
LORD DRUMALBYN: My Lords, Article 189 of the Treaty says that directives are binding as to the result to be achieved upon each Member State to which they are directed, but that they shall leave to the national authorities the choice of form or methods of implementation. But each of the national authorities is obliged of course to carry out its obligations, and there is no reason to suppose that this country will not do so.
LORD SHINWELL: My Lords, in view of the answer he has given to me, might I ask the noble Lord whether he recalls the assurances so frequently furnished to your Lordships' House by his noble Leader when we were debating these matters, that Parliament would—I use the language used by the noble Earl—retain control over matters of this sort? How does the noble Lord, Lord Drumalbyn, reconcile what he has just said with the statement made by his noble friend?
LORD DRUMALBYN: My Lords, the Government do retain control, and the duty of the Government, when notified of these Directives, is where necessary to transform them into suitable legislation for this country.
BARONESS ELLES: My Lords, may I say that those Parties who send delegates to the European Parliament can always submit Amendments to draft proposals at any time until the Directives are passed by the Council of Ministers?
LORD DRUMALBYN: My Lords, I am grateful to my noble friend for that intervention but, with great respect. I was really being asked about the mechanics, and I did not really like to term this subject "mechanics".
LORD BESWICK: My Lords, the noble Lord refers to Article 189 relating to the form and methods by which Amendments may be enforced. Are Her Majesty's Government going to make a Statement as to the forms and methods to be used here in order to enforce directives?
LORD DRUMALBYN: My Lords, I think that when the noble Lord has had time to study the Answer I have given he will see that that matter is included in the Answer. The Government will have to study these matters as soon as they are notified after formal adoption by the Council.
EARL JELLICOE: My Lords, I apologise to the noble Lord, Lord Beswick, I think the House recognises that he and I have rather different views on our entry into the European Community; but I hope that the noble Lord, Lord Beswick, and the House as a whole, will agree that from the point of view of our Parliamentary procedures we have probably had sufficient debate on this important topic, more especially since a Select Committee, under the chairmanship of the noble Lord, Lord Maybray-King, is looking into this particular area. I would therefore suggest to your Lordships that we should now move on, at 3.32½ p.m. to our next Question.

CRIMINAL LAW REVISION MEMORANDA
3.33 p.m.
LORD GARDINER: 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 propose to publish the Memoranda they have received from informed opinion on the Eleventh Report of the Criminal Law Revision Committee before it is debated in Parliament.
BARONESS YOUNG: No, my Lords. A number of memoranda on the Report have been published by the bodies responsible for them. It is open to others to publish their memoranda if they wish.
LORD GARDINER: My Lords, while thanking the noble Baroness for that Answer, may I ask whether she recollects that the last time this question arose, namely, when there were memoranda from informed opinion sent to the Home Office on the question whether the magistrates' courts organisations should come under central control, the Home Office kindly supplied me with copies of the
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memoranda? If that was done on that occasion, may I ask why it has not been done on this occasion, not only for me but for all noble Lords who have put down their names to take part in the debate on Wednesday, so that the debate may be a properly informed one?
BARONESS YOUNG: My Lords, I of course recall the point made by the noble and learned Lord, Lord Gardiner; but I am sure he will understand that I personally am not in a position to give him that kind of assurance on this particular question. I will certain refer it to my noble friend Lord Colville of Culross.
LORD GARDINER: My Lords, may I ask the noble Baroness whether at least she will be good enough to tell us who the organisations are who have sent in memoranda so that, if that is what we must do, we can all write to them individually for copies?
BARONESS YOUNG: My Lords, my understanding is that it is not usual practice at this stage to publish a list of organisations that have submitted memoranda on a Report to the Government in this way, but a number of organisations have published their memoranda. Others would probably feel they were not in a form to be published, and yet others might not wish them to be published.
LORD HALE: My Lords, is the noble Baroness aware that we are told in The Times that the Bar Council have published a very critical series of observations about these important matters which are fundamental to the issue of British justice? The Bar Council report, according to The Times, can be bought for £1; and I should be quite happy to pay £1 for it if I am told where and how I can get it. But between now and next Wednesday there is not much time to secure a copy and read it. Surely, on an issue of this kind, a report of the Bar Council is of quite exceptional importance. It would not be a difficult matter to make one or two of the criticisms available in the Library. Would the noble Baroness consider doing that?
BARONESS YOUNG: My Lords, I will certainly take note of what the noble Lord, Lord Hale, has said; but of course it is always open to any member of the public to buy a copy of publications by the Bar Council.
LORD SHACKLETON: My Lords, would the noble Baroness, and perhaps even the noble Earl the Leader of the House, agree that it would not be impossible for the Library, if requested by my noble friend, to acquire copies of this particular report? I actually had a copy, but unfortunately have already given it away to somebody else.
BARONESS YOUNG: My Lords, may I say to the noble Lord, Lord Shackleton, that I will see whether what he has suggested can be done.
LORD GARDINER: My Lords, is the noble Baroness aware that on the last occasion I was sent copies by the Home Office, on condition that I would not quote from them without the societies' consent, and that I then had to write to 16 organisations, all of whom of course said they had no objection at all? Is this a sensible way of keeping Members of this House properly informed on an important subject?
LORD CONESFORD: My Lords, would there be anything to stop the Bar Council from making available in the Printed Paper Office a reasonable number of copies? The Printed Paper Office may perhaps afford facilities for the Bar Council to do this.
BARONESS YOUNG: My Lords, I should have thought this would be possible if the Bar Council does make this report available.
LORD HALE: My Lords, may I ask whether the noble Baroness is aware that one cannot buy the other reports unless one knows by whom they were issued? We have not available to us the evidence which is before the Revision Committee, and we just do not know how or where to get these reports.
EARL JELLICOE: My Lords, I was half-invited by the noble Lord, the Leader of the Opposition, to come into what now is rather turning into a debate. I must confess that I do not know all the ins and outs of this particular subject, but I have been impressed by the feelings expressed in your Lordships' House in supplementaries to the Question put by the noble and learned Lord, Lord Gardiner, and, if I may, I should like on behalf of the Government to undertake to have a further close look at the situation and see
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what can be done. I hope that noble Lords will agree that that is as far as my noble friend and I can be expected to go at this moment.
LORD LEATHERLAND: My Lords, when the noble Earl discusses this matter with his right honourable friend the Home Secretary, will he remind him about the promises of open Government that were made at the last Election?
EARL JELLICOE: My Lords, I think that was really a rather pointless supplementary question, if I may say so.

NORTHERN IRELAND: BELFAST STRIKE VIOLENCE
3.39 p.m.
LORD SHACKLETON: My Lords, I beg leave to ask the Question of which I have given Her Majesty's Government Private Notice. The Question is as follows:
To ask Her Majesty's Government whether they will make a Statement on the strike in Northern Ireland yesterday and the consequent security situation.
EARL JELLICOE: My Lords, I should like, in response to the noble Lord's Question, to repeat a Statement which my right honourable friend the Secretary of State for Northern Ireland is making now in reply to a Private Notice Question in another place. The reply is as follows:
"A one-day strike was called in Northern Ireland yesterday by various Protestant organisations. This particularly affected Belfast, where most of industry closed down, bus services were stopped, and electricity supplies were severely cut. There was widespread intimidation.
"In the course of the day there was a number of serious shooting incidents and riots. Some of these were inter-sectarian; in others the security forces came under fire from Catholic and Protestant gunmen. There were five deaths. Three were gunmen shot by the security forces, the fourth was a fireman on duty shot by a gunman, and the body was found of a civilian who had previously been abducted. Several civilians were injured and two

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soldiers were wounded, one of them very seriously.
"In East Belfast, some of the rioting was extremely violent. A mob of 1,200 wrecked a Catholic church and the priest's house. They were dispersed with baton rounds. Barricades were erected in a number of Protestant areas in Belfast by the U.D.A. and Tartan Gangs.
"In Belfast and elsewhere, the security forces arrested and are charging 68 people—18 for riotous behaviour, 31 for disorderly conduct, 10 for burglary, 5 with possession of explosives and weapons, and 4 for taking and driving away cars. I should like to pay tribute to the brave and strenuous efforts made yesterday by all members of the security forces to control the violence.
"By this morning, the situation had improved. Electricity supplies have been restored, and normal working has been resumed. All barricades have been removed.
"The responsibility for yesterday's catalogue of violence rests squarely on those who called the strike and should have appreciated the risks involved."
My Lords, that terminates the reply from my right honourable friend.
LORD SHACKLETON: My Lords we are grateful to the noble Earl for repeating a Statement, which can give none of us any satisfaction. We all once again regret the deaths, especially the death of a fireman. We shall be debating the Fire Services (Northern Ireland) Order in due course, and I think it is right to pay tribute, among the many tributes that have been paid, to the fire services who had to operate under the most extreme conditions—more extreme than is normal anywhere else.
I notice with some interest and regret the fact that the noble Earl specifically pinned the responsibility on the U.D.A., among the others. This presumably includes the I.R.A. on the Nationalist side. The extent to which the U.D.A. seem to be following along with the U.V.F. is very alarming—it is rather important to get these letters right, since I was wrongly reported on this. What was at one time a peaceful body is rapidly becoming less peaceful and may invite, as it has in fact
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done, action by the Secretary of State (and this partly triggered off the riots) to detain sonic of those who are now leading Ireland further and further over the brink—it is difficult to talk about being at the brink, because they are very nearly over the brink. There is something to be said for this in regard to the publication of these events. The Irish Congress of Trade Unions has consistently opposed all strikes for political ends, and it is unfortunate that the media continue always to feature the more sensational extremist point of view. I hesitate to say that they actually organise the events, but certainly they have contributed to the picture. It is very unfortunate that the moderate voices, because they are less newsworthy, do not receive the publicity that someone like Mr. Tommy Herron gets on this.
The noble Earl mentioned that one particular mob who wrecked the Catholic church were dispersed with baton rounds. I am not clear what that means. None the less, it appears that the security forces did not arrive until a little late. I make no criticism at all of them. The military leadership are responsible even more than the Secretary of State for properly maintaining a cautious posture—not seeking to be provocative in areas where an occasional military presence may trigger action. It may well he that a less low posture may be necessary in the future in the way events have gone.
Finally, as we come up to the Border poll—and I will not repeat the criticisms that one has made in the past on this matter: so far as we know there is still going to be a Border poll—I am sure that the Secretary of State and the Government will see that all the forces necessary are available. It may be that rather soon we shall have to debate the Irish situation, which is getting to a point of such desperation that I believe neither the Government nor any of us at the moment knows what the answer is, and what the outcome is going to be.
EARL JELLICOE: My Lords, I should like to thank the noble Lord the Leader of the Opposition for the typically responsible attitude that he has taken in questioning us on this very serious Statement on this very serious situation. I should also like to endorse what he has said about the Irish Congress of Trade Unions. It is certainly my understanding

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of the position that we owe a great debt to the trade union movement in Northern Ireland, on both sides of the sectarian fence, for the moderation they have shown. It is the view of my right honourable friend, and certainly the view of Her Majesty's Government, that we must continue to afford all support we can for those in the centre who are standing for moderate views and working towards some form of way out, some form of reconciliation.
So far as the question of the Armed Forces is concerned, I note what the noble Lord has said. The Armed Forces in the future, as in the past, will continue quite impartially to confront and deal with violence, from whichever side it comes, and with whatever degree of counter-force the situation demands. I note also what the noble Lord has said about a debate on this subject. I shall be glad to follow up that suggestion through the usual channels.
LORD DERWENT: My Lords, while entirely agreeing with what has been said about the fire services, would my noble Leader care to say a word of approbation also about certain local authority workmen? I do not know whether he saw the television news the other night which referred to a bomb being placed in a petrol lorry. Before anybody could do anything (and presumably the tanker might have suddenly exploded) local authority workmen and lorry drivers brought in sand to spread all over the street. I am told that both in that instance and in demolition work the local authority workmen are repeatedly carrying out highly dangerous jobs.
EARL JELLICOE: My Lords, I gladly endorse what my noble friend has said, and the commendation he has paid, and likewise the commendation which the noble Lord the Leader of the Opposition paid to the fire services. In so far as we feel horror and revulsion at these acts of violence in Northern Ireland, at the same time our admiration for the acts of courage one sees performed is equally great.

DIVISIONS: NOTIFICATION TO PEERS IN COMMITTEE
3.50 p.m.
EARL ST. ALDWYN: My Lords, I understand that on Tuesday afternoon, while the European Instruments Committee was hearing evidence in Committee Room 2 upstairs, a Division was called in the House. This was not communicated to the Committee, with the results that a number of members of the Committee, who would have voted, missed the Division. I share the concern which has been expressed to me that all Peers should be given an opportunity of voting if they so wish. I therefore investigated the causes of this failure, and I am sorry to find that on this occasion the standard arrangements for communicating a Division to Members of the Committee failed in two respects. First, the bell in that particular Committee Room was not turned on as it should have been; secondly, the normal chain of oral communications from the corridor outside the Committee Room to the Chairman of the Committee failed to operate.
Yesterday I reviewed the existing arrangements, in consultation with Black Rod and the Clerk of the Parliaments, and I think it would be helpful if I spelt them out so that in future everyone concerned knows what the proper course of action is when a Division Bell is sounded. When a Committee of the House is sitting upstairs, in addition to the Bell, which will normally ring in the room itself, the right procedure is for the custodian or the policeman on duty outside the Committee Room to inform the Doorkeeper on duty inside the Committee Room, who will then inform the Clerk, who shall tell the Chairman of the Committee that a Division is taking place in the House. When a Peer who is holding a private meeting in one of the Committee Rooms upstairs wishes to be told that a Division is taking place in the House, he should inform the Principal Doorkeeper, who will make the appropriate arrangements.
I am satisfied that if the arrangements which I have just explained are properly operated they are adequate to secure what I am sure we all desire; namely, that every Peer in the building is aware

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a Division is being called and has a chance to vote if he so desires. When the closed-circuit television sets are installed there will be a third channel of communication, in addition to the voices of the police and the custodians, and the Division Bells which are rung at all strategic points.
LORD BESWICK: My Lords, we are grateful to the noble Earl for making clear what happened on an occasion when the Government defeat apparently might well have been greater than in fact it was. So far as future arrangements are concerned, I am sure we appreciate, with the noble Earl, that difficulties can arise. I am just a little concerned about the length of the chain of communication. It would seem that if there is a weak link in it the arrangement may break down again, and we shall have to watch it very carefully. But I have no doubt that we can leave this matter with the noble Earl himself.
LORD SHACKLETON: My Lords, before the noble Earl replies, if he is going to, may I ask whether it would not be possible for the policeman to open the door and shout, "Division!", which is a well-established practice in another place, rather than rely on this surreptitious passing of notes? May I say that recognise that fortunately there was not a disaster, thanks to the loyalty of my own Party and the independent and courageous-mindedness of many noble Lords opposite.
EARL ST. ALDWYN: My Lords, both the noble Lord, Lord Beswick, and the noble Lord the Leader of the Opposition are rather more able, apparently, to forecast how noble Lords will vote than I am. In all the years I have been Chief Whip I have never pretended that I could ever forecast exactly how noble Lords would vote. I appreciate the procedure I outline is rather complicated, but there have in the past been complaints that Committee proceedings were being interrupted by policemen and custodians putting their head round the door and shouting, "Division!"; and as a result this rather more cumbersome but quieter procedure was adopted. I hope that in future it will work and that once we get the closed-circuit television we shall have solved these problems satisfactorily.
LORD FERRIER: My Lords, can the noble Earl say when the closed-circuit television system is likely to be available?
EARL ST. ALDWYN: My Lords, I cannot say exactly, but I hope it will be in the early part of next Session.

DERBY FRIAR GATE CHAPEL BILL [H.L.]
Read 2ª, and referred to the Examiners.
FORWARD TRUST BILL [H.L.]
Read 2ª, and referred to the Examiners.

NATIONAL HEALTH SERVICE REORGANISATION BILL [H.L.]
THE MINISTER OF STATE, DEPARTMENT OF HEALTH AND SOCIAL SECURITY (LORD ABERDARE): My Lords, I beg to move the Motion which stands in my name on the Order Paper.
Moved, That on the Report stage of the National Health Service Reorganisation Bill the Amendments be considered in the following order, vizt,:

Clauses 1 to 6,

Schedule 1,

Clauses 7 to 15,

Schedule 2,

Clauses 16 to 39,

Schedule 3,

Clauses 40 to 56,

Schedules 4 and 5,

Clause 57.—(Lord Aberdare.)

On Question, Motion agreed to.

CONSOLIDATED FUND (No. 2) BILL
LORD ABERDARE: My Lords, on behalf of my noble friend Lord Jellicoe, I beg to move that this Bill be read a second time.
Moved, That the Bill be now read 2ª—(Lord Aberdare.)
On Question, Bill read 2ª: Committee negatived.

