INSURANCE COMPANIES BILL [H.L.]

HL Deb 22 March 1973 vol 340 cc887-970

4.21 p.m.

Report stage resumed.

LORD ALDINGTON

My Lords, if I may talk about the Insurance Companies Bill, I think we are all grateful to the noble and learned Lord the Lord Chancellor for introducing the Report stage of this Bill with a fairly wide-ranging statement. It is a little embarrassing for me to put down an Amendment and hear it shot down before I have been given a chance of moving it, but I am sure that the House will allow me to give the arguments for it when the proper time comes. As the noble and learned Lord, Lord Stow Hill, said earlier, there are some good arguments. Over the last few days, many of your Lordships may have found yourselves in the difficulty in which I have found myself, that as we have not had the Marshalled List of Amendments in good time it has not been very easy to consider them all together, or to put down one's own Amendments reacting to others. In my case, some of the Amendments put down by the Government were a little disappointing after some of the conversations which I have had, and I have therefore been taken a little on the wrong foot. I am not saying that the Government have not done what they indicated to me they were considering doing, but I am an optimist and I had hoped that they would do more. The other difficulty in which I find myself, which I hope none of your Lordships shares with me, is that I have a most terrible throat and if your Lordships cannot hear me I hope you will forgive me. I am also suffering from the effect of what the doctors did, so I may not be so bright as I otherwise would be.

May I take separately the points which the noble and learned Lord the Lord Chancellor made? On the definition of the word "controller", I think it is right to take the simple director out of the definition of "controller", and therefore I think that Amendments Nos. 1 and 2 are right, so far as they go. But I must put to the Government my feeling that, though the fairly broad definition of "controller" in Clause 2 is right, it may well not be right in other clauses of the Bill. Let us take the chief executive or the managing director. He changes by the law of nature, so to speak, every ten years or so; actually, I think it is an average of every seven years or so. As the Bill is now drawn, all the powers in Clauses 12 to 20 come into operation in any company on the change of controller, and the new subsection (4) of Clause 11 has been drafted so as to give the Secretary of State carefully defined powers over a period of five to ten years for no reason at all, if there has been a change of controller. I cannot believe that the Government, or this House, want any Secretary of State to have powers like that just because, in the ordinary course of events, one chief executive has grown too old and has retired and been replaced by another.

I do not think I need say again that my noble friends connected with insurance, who spoke earlier, and I are wholly with the Government in their aim in this Bill, and, in particular, in seeking stronger powers. But I hope that the Government and my noble friends, and others, too, support the proposition put forward on both sides of the House that those powers should be carefully drawn to fit in with the needs of the case and should not give Governments—the present Government or future Governments—of whatever type one can imagine, powers going wide over the whole industry, without any specific reason being stated. That is what I think will happen, because of the way the Bill is drafted at the moment.

Secondly, I come to particulars, and at this stage I do not really think I can add anything to your Lordships' discussion, other than to say that I wholly agreed with what the noble and learned Lord, Lord Stow Hill, said, as I agreed with him on the appeal. I regret that there is no provision for an appeal procedure in these Amendments. I have not put down an Amendment with an appeal procedure in it because I hoped the Government would produce one and there has not been time since I received my copy of the Marshalled List. But my noble friends in the Government are aware that some work has been done by, or on behalf of, the British Insurance Association and a possible procedure was worked out. The House will have in mind, too, the procedure which was summarised in the Amendment moved on the last occasion by my noble friend Lord Selkirk.

So there are ways of ensuring that there is an appeal procedure and I think that that is an important matter of natural justice.

It has been said that the application of natural justice can, and should, be different in different circumstances. In particular, the noble and learned Lord the Lord Chancellor argued that the new applicant to an industry can be treated differently in terms of natural justice from the way we treat a company which is already in the industry. I doubt, as the noble and learned Lord, Lord Stow Hill, doubted, whether that argument is as valid as at first sight it looks. Presumably, even a new applicant company with executives, directors or managers in it has some existing business. If you tell that company that it is, as it were, blackballed against entering the insurance industry, is it not right to tell it why, so that it can at least be put in a position to answer or to take action to improve itself? I think the noble and learned Lord the Lord Chancellor assumed that there would be some kind of procedure which would enable the company concerned to be given an opportunity to satisfy the Secretary of State that things were right, and that the managers, directors, controllers and so on were fit and proper persons. I say that because when the noble and learned Lord was referring to the gaming clubs, he read an extract—which I did not hear very well—from a judgment of the Master of the Rolls which seemed to me to say that it might suffice, in the case of a new entrant, if the person concerned was given an opportunity of satisfying the Secretary of State that he was a fit and proper person.