INSURANCE COMPANIES BILL [H.L.]
3.57 p.m.
THE PARLIAMENTARY UNDERSECRETARY OF STATE, DEPARTMENT OF TRADE AND INDUSTRY (THE EARL OF LIMERICK): My Lords, I beg to move that this Bill be now read a second time. I hope your Lordships will share my gratification that this Bill has been entrusted to your Lordships' House. It seems to me appropriate that it should be so, for there exists among our membership a very wide experience in many areas of the great insurance industry. We have the capacity to make a major contribution to the discussion of this important question, and I have no doubt that this is just what your Lordships will do.
The purpose of this Bill is to refine and supplement the Insurance Companies Acts 1958 to 1967. The 1958 Act was itself a consolidation of Acts passed between 1909 and 1946. It has fortunately been possible to spend a little more time on reviewing recent experience and developments in prospect before embarking on the preparation of this Bill than seems to have been the case with some of its predecessors. In particular there have been extensive consultations with insurers, with insurance brokers, with accountants, actuaries and lawyers and with consumer organisations, revealing a large measure of agreement with the conclusions we have reached. We intend to take further time to ensure that we get the consequential details right; wherever appropriate the Bill provides for these to be filled in by Statutory Instruments which will be drafted after further consultations. We shall not, however, be reaping the full benefit of the new provisions until the details have been filled in, and I shall see that we press on with this as soon as the Bill has been passed. I look forward at that stage to receiving the same co-operation and immensely helpful advice from the industry as we have been fortunate enough to receive in preparing the Bill.
Although accordingly the Bill does not go into the more esoteric detail, it is nevertheles of some complexity, and I shall not claim, in introducing it, to
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explain to your Lordships all the niceties of the changes which it would make in the two existing Acts. I shall try rather to bring out the general principles upon which it is founded. I hope that I may be given the time I shall need to do justice to this. Your Lordships may wonder why such complexity is necessary: what is so special about insurance business that it should need so much more surveillance than business of other kind. This is in fact an area in which we have had legislation providing a form of consumer protection for more than a century. I will put the reasons as briefly as possible. People and companies seek the protection of insurance against risks that could cripple them financially, possibly with serious repercussions upon their families and their employees. In the case of long-term insurances the object is rather different; it is to save, in order to provide for old age or for the needs of dependants. But in each case, when the policy holder puts down his money he has to put his trust in the integrity and competence of the insurer: if this trust is misplaced his own prudence in insuring is to no avail.
The form and extent of supervision designed to reduce the risk of insurance failures has changed through the years, but a modified form of the caveat emptor doctrine has been the guiding principle throughout. This has usually been referred to as "freedom with publicity", meaning that the insurer normally has more or less complete freedom to run his business as he thinks fit, but must make available certain prescribed information to help the policy holder take a view as to his likely ability to pay up if and when the occasion for indemnity arises.
We do not share the view which prevails in some other countries that it is necessary for the Government to regulate premium rates, policy conditions and the choice of investments. We are content, as a general rule, to leave these areas to the free play of competition with all its advantages to our industry, to the consumer and to the economic interest of the country. But there are circumstances in which the Government must be in a position to react quickly and appropriately in order to protect the interests of policy holders, interests which may extend many years into the future.

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I say "the Government" advisedly. We have carefully considered the arguments which have been advanced in various quarters for hiving off this responsibility to some specialised independent agency or to the industry itself. I do not believe that either House of Parliament would willingly see Ministers divest themselves of accountability for the protection of the public in this area. Yet, if they did not do so, no specialised agency could be truly independent and there would inevitably be duplication of effort. Provided that adequate resources are made available—and we have already advised our intentions in that respect—there is no reason to suppose that a Government Department is inherently less capable of effective supervision than some other form of organisation, and indeed the experience of the present supervisors in this highly specialised field is widely recognised. It is public knowledge that the British Insurance Association have, at the request of the Secretary of State, given great thought to the practicability of their undertaking a measure of supervision of their own members. They have concluded that this would be inconsistent with their status as a voluntary trade association and the Secretary of State felt bound to accept this view.
Until 1967 the Board of Trade's function was limited to prescribing the information to be made public and to securing the winding up of any company which could be shown to have become technically insolvent. That function was extended in an important way in 1967 when the Board of Trade were given powers in specified circumstances to require an insurance company to take various kinds of action with a view to averting a risk of insolvency. The present Bill is largely concerned with refining and complementing those powers of intervention in the light of subsequent experience in administering them. Clauses 11 to 16 and 20 do this by reformulating and extending the powers given by Sections 65, 68 and 80 of the 1967 Act. The somewhat artificial distinction between a newly authorised company and an established one is removed, and the Secretary of State may invoke whatever action may appear most appropriate in the circumstances of the particular company for protecting policy holders against
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the risk of insolvency. In the case of long-term insurance, where policy holders may reasonably expect substantially more than their contractual rights (as in the case of "with profit" policies), it is those reasonable expectations which are to be the criterion.
These powers give a wide discretion to the Secretary of State to react speedily and flexibly to a threat of insolvency while there is still a hope of averting it by appropriate corrective action. In other words, to maintain the company in a state to continue to meet the present and future claims of policy holders. This consideration is paramount. The discretion needs to be wide because it is impossible to foresee all the circumstances in which an insurance business might run into trouble, and whether the more obvious safeguards and remedies will be adequate to meet such cases.
The 1967 Act gave the Department another important new power; namely, to require information to be included in the annual returns of insurance companies of a different kind from that given in conventional accounts. This power was used in Regulations made in 1968 to lay the foundation for a new method of testing the adequacy of the provisions made for outstanding and future claims—a major element in the determination of an insurer's solvency and one of the most difficult to assess. There is already reason to believe that methods devised by the Department to use this information—the new returns are available for only two years so far—will enable them to make more confident judgments of the trend of a company's affairs and the adequacy of the provision it has made for liabilities not yet quantifiable with certainty. Thus, although these predictive judgments can never be infallibly right, the Department are now becoming better equipped to make use of powers of a more discriminating kind than those provided in 1967.
In order yet further to improve the information upon which we can base our judgment of the need for intervention, Clause 6 enables the Secretary of State to require returns from all companies more frequently than annually (quarterly is what we have in mind) Clause 7 enables him to require notification of prescribed kinds of transactions; Clause 17 enables him to require a company carrying on long-term business to make

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actuarial investigation within the three-year maximum interval; Clause 18 permits a shortening of the normal six-month interval for making annual returns and Clause 19 improves the powers to require other information ad hoc from individual companies by means of special inquiries. This last investigatory power will now be generally exercisable so that—and this is an important point—the stigma and presumption of trouble currently attaching to an "inspection" will be removed.
I believe that, however good a system of "paper" returns may be as a monitoring device, it is not a complete substitute for inspection on the ground. In particular, I believe that the study of methods used by the best companies will give us a valuable guide to our assessment of those who may not be so strong. Our aim is not the proliferation of form-filling, but to raise the management control of the less good companies to the standard of the best. This will of course make demands on skilled manpower and we shall have to consider carefully how to deploy it to the best advantage to cater for requirements for special skills. We have taken power in Clause 19(2) to employ outside specialists to help us.
The minimum financial standards required of insurance companies are affected by the Bill in three ways, in each case by enabling the Secretary of State to vary existing requirements, or to impose new ones, by Statutory Instrument. These powers will permit increases, first in the minimum share capital required before a company may be authorised to carry on any class of insurance business and, secondly, in the solvency margin which a company carrying on general insurance—that is to say, non-life insurance—must maintain. Thirdly, the powers will also permit specified categories of assets to be ignored and others to be discounted in calculating solvency. Rules for the estimation of liabilities may also be laid down. This will be particularly important in the case of long-term business and I shall presently refer to it further. Clauses 1, 27 and 31 deal with these powers.
It may surprise your Lordships that it should be thought necessary to provide specially for the better protection of holders of life insurance and endowment policies and annuities, to which the
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Acts refer as long-term business. It is many years since a long-term insurance business has failed and we fervently hope that this happy state will long prevail. But prominent members of the industry have publicly expressed some misgivings that the large, virtually permanent funds which accumulate in the course of carrying on this type of business may attract the attention of persons anxious to apply them in pursuance of other of their activities, activities which might not give the necessary degree of security for the interests of the long-term policy holders. Those other activities could include general insurance business, such as motor insurance in which underwriting has been markedly unprofitable in recent years for many companies. But we must also have regard to the tendency, observed in the United States, for the funds of long-term insurance to be used as a springboard for the creation of so-called conglomerates; empires of diverse industrial and commercial enterprises under the same ownership.
If a crisis occurred, it could be on a grand scale. In this country the total assets of life insurers are of the order of £15,000 million, representing the savings of many millions of policy holders. The Bill provides safeguards for the preservation of these vast sums in a number of ways. First, Clause 8 requires the assets and liabilities of a long-term insurance business to be distinguishable at all times from those of any other business carried on. Clause 9 restricts the application of the assets representing the long-term funds to the proper purposes of the long-term business and defines the circumstances in which withdrawals from those funds may be made after an actuarial investigation. Second, in valuing both the assets and the liabilities in the course of such an investigation, the actuary will be required to observe certain minimum standards to be prescribed by regulations under Clause 31.
As regards the assets, we shall give special consideration inter alia to investments in associated companies. These are not necessarily undesirable, but we shall probably put a limit on the extent to which they may be admitted as cover for the liabilities of the long-term business. As regards long-term liabilities, the valuation regulations will also have the effect of preventing credit being taken prematurely for the bonus loadings in

1161
the future premiums payable by with-profit policy holders. Thirdly, once a surplus has been shown, in accordance with these standards, to exist, the company will be required to give advance notice if it intends to distribute that surplus in a manner significantly less favourable to the policy holders and more favourable to the shareholders than has been its custom. Clause 4 clarifies certain aspects of the existing provisions relating to actuarial investigations and requires that the person to be responsible for them be named to the Department.
We hope that these provisions will ensure that long-term insurance business will continue to be properly conducted so that, as a result, not only will the sums assured under policies be forthcoming when due, but also policy holders entitled to participate in profits will continue to receive the bonuses arising from proper investment of their premiums. Should a company carrying on long-term business nevertheless come before the court for winding up, the liquidator will be required under Clause 30 to continue that business separately from any other business carried on, until such time as it can be seen whether the long-term business as such is viable. If it is—and it is rarely likely to be beyond salvaging to the advantage of the policy holders—it will be for the liquidator, subject to the approval of the court and with such independent actuarial assistance as he may need, to negotiate a transfer of the longterm business to new owners.
In the extreme case where this is not the most reasonable course to adopt, the long-term policy holders' claims upon the separate funds of the long-term business will be equitably determined in accordance with new winding up rules to be made under Clauses 28 and 29. There are already provisions governing the amalgamation or transfer of long-term business and certain defects in these are rectified in Clauses 25 and 26.
Because these quite complicated provisions are necessitated in part by the freedom of authorised insurance companies to carry on general insurance business concurrently with long-term, power is taken in Clause 3 to refuse in future to entertain applications for authorisation which would result in new composite companies being created.
1162
I turn to the important provisions which are concerned with securing, so far as possible, that the control and management of insurance companies do not fall into the hands of unsuitable persons. It is an essential feature of insurance business that payment is made in advance to secure indemnification for losses or liabilities which may arise during a given period, and in many cases the amount of the loss of liability cannot be determined for some considerable time after the occasion for it has arisen. Thus, the insurer holds very substantial sums in trust for those of his policy holders who have occasion to make claims. Moreover he will normally be using the current cash flow of new premiums to meet claims as they fall due for payment, especially if the premium income is expanding. Thus, there is a wide possibility for fraudulent or incompetent handling of large sums at the expense of the insuring public. Potential beneficiaries include not only the policy holders themselves but also innocent third parties, such as the victims of road accidents.
The extreme case is, of course, that of life insurance, to which I have referred, where temptingly large funds build up. The policy holder, committed as he is to a long-term contract, is particularly vulnerable during the greater part of his life to unforeseeable changes in management or ownership. The present position is that the Department is bound to refuse an application for authorisation to carry on a class of insurance business if it appears to the Secretary of State that an officer, or a major shareholder of the company, is not a fit and proper person. The relevant section, Section 64 of the 1967 Act, does not define fitness, and we are not required to give reasons for rejecting an application.
Currently the situation is rather different either when a new person moves into one of the relevant positions—for example, when the company is taken over by new owners—or when information comes to our notice which throws doubt on the continued fitness of a person already in such a position. In these circumstances we now have to follow the rather cumbersome procedure laid down in Section 68 of the 1967 Act—that is, to put it rather badly, we have to threaten to put a stop on the acceptance of further premiums unless the

1163
person whose fitness is in question is removed or unless the Department can be convinced that their doubts are groundless. They must allow the company a month in which to make representations before imposing such a restriction and they must give particulars of their reasons for thinking the person unsuitable.
All this is prima facie very reasonable and desirable, since the freedom of the individual concerned to pursue his chosen line of commercial activity is at stake. Indeed, when the provision was introduced in 1967 there were misgivings on the part of some noble Lords that there was no provision for appeal to an independent authority, either in these circumstances or where an application for initial authorisation was rejected. I have to explain, however, that in practice even the constraints upon us which I have described have been found to make it difficult or even impossible to give the public the degree of protection which they may reasonably expect.
There is no problem about the man who was convicted of company fraud a couple of years previously, but this is not the typical case with which we have to deal. There may perhaps be a conviction of a dubiously relevant nature, or one many years ago, which makes the judgment a little more difficult. But the really difficult case is where the man's previous activities have left such doubts as to either his competence or his honesty as would lead any prospective employer to eliminate him from his short list of candidates but which would be extremely difficult to substantiate to the satisfaction of any judicial tribunal. Moreover, such information may reach us from sources well placed to judge and to advise, but which are willing to assist us in this way only on the assurance that the source will not be revealed. Often the nature of the information is such that its disclosure would almost certainly permit identification of the source and the consequence would be the loss of that assistance in the future.
Clauses 2, 21, 22 and 32 of the Bill seek to remove the Department's genuine difficulties in exercising their protective function, while improving the opportunity for persons whose fitness may be called
1164
in question to convince us that we are mistaken in our view. Clause 32 makes a change of control of a company dependent on our first being satisfied as to the fitness of the persons concerned. Clause 11 permits the imposition of precautionary requirements in such a case until such time as the actual performance of persons to whom there is no evident objection can he assessed.
I recognise that there may be those who think that these powers to control entry to the business are harsh and potentially unfair to the individual. To them I would say three things. First, it would be expensive folly to build up an expanded apparatus of supervision and control of initial entry but leave it open to penetration by the imprudent or the fraudulent operator. Second. I believe that we are seeking to do no more than any of your Lordships would do privately if you were looking, for colleagues in a business of this kind and if your own money were at risk. Third, I believe that most people would agree that we are right to require exceptionally high—and I use this phrase deliberately—standards of morality and competence from those who seek to control the destinies of an industry so uniquely important to the consumer.
There is a counter-weight to the important discretionary powers for the Department to restrain undesirable conduct to be found in Clause 36. This gives powers to modify normal requirements, subject to appropriate safeguards, so as to give relief to a company in whose particular circumstances the full rigour of those requirements would be unduly onerous. This is a consolidation and refinement of a number of existing powers and is extended to include the new requirements provided for in Clauses 4 to 10. Finally, it is proposed in Clause 38 to take power to make regulations as to the form and content of insurance advertisements in place of the rather inadequate requirements in Section 25 of the 1958 Act, and in Clause 39 to require disclosure of connections between an insurance broker and an insurer. Clause 41 removes a doubt as to the validity of certain group policies.
My Lords, in this brief summary of the principal clauses of the Bill, I have tried to avoid wearying your Lordships' House with overmuch detail. If it still appears to be a somewhat complex Bill

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I think that may be attributed to two main causes: first, that the subject matter is inherently complex; and second, that the structure of the Bill is complicated by the fact that we already have two Acts—the Insurance Companies Act 1958 and, superimposed upon it, Part II of the Companies Act 1967. We are adding a third, but a good deal of this will replace or modify parts of the two earlier layers rather than introduce new principles. In short, it raises, or permits to be raised, the existing minimum financial standards; it intensifies the closeness of monitoring by the Department and it gives them more flexible powers to intervene if the need should arise.
The detailed conduct of insurance business will still be left normally to the enterprise and good sense of competent managements, thus preserving the benefits to the consumer of innovation and fair competition. Moreover, this is achieved with a relatively modest expenditure of resources on supervision, as compared with the more extensive control which some other countries have imposed. Although we have almost certainly tried to supervise insurance too cheaply in the past, there is a point at which the returns for increased expenditure must diminish sharply. I think that with the refinements provided by the Bill and the increased resources to which the Explanatory Memorandum refers, we shall achieve a reasonable balance. I would certainly not be so rash as to claim that this Bill, or any conceivable Bill, or any conceivable increase in supervisory staff, will prevent there ever being another insurance failure. It is, however, only fair that the Department should have all the powers and resources it reasonably needs to give the public a reasonable degree of protection; there is no doubt that this is what the public expect and are prepared to pay for.
I commend this Bill for consideration by your Lordships' House as a useful and necessary measure of consumer protection, drafted with regard to the continuing health and vigour of one of our major industries. I shall do my best to clarify at the end of this debate any aspect of it to which noble Lords may wish to give special attention.
Moved, That the Bill be now read 2ª.—(The Earl of Limerick.)
4.26 p.m.
LORD DIAMOND: My Lords, I am sure that all your Lordships will wish me first of all to thank the noble Earl for the full and careful explanation he has given to the House of the general effect and some of the details of this particular Bill. I assure him straight away that we share the gratification to which he referred at the start of his speech, that we in this House are dealing with this Bill first, for the very reasons that he gave. It is obvious, therefore, that from this side of the House we are not going to seek to divide the House against the Second Reading of this Bill, both in the circumstances to which he and I have referred and having regard to the nature of the Bill. I want, however, to do two things in a speech which I am afraid is bound to take a little time, but I hope not to try your Lordships overlong. First, I want to pursue the assumption that this Bill will pass your Lordships' House and therefore to indicate the kind of matters with which we shall seek to deal on the Committee stage. Then I should like to invite your Lordships to look at the general approach of the Government to this very important issue of insurance and to consider whether it is the only or the best approach.
First of all, then, may I deal with the matters which we shall broadly seek to improve at the Committee stage. We shall seek to increase the protection of the short-term policy holder in a number of ways: first, with regard to cover. I have in mind that there are many policy holders who find that most of the terms of a policy in small print—although I am not making the slightest suggestion that they are put in as small print—leave them lacking in the kind of cover for which they thought they were insuring. It may be possible, therefore, to have standard forms of cover for various categories of insurance. We believe also that we might further protect the short-term policy holder on the question of the invalidation of his policy through what I might call the involuntary non-disclosure on a proposal form. I understand that cases have arisen where a proposal form has not asked a relevant question; the answer has not been given; but having regard to the nature of an insurance policy, which we all understand, the policy has been held to be invalid.

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We want also to probe the possibility of protecting the short-term policy holder further by closer control and regulation of agents. I do not refer only to brokers but to anybody who is receiving an agency commission—garage employees who it is alleged have gone to unnecessary lengths to secure commission for themselves by offering advice of an undesirable kind to prospective policy holders, especially with regard to the completion of their proposal forms, and which has again resulted in a claim's not being met when it has arisen. That is so far as the short-term policy holder is concerned. Then we would seek to protect the long-term policy holder more by strengthening the control of the surplus which is allocated to the policy holder and by strengthening the control of the proportion of overhead expenses which is charged to life business. We would seek to strengthen the prevention of fraud by further provisions in relation to the identification of assets, a matter which is referred to in the Bill, and by strengthening provisions against investment in or loans to associated companies. All these are matters which I hope my noble friend Lord Jacques will develop more fully when he comes to speak later on in the debate.
Then we would seek to protect the individual against injustice through the possibly arbitrary decisions of a Secretary of State. The noble Earl referred to this matter with some obvious hesitation, some very proper hesitation, if I may say so; it is a very difficult issue indeed, and we should therefore want to discuss it more fully on Committee. Obviously, what I am getting at is that we must avoid the attitude of "Now you are in, now you are out", and of a person's not knowing why all this has happened. The protection of the individual in carrying on his business as he thinks fit within the law of the land is an important protection. I hope my noble and learned friend Lord Stow Hill will develop this matter when he speaks later on.
Further we would, during the Committee stage, seek to protect the well-run company against the stigma of investigation, to which the noble Earl again referred. It is a very difficult issue. Investigation is to see that adequate in-
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formation is given, and may be for no bad reason, but it is very difficult to persuade people that it is for a good reason and not for a bad reason. That being so, one has to take great care that the stigma which might otherwise attach to an investigation—and one must assume that information about investigations always gets out—shall not do so. These I are Committee matters, but they are important. They are matters we shall seek to raise at Committee stage, together with any others which any of your Lordships or my noble friends think of, and which we think would strengthen the Bill, always making the assumption that this is the right approach for the problems of insurance as they have been shown to exist.
What I now want to do is to stand well back from the Bill and to look at the policy which the Government are adopting, and to ask whether it is the right policy and whether it is the only one. And to assist your Lordships in coming to a conclusion on that I think I must trouble your Lordships with the history of insurance legislation. It was referred to by the noble Earl, and nothing I am going to say is in contradiction of what he said, but I should like to deal with it a little more fully. May I first remind your Lordships that in the 1860s we experienced the failure of two large insurance companies, and as a result Parliament passed the Life Assurance Act 1870. This was followed by the failure of several small insurance companies in the 1920s and the Report of the Clauson Committee, as a result of which further powers were given to the Board of Trade in 1933 and again in 1935.
The failure of the Fire, Auto and Marine Company and a number of other motor insurance companies followed in the 1960s, as a result of which Part IV of the Companies Act 1967 very substantially strengthened the powers of the Board of Trade. But, despite the 1967 Act, there occurred the Vehicle and General failure in February, 1971; and the present Bill, as the noble Earl explained is being introduced largely as a consequence of the Vehicle and General failure.
So we have had a series of rearguard actions taken by the Governments of the time, after some horses have fled, closing certain stable doors, protecting the policy

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holder against further failures. And one is bound to ask (the noble Earl himself referred to it, but did not ask the question) when the next failure might take place. The noble Earl hoped there would not be one. I echo that hope. I am only recounting the history. I dare say—I have not looked up the debates—that on each occasion a Minister expressed himself as reasonably satisfied and very hopeful that no further failure would take place. He would be entitled to do so on the basis of the knowledge he had at the time. I am only saying this is the history of the case as I understand it.
We have had, as a result of these various pieces of legislation, restriction piled upon restriction, and in the present Bill again we have some restrictions varied but a large number of new restrictions introduced. So I think we can properly say that we have now reached a stage when the industry is attempting to function in a straitjacket. The restrictions, both old and new, are many and powerful. There are restrictions on starting an insurance business; there are restrictions on running the business; there are restrictions on stopping running the business; there are restrictions on the kind of insurance business to be undertaken; there are restrictions on the kind of investments; there are restrictions on the methods of valuing those investments; there are restrictions on individuals responsible for running the business; there are restrictions on advertisements. I am giving but a short selection of the restrictions imposed by what will be the three current Acts of Parliament, all seeking to protect the policy holder by the process of adding restriction to restriction, leading to a situation where the scope for private enterprise and competition has been reduced to minimal ebb.
Now, my Lords, what is the insurance of which we are talking? It is a vitally important service, vitally important to the policy holder, both as a means of saving, as the noble Earl said, and as a means of spreading among his fellow countrymen, or wider than that, the risks which are inherent in life. It is of growing importance. One has only to look at the total figures of premiums collected to appreciate this fact. And it is of vital importance also to the State in terms of saving—a most important element in the
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financial management of our economy, and of any country's economy. It is because of this that the State has for many years encouraged life assurance as a form of saving. The result of that has been, as your Lordships are well aware, that almost every year we have had to design methods in the Finance Acts of closing loopholes which have been created by those desirous of transferring the tax savings to which I have just referred to a different purpose. That has continued year after year.
In the present system there are, of course, areas of considerable waste. One has only to compare the proportion of the administrative cost of management with the premium income of various types of insurance to see how forceful this argument is. If we look at National Insurance we see that the proportion is 5·7 per cent.; in the Industrial Injuries Board the proportion is 12½ per cent. Moving now to the companies which are restricted, and are now to be further restricted, we see that so far as motor insurance is concerned the proportion is 31 per cent.; so far as industrial life is concerned, 34 per cent.; and so far as accident insurance is concerned, 38 per cent. In the case of fire insurance, nearly 40 per cent. of the premium the policy holder pays goes in arranging the cover which he is seeking, and only 60 per cent. is left for meeting the risks against which the policy holder seeks to be insured.
Would your Lordships think of the enormous waste which arises in settling motor car claims throughout the country? Actions are going on all over the place all the time. They could all be avoided simply by adopting some method whereby, just as a man who is injured in an accident finds his way into hospital, which is there provided for him, so any damage that he suffers is compensated without all the argument as to whether he is entitled to it. It does not take much to see whether a person has been blinded in both eyes, or whatever it may be; but actions go on year after year—four, five or six years—before being settled. The thalidomide history is not the only history of those who have suffered damage and who have been unable to secure one penny in the normal processes of securing cover, securing repayment from an insurance company. That waste, which

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must be enormous, could be easily avoided.
THE EARL OF LIMERICK: My Lords, may I interrupt the noble Lord? I am not quite clear as to his point here. What he is suggesting is the connection between the thalidomide case and delayed payment of claims by insurance companies?
LORD DIAMOND: My Lords, what I am suggesting is that in the method adopted at the present time, which the Bill perpetuates, there is enormous waste in human activity, and delay in time, before those who are injured can get compensation for their clearly established injury on a variety of grounds of law and the calculation of the compensation. All that could be swept aside under a different system, as I shall disclose. That is the point I am making. I am grateful to the noble Earl for asking about it, because I apparently had not made it clear.
A great deal of work has been done on the subject, as the noble Earl knows, and I think that this is an opportunity for considering that as one element in the question which I am putting to your Lordships' House; that is, whether this is the best and the only philosophy to adopt in dealing with the problems of insurance. The waste again is in the Minister's own Department. I am not saying that any civil servant is not going to be fully occupied in doing what he has been called on to do—of course he will be. But what I am saying is that, according to the Explanatory Memorandum, the Bill will call for, not a total new force but a total force of 100 civil servants to supervise the insurance industry.
Having covered the background, I can now describe what I think is a fair analysis of the Government's attitude. It is to stick to the old cycle of failure followed by restriction, followed by further failure followed by more restriction, until the competitive private enterprise is so restricted as to be incapable of carrying out its traditional function. I would not call that approach to our problems an imaginative one; it is an extremely pedestrian one. If I were to be asked why then has the insurance industry signified its general acceptance of these provisions
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—as I understand it has—I would say, "Well, that is exactly what one would expect" One would expect the existing, well-established companies to say, "Pull up the ladder, Jack; I'm all right." It would not be the first time that that kind of approach had illumined the activities of bodies well established.
I should prefer to see something different. I should prefer to see consideration given to the question of whether, for certain forms of insurance such as life assurance, accident insurance, ills which befall every one of us, we ought not to recognise that competitive private enterprise is no longer appropriate. We ought to consider whether the community should not organise this national service on a national basis. It would clearly lead to an enormous saving in administrative expenses; and most of the problems with which we are battling in this Bill, and in the earlier Bills, would no longer arise. The protection of the policy holder would be complete; his savings, which would need to be held and managed on a commercial basis by an entirely independent body, would be secure; failure and fraud would no longer arise; the policy holder would get more for his money.
To sum up, the Government have decided to travel the old road of ever-greater restriction. I should prefer to see the alternative route examined, of establishing a non-profit-making national service for those forms of insurance that are of very general application. But as we have this Bill before us, all we can do for the time being is to go along with its Second Reading and seek to improve it at the Committee stage.
4.50 p.m.
LORD CACCIA: My Lords, I must start by declaring an interest, as I am myself a director of an insurance company; namely, the Prudential Assurance Company. But, of course, I do not here speak for that company, or for the industry or for any of its associations. I speak purely in my own personal capacity, which is proper and fitting as a Member of your Lordships' House. Having said that, may I start by welcoming the Bill in general and also, as the noble Lord, Lord Diamond, has done, in the fact that it should start in this House.
As a background, I begin from the position that the insurance industry in

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this country has provided a great deal towards its prosperity, economically and socially, and it now has an increased chance to do so and to spread into Europe where our own pioneering work will give us every right to claim to be in the lead. So I would hope that the approach will be one of seeing how the strength and vigour of this industry can be promoted. In saying that, I would not in the smallest degree wish to set aside a debate of the kind that the noble Lord, Lord Diamond, has suggested; that is, about the alternative. But in my own judgment, having considered the matter—and this must be a personal opinion—I should have thought that, despite the failures to which the noble Lord has referred, the public interest is at present being promoted, and indeed has been in the past, by the system which has grown up in this country. But by all means let that be debated; it is a very proper subject for consideration. I think I know the answer, and I dare say the noble Lord is capable of being persuaded in argument at a later stage.
If my approach is adopted, then one is faced not—as I think the noble Lord was saying—with the position of the major companies in this country. They have not been subject to the failures to which he referred. What one is trying to protect the public against are companies who are not perhaps quite so well founded, that undertake risks which, in the interests of the policy holder, have proved to be improper and impossible to be sustained.
On that basis, there are two lines of approach. One is what has been the continental approach, and the other is what has been the approach in this country. The continental approach has been to try to protect the policy holder by laying down by Statute, by act of State, very precise regulations on the matters referred to by the noble Earl, Lord Limerick, such as premium rates, investment policy and so on. That is one route, but it is not the route that we have taken. As the noble Earl pointed out, our route, briefly summarised, has been freedom with publicity and a discretionary power in the hands of the Government to see that the policy holder is protected. To my mind, this Bill quite soundly takes the second course and, in my book, is
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welcome for that; and welcome not only in general but, also, in particular for the provisions to protect life policy holders, who I think are in a special category. Looking at the past and at the future, I should have thought that this is not only the correct way, but is the way to sustain and promote the vigour of this industry which, despite the failures, has up to now been a national advantage. The failures are admitted, but they are the fringe; they are not the substance of the business.
From that, the question arises of the responsibility of the Department of State, once the Board of Trade and now the Department of Trade and Industry. As the noble Earl made clear, under previous Acts the old Board of Trade, and then the Department of Trade and Industry, had responsibility in this area. It was not as if they had no responsibility, nor was the proposition ever put forward that the industry should be able to police itself. You have only to look and see how a competitive business is run to realise that in no circumstances is it conceivable that the industry should on its own, and without any interference at all from the State, be able to police itself and protect the policy holder. It can do a great deal but it cannot do it all, and the responsibility for that under Acts of Parliament over many years has been with the Department of Trade and Industry, or with the Board of Trade before it.
Latterly—and I think this was shown very clearly in the inquiry into the Vehicle and General—the problem has been that the Department had the responsibility, but not necessarily all the powers required and the machinery to do what was needed. This Bill should provide those powers and the machinery to do it, with one proviso to which the noble Earl referred. He said that there would be skilled manpower to carry out the provisions of this Bill. I cannot emphasise too strongly the importance of that element, for if the manpower that is to apply this Bill—assuming that it becomes an Act—is to he a help to the industry, it is essential that it should be skilled and experienced. Otherwise, those people could tie the industry up in so much red tape that we might find ourselves in the difficulties to which the noble Lord, Lord Diamond, referred, and which in general is not a risk of the industry at present.

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One aspect to which both the noble Lord and the noble Earl referred, which at first blush makes me hiccough, is Clause 32, with the definition in Clause 2, giving powers to the Secretary of State not only to have reported the people who will be in control, whether on the higher management side or as directors of a company, but, after having given certain warning, to say, as an act of State and power, that such-and-such a person shall not be in a position of control, either on the management side or as a director. I know that such powers exist in legislation in other countries, and that this is a very difficult area, but there is an element of "Big Brother" here which makes me feel uncomfortable.
I realise that this subject has been looked at already, but I hope that it may be looked at yet once again when we come to the Committee stage, to see whether there should be some form of tribunal which could be set up, to which particular cases could be referred: this because under the Bill not only has the Secretary of State complete power to make a decision, but he is also to be excused from giving any reason at all for that decision. In the circumstances described by the noble Earl, I can see that this might be to the advantage of the policy holder, but one then runs into another principle which is of value. I refer to the principle of the liberty of the subject in this country to conduct business, if he so wishes, and not to be prevented unless there is some public process, some public tribunal, some place in which he can defend himself and see that there are valid reasons, accepted by the public, why he shall or shall not be allowed to proceed. But, as I said, I know that this is a difficult area.
I should like to conclude by saying that, apart from that proviso, I would in general welcome this Bill. I hope that it will proceed through this House and, with such Amendments as may be made, will reach the Statute Book as soon as possible. This not only for the health of the industry which it seeks to promote, but to add to the strength of this country at home, both economically and socially, and to give us a chance to spread overseas into Europe and elsewhere.
5.0 p.m.
LORD O'NEILL OF THE MAINE: My Lords, like the noble Lord who has just sat down, I must declare an interest in this matter to the extent that I am a director of the Phoenix Insurance Company; but, also like the noble Lord, I do not speak for any company, or indeed for the industry, but merely as a Member of this House. It may be that I shall cover some of the points made by the noble Lord who has just sat down, but others, I think, have not been mentioned in this debate so far. The far-reaching importance of this new Insurance Companies Bill does not rest solely upon what it seeks to achieve by vesting in the Department of Trade and Industry more flexible powers with which to discharge its responsibilities for the supervision of the solvency of insurance companies. The Bill's importance rests also upon the fact that it is concerned with an industry vital to the economy of this country, because of the major contribution it makes by way of overseas earnings in the invisible sector; an industry which, by virtue of the esteem in which it is held as the leading world insurance market, reflects great credit upon this country.
The flexibility, stemming from a comparative freedom from detailed Governmental regulation, which, unlike its competitors in many other countries, British insurance has traditionally enjoyed within our economy, has been an important factor in the achievement of this leading role. Against increasing world competition and, as has been mentioned already, on the eve of opportunities in Europe, it is imperative that this flexibility be maintained. Within the constraints imposed by the need to provide satisfactory protection for insurance policy holders, this precept has in the main been recognised in the proposed legislation before us, and the long-held tenet of freedom with publicity has been preserved. The new Bill has been welcomed, both by the public and by the insurance industry alike. The British Insurance Association has recorded its general support, and has described the Bill as
"an important advance in giving the Department of Trade and Industry more flexible powers to take effective action to prevent insolvencies of insurance".

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The Life Offices Association, too, has welcomed the Bill, noting with satisfaction that one of its main purposes is the amendment of the law so as to improve the security of life policy holders. Both associations have, however, reserved their positions by stating that they still have to carry out a study of the detailed provisions of the Bill.
During the preparation of the Bill—and of course the Minister knows this only too well—the insurance associations have assisted the Department of Trade and Industry by providing information and technical advice. It is to be hoped that this co-operation will continue over the framing of the regulations provided for in the Bill. I think I am right in saying that the Minister gave that assurance in his speech. The Bill gives the Secretary of State power to put into statutory form practices which have long been adopted by reputable insurance concerns and which are necessary for the protection of their policy holders. It also gives power to the Secretary of State to intervene and to exercise control in a way the insurance industry has for long thought to be necessary. In certain respects, however, it seems to me that the Bill provides powers which are very wide indeed and which may be without precedent in legislation affecting our commerce and industry. Parliament is careful about creating precedents, and is especially careful not to provide powers over individuals and organisations against which there is no appeal in the courts. Consideration should perhaps be given to these points in the later stages of the Bill—with this reservation, my Lords: I believe this to be a Bill which can be commended and one which, while strengthening the protection afforded to the insuring public, is at the same time in the best interests of a great industry and is accepted by it as such.
5.5 p.m.
LORD STOW HILL: My Lords, I hesitate to intervene in this debate because the aspect of the Bill to which wish to direct your Lordships' attention has already been dealt with, if I may say so, so adequately by the arguments of the noble Lord, Lord Caccia, which he introduced by saying that that aspect of it made him hiccough, and by the noble Lord, Lord O'Neill of the Maine. But possibly I might add a little
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to what they have said with regard to what I may compendiously describe as the "fit and proper person" provisions in the clauses of the Bill. I am not a director or a consultant of any insurance company, and I do not know whether the Rules of your Lordships' House require me to say that I have an interest in that, over very many years, I have had the most happy professional associations with insurance companies, which makes me well disposed in their favour. I do not know whether that is, in the terms of your Lordships' Rules, a declarable interest or not. However, there it is.
My Lords, may I pursue the arguments of those two noble Lords a little further by inviting your Lordships to consider a little more in detail the actual "fit and proper person" provisions? One starts with Clause 2. That clause defines what is described as the "controller" or "manager". A controller, broadly speaking, is a director or a chief executive; and may I, for the sake of brevity, use the terms "controller" and "manager"? As the noble Earl said, no company can start to carry on the business of insurance unless it receives an authorisation under Section 61 of the Companies Act 1967. Clause 2 of this Bill provides that the Secretary of State shall not grant an authorisation to a company to begin business if he considers that a controller or manager who is not a fit and proper person is to be associated with that company.
It is not as if we were, as the noble Earl pointed out, introducing a provision of this sort for the first time. It was introduced for the first time, I think, by Section 64 of the 1967 Act. Nor could I (I should have thought) suggest to your Lordships that there is no sort of precedent in other contexts for this kind of provision. When a Bencher of one of the Inns of Court wishes to propose a young man to be called to the Bar, lie has himself to certify in writing that in his opinion the young man is a fit and proper person to be called to the Bar. Earlier this week we were discussing, on Second Reading, the Solicitors (Amendment) Bill, and your Lordships may remember that in that Bill, equally, there is a provision that the governing body of that profession has to be of opinion that a new entrant into the profession is suitable, in terms of character