As I read the Bill at the moment, there is nothing in it that gives any new applicant, or a controller of a new applicant company, any such opportunity. It was indeed with that in mind that I drafted the Amendment to which I referred earlier and which the noble and learned Lord the Lord Chancellor has rather roughly treated so far. But I should like to know whether my interpretation of the Judgment of the Master of the Rolls in that case was correct, and, if so, what opportunity the Government have in mind to give to a person or a company applying to join the industry to prove to the satisfaction of the Secretary of State that the persons concerned are fit and proper. Perhaps when the noble and learned Lord has answered that and other questions it may be easier to decide what to do when we come to the Amendment at the end of Clause 2, which I hope to be able to move.

There is only one final observation that I would make, and it really concerns the subject of the controller, the subject of the particulars and of the appeal. It is that the Bill seems to me to assume that it is only the particular person—that is, the chief executive, the director or the manager—who has to be looked at here. Business does not work that way. In fact, the chief executive or the managing director is appointed by a board of directors. In fact, the main duty of a chairman of a great company is to see that the right man is appointed chief executive and, with his colleagues on the board, to watch over his running of the business of the company. It seems to me—and in this regard I have down some Amendments later on—that the Bill as now drafted does not take into account the duty of boards of directors to appoint fit and proper persons. It is they, as well as the person concerned, who should be consulted by the Secretary of State if he is in doubt, and who should be informed of what, in the view of the Secretary of State, is wrong.

LORD BROWN

My Lords, this is rather difficult debate. One has to make one's position rather clear here. I am not really in favour of this group of Amendments, because I think the Bill is better as it stands. Yet I rise to my feet not to argue against the Amendments, because I think the pressure of the situation has made it necessary for the Government to relax to this extent. I rise rather to argue against the arguments put against certain principles of the Bill, and particularly those put by the noble Lord, Lord Aldington, and my noble friend Lord Stow Hill. I always listen to my noble friend Lord Stow Hill with the greatest possible admiration. Not only does he show a humility and courtesy which is outstanding, but also his logic is almost invariably impeccable. The logic he used to-day I think stood the test of that; but his position, and that of the noble Lord, Lord Aldington, was weak, not because of failures in the logic of the argument he put forward but because he completely ignored one total aspect of the whole situation.

I do not think either of the two noble Lords has mentioned the consumer at all in discussing this issue. Were it merely a question of ensuring natural justice to people, and one could do so without other dangers to the consumer in this instance, then I think there would be no argument in this House at all. Of course one must give people the right of appeal; one must tell them as much as one can about one's reasons for coming to certain decisions, and all the rest of it. Who could argue against that? Except that past experience has shown beyond reasonable doubt that it is necessary to inflict this degree of injustice on probably an extremely small number of people in order to protect the interests of potentially large numbers of the public who can ill-afford to lose the money that they have paid in insurance premiums—either life assurance, car insurance or fire. Indeed, we all know that many thousands of people have already suffered in this respect. There was no mention of this side of the case made at all and this I deplore.

THE EARL OF ONSLOW

My Lords, perhaps I may ask the noble Lord to give way and again support the noble and learned Lord. How many people in the fire insurance business have suffered from fraudulent companies over, say, the last five years? Before the noble Lord makes these sweeping statements about protecting the consumer, can he say how many fire insurance claims have been reneged upon in the last five years?

LORD BROWN

My Lords, I doubt if there were many. I was referring to potentialities in the future about fire, and I can refer to thousands of claims, which the noble Earl must be aware of, in the car insurance field. Those were the ones that hit the headlines, but there have been others, too. I do not have to give a statistical basis for my comments because the facts are known to every Member of this House and to the public—and that is the danger. In a previous Committee stage debate it was argued that this Bill would be damaging to the status of the insurance industry of this country. I would plead that this Bill, with its full powers, is essential for the maintenance of the status of the British insurance industry; and that the provisions in it, far from causing other people to think that there is something wrong with the industry because this Bill has become necessary, are far more likely to mean that the international market, which takes advantage of the very efficient British insurance industry, will be reassured that certain failures that have taken place in the past are much less likely to take place in the future as a result of the great powers in this Bill. I think it will redound to the status of the industry rather than the reverse.