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and so on, to he a member of the profession. Private, domestic tribunals in which that sort of phrase is used of course abound. It is not, therefore, as if we are wholly strange to provisions, either in private, contractual arrangements relating to tribunals, clubs and so on, or in our legislation at any rate since 1967, to the effect that a person may be prohibited from undertaking a particular activity, or may be otherwise subjected to restrictions, if somebody, whether the committee of a club or, as in this case, an executive Minister, is of the opinion that he is not a fit and proper person.
If I may pause for a moment on Clause 2, if the Secretary of State is of that opinion in the case of any particular company, and accordingly feels that he is under an obligation to refuse an authorisation under Section 61 of the 1967 Act, then, as the noble Earl pointed out, he need give absolutely no reason. There is no requirement that he should say who the person is or on what grounds he thinks that the person concerned is "not a fit and proper person". There is simply a blank with regard to that. The company just does not get the authority.
Then one goes on to Clause 11(1)(e). Your Lordships will have noticed, I am sure, that it is Clauses 12 to 20 which provide most of the extremely drastic powers that are vested in the Secretary of State enabling him to interfere in the conduct of insurance companies. Clause 11 sets out the circumstances in which those powers can be exercised. As I have said, one of those grounds is contained in Clause 11(1)(e). That is the ground which relates to "a fit and proper person". Under that provision, the Secretary of State can exercise these drastic powers contained in Clauses 12 to 20 if he considers a person will be a controller or manager who is
"not a fit and proper person to be associated with the company".
The requirements in that particular case are slightly different. If one goes on to look at Clauses 21 and 22, one finds that if the Secretary of State proposes to exercise any of those powers contained in Clauses 12 to 20, he has to serve certain notices.
The two clauses are somewhat complex and I shall not take up your Lordships'
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time by going into them in detail. But I think that I should be fairly summarising their effect if I said this. Supposing that under Clause 11(1)(e) he proposes to exercise the powers, and in particular the powers under Clause 12, on the ground that there is in his view a manager or controller who is not a fit and proper person in the company, he has to serve a notice on the controller or manager in question. If he wants to exercise his powers under any of the other provisions of Clause 11, he has to specify the grounds. The clauses say that he has to specify the grounds even if he wishes to use the "not fit and proper management" provision of Clause 11. But it goes on to say that in that case the only ground that he need specify is the identity of the manager or controller in question. In other words, he need give no sort of reason. All he says is, "You, 'X', are not a fit and proper person". But if "X" wants to know why, the Secretary of State is under no obligation by the express terms of Clauses 21 and 22 to give any such grounds.
I do not know whether or not the noble Earl, Lord Limerick, will pardon me if I venture to offer what I think is a slight correction to what he said with regard to Section 68 of the 1967 Act. He said that in that case grounds had to be given. I understood him to be implying that the grounds in that case would include grounds for saying that a person was not a fit and proper person. If he looks at it again, I think he will find that he is mistaken. But perhaps I read it wrongly and he is correct.
That is the position under Clauses 21 and 22. Then the noble Earl referred to Clause 32. Clause 32 deals with the situation in which somebody is proposing to become a controller or manager. The Secretary of State can file a notice of objection. Again, he need give no reasons for saying why that person is not, in his view, fit and proper; all he has to do is to serve a notice on that person saying, "I object to you". In order to complete the picture, my Lords, I ought to make this addition. When the Secretary of State serves a notice under Clauses 21, 22 or 32, he must serve a notice on the controller or manager in question telling him that he has the right to make written representations to the Secretary of State or to make oral representations to an officer in his Department. I ask myself

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what is the position of the supposedly unfit person when he receives that notice. He can write a letter to the Secretary of State saying, "Dear Mr. Secretary, you say that I am not a fit and proper person. I have not the remotest idea of why you should think so. But I think that I am a highly fit and proper person." He can do that. He has the further consolation that those clauses provide that when the Secretary of State receives a representation of that sort he must take it into account. What on earth the unfortunate man—if he is unfortunate; he may be an out-and-out rascal, but he may not—is to put in the letter I do not know.
What is his position to be when he goes before an officer and says, "I wish to make an oral representation" He will sec an extremely polite and well-informed civil servant sitting on the opposite side of the table. He will no doubt be invited to sit down and say what he wants to say. He will then ask the civil servant—perhaps it is natural for him to do so—"What have you against me?" He will be met with a stony silence. It is not really giving him much of a safeguard to put him in that position. Therefore in that situation, these drastic powers arise; he can be prevented from becoming a controller, a director, a chief executive or a manager of a company, and he is given no more information that that.
A very odd contrast appears when one looks at Clause 25. As the noble Earl reminded us, it deals with the case where an insurance company is to be transferred, wholly or in part, to a transferee company. The court will be required to sanction the transfer; but one is told in Clause 25 that the court is not to sanction the transfer if, inter alia, the transferee company is not a company which will obtain authority under Section 61 of the 1967 Act to carry on business. In other words, again, if there is associated with the transferee company a not "fit and proper" person, the not "fit and proper" person is given no right to he heard before the court. In contrast, any employee who can say that he will be adversely affected by the transfer is given by Clause 25 an express right to be heard by the court. It is a very unequal situation for these two people. I sympathise with the desire to keep scallywags out of this great industry, but a person may be dubbed a scallywag when he is not.
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If one is trying to make up one's mind whether a young man is a fit and proper person to be called to the Bar, one is undertaking probably a very much easier judgment than one might be undertaking in nine out of ten cases when seeking to assess the behaviour and conduct over ten, twenty or thirty years of somebody associated with an insurance company. I do not know what I would think the words "fit and proper person" mean. In general, I suppose, if the Secretary of State thinks, to put the matter loosely, that the individual is of a shady financial character, he will be justified in saying that he does not think him a fit and proper person. But what else ought he to take into account? Let us suppose that he thinks the man completely incompetent. Does that make him an unlit person? I think it is arguable that it does. But it is hard lines on the individual who may entirely dispute that he is unfit or incompetent. How far does it go? Is the Secretary of State to take into account sexual morals? If a man has been vicious and cruel to his wife, is that relevant? My Lords, one's mind boggles at the idea of what is to be taken into account.
Then it may be said, "Ah, but the Secretary of State is, after all, under our Constitution, responsible to Parliament. When he goes to either of the two Houses lie may find a Question down to him, asking why he exercised his responsibiity in a particlular case in a given way". But when the Statute says in terms that he is under no obligation to give any reason, I should have thought it was difficult to get much out of him by questions. If the questioner says, "Why did you exercise your power under Clause 12 in relation to Mr. X? What have you against him?", I suppose that the right answer would be, "It is expressly enacted that I am not bound to give any reasons, and I cannot think that it would be in the public interest to go against the expressed will of Parliament". So, my Lords, the Secretary of State is impregnable in his place at the Box.
I do not know whether difficulties might arise in the future if there were a really persistent Mr. X who was thoroughly aggrieved at what he thought was a completely unjust decision in his case and who said, "I will harass the Secretary of State. I will issue a writ for libel against him for saying that he

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thinks I am an unfit person The Secretary of State would have qualified privilege. He would be entitled to say, "I have not committed a tort against you because I did not act maliciously". If I were Mr. X and felt strongly about it I might be tempted to put in my reply, "There is plenty of evidence that you acted maliciously, otherwise you could not have come to such an utterly ridiculous conclusion in my case, without having the smallest ground to support the opinion that you have expressed that I am unfit and an improper person". I do not know what documents or what material the Secretary of State would have then, in the course of the proceedings, to furnish to the court in order to defend himself against a claim of that sort. When they get vicious, people can go a long way, and vexatious litigants are very difficult to handle. I can foresee that if someone thought that he was really the victim of a serious injustice he might go a long way and make the position of the Secretary of State very uncomfortable indeed.
My Lords, my noble friend Lord Diamond said that we wished to test this matter in Committee and I hope that your Lordships may think that that is a right course to take. Whether the two noble Lords who spoke last are right in suggesting that there may be some right of appeal, some sort of tribunal, I do not know, but I hope that your Lordships will think that I have not taken up the time of the House unnecessarily. After all, we are a legislative Chamber and we all want to keep rascals out of this great industry. But also we are under a duty not to pass what we have not considered, and not to be oppressive even in our dealings with scallywags. I hope that your Lordships will think that this discussion has been of some value and that it would be appropriate to return to this matter during the Commit tee stage.
5.24 p.m.
LORD SELSDON: My Lords, I feel that in speaking to-day I should declare a rather indirect interest, in that I work for a financial services group which, among its interests, owns two British insurance companies. Like the noble Lord, Lord Caccia, I would point out that
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I am in no way speaking on behalf of the company but rather as a Member of your Lordships' House whose commercial interests occasionally have touched on the insurance field. I think it must be a comparatively rare occasion when Government interference in the commercial world is welcomed by companies, by the Press and by the general public. This is certainly the case with this Bill, for inquiries that I and others have made throughout the industry have shown that on all sides people are unanimous in their belief that some further form of Government control is necessary if certain disasters in the past are not to be repeated. It might not be out of place for me to suggest that if there were closer co-operation between Government, industry and commerce on all fronts at this stage, many of the problems might be overcome.
I have no hesitation at all in supporting my noble friend Lord Limerick, but I should like to take a few brief moments of your Lordships' time to touch first on the general concept and the need for a Bill; secondly, to make a few points on its implementation; and, thirdly, to refer to one or two international aspects. The insurance world is, and has been for decades as we know, an integral part of the economy of this country and, equally important, an integral part of our social life. The whole essential psychology of insurance is that it provides security; security for the man who drives a car, for the pedestrian, the wife, the family and the employer or employee. This sense of security has been built up by years of work and reliable trading by numerous honest and reliable companies, and without any doubt the insurance industry in this country has had one of the best reputations in the world. But, my Lords, you need only one or two occasional failures by companies—they may be spread 100 years apart—whether by failing to meet their commitments or because of failures in certain other areas, and the whole underlying sense of security begins to be eroded. It could perhaps even disappear, with disastrous results to the economy of the country and to our social life as a whole.
As recent events have demonstrated, voluntary controls, however good, have been inadequate, and there are some who would argue that the industry itself has

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failed and has passed the buck to Government. Although there may be an element of truth here, it has been demonstrated that the whole field of insurance is too big and too complex to be operated entirely by voluntary control. Thus, with the support of the industry, the Government, fairly and rightly, step in. But I hope that this is not the thin end of the wedge or that there may be steppings in other areas—perhaps Lloyds of London, or our chartered accountants, or lawyers, or in other professions which have demonstrated their success under voluntary controls and at maintaining high standards. This is a right and a fair Bill and it has been prepared in co-operation with the industry. It is now the Statutory Instruments or Regulations which are awaited with considerable interest. I hope that in preparing these the Government will not over-restrict or at the same time will not under-protect. There is a very fine dividing line which perhaps we shall come to in Committee.
There are two minor points I should like to make here, and I think that they need to be made. First, there is the role of the actuary, which will need to be clearly defined. I know that the D.T.I. will work in close co-operation with the Government actuaries' department. Secondly—this point was raised by the noble Lord, Lord Diamond—there is the question of investing money with associates. I believe that this needs properly spelling out. It is the Regulations and their implementation which will be critical, and I hope that if ever the Government are called on to act they will do so immediately and with the utmost despatch; for in matters concerning insurance companies any element of fear or doubt must be removed or confirmed immediately if the company and its policy holders are not to suffer. It is the speed of action which I believe will be critical above all else.
My Lords, the final area upon which I should like to touch is the international one, for one cannot look at this problem purely in a national context. Without going into the argument on the question of the nationalisation of the industry I should like to say to the noble Lord, Lord Diamond, that if one took the steps which he suggested, it could have disastrous effects upon our overseas earnings, certainly in the field of invisible
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earnings, and that does need watching. Your Lordships will be well aware that insurance legislation in most of the E.E.C. countries is far more restricted than our own and is far more pedantic than our own. Your Lordships also will be aware that in general our insurance companies are larger and more powerful than their equivalents on the Continent; and, I hope, more responsible. But the dynamic international expansion of our companies is envied and feared within the E.E.C. and the whole insurance area is at this time a very delicate and sensitive one.
As we move towards harmonisation it would be wrong for us to forget that if we are forced by other members of E.E.C to accept their standards and restrictions our insurance industry could be severely handicapped, our invisible balance of payments would suffer and it would be totally against the national interest. There are many on the Continent who might welcome restrictions which could handicap our own companies and perhaps reduce the competition. It would be very dangerous indeed if they found a way to use this Bill as a foil to encourage greater restriction, and if they were to claim that its introduction has demonstrated the failure of our own insurance industry to maintain proper standards. Thus, my Lords, I end and sit down making this final point. This Bill is a good Bill, but in no way must it be construed as a general indictment of the insurance industry, but rather as a protection from the would-be black sheep of the future.
5.31 p.m.
LORD HAWKE: My Lords, I think my noble friend Lord Selsdon is quite right to refer to the great benefit that could come to our industry through our entry into the European Community. There is no question that we have the best insurance industry in Europe, if not in the world. I should declare an interest here (of course, we all have an interest in this Bill either as insured or insurers), because I am a director of a small company which is virtually a charitable trust. But that does not stop us from being a fairly efficient company. The business, in general, welcomes the Bill, which has been drafted with tremendous cooperation with them. There are some Committee points on which they are not

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quite satisfied, and I have no doubt that they will be argued in due course.
Many powers already exist. But there has been in the Board of Trade (or whatever they call it nowadays) a reluctance to act. The Department there was probably under-powered, and nobody liked in the old days to take the step of putting in an inspector, which of course was an immediate signal to the world that there was something wrong with the company. Under this Bill it will be possible to have inspections made of very good companies, and I hope that that will be done. If I was the Minister, I would send my inspector first of all to Lord Caccia and his Prudential. Then it would be quite possible in doubtful cases to have an inspector go along without ruining the company. He might find that it was being well conducted. That would be a great improvement on the present situation.
The noble Lord, Lord Stow Hill, has put his finger on an important facet of of this business. He stood up as the apostle of freedom and said: "How can we debar a man from running an insurance company because of unknown charges by bureaucrats behind closed doors?" There is of course great force in that argument. On the other hand, can you leave this important field wide open to the rogues of the world? It is a most attractive field for rogues, particularly from across the Atlantic; and they breed a lot there. You can collect a lot of money, and then you can vanish. Not all forms of roguery are so easy. Once you get your company launched with advertising (they say a "mug" or a sucker "is born every minute), there are always people who will fall for it. You can collect their money and vanish. I think we shall have to stick to the terms in the Bill.
May I, for instance, make a comparison with the money-lending business. I believe you can set up as a moneylender with no character at all. On the other hand, you cannot call yourself a bank, which gives you respectability, without going through a remarkable lot of hoops. I think that that is an analogous case. I do not think the moneylender would find it so easy to collect money from the general public as would somebody vino has permission to call himself a bank.
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The noble Lord, Lord Diamond, in his modern role of lugubrious prophet of doom, started out with a catalogue of restrictions. The other day it was a catalogue of records. He gave a good many, but he left out far more than he gave. I think he said that the British people were drinking far more beer than they have ever done before. I believe British swimmers are swimming faster than they ever swam before. All over the world, every day records are being beaten which are quite outside the purely political field in which the noble Lord was wandering. Here he really was a prophet of doom, and his catalogue of restrictions sounded as if the industry was rapidly coming into a straitjacket and would soon end up in Dartmoor. If we consider every other industry in this country, there is not one of which I am aware that has not, again and again, been legislated upon over the years. As people have found weaknesses and loopholes in our law, so Parliament has drawn up a new law. I suggest to the noble Lord, Lord Diamond, that he should start up a bus company and see what sort of restrictions that carries; or even a milk round, which is perhaps a little simpler; or a food or drugs factory. He will find that he is absolutely enmeshed with restrictions the whole time, and he will be very lucky, if he happens to find a loophole, if another Bill does not appear in no time to stop it up. Anything to do with commerce in this country necessitates a series of restrictions as the community finds that it needs to protect itself from the more undesirable citizens.
I think the general public prefer to have some degree of variety in their insurance. I cannot imagine enormous enthusiasm for buying forms at the overworked counters in a post office, filling them up and then going along to try and get your claim paid when the disaster occurs. It is quite fallacious to think that a Government organisation, to pay out as well as take in, could make a great saving in overhead charges. The service would either not be provided or it would cost much the same as at present. For instance, if there is a fire, we expect to have one of our surveyors on the spot within 24 hours; and we expect that there will be an assessor there within perhaps 48 hours. The Government would have

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to provide these people to do exactly the same.
I think, on the whole that this is a good Bill, but I should like to make one further point. There have been bad insurance companies. They have always been pretty well known to the people in the trade. The reason why people insure with them is because they cut the rates. If you buy cut-price insurance, you get cut price value; and sometimes, if the price is cut too far, you find that your company does not exist any longer. If you pay full price insurance, you get very good attention; and if your company is not strictly legally liable for the loss, you will without fail get an ex gratia payment. That is the virtue of having the operation done by a private system. I cannot see Government Departments paying out ex gratia payments, and I am sure the general public would have no such wish. With other noble Lords, I welcome the Bill, and I am sure that we shall have an interesting Committee stage.
5.39 p.m.
LORD JACQUES: My Lords, I have no financial interest to declare, except that I am a policy holder. But I do not seek to disguise the fact that during my working life I was deeply associated with the Co-operative Movement, in which there is a large co-operative insurance society—in fact one of our biggest societies, with assets of £600 million. And still less do I seek to disguise that my lifetime experience in the Co-operative Movement tends to influence my judgment on some things.
Like my noble friends and other noble Lords, I appreciate the initiative in having this Bill commencing in this House. I also appreciate the very lucid explanation of the Bill which was given by the Minister. Because of the nature of insurance, it is inevitable that there must be a strong need for consumer protection. The policy holder pays a premium and in return he gets a mere promise—a promise that on the happening of some event the insurer will pay. The State must be concerned as to whether the people who make the promise are suitable persons, and it must also be concerned with their capacity to carry out their promise.
It has already been explained that insurance is generally of two kinds: the
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short term and the long term. The short term, such a household, fire and motor, is on a year-to-year basis. The long term is quite different: it involves the subscription of premiums, very often over a long period of years. Consequently, the sums held by the insurance establishments on behalf of policy holders are exceedingly great, and in those circumstances it is right and proper that the interests of the policy holders should be protected by the State. At the present time there is nothing to prevent anybody from buying an existing insurance establishment, provided that the shareholders are willing to sell.
I should like to illustrate that by giving a quotation taken from the Colour Supplement of the Sunday Times last Sunday. It is a very brief quotation from an article on John Bentley, who is described as a new-style millionaire. It says:
"His major break came in 1965. He went to see Jim Slater (of Slater, Walker fame) with an incredible-sounding idea which he said would guarantee a return of £100 million for an outlay of only £2·5 million. He'd discovered that an insurance company, Scottish Life Association, was capitalised at a mere £2·5 million, yet controlled book investments worth £40 million and had hidden reserves of another £60 million. The two of them bought up 8 per cent. of the equity before the company's board discovered what was happening. The deal was caught in the bud, but the shares doubled. They had to be content with only a 100 per cent. profit but Slater was so impressed that he took Bentley under his wing."
That, I think, shows the way in which anybody can get hold of an insurance company and get access to the huge sums which policy holders have paid. Because of that it is absolutely imperative, so long as we have this system, that the State should protect the policy holders. My noble friend pointed out that this protective legislation commenced one hundred years ago. I am concerned with more recent history, especially the last twenty years.
The large and growing market for motor insurance has attracted some newcomers. The newcomers come in very often inexperienced and prepared to take far greater risks than the established companies. Very often they are prepared to cut the rates in order to get in, and consequently as might be expected, there have been failures. The failure of Fire, Auto and Marine and other companies in the 1960s caused Parliament to strengthen the powers of the Board of Trade

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in the Companies Act 1967. Despite this, however, in 1971 we had the failure of the Vehicle & General. Overnight this left 10 per cent. of motorists without cover. In addition, it placed other people in a very serious position. For example, the motorist whose car had been damaged by a negligent driver who had been insured by the Vehicle & General had no claim for the damage to his car, except against the driver, who was probably unable to meet the damage.
In an indirect sense the failure of the Vehicle & General affected all of us who drive motor cars, because in 1946 the motor insurers gave an undertaking to the then Minister of Transport that if a court gave a judgment on any liability required to be insured by law and that judgment remained unpaid for seven days, they would meet the bill at once. It was intended that that should cover the uninsured driver or the driver who was ostensibly insured but had not fulfilled all the conditions. But the undertaking was wide enough to cover the failure of other companies, so we now have the ironic position that a newcomer can come into the industry, can cut the premiums and, as a result of his recklessness, become insolvent, and a large part of the bill will have to be met by the established insurers within the industry.
It is estimated that arising out of the failure of the Vehicle & General the established companies within the insurance industry will probably have to meet a bill for £7 million arising out of the undertaking given in 1946. However, the members of the British Insurance Association sustained a loss of £31 million on motor insurance in 1970. I think we can assume, therefore, that if the insurers get this bill of £7 million from the Motor Insurers' Bureau they will have very little choice but to pass it on to the consumer. So all of us, in one way or another, will have to pay for the failure of the Vehicle & General, together with any other failure that there might be in the future in that particular field of insurance. Therefore, I believe that in the present circumstances this Bill is absolutely necessary, and has not come too early.
I should like to concentrate on three purposes of the Bill, which go to the heart of it, and to express an opinion
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as to where it perhaps does not go far enough and also where it probably goes too far. The first important purpose of the Bill is to strengthen the solvency requirements for general business; that is, the year-to-year business. The Bill does this in two ways: it gives the Department of Trade and Industry power to increase the safety margin, or the solvency margin, whichever one cares to call it, by way of regulations. That means that the Department can insist that the excess of assets over liabilities can be greater than it has otherwise been. Secondly, it gives the Department power by regulations to ensure that the liabilities are not understated and the assets are not overstated.
These are welcome provisions; they are absolutely essential. We shall seek to give further guarantees to the policy holder of motor insurance. My noble friend has outlined some of these. I do not think I need to comment further on them at this stage. I am more interested in the second of the principal objects. This is to strengthen the safeguards against the misuse of assurance funds. This is the long-term business. The Bill does this in a number of ways: first, there is the welcome provision that the assets of the life assurance fund should be separately identified. I doubt whether the provision, as it stands, goes far enough. It is not quite clear whether it would be sufficient to make an apportionment of the assets at the time when the annual balance sheet was prepared, or whether the assets of the life assurance fund have to be kept separate on receipt, and have to be separately identified at all times thereafter. I hope that the provision means the latter.
Secondly, the Bill provides that the assets of the life assurance fund shall be applied only for the purposes of the life assurance, except in so far as the assets exceed the liabilities. I have grave doubts as to whether the clauses on this point go far enough. I hope that we shall bear in mind that the investigation into Vehicle & General showed that it had two subsidiaries, and that they carried on life assurance. From one of these subsidiaries Vehicle & General borrowed £1 million for use in its motor business. The time has come when we should say quite definitely that the life funds of any company shall not be used, not only in

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any business of that company but also in the business of an associated company. This is good business practice. For example, Jim Stater, shortly after the failure of Vehicle & General, bought from the liquidator one of the subsidiaries carrying on life assurances. He at once declared that the life funds would not be used by his company, or any company with which he was associated. If that was good enough for Jim. Slater, it should be gcod enough for the Government, especially with the Minister's right honourable friend, Mr. Walker, as head of the Board of Trade.
We have doubts as to whether the Bill goes far enough so far as expenses are concerned. The Vehicle & General, in its latter years, charged management fees to its life insurance subsidiaries. There are grave doubts as to whether those fees were reasonable. It is generally thought that the fees which were charged to the life fund of the subsidiaries were excessive. We believe that this problem should be dealt with now, and should be dealt with decisively. It should be the responsibility of the directors and managers of a life assurance company to ensure that no expenses are charged to the life assurance fund which are not attributable to life insurance, and they should certify that they have observed this procedure when they sign the annual return. That is the kind of provision that should be made to stop the milking away of the funds which properly belong to the life policyholders.
Thirdly, the Bill provides that the proportion of excess of assets over liabilities which are distributed to the policy holders should not be materially reduced without appropriate publicity. I am a little concerned as to what is meant by "materially reduced", for I find m Clause 10(2)(b) that it is proposed that the shareholders could, if they so wished, reduce the proportion which goes to the policy holders by 1 per cent. in a year; and that that amount would not be regarded as "material"; it would not require publicity. May I point out that the majority of companies carrying on life assurance take less than 10 per cent. of the profits of life assurance—the figure of 10 per cent. would be rather high, but let us assume that it is 10 per cent. They could take 11 per cent. in one year, 12 per cent. in the next year, and, in the
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course of a short period of five years, they could increase the proportion taken by the shareholders by 50 per cent. We believe that this particular clause should be deleted from the Bill.
There are also other excellent provisions for the safeguarding of policy holders. In particular, there is the provision that life policy holders shall have prior claim on life assurance funds in insolvency. The liquidator should be required to continue the life assurance business, if possible. This is a very welcome provision. Furthermore, it is provided that a life assurance company cannot be wound up voluntarily. This is long overdue. At the present time a life assurance company can be purchased, it can be put into voluntary liquidation and the benefits can be taken by the new owners, to the disadvantage of the policy holders.
I come now to the last way in which the Bill seeks to strengthen the present controls. It strengthens the power to require information, and to intervene where there is doubt as to the soundness of the company, or the fitness of the directors and managers. As a whole, these prcriisions are welcome because they are, to a large extent, necessary. But we feel that this is a field in which the Bill probably goes too far. I give two examples. First, Clause 19(1) gives very wide powers to the Secretary of State. He can ask any company in the insurance business 'or any information at any time, and can specify that it has to be certified in any way. Those are very wide powers. They are powers that could be unreasonably used by a keen civil servant against a well-established company. Remember, my Lords: a keen civil servant is sometimes regarded as an over-zealous bureaucrat. We believe that the well-established, manifestly sound company should be safeguarded against that possibility. It seems to us that Clause 19 without subsection (1) would be ample to give the necessary controls to the Secretary of State. But if the subsection has to stay, we think it should be qualified; it should specify the grounds when the information can be demanded. We suggest that the grounds in Clause 11(1), (2) and (4) would be adequate for that purpose.
Clause 11(4) is another example of where the powers proposed go too far. As I understand it, Clause 11(4) deals

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with new companies. It gives the Secretary of State extensive powers in relation to new companies. He has some of those powers at the present time, but he has them for only five years. Under the Bill he would have them indefinitely. Is it reasonable that the Secretary of State should have unusual powers against the new company indefinitely? Surely there comes a point of time when a new company is an estabished company and should be treated like everybody else within the industry. I would suggest that ten years would be sufficient. If the company had not been sufficiently established at the end of ten years, then there would be other grounds in Clause 11 which could be used so that the Secretary of State could exercise the powers.
I may say, too, that I personally was very much impressed by the suggestion that there might be a tribunal as a tribunal of appeal when a person is regarded as unfit by the Secretary of State. I certainly believe that in the interests of the individual there should be some kind of precaution of that kind. In conclusion, my Lords, may I say that, as a measure of consumer protection, we welcome this Bill. We will conscientiously try to improve it in Committee, and we hope that in that spirit we shall have the co-operation of the Government Front Bench.
6.1 p.m.
THE EARL OF LIMERICK: My Lords. I am most grateful—I say this quite sincerely—to noble Lords for the understanding they have shown in this debate: understanding both of the complexities of the subject and of the difficulties which it presents to a Department charged with the protection of the public without undue curtailment of the benefits to be derived by the consumer from a substantial degree of freedom of enterprise. All the comment we have had has been constructive and I shall study it. Inevitably, some insurance managements will make mistakes in the view they have to take of future events. And no less inevitably the Department will make some in assessing the validity of the conclusions and policies of those managements, and in deciding when and how to intervene. Our objective is not primarily to penalise post facto dishonest or incompetent managements, but to protect policy holders
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by taking or requiring suitable corrective action in time to avert the consequences of imprudent or misguided policies.
I turn now to points to which noble Lords have drawn particular attention, and I shall do my best to illuminate them. The noble Lord, Lord Diamond, was kind enough to give notice of the points which he would wish to examine more closely in Committee, and I appreciate that. As he himself said, most of these are Committee points and I do not think he would expect me to comment on them. I should however like to refer to just two. One was the question of surpluses and the percentage of expenses charged against life funds. That is precisely what our regulations will be for. In the course of discussion with the industry we shall work out an appropriate framework. The second point is the one about investigation and the noble Lord's worry that a well-run company needed protection from the stigma of investigation. I have two points to make on that. The first is perhaps a rather obvious one. How do we know, without investigation, that a company is well run? On the second point, the words I would have used were taken from my mouth by the noble Lord, Lord Hawke, and the point was one I made in my speech. If we have more inspection, the stigma will be greatly diminished and will disappear. I also assume that our inspectors will be knocking on some very eminent doors in the not too distant future. They will become more like auditors, people one expects to see, and their arrival will occasion no comment.
The noble Lord, Lord Diamond, then took us through an historical review, and here again I find myself in close agreement with the noble Lord, Lord Hawke, in that the development we have seen is not surprising. Insurance is a complex industry. It is one engaged in by highly intelligent people using sophisticated techniques. It is therefore not surprising that the poacher and the gamekeeper should be playing leapfrog. I thought Lord Diamond departed from his normal standards of consistency, though, in some of the remarks which he made in that section of his speech. On the one hand, he wants increased protection in the detailed areas which he listed. On the other hand, he complains that the industry finds itself in a straitjacket, which is hardly in accordance with the welcome accorded to

1197
this Bill by the B.I.A. He wants less restriction on entering, and he is concerned with the high level of staff which we have for supervision, which, as I could well illustrate in relation to almost any other country, is still very much on the low side. But I am grateful to him for bringing out these points because I think they illustrate precisely the dilemma we have in looking at this whole area of control.
The noble Lord then went on to talk about a more radical remedy. I will not follow him far down the path that leads to nationalisation, except to say, as I feel I should, that I find myself in complete disagreement with his analysis of the Utopia which he expected to find at the end of that road. In particular, I would question his assumptions about the possibility of continuing innovation in a nationalised industry. I would question his assumptions that cost ratios would fall. I do not think that that has been the experience in other fields. Also, like my noble friend Lord Selsdon, I would greatly fear the effect of nationalisation of the industry on its very substantial contribution to our invisible earnings. But I think we shall not agree on this point, and indeed the noble Lord himself recognised that it was outside the scope of this Bill, whatever other Bills might be brought forward on some dim, distant future day.
The noble Lord, Lord Caccia, gave a general welcome to the Bill and referred in particular to the need for skilled manpower for the purpose of supervision. Here I find myself in close agreement with what he said, but I would point out that the skills required for the supervision of the insurance industry, and for the management of insurance companies, are very different skills and require very different techniques. We have recently engaged as a senior adviser to the Department an ex-general manager of one of the big insurance companies; we have an advisory committee; we are exploring with the industry other possibilities in this direction, and it is very much in mind. The noble Lord, Lord Caccia, then referred to Clause 32 and the power of exclusion. He referred to his feeling of discomfort on the question of a tribunal, and this was echoed later on by many other noble Lords. Here I would say that the dilemma is very well recognised. Anyone who has to exercise these judg-
1198
ments must feel uncomfortable about them, and I would say also that we are prepared to look at any proposal which is put forward on these lines. I cannot say that I am optimistic that there will emerge a proposal which meets our very real difficulty, on which we spent a long time in discussion and consideration.
It revolves, really, around three things. One is the safeguarding of confidentiality. The second is the burden of proof; think it is the experience of tribunals that if one is set up it tends to behave more and more like a court and demands higher and higher standards of proof. The third is the scope, the very substantial scope, there would be for delaying the proceedings of such a tribunal and for carrying on with whatever activities are complained of, rightly or wrongly, while the tribunal were reaching their findings.
The noble Lord, Lord O'Neill of the Maine, and also, earlier, the noble Lord, Lord Caccia, stressed the importance of the insurance industry for our invisible earnings, and in this I entirely echo what was said. I should like now to say a few words about what is emerging as the central worry of most noble Lords who have taken part in this debate, and that revolves around the "fit and proper persons" provisions and was introduced by the noble Lord, Lord Stow Hill, in relation to Clause 32. I listened with interest and with enjoyment to his remarks on this subject and I should like to study them carefully. I was also grateful for the precedent which he gave us concerning admission to the Bar.
I should also like to say a word about how we stand on the question of authorisations and change of control. With authorisations for companies seeking to enter de novo into this business there is no major change in prospect from the 1967 régime. We have two small changes: the first is introduced by the new definition in Clause 2 of controllers and managers—that is, persons in respect of whom the "fit and proper person" provisions criteria are applied. The second—and this was a point raised by the noble Lord, Lord Jacques, a moment ago—is the necessary lapsing of the provision that special supervision will last only for five years after authorisation. It lapses necessarily because we move into an area where there is a new system of control and where the new control, which is a

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continuing control, will apply in place of this special provision that new companies should be supervised in a special way for five years. When we come to changes of control—the Clause 32 question—the provision for prior approval of persons proposing to become controllers is a new one, which comes in in place of a restrictive action which it was only possible to apply after the event had taken place, which I think the House will generally agree must be an unsatisfactory situation.
The next difference is that a manager, and in appropriate cases also a controller, should have the right (Clause 22(1)) to be heard before the company is made aware of a possible complaint against him, which I think is a new and substantial safeguard against a situation which might leave a slur on his character if it were not satisfactorily cleared up in the course of a discussion. So there we have moved a step towards meeting this worry, rather than the contrary. Previously, the reason had to be given to the company but not as of right to the individual, although customarily it was generally given to the individual. As the Bill proposes, it will now be necessary to give particulars of the matter concerned in these cases.
This brings me to the question of appeal, and I should like to study in detail what the noble and learned Lord, Lord Stow Hill, said in this connection. I think we all acknowledge the great difficulty of this area, and indeed I stress it myself. I can recall recent cases where the new associates of a person intending to enter into the insurance industry were quite unaware of his unsatisfactory past record. So there is a real point in these provisions. The noble and learned Lord, Lord Stow Hill, then referred to the impregnable position of the Department or the Minister when they merely sat tight and said, "We are not going to tell you any reason why we object to you". I would just point out that there is always the right of appeal to the Parliamentary Commissioner (Administration) in cases where it is felt that a substantial denial of justice may exist. I would also point out that the public expects the Department, as the supervising authority, to have perfect judgment—perfect judgment, due to the advantage of hindsight. We do not like sitting on a horn—and this is a
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dilemma; one cannot avoid it, but I think we have become somewhat hardened in a certain part of our anatomy since 1967. This subject was very well explored in the debates that took place in 1966 and 1967 and I anticipate that we shall go over much of that ground, and by all means let us explore it.
The noble Lord, Lord Selsdon, made one other point with which I should like strongly to agree, which is the necessity for speed of action when this can be seen to be the necessary means of protecting the interests of policy holders. This, of course, is what a substantial part of this Bill is all about. I agree also with the noble Lord that the Bill is in no sense an indictment of the past performance of the industry at large. Indeed, it has had the general welcome which has been referred to by several noble Lords. I think the Bill will encourage the healthy development of the industry. I have already referred to two points made by the noble Lord, Lord Hawke. I should like now to refer to a third one, which is his reference to the necessity and desirability of competition, which I believe is a strong point. As we stand to-day there are under the supervision of the Department 760 insurance companies from which insurers can choose. In the motor field alone—and this includes Lloyds—there are some 270 motor insurers from whom the motorist can make his selection.
The noble Lord, Lord Jacques, made a number of points to which I have no doubt we shall return; therefore I shall not comment on them all. He started by declaring his interest as a policy holder, and that struck me as interesting, because I doubt whether there is a single noble Lord who would not have that interest as a policy holder. That is just the point: it is a very wide-ranging industry and that is why it needs such special treatment. The noble Lord referred also to the hardships arising from the V. & G. case, and here again this illustrates the reason why we are asking for these new powers. The basic trouble there was that premiums were too low; so, to a degree, of course, what he says is absolutely correct: that we are asking the insurers of the future in some way to pay for the losses of the past. The noble Lord then asked one or two specific questions and I think I can reassure him on at least two of them. The first was about the

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segregation of long-term assets, and here indeed it will be necessary, as soon as these provisions become operative on the time table which is apparent in the Bill, that they shall be separately identified at all times in the records of the company and not merely in annual returns. The noble Lord referred to the question of expenses and we expect to lay regulations which will deal with their proper apportionment on reasonable commercial terms implicit in a proper use of long-term assets.
Then the noble Lord moved to an area which we all acknowledge to be of great difficulty, and I listened with sympathy to what he said, which was in regard to the integrity of funds which represent the interests of long-term policy holders. Nevertheless there are problems in this area. For instance, if the top company is a life company and it has subsidiary companies engaging in general insurance, it may be, as seen from a record extending over decades that the business is conducted in this way entirely properly, without any prejudice to the present or foreseeable interests of policy holders. Nevertheless this sort of situation is hard to disentangle. There are all sorts of legal complications and taxation complications in transferring assets from one company to another which would have to be taken into account. As we stand today, we are seeking wide powers ad hoc. We shall have our quarterly reports when we hear of something going wrong and we shall be able to move in quickly and prevent the making of new investments or loans, as the case may be. But a general prohibition is rather a different matter and there are problems which would have to be discussed. I have no doubt that the noble Lord will have noted that under Clause 3 we have power to bring into effect arrangements to ensure the impossibility of having life business conducted in future in the same company as general business.
LORD JACQUES: My Lords, would the Minister agree that it would be good for investment of life funds in the same company or the same group of companies to be prohibited, except with the consent of the Secretary of State?
THE EARL OF LIMERICK: My Lords, that is a rather difficult point and I should not like to give an off the cuff
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answer. Perhaps it would impose a heavy and unnecessary duty on the Secretary of State. But certainly it is a matter about which I should be happy to think. The noble Lord, Lord Jacques, mentioned two areas in which he thought we had gone too far. One was in respect of Clause 19(1); he is worried about the possible actions of some keen civil servants. I am happy to say that keen civil servants do exist. Experience, however, has shown that if they show too much keenness they upset the recipients of their demands and it is not very long before a complaint comes back to a higher authority and keenness is put back into its proper perspective in this sphere of supervision. The noble Lord also referred to his worries about Clause 11(4). I think I have already dealt with these; this is the question of the five-year limit. I hope that I have answered most of the points that were raised in the debate and certainly those that can be answered at this stage. It only remains for me to thank noble Lords who have taken part, and I shall be looking very closely at what they have said.
On Question, Bill read 2ª, and committed to a Committee of the Whole House.

SALMON AND MIGRATORY TROUT (NORTH-EAST ATLANTIC) ORDER 1972
6.23 p.m.
EARL FERRERS EARL FERRERS rose to move, That the Salmon and Migratory Trout (North-East Atlantic) Order 1972, be approved. The noble Earl said: My Lords, it may be for the convenience of your Lordships if we discussed at the same time the two following Prohibition Orders which stand in my name. These three Orders replace the existing Salmon and Migratory Trout (Prohibition of Fishing) Order 1971 which expires on February 14, 1973, and it may be helpful if I refer first to the North-East Atlantic Order. This would prohibit fishing for salmon and migratory trout by British fishing vessels in the North-East Atlantic Fisheries Convention area outside British fishery limits. The existing Order was made in the light of the Resolution passed by the North-East Atlantic Fisheries Commission in 1970. The Order now before your Lordships would continue this arrangement for ten

1203
years. The Government think that this is a reasonable length of time in which to take a view of the working of the conservation arrangements. The period of operation for which it is suggested that this Order should operate coincides with the length of operation of the other two Orders now before the House.
The Prohibition of Fishing Order would also replace arrangements which are embodied in the current Prohibition Order, which expires in the middle of this month. It is designed to prohibit fishing for salmon and migratory trout off the coasts of England and Wales outside our exclusive fishery limits. Such fishing has, under existing arrangements, been controlled in the waters off England and Wales through a licensing system operated by river authorities and the Ministry of Agriculture. No change of substance is proposed under the new Order, but with the agreement of those concerned its effect is that river authorities or their successors will now become solely responsible for the issue of licences to fishermen who wish to catch salmon and migratory trout.
The Ministry of Agriculture has a comparatively small role. It used to be the role of issuing licences for use in the three to twelve-mile belt of our fishery limits. This will now cease and those who are in the best position to decide on the issue of licences—namely, the river authorities or their successors—will undertake the whole task in the nought to six-mile belt of water for which they have responsibility.
The No. 2 Prohibition Order would, as under the arrangements made in the existing Order, continue the prohibition of all fishing for salmon and migratory trout by all fishing boats in British fishery limits off the Scottish coast. Separate Orders are desirable in this instance not only on grounds of simplicity but in case, for example, legislation were to be introduced affecting the position in Scottish waters. The duration of this particular Order is therefore uncertain, although provision is made in it to continue it for ten years, like the other Orders. If a change in the control arrangements off Scotland were to be made, that could of course be done without affecting the other two Orders which I have described. I beg to move.
Moved, That the Salmon and Migratory Trout (North-East Atlantic) Order 1972, be approved.—(Earl Ferrers.)
6.27 p.m.
LORD BALFOUR OF INCHRYE: My Lords, before we part with these Orders there is some information which I should like the Government to give the House. First, when, oh! when, is the promised legislation coming? The Minister mentioned it but we have been waiting eleven years for legislation based on the Report of the Hunter Commission. If my noble friend could say that it is coming during this Session of Parliament, many of us would be greatly relieved.
Secondly, I should like information in respect of the Southern part of the Northumbrian River Authority, where what I would call an open-door for drift net fishing has existed and which has done much to nullify the good effects of the drift net prohibition in Scotland. In a debate a year ago the then Minister of State for Scotland, the noble Baroness, Lady Tweedsmuir of Belhelvie, admitted that the number of licences in that particular area had leapt to the enormous figure of 240. It was, however, she said, hoped gradually to reduce the number of licences to 40, which would be a reasonable figure. Indeed, I regret to say that Scotsmen were coming down to Northumberland to get licences from that local authority, so popular was the obtaining of licences there and so comparatively easy was it to get them, and then they were able to drift net in places where drift-netting should not have taken place. Can the Minister say how far the hopes of the then Minister of State have been justified? Is the total down to forty or some similar figure?
The third piece of information I should like is in regard to fishing off Greenland. Will that be reduced as the result of one of these Orders now before us? I welcome these Instruments as one, like many other noble Lords, who is anxious to see this noble fish preserved not only for sport but for food and commercial purposes in the United Kingdom. This is the first breakthrough we have had, thanks to the North-East Atlantic Conference and to Danish resistance to a position which was untenable from their point of view. It is a start. It is not the whole distance; but I am grateful for it, and I know that many others will be

1205
pleased that these Orders are before your Lordships to-night.
6.30 p.m.
LORD WALSTON: My Lords, I intervene very briefly to welcome these Orders. I do so as somebody who, some 18 months ago, presented a report to the Council of Europe on this subject which, I am glad to say, was accepted there. It is good to know that Her Majesty's Government are taking this very necessary and valuable action. The only point I would stress, which I am sure the noble Earl has very much at heart, is the need to continue watching the situation, particularly in the North Atlantic. What is being done at present is certainly a step in the right direction. It may well be an adequate step; it may be that there is no need to do any more than this. But knowledge so far is insufficient. We have to watch very carefully to make sure that the stocks do not diminish and that the steps which have been taken already by Her Majesty's Government and by other Governments are indeed adequate. If they are not, then we must be prepared to act very quickly. So in welcoming this Order I urge upon Her Majesty's Government the need continually to watch the situation and not to delay if it appears necessary to take any more drastic steps than have been taken at present.
EARL FERRERS: My Lords, I am grateful to my noble friend Lord Balfour of Inchrye and the noble Lord, Lord Walston, for giving these Orders the welcome that they have done because we are all at one in wishing to conserve the salmon stocks and the salmon situation. My noble friend asked, "When will the Hunter Report be put forward in the form of legislation?" I know that that is a matter which greatly concerns him and a number of other people, particularly North of the Border, and I can assure your Lordships that it is the Government's firm intention to introduce a Bill as soon as it can be fitted into the Parliamentary timetable. Whether or not it will be possible to do so in the current Session will depend upon the progress of the business we have in hand. But I can assure my noble friend that it is our intention that this should be done as soon as is possible.
My noble friend referred also to the situation with regard to the drift-netting
1206
off the North-East coast of England, and he particularly asked for the position with regard to licences given by the Southern part of the Northumbrian River Authority. It is perfectly true that over the last few years, in fact back in 1970 only, there was considerable drift-netting there and the number of licences issued in 1970 was 148. It then went up to 254 and is now down to 91. That figure will revert to 40; but as my noble friend will know, anyone who has had a licence one year has a licence of right to have it another year and it is, therefore, a question only, as it were, of wastage until we get down to the figure of 40. But while on that point, I am sure that my noble friend would be interested to know that the actual number of salmon and grilse caught in 1970 was nearly 31,000 while in 1972 it was down to 6,000.
He referred also, as did the noble Lord, Lord Walston, to the situation with regard to the fishing off Greenland in the high seas. Of course this has been the very great concern of this country for some years, and this particular fishing developed rapidly only over recent years. We are anxious that steps should be taken to safeguard the stocks in this area from over-fishing because there is no doubt that many of the salmon caught there would have returned to our own rivers. Various taggings that were done of salmon show that of 22 fish which were tagged in Greenland, ten were found in the home waters in North America, five in Scotland, four in Ireland, and three in England and Wales, which shows that salmon in that area would, or might, have returned to their home waters.
The only way in which this can be controlled effectively is by international agreement and we are members of the International Commission for the North-West Atlantic Fisheries. That particular body has considerd this matter in its last six meetings. In 1970 agreement was reached upon a resolution under which most countries accepted a complete ban on fishing. But the other countries who could not go quite so far agreed to limit their effort to the 1969 levels. In addition—and I believe that this is an important point—agreement has been reached for the phasing out of fishing for salmon by all non-Greenland vessels by the end of 1975. While I recognise that this does not go as far

1207
as some people would wish it to go, it is fair to say that the measures which have been taken will go a long way towards safeguarding the stocks, and I can assure the noble Lord, Lord Walston, that we shall watch this point; but, in the end, one can only get it by international agreement. My Lords, I hope that your Lordships approve the first Order which stands in my name.
On Question, Motion agreed to.

SALMON AND MIGRATORY TROUT (PROHIBITION OF FISHING) ORDER 1972
6.36 p.m.
EARL FERRERS: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the Salmon and Migratory Trout (Prohibition of Fishing) Order 1972 be approved.—(Earl Ferrers.)
On Question, Motion agreed to.

SALMON AND MIGRATORY TROUT (PROHIBITION OF FISHING) (No. 2) ORDER 1972
EARL FERRERS: My Lords, I beg to move.
Moved, That the Salmon and Migratory Trout (Prohibition of Fishing) (No. 2) Order 1972 be approved.—(Earl Ferrers.)
On Question, Motion agreed to.

ADMINISTRATION OF JUSTICE BILL [H.L.]
6.37 p.m.
THE LORD CHANCELLOR (LORD HAILSHAM OF SAINT MARYLEBONE): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(The Lord Chancellor.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ALPORT in the Chair.]
Clause 1 agreed to.
Clause 2 [Stipendiary Magistrates]:
LORD GARDINER LORD GARDINER moved Amendment No. 1:
Page 4, line 4, leave out from ("Wales") to end of line 7 and insert ("shall not in the Inner London area and in the City of London exceed sixty or elsewhere eighteen unless so provided by Order in Council laid before Parliament and approved by both Houses of Parliament.").
The noble and learned Lord said: It is a tribute both to this Bill and to the noble and learned Lord the Lord Chancellor that, although it is an important Bill, there is only one non-Governmental Amendment at the Committee stage of the Bill. We have considered the Government Amendments which are to follow later. They are mostly technical or drafting and we raise no objection to them or any objection to however fast the noble and learned Lord likes to dispose of them.
The subject matter of the Amendment I am moving raises a question of some importance which I mentioned at the Second Reading of the Bill. It relates to our system of criminal justice which is unique in the world in that 98 per cent. of all criminal cases are decided by laymen. There is no other country in the world, I believe, in which that is the case, and indeed there is no country where, with them and juries, lay citizens play so large a part in the administration of justice. My Amendment is designed to prevent this system from being radically changed without the authority of Parliament.
The present position is this. In London, where the work is very heavy indeed, including long cases which are going to trial and a multiplicity of small traffic offences, there have to be a number of stipendiary magistrates. These are limited by Statute to 40 and there are at present 39 in post. Outside London, the position is that stipendiaries can be appointed only on the application of the local authority and at the moment there are only 11. The Bill proposes that instead of their being appointed only on the application of a local authority, the Lord Chancellor should be able to appoint as many stipendiaries throughout England as he likes, and that there should also be no limit whatever to the number of stipendiary magistrates in London. It would thus be possible—not, of course,

1209
immediately but at a future date—to change the whole of the system without the authority of Parliament.
The answer made by the noble and learned Lord to this unusual and drastic proposal was, first, that he was just as much an enthusiast about the justices of the peace as I am; that he had no intention of appointing more than one or two outside London, or as might be necessary in London, and that if he wanted to he could not because there would not be enough lawyers to be appointed. I fully accept all that. But it is the way of Government Departments to take wider powers than they necessarily need, and this is a question which is essentially a matter of opinion. I think all those who have addressed public meetings of one kind and another where questions are put relating to the administration of justice know that one question you are always asked is: "Would it not be better, instead of having all these lay justices, to have stipendiaries?". That is something on which different views may be held. If a Lord Chancellor in the future persuaded his colleagues that that was desirable, it is a change which, if the Bill is passed into law in its present form, he could very easily make.
One stipendiary is about equal to 50 justices of the peace. This is because he sits daily; the justices sit on average once a fortnight and there have to be two or three justices sitting together. There are about 1,000 courts sitting daily, 950 presided over by justices and about 50 by stipendiaries. Therefore, if a Lord Chancellor wanted radically to alter the system, and persuaded his colleagues to accept his view, he could very easily do so, because every year about 1,500 justices retire and 1,500 others have to be appointed; so by appointing stipendiaries and omitting to appoint further justices of the peace the change could very easily be made.
What, therefore, this Amendment seeks to do is to place a limit on the number of stipendiaries who can be appointed without coming to Parliament. It is proposed that in London that number should he an increase of rather more than 50 per cent. As I have said, there are 39 in post and the Amendment proposes that there should be a maximum of 60; and
1210
that outside London, where there are 11, there should also be an increase of rather more than 50 per cent. These figures, I hope, are reasonable. At the Second Reading the noble and learned Lord also made the point that once you have a statutory limit difficulties can arise, because then you have to pass an Act of Parliament to get the statutory limit altered. Therefore, in the Amendment which I have put down—though I do not suppose for a moment it is properly worded—I have sought to provide that if at any time it is thought that the numbers are insufficient, instead of coming to Parliament with a Bill it would only be necessary for the Government to come to the House with a Statutory Instrument for an increase, provided it was approved by both Houses of Parliament.
On the Second Reading of the Bill, the noble and learned Lord was good enough to say:
"…this is not the kind of Bill about which I have any inhibitions. I should be delighted to have suggested Amendments on this subject. If the noble and learned Lord, Lord Gardiner, desires me to curb the powers which I am proposing, I am sure he will do so kindly and I will certainly look at any Amendment he or anybody else puts down; and in the meantime I will contemplate the possibility of proposing a Government Amendment, without undertaking to do so. At any rate, this is not something about which I feel any kind of false pride and I should be delighted to have any suggestions for improvement either now or at any other time."—[OFFICIAL REPORT, 29/1/73. col. 426.]
So I am not unhopeful that the noble and learned Lord will favourably consider the Amendment.
In a sense, if I may say so, for one who is as logical as he is, I think he is in a slight logical dilemma, because, of course, the more he says, "But I have no intention of doing anything of the kind; I may want a few more in London; I might want to appoint a couple of extra ones in the Provinces, but I am certainly not going to do this", the less reason there is for his opposing the provision that there should be a point beyond which future Lord Chancellors cannot go without the authority of Parliament. He has also said, of course, that he would have to get the agreement of the Treasury, but if a future Lord Chancellor persuades his colleagues to adopt this policy it would follow that lie would also get the approval of the Treasury. I beg to move.
THE LORD CHANCELLOR (LORD HAILSHAM OF SAINT MARYLFBONE): The noble and learned Lord has rightly said that he raised this question on Second Reading, and, as I promised on Second Reading, I went straight back and took advice about both the principle and the practice of this. I received very strong advice against a statutory limit, both on principle and in practice, and I should like the noble and learned Lord to consider some of the things which were said to me, as I think on the whole they are persuasive.
The noble and learned Lord referred to the Bill as drafted in Clause 2 as an unusual and drastic proposal. I think for once he was overstating his case. When he left me the valuable legacy of the Courts Bill, which is now in the form in which I approved it—it was not identical, but I think for this purpose is very nearly the same—I found a proposal that I should have an unlimited power, exactly as drafted here, to appoint circuit judges under the new Courts Act. Indeed, I have had that power and I have had to appoint, I think, more circuit judges than Lord Chancellors have ever appointed county court judges or chairmen of quarter sessions in the history of the sport. A circuit judge is a very highly paid official, I think far more highly paid than a stipendiary, and I am allowed to appoint as many as I like simply after consulting the Civil Service and without getting express approval of Parliament. Of course, I have to persuade the Civil Service Department and I have to persuade the Treasury, which is really a effective bar to my appointing too many.
I do not know what I would do if I had to ask for Parliament's approval every time I wanted to raise the maximum, and I must say that if I chose to be the kind of Lord Chancellor that the noble and learned Lord is postulating some Lord Chancellor might be in the future, I could put all those circuit judges on the Commission of the Peace, and as they would be receiving a permanent salary they would do a great deal of work for nothing. So in effect I could outwit the wishes of Parliament, if they were as embodied in the noble and learned Lord's Amendment. The fact is, of course, that what the noble and learned Lord has done is to swallow a camel himself
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fand then five years later ask me to strain at a gnat, because this is very much less than he left behind to me. I suggest that the danger which he postulates is wholly fanciful. I was not just saying it for the sake of saying it. I think that there has been no more vocal, articulate, and sincere apostle of the lay magistracy than I, and I certainly have not the intention of using the power to any appreciable extent.
But my experience—and I suspect the noble and learned Lord's experience—has been that every time you put a statutory limit on anything which is as rapidly increasing as crime is at the moment, sooner or later you find that you are up against the Statute. I appreciate that he has provided in his Amendment that there should be an Order in Council and not an amending Act if the statutory limit is to be raised. But I really would ask the Committee to consider this aspect, that almost every week we are adding to the burden on Parliament by providing for the Affirmative Resolution procedure, so that every time you want to do anything you have to add to the burden of both Houses by a separate debate on the subject. I should have thought that this is a burden that we could, on the whole, afford to do without, and not lay it upon our successors, and this is the advice which I have received.
Now may I turn from the general to the particular. I would ask the noble and learned Lord to consider this: as I have said I have absolutely no intention of altering the system in the Provinces or for that matter in London. In London, during my lifetime at the Bar, the system has moved in favour of the lay magistracy and not against it. When I first went to the Bar, apart from licensing and juvenile courts (or whatever they were then called), all the London work was done by stipendiaries. It is now very largely done by lay magistrates—I think to the infinite advantage of the public, and also the taxpayer. I have now 39 London stipendiaries in post, and I have a maximum limit of 40, so I am right up against the limit.
I should like to take this opportunity of explaining what I am doing. I have been using them more and more as deputy judges in the Crown Court, and sometimes appointing them to the Crown Court. The reason for that is partly because they are

1213
so good at it and partly because there was a time, not very long ago, when a stipendiary magistracy was considered to be a dead end. I do not want it to be considered a dead end; I want the stipendiaries to be able to think of themselves as potential judges of the Crown Court if their work is successful, so that they do not get into the stale feeling that sometimes a man does if he has reached the end of his career at a comparatively early age. I am sure that this has been a good plan.
So far as the figure 60 is concerned, I should have thought that probably would have met my needs, or the needs of my successors, for quite a considerable period of time. But just look at where you are getting; what the noble and learned Lord proposes is that there should be 60 for the metropolitan area alone to be appointed without going to Parliament, and only 18 for the whole of the rest of England and Wales. We know that there are historical reasons why there are a lot of stipendiaries in the Metropolis and practically none anywhere else. It may be that that situation can continue indefinitely; I do not know. It seems to me, however that there is no logic about this kind of arrangement though as I say I see absolutely no reason why I should alter the balance at the moment. This is because as I chose to say outdoors last week—and I shall be saying again when we come to a debate next week about the Criminal Law Revision Committee—my chief preoccupation at the moment is not to impose a number of unwanted judges on a lot of eager and efficient lay magistrates; my chief preoccupation is to find lawyers of adequate calibre to undertake the posts that I have got available. I think that I have made more than 100 appointments to the Crown Court in one way or another and certainly approaching 200 part-time recorders.
The effect of what I have done in the last three years is to diminish the practising Bar at the top by something like 10 per cent. of its total numbers in whole-time appointments, and possibly another 10 per cent. in part-time appointments. I have really imposed a great burden upon the profession, and the danger is not that I shall be making too many but that I shall not find enough to make. I say frankly that I do not see any radical
1214
difference in principle now between the great urban areas in the Provinces and the Metropolis, although, as I say, I have no intention of altering the balance as regards the figure of 18 for the Provinces which is, I should have thought, spectacularly low as compared with the proposal of 60 for the Metropolis.
I must tell the Committee that there were 18 provincial stipendiary magistrates 20 years ago. It is true, as the noble and learned Lord has rightly said, that there are now only 11; but the reason for there being only 11 now is the reason I gave on Second Reading; namely, that provincial cities have been extremely reluctant to petition the Lord Chancellor, or the Crown, for the appointment of a stipendiary, and very often have not done so when a stipendiary would have been extremely useful. The reason for this is very largely because they did not want to pay a salary which was determined as to its size by the central Government. We are, by this Bill, undertaking to pay the salary, and I should have thought that it was a reasonable piece of judicial administration to determine whether or not a stipendiary post, that we shall pay for, is required.
The other reason why the Provinces are rather slow to petition is that sometimes local benches of magistrates have, I think rather fanciful, fears that one is trying to supersede them in their work, which is far from the truth. It is true, as the noble and learned Lord said, that I said on Second Reading (and it is the case) that my present intention is to appoint one or two, which is well within his proposed maximum. Therefore, in practice, I do not suppose that I should be much constricted. However, I should expect to find at some future date that we might get back to 18, which was, after all, the figure of 20 years ago when the work was much less onerous and far less in volume. They are extremely valuable characters to have in the Provinces. It is for this reason that I intend, as I said on Second Reading, to extend their jurisdiction from the boroughs, where alone they are now allowed to operate, to the whole of the new counties. There are cases which are better taken by a professional, and to have them there is a convenience. It may have special value in Wales too, for rather a different reason, which I will not enter into at the moment.

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The noble and learned Lord can rest assured that I am not receding from what I said on Second Reading. I do not regard this as a slur on myself or any future Lord Chancellor; but the advice that I have is that this Amendment is not right, and I wonder whether the noble and learned Lord wishes to press it in the light of this expression of opinion, which I believe is the best view that can be formed.
6.59 p.m.
LORD GARDINER: This is not a particularly crowded Committee. May I say first that I made it plain on Second Reading of the Bill that, in so far as the Bill provides that in future stipendiaries can be appointed by the Lord Chancellor otherwise than on a petition by the local authority, I entirely agree with him. It is in accordance with the spirit of the Report of the Royal Commission on Assizes and Quarter Sessions and of the Courts Act. So far as Circuit judges are concerned, I have no objection to however many are appointed. It does not really affect at all the justices of the peace.
The noble and learned Lord said that my fears were wholly fanciful. I can only assure him that, after making careful inquiries, the justices of the country as a whole are very concerned indeed about the Bill on this point. The Magistrates' Association is always in a little difficulty, because the noble and learned Lord the Lord Chancellor is their President. But I can assure him that I know there is very great concern indeed among the justices. Under my proposals, any Lord Chancellor would be entitled to appoint an additional 28 stipendiaries; that is the equivalent of 1,400 justices less. All I am saying is simply this: that I do not think we ought to go further than that towards replacing justices by stipendiaries without coming to Parliament—not necessarily in a Bill; I appreciate that that can be a nuisance and I have provided against that by enabling the point of further increases to be brought forward in a Statutory Instrument.
I shall of course carefully consider what the noble and learned Lord the Lord Chancellor has said. It may be that we can consult together and consider what sort of figures would be acceptable to him, because my sole desire (and I accept
1216
everything he has said throughout about his own personal view about the justices, which I know is the same as mine) is to prevent some future Lord Chancellor who, perfectly bona fide on a question which is a matter of opinion, might consider it would be a very good thing if we replaced the justices by stipendiaries, from being able to do so—as he would be able to do if this Bill passed in its present form—without further reference to Parliament. Meanwhile, and before the Report stage of the Bill, I will of course consider most carefully everything which the noble and learned Lord has said.
THE LORD CHANCELLOR: I am grateful to the noble and learned Lord. Of course I shall be only too glad to consult with him, as I always am.
Amendment, by leave, withdrawn.
Clause 2 agreed to.
Clauses 3 to 7 agreed to.
Clause 8 [Judicial salaries]:
7.2 p.m.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved Amendment No. 2:
Page 7, line 16, leave out ("ordinary").
The noble and learned Lord said: Perhaps I may discuss Amendments Nos. 2, 3, 4, 5, 6, 11, 12, 14, 15, 16 and 18 together. They all relate to the omission of the word "ordinary". There is a technical reason for this Amendment: it is to repair a mistake of construction which occurred in my Office. It makes no difference to the substance of the Bill and, unless I am pressed, I do not particularly want to go into the detail, which is quite intricate. So I beg to move.
On Question, Amendment agreed to.
THE LORD CHANCELLOR: With the consent of the Committee, may I take Amendments Nos. 3, 4, 5 and 6 together? They are all the same. I beg to move.
Amendments moved—
Page 7, line 17, at end insert ("other than the Lord Chancellor").
Page 8, line 3, leave out subsection (6).—(The Lord Chancellor.)
On Question, Amendments agreed to.
Clause 8, as amended, agreed to.
Clause 9 agreed to.
Clause 10 [Retirement of higher judiciary in event of incapacity]:
THE LORD CHANCELLOR: I beg to move Amendments Nos. 5 and 6.
Amendments moved—
Page 8, line 19, leave out ("ordinary").
Page 9, line 12, leave out subsection (5).—(The Lord Chancellor.)
On Question, Amendments agreed to.
Clause 10, as amended, agreed to.
Clauses 11 and 12 agreed to.
Clause 13 [Appointment of deputy district registrars of High Court and deputy county court registrars]:
THE LORD CHANCELLOR THE LORD CHANCELLOR moved Amendment No. 7:
Page 10, line 21, at end insert—
("(3A) Section 29(1) of the County Courts Act 1959 (which provides that no officer of a county court shall, either by himself or his partner be directly or indirectly engaged as solicitor or agent for any party in any proceedings in that court) shall not apply to a deputy county court registrar appointed under this section; but a deputy district registrar or deputy county court registrar so appointed shall not act as such in relation to any proceedings in which he is, either by himself or his partner directly or indirectly engaged as a solicitor or agent for any party.")
The noble and learned Lord said: This is another purely technical Amendment. It is to restore what is, in effect, subsection (6) of Section 11 of the Administration of Justice Act 1956, which this Bill would repeal. As it stands, and without the Amendment, Clause 13 of this Bill contains nothing to prevent a deputy district registrar acting as such in a matter in which he or his partners may be professionally engaged. I beg to move.
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This Amendment is consequential. I beg to move.
Amendment moved—
Page 10, line 43, after ("subsections") insert ("(3A)").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 13, as amended, agreed to.
Clause 14 agreed to.
Clause 15 [Commencement and transitional]:
THE LORD CHANCELLOR: This Amendment corrects a misprint to which
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I referred in my Second Reading speech. The year "1974" should be read, instead of "1973" as in the print. I beg to move.
Amendment moved—
Page 12, line 6, leave out ("1973") and insert ("1974").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 15, as amended, agreed to.
Clause 16 agreed to.
Schedule 1 [Justices of the peace (consequential re-enactments and amendments)]:
THE LORD CHANCELLOR: This Amendment corrects a faulty reference. Paragraph 12 in Part IV of Schedule 1 refers to an Amendment made by Section 58 of the Criminal Justice Act 1972 to Section 27 of the Justices of the Peace Act 1949. The Amendment was in fact made by Section 61 of the 1972 Act, and this is put right by the Amendment which I now propose. I beg to move.
Amendment moved—
Page 19, line 13, leave out ("58") and insert ("61").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Schedule 1, as amended, agreed to.
Schedule 2 agreed to.
Schedule 3 [Pensions of higher judiciary]:
THE LORD CHANCELLOR: Amendments Nos. 11 and 12 cover the same point about the word "ordinary" which we dealt with earlier. Amendment No. 13 will be slightly different. I beg to move.
Amendments moved—
Page 20, line 35, leave out ("ordinary").
Page 20, line 36, after ("Wales") insert ("other than the Lord Chancellor").—(The Lord Chancellor.)
On Question, Amendments agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved Amendment No. 13:
Page 21, line 26, leave out ("as Lord Chancellor").
The noble and learned Lord said: This Amendment and Amendment No. 17 on line 32 are both drafting Amendments. The words to be left out make no difference to the sense of paragraph 3 of Schedule 3 (which defines the relevant

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service for the purpose of calculating the pensions of the Higher Judiciary) because the Lord Chancellor is, by virtue of Section 2(1) of the Supreme Court of Judicature (Consolidation) Act 1925, a Judge of the High Court, which is part of the Supreme Court, and he is covered by the references in the paragraph to a Judge of the Supreme Court. The Amendments are therefore consequential on the removal of the definition of the words "ordinary judge" from paragraph 4 of Schedule 3. With that explanation, I beg to move.
On Question, Amendment agreed to.
THE LORD CHANCELLOR: If I may deal with Amendments Nos. 14, 15, 16, 17 and 18 together, they are all concerned with points I have already explained. I beg to move.
Amendments moved—
Page 21, line 27, leave out ("ordinary")
Page 21, line 30, leave out ("an ordinary") and insert ("a")
Page 21, line 31, leave out ("an ordinary") and insert ("a")
Page 21, line 32, leave out ("as Lord Chancellor")
Page 21, line 37, leave out paragraph 4.—(The Lord Chancellor.)
On Question, Amendments agreed to.
Schedule 3, as amended, agreed to.
Schedule 4 [Repeals]:
THE LORD CHANCELLOR: This Amendment and the next one, No. 20. correct another faulty reference. There is no paragraph 20(8) in Schedule 2 to the Administration of Justice Act 1964, but there is a sub-paragraph (8) in paragraph 20 of Schedule 3 to that Act, and this is the sub-paragraph which should be repealed. I beg to move.
Amendments moved—
Page 26, leave out line 23.
Page 26, line 26, at end insert ("and (8)").—(The Lord Chancellor.)
On Question, Amendments agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved Amendment No. 21:
Page 28, line 30, leave out ("subsections (4), (5) and") and insert ("subsection (4), in subsection (5) the words "and provisional district registrar", subsection").
The noble and learned Lord said: This is a drafting Amendment to make
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good a mistake in the drafting of the Bill. Section 84(5) of the Supreme Court of Judicature (Consolidation) Act 1925 provides as follows:
"The power to make appointments to the office of district registrar and provisional district registrar shall be vested in the Lord Chancellor".
The repeal Schedule to the Bill, which is the Schedule we are now discussing, Part VI, inadvertently repeals the whole of this subsection, thus removing the Lord Chancellor's power to appoint district registrars. The Amendment puts this right by limiting the repeal to the reference to provisional district registrars, this office being abolished by Clause 13 of the Bill, which provides for the appointment of deputy district registrars by the Lord Chancellor. I beg to move.
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This Amendment concerns additional repeals which are consequential on the Amendments to Clause 13, Nos. 7 and 8. which we have already passed. I beg to move.
Amendment moved—
Page 28, line 40, at end insert—

("In section 29, the subsection (1A) inserted by the Administration of Justice Act 1970.

1970c. 31.

The Administration of Justice Act 1970.

Section 46.")

—(The Lord Chancellor.)
On Question, Amendment agreed to.
Schedule 4, as amended, agreed to.
House resumed: Bill reported with Amendments.

BANKRUPTCY LAW
7.15 p.m.
LORD HALE LORD HALE rose to ask Her Majesty's Government whether they are satisfied with the practice and procedure of the existing law of bankruptcy and with its equity to debtors. The noble Lord said: My Lords, it is 56 years since I entered the office of the Official Receiver in Bankruptcy at Leicester and found myself becoming acquainted with a procedure which had been enacted in 1914, though substantially based on Acts passed many years before. Fifty-six years ago, of course,

1221
was a time when the roses were not blooming in Picardy, nor the poppies growing in Flanders. Best blood, having run, was then manuring the plain. In Leicester, business was as usual, and there was very little bankruptcy work about for some time. Customers were rare; but my principal was also a practising solicitor. I hope your Lordships will forgive me if I say very briefly what we did. I recall a single, simple case. One day, while my principals were out, a lady called to say that she felt she ought to go bankrupt, and that her friends had so advised her. I had to tell her that she must deposit £10 as evidence of insolvency, as that was a requirement of the law, rather in the manner of the story about the virgin who applied for admission to the Magdalen Hospital for Fallen Women and was told she had not yet fallen and must go out and come back morally depraved.
Having got the £10, I had to fill in a form setting out this Leicester lady's long history; I had to prepare her statement of affairs, which was minimal, because she had no assets and had borrowed the £10; and I had to prepare a form of adjudication and receiving order, take them round to the county court and have them stamped by an elderly clerk who was almost blind and who used to say, "Is this in order?" and, in response to the reply "Yes", stamp something twice and send out the notice to the Press. By that time, much of the procedure was over. There remained only the public examination before the registrar on a day fixed, which would almost inevitably be formal until some information came in. I waited for the congratulations of my principals on this evidence of industry, but they came back and said, "You have not put in the lady's occupation."I said," She hasn't got an occupation", and they said, "Then she cannot possibly be made bankrupt; a married woman can be made bankrupt only if she is in a trade or business." I said, "You should have told me that before, but this matter is now res judicata, the matter is published, she is adjudicated and there is a receiving Order"; and, with that tact which always gets us out of our legal troubles, the public examination did not raise the question of the lady's occupation and she still remains one of those examples to which the noble and learned Lord so felicitously
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referred in his brilliant judgment on Monday as one of those unexpected events which shape the history of the law.
My Lords, some six years later I left to buy a brass plate and was not directly concerned with bankruptcy law for a long time, though from time to time one had ample evidence of its difficulty. But one of the problems when I was in the bankruptcy office was that, as the years went by, particularly in the case of country bankruptcies and we gathered less and less to share, there was a flood of anonymous letters making allegations against the conduct of the bankrupt. For example, "There was an old Rolls-Royce car that he used to park in the tithe barn"; and if we looked in the tithe barn we would find this—in those days—not very sub-stantial asset. Or, "There was a lady who visited him and stopped all night and was seen to be wearing jewels". Those letters arrived in quantities.
I have often argued that one should not act on anonymous information, but my police constable friends tell me that a "tip off" is better than Lord Peter Wimsey; and that if it is not acted upon a great deal of very useful information would be rejected. We did not try to look into these things; but if the vicar had the car in the tithe barn, the vicar's name appeared in the Press. He was asked to explain it; and he did. With luck, he could make a statement to the Press and get away with a headline saying, "Vicar denies allegations"—never the most happy form of exculpation. No doubt he was interviewed by his Bishop and told that Christian charity has limits and should be exercised with discretion.
I do not propose to mention the other things that happened. But it was the law. The official receiver or, in case of assets, the trustee appointed by the creditors acting on the instructions of a committee of inspection appointed by them, should in open court question the bankrupt very fully about his assets, his liabilities and his recent financial history and connections. There were complaints, and the people complaining were told, "Write to your M.P.!" Some, no doubt, got a letter from their M.P. saying that he would take the matter into consideration next time the bankruptcy law was revised; but apart from some Amendments in 1926 it never has been revised.

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There are two things about this procedure. First, it seemed really hopelessly supererogatory in tiny cases. It was far too elaborate for the minor case. Secondly, the whole organisation was quite inadequate to deal with the rare and large case which presented major problems of investigation; nor had anyone the resources to pursue it to the end.
There was a period when I acted for a gentleman who exemplifies the problems of bankruptcy law. His name was a household word. I am disclosing nothing that is not known. I have not troubled to check the facts; indeed, the Dictionary of National Biography does not record his existence. But in his day his name was very well known and on his first bankruptcy, which was for something in the neighbourhood of five figures, he was made to dispose of an immense hall in Cambridge and the yacht he had bought from the Prince of Wales; and St. Paul's Cathedral returned for the benefit of the creditors the gold plate which he had presented to them.
On his second bankruptcy, which I think was for six figures, there was no possibility of this because, under the law, the unsatisfied creditors in the first bankruptcy still took priority. On his third bankruptcy which, if I recollect—and I hope I am not deceiving the House—ran into seven figures, there was really nothing for the creditors to do. He was never prosecuted, so far as I know, for a bankruptcy offence. If he was, he was acquitted, though he did spend two periods as a guest of Her Majesty, one of nine months over the Tsar of Russia's diamond mines and one of three years over the Jubilee Cotton Mills. From then on, his bankruptcies made him absolutely writ-proof. To make him bankrupt a fourth time was useless. He used his career as a method of selling shares. He would say, "Do not trust me. You know all about me. Everybody knows about my record". He was an engaging character. He was far too clever to follow once he got on figures. He lived throughout his three bankruptcies at a modestly stately hall in Derbyshire which he had the foresight to settle on his very charming wife before his financial career which, once very promising, came to ruin.
That is the system. I became, to my great advantage personally, a member
1224
of the Payne Committee on the Enforcement of Debt, having acted more recently for another gentleman who had a judgment against him for £800,000 in this House for tax and who was being sued for £3 million damages for criminal conspiracy with about sixty others and whose operations I followed throughout Australia. I shall not have time to do justice tonight to my distinguished colleagues on that Committee. Their labours were immense, their courtesy wonderful. The amount of work done by the chairman, Mr. Justice Payne; the amount of patience he displayed, the amount of tolerance and kindness was infinite. This was a period of illness for me and I could not take much part, for so many knew much more about it. The joy of the conversation and the legal polemics was such that I sat and looked around sometimes expecting either Sam Johns or Ben Jonson to arrive from the club or from the Mermaid Tavern. Everyone should read that Report. I beg them to read it. There are 453 pages of close print, a quarter of a million words. They will see what was said.
My problem was that we were in theory abolishing imprisonment for debt; but we did that at Oldham years ago by sheer good sense. No one went to prison from the county court in Oldham for years and years. We were applying once more to the small debtor a system which was pretty harsh. We were applying the attachment of earnings, of future earnings, in payment of debts. How can a Socialist sign such a document?—when the man who owes £10,000 can go into court, give an interview to the Press and say, "Of course, this will not affect my earning capacity. I can make £15,000 a week any time. I am just popping in to clear up my past and to get a new start in life." There is a great deal to be said for a new start. I do not object to it provided it is open to all. The law should be open to all.
I am detaining the House; but your Lordships will have become aware that at this moment the bankruptcy laws are attracting increasing attention and most of the newspapers have been indulging in polemics about some aspects of this law. It may be that the time is ripe for reform. Noble Lords on the Government Front Bench have said that they want to do something about the Payne proposals

1225
—but not this year. I thought that "not this year" gave at least hope of next year.
I want to say only one word or two about the proceedings now on. I want to say them with restraint; but I passionately want to say them. I think they ought to be said. I do not know Mr. Muir Hunter. I know that he is the editor of the standard work on bankruptcy which is regarded as a brilliant work and is very dull reading. I know he is esteemed by some of his contemporaries. I desire to dissociate myself wholly and entirely from the ill-informed criticism which has been made about a man who is performing his duty as counsel to trustees whose job is to get money for the creditors; who is getting money for the creditors. I am not sure whether money should be accepted on a promise of anonymity, but that is a matter for the court and not for counsel who is handling information which is coming along the conveyor belt and having to deal with it almost as it arrives.
My Lords, I have trespassed on the indulgence of the House quite a bit now. I am hoping that the noble and learned Lord on the Woolsack will permit me to correct one thing, and I come to the question of the Bar Council and what was said to-day and which is really irrelevant to this Question. There was some discussion about the Bar Council report on Wednesday. I was immediately informed that the Bar Council have sent copies of their report, not to all 1,150 Peers, which might be expensive, but to a list selected without consideration of Party or rank; to every one of the Peers who had shown an interest in legal matters, and that one had been sent to me. I have said that to the best of my humble belief it has not arrived but they have promised that if that is so another one will be sent. I had hoped that I might correct that.
I wonder whether it is presumptous of me to add a word about the astonishing announcement about Mr. Muir Hunter. It seems to me that it would be presumptous for me to say anything, but perhaps it would be a little cowardly to refrain at the stage I have reached. Perhaps I may say that when I heard the news on the radio I did not believe it. When it was reported to me I said that I did not believe it. When I heard it I said that the B.B.C. had got it wrong. I do not
1226
recall any precedent for this action, but of course—I do not know—I must assume that they have information about which I do not know. Nowadays I never express myself in very strong terms, but if there is one thing in which I passionately believe it is the freedom of the advocate, and I believe that the noble and learned Lord on the Woolsack would be the first to echo that sentiment.
My Lords, we demand that our judges should be entirely independent of the Legislature, and we shall go on insisting on that. And the only curb upon the judges is of course the freedom of the advocate. I reflected that night that if the Bar Council had acted 200 years ago as they appear to have acted that night, then Erskine would have been cut short in the opening speech of his career, at the moment when he said, "Whether Lord Sandwich is before the court or not, I will bring him before the court." And it would have been a bad thing for England—though perhaps the Woolsack would not have suffered much—if that advocate's first 20 years at the Bar had not been lived. There was more tolerance in those days. As the Lord Chancellor knows, one advocate attacked his Scottish colleagues at the Bar with a ferocity, we are told, that had never been equalled; and then departed in a hired cab, which his enemies said had been already hired for the purpose, on his way to London and to the Woolsack.
I am grateful for the tolerance I have had and I have strayed a little beyond the bounds which I ought to have set myself, but I want to conclude with this. I did, my Lords, put the point I have been humbly trying to make—and not doing so very clearly—in the form of a Minority Report. I apologise to my old colleagues for quoting myself and not their much more important utterances. We did, of course, have to examine the whole law of bankruptcy in those proceedings. Every analogy had to be taken from the law of bankruptcy; all the questions of priority had to be considered, and I wrote a Report of which I will read only a little as quickly as I can:
"The result of the exclusion is that it has not been possible to consider the anomolies or the injustice which the continued operation of the two-tier system must inevitably produce nor would it be permissible for me to pursue, in detail, subjects on which evidence has not been formally taken."

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That was because the main subject was outside our terms of reference. But I said:
"The position now, therefore, remains and will remain if the Report be implemented, that any civil debtor to whom the Report applies may be forced into bankruptcy at the option of any one substantial creditor; and that any debtor who possesses at one and the same time the sum of £10 and a disposition not to pay his debts, can opt out of the new system and seek refuge in the safer harbour of bankruptcies…"—
and that in fact there was evidence that that was being done.
I said that two of my colleagues had made reservations in which they too made reference to the importance of considering the law of bankruptcy, and then I concluded in a paragraph, after recommending of course that the existing system of the Official Receiver, with all its deficiencies, with all its inadequacies, might well be combined with the enforcement system so as to make a single equitable system applying fairly to every debtor:
"I venture therefore to conclude, in the absence of evidence to the contrary, that the maintenance of a dual system is contrary to justice, morally wrong and that its existence would impair the working of the new system. Wholly unwilling to embark upon economic seas I can only humbly suggest that some economists might opine that two systems operating different rules in adjacent and, indeed, overlapping areas would needlessly increase public expenditure to the public disadvantage."
My Lords, in conclusion, may I say, at Stephen Leacock said, that one thing that was missing out of the biographies of successful men was the point between when they struck the town without a "bob" in their pocket and the time when they had £2,000 in their pocket to buy somebody's company and expand it into £100,000. It was how they got the first bit of money. Now we know how it is done. You borrow £49 from a friend and allot yourself 51 shares as fully paid in return for your services. You embark upon a career of debt. You fail and go "bust". You find another friend with £49 and, with any luck, by the fifth small company you may strike lucky and become a millionaire and an ornament of mercantile society.
We have always failed to deal with that aspect in bankruptcy affairs. We find delay after delay which usually
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finishes with a long fraud investigation and the delinquent insolvent in the I3ahamas. Therefore I beg the Government and their advisers when they consider the reform and the implementation of the Report of the Payne Committee; when they consider the objections to two systems, and the objections to the lack of equity, that they should try to present a comprehensive system with a full-time headquarters, capable of handling the massive tasks which may fall upon them; and a system which might draw much from the present French law in its essence of a differential bankruptcy which I will not elaborate now. My Lords, I apologise for taking up time at this hour of night. I had intended to try to be brief, and I am very grateful for the courtsey I have received from those who have so kindly listened to me.
7.39 p.m.
THE LORD CHANCELLOR: My Lords, if no other noble Lord wishes to address the House. I shall reply to Lord Hale's Unstarred Question. I am sure that the House is greatly indebted to the noble Lord and also has been greatly diverted by some of his reminiscences. The subject of bankruptcy law, which is an intricate and highly technical one, has become, in the last few months, a popular subject for discussion for the first time in my professional career which, though perhaps not so long as the noble Lord's, at least goes back to 1932. The noble Lord's question was to ask the Government
"whether they are satisfied with the practice and procedure of the existing law of bankruptcy and its equity to debtors".
It was not possible for me, with the best will in the world, exactly to divine the scope of the inquiry which the noble Lord was seeking to make of the Government.
I was afraid at one point that the noble Lord might be going to comment upon the implications of the Poulson case or a recent exchange of Questions and Answers in another place between the Attorney General and two Members of Parliament and the rather intemperate comments which have been made in some quarters about those exchanges. Except tangentially in his references to one of the counsel engaged in the case, I do not think he has done so. But his tangential reference perhaps allows me to

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say that had he gone further into the matter I should have had to say to him, and I must say to the House, that there are four separate sets of inquiries proceeding at the moment about that case which render it particularly inappropriate either for the Law Officers or for the Lord Chancellor to make any comment about it. There is the public examination of the debtor himself. There are the police inquiries into the matters emerging as the result of the case which may or may not result in criminal proceedings of one sort or another. There are the Civil Service inquiries into the public servants involved and there is the Bar Council inquiry into the professional conduct of one of the counsel engaged in the case to which the noble Lord referred. So that if I were asked, or any of my colleagues were asked, to make any comment remotely relevant to the Poulson affair, I should have to say that we really must wait until the results of, at any rate, some of these inquiries are known before beginning to adopt attitudes or draw inferences.
The noble Lord has referred much more generally to the law and practice of bankruptcy, and he has really had to leave me to answer the Question by giving the state of play at the moment as I sec it at the moment in relation to the general law. As he told the House, the law and practice of bankruptcy was last reformed on a general scale in 1914 when the principal Act was enacted. This Act and the amending Act of 1926, together with the Bankruptcy Rules, still dominate the scene. In 1955 a further Committee was set up under the late Judge Blagden and that Committee reported in May, 1957. That report was to the effect that,
"the basic structure of the Bankruptcy Law apart from that relating to discharge is generally sound and well suited to its purpose."
That has remained the view of successive Governments ever since. The Blagden Committee went on to suggest a number of amendments, designed as they put it,
"to remove as far as possible administrative difficulties and inequalities some of which have been inherent in a system of law which has to serve a twofold purpose: on the one hand protecting the bankrupt from anything in the nature of persecution by his creditors, and on the other protecting creditors from the dishonest or fraudulent financial dealings of their debtor."
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There the matter rested, because the amendments were relatively small; and although they accepted the general thesis successive Governments from that day to this have never found Parliamentary time to enact the minor amendments.
Dealing next with the Government structure, the Department of Trade and Industry is responsible for amending the bankruptcy law, as was its predecessor the Board of Trade. The recommendations of the Blagden Report have not so far been enacted and I must add that no legislation is contemplated this Session. There have been small changes since 1957 and the House will recall that last year in the Criminal Justice Act 1972, which we have just passed, we introduced the new concept of criminal bankruptcy which will involve the Department in a considerable volume of new arrangements and new work. In addition to that, the Department of Trade and Industry is at present considering bankruptcy law as a whole since this has been rendered necessary in the light of our entry into the E.E.C., and in particular in the light of the draft Bankruptcy Convention which is at the moment under negotiation between the nine Members. Presumably, any general reform of the law would await the negotiation and discussion of that Convention.
In addition to the substantive law, I am primarily responsible for the bankruptcy rules, although of course I have to consult Departments in the ordinary way. There are under consideration the following proposals which are still under consideration by Departments. These amendments, I frankly confess, have been prompted to some extent by public discussion of the public examination of Mr. Poulson. But so far as I am concerned, none of them involves any judgment whatever upon the merits of that case. I am considering an amendment which would have the effect of requiring the court, when considering an application for the adjournment of a public examination, to have regard to the fact that criminal proceedings either have been or are likely to be brought. I am also considering—but again I emphasise that I make no comment or judgment on recent events—amending the rules so as to underline the courts' powers to exclude all irrelevant or scandalous matter and to order that such matter be excluded from

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the record of proceedings. I am further considering reminding registrars of their powers to refer examinations of exceptional difficulty to the judge, or for hearing in London.
My Lords, I want to add one or two general considerations in the light of public comment without going near the actual facts of the particular case that we all have uppermost in our minds. The first is the introduction of matter into bankruptcy proceedings which is or may be defamatory of third parties. Naturally, I have been considering that particular aspect of the question from the very first, but obviously I cannot comment wholly candidly upon that kind of point with the examination still continuing. I should like, however, to make one or two general observations. The first is that this is not a bankruptcy problem in itself. Indeed I must say that I cannot recall its ever having arisen in bankruptcy proceedings before. On the other hand, the mention of third parties' names in this way can occur in a wide variety of proceedings—indeed, in almost any kind of proceeding. It could happen, for instance, in a Crown Court trial tomorrow. To give the House an example, in the Cambridge Garden House Hotel not case a complaint was made that evidence was given at the trial that senior members of the university, and one don in particular, had encouraged the rioters. It can also occur in civil cases. I cannot for the moment recall whether the Pemberton Billing Black Book case which occurred in my boyhood was a criminal or a civil case, but it quite clearly could happen to-morrow in a libel case in the civil courts. It can happen at inquests; and it does occur in tribunals of inquiry in relation to which the probem was discussed in the Salmon Report which resulted in one of the recommendations regarding legal representation which has been generally accepted since.
The second general observations I would make is that the difficulty is not surmounted—or at best is only partially surmounted—by the provision of legal representation either at inquiries or in other cases. It is the initial impact of the scandalous matter which counts most, as I think the noble Lord pointed out in one of his observations. Third parties cannot of course be allowed to interrupt proceedings
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to hold, as it were, a trial within a trial. It is sometimes more effective to make statements to the Press, provided one is careful not to commit a contempt of court. Representation at the hearing, although it does sometimes enable counsel with watching briefs to make statements at the end of proceedings does not always remove the injustice, except perhaps in relation to some inquests and inquiries.
Looking at various other aspects of bankruptcy procedure, I do not think one can really hope to cure the difficulty by holding inquiries in camera. Of course, when third parties are brought before the bankruptcy court they are examined in private, and it is right that that should he so. I suppose it would be possible to devise a bankruptcy law in which the debtor was examined in private too, but I wonder whether the public would accept the private examination of a debtor, particularly in a notorious case. I suppose it would be possible to prohibit reporting, as was done for matrimonial cases in 1926, but if one tried to do that I am sure the legislation would be extremely contentious and very unpopular with the Press. I do not know whether it would commend itself to Parliament.
I think it is out of the question to remove the absolute privilege from witnesses or counsel. I share to the full, without expressing any view about this case, the noble Lord's anxiety that the independence of advocates should be respected. At any rate the remedy, by removing absolute privilege, would take place long after the event. No doubt the Faulks Committee will be considering the matter, but I doubt whether there is any advantage in pursuing it. I should also like to emphasise (and this again without any kind of criticism of the way in which this case is being conducted) that it is the business of the presiding judge or the registrar to exercise a strict control over proceedings—this is true in every court case—and in particular he must exercise control over members of the Bar or solicitors, however eminent. Subject to that comment, I do not impute the slightest impropriety in the actual case. I must remind the House that members of the Bar have a great responsibility to exercise their privilege with restraint. Failure to

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do so can, in extreme cases, amount to professional misconduct.
There is only one other comment I should like to make on the noble Lord's very interesting speech; that concerns the Payne Committee, which of course was not primarily concerned with bankruptcy law, though I took the point which the noble Lord made in his reference to his Minority Report. I think the majority of the salient recommendations of the Report have been brought into effect by me since I have been Lord Chancellor. While the noble Lord was speaking, I sent for a note of those which have not yet been brought into effect. I do not think they are major recommendations. I may not have got a complete list of them, but they certainly include transfer from the magistrates' courts to the county court jurisdiction in civil debts, the establishment of enforcement offices, the transfer of responsibility of under-sheriffs to the county court and the abolition of distress for rent. But on the whole I think that the main recommendations of the Report I brought into effect more than a year ago.
My Lords, I am sorry to have made rather a scrappy reply to the noble Lord's interesting Question, but it is a very big subject and I thought the House would like to know the state of play as I saw it.

CRIMINAL LAW REVISION MEMORANDA
7.53 p.m.
LORD DENHAM: My Lords, before we adjourn, I should like to make a short statement about the supply of memoranda relating to the Report of the Criminal Law Revision Committee. This afternoon my noble friend the Leader of the House, in response to a question by the noble Lord, Lord Shackleton, undertook to see whether arrangements could be made for memoranda published by individual organisations to be made available to Members of the House before the debate on Wednesday on the Report in question. I understand that only three organisations who submitted memoranda have had them published. Of these, there are already copies of the Bar Council's memoranda available in the Printed Paper Office. Efforts will be made tomorrow to obtain copies of the memoranda of the other organisations concerned.
LORD BESWICK: My Lords, I am sure we are very grateful to the noble Lord for giving us that information, and we appreciate the speedy action taken by the Leader of the House.
House adjourned at six minutes before eight o'clock.