Dealing now with the question of natural justice, I think we are faced with a situation which is really not uncommon. If one enters the Army to-day, one knows in advance that one may lose one's life. That is a condition of entering the Army. If one is a miner, one knows that one hazards one's life, and regrettably we are in the situation to-day when some men are probably going to die as a result of an accident in a mine. If one enters the insurance industry in the future, one knows in advance that there are certain hazards one will have to face. That is part of the penalty one pays for taking on a job in that industry, although there are of course very substantial gains to be made in an economic sense because it is, for the directors of insurance companies, an extremely lucrative profession. So it is not without is benefits as well. There is nothing wrong, if it is necessary for the protection of the consumer, that the industry should be put in this position; and it is my belief that those who manage the industry, as opposed to the boards of the industry, which often contain amateurs who do not manage the industry, are in favour—it certainly was the case in the past—of these rigorous controls in order to keep their own industry clean. So I regret the fact that the Bill is being very marginally weakened, but I can understand the reasons why this has come about.

There is one last point I should like to make on the argument that a right of appeal should be given. It is of course familiar to the House that from time to time boards of directors in public and in private companies have to consider succession to the job of chief executive. Some men who have apparently been heading for that position are turned down. Are they stigmatised? No. Are they given clear reasons why they have been turned down? Seldom. Are they allowed to argue their case in front of the board? No. Have they a right of appeal? No—and I will tell your Lordships why. It is because the judgments that have to be made of the potential capacity of people, let alone their integrity, are subjective judgments. It is the burden of a board of directors and of many managers to make subjective judgments of subordinates. You cannot give a right of appeal. It is an opinion formed over a long period. In the case of people who were turned down by the Department of Trade and Industry, the basis will be largely subjective. It may be based on opinions offered in the past by the industry, who have offered them in a very responsible way. If there is a necessity to state these you will not get the real opinions, and if there is an appeal you will not get information from the insurance industry that you need and which the insurance industry are anxious to give to the Department in an effort to keep their industry clean. In the face of these arguments and the overriding argument that it is the duty of the Government to protect the many, even if perhaps at the risk of a tiny number who might clearly suffer injustice, the Government are doing the right thing in arming the Department of Trade and Industry and the Secretary of State with these powers.

LORD CACCIA

My Lords, perhaps from these Benches I may be allowed to say something, and I start by thanking the noble and learned Lord, as the noble Lords, Lord Aldington and Lord Stow Hill, have done, for the consideration which the Government have given to the views put forward by us and by others. In the second place, I should like to say again, and in comment on what the noble Lord, Lord Brown, has just said, that I think everybody concerned in the insurance industry would much prefer a Bill of this character, giving discretion and powers to the Department, rather than the Continental system, which is the only existing alternative and in which Continental insurance companies are very much restricted in the manner of their operation. I do not think there is really anything at issue in the general objec- tive. I hope the noble Lord, Lord Brown, will agree with that.

The question, the very important and, if you like, marginal question, is this: what powers do you give? In that I should like to associate myself briefly with what was said by the noble Lords, Lord Stow Hill and Lord Aldington, on the two subjects; that is, the narrowing to existing companies and existing controllers, and so on, of the right to be told what is wrong. I think that that is too narrow. I should prefer to see it widened. I cannot see why a new company could not be told, "We do not like the look of you for such and such a reason. We do not think you will be able to stand up and in the long term meet the requirements of the consumer." Naturally that is, and should be, not only one determinant but the main determinant in their mind: will they be able to perform their contracts? That is the point. I should have thought that there is a very strong case for the extension to new companies as well as old of the provision of informing. That is on that side.

On the appeal side I would also urge that there should be some form of appeal procedure. In saying that, may I at once repeat to your Lordships that, speaking as an ex-head of a Department of State on the official side in Whitehall, I had the greatest possible respect for the then Board of Trade officials and no doubt now have for their successors in line. I have the greatest respect for their good intent in carrying out the provisions of this Bill with scrupulous honesty and good purpose. There is no question about that. They are that sort of people. We are not arguing about that. Equally, I say, with great respect to the noble and learned Lord, that I was brought up to believe that the Litany omitted one extremely important clause and that was: From all lawyers and doctors, good God deliver us. Nevertheless I think the noble Lord, Lord Stow Hill, made a very strong case last time when he asked why a Judge sitting in chambers should not have at least the same independence of mind and at least the same experience. He is more likely to have experiencee of these matters than people sitting in a different Department of State from the one I sat in down the road. He would have more experience in judging cases of this kind in seeing whether a reasonable case had been made or not. If you do not like an appeal to a Judge in chambers (and the advantage of having that was that in certain circumstances he could be given confidential information and could take that into account) perhaps some other form of tribunal could be considered; and the noble Lord, Lord Aldington, said that such a thing had been mooted and was perhaps before Ministers at this time.

I do not want to say more on the subject, but I think it is important to the insurance industry, not only that the Department shall be seen to have sufficient powers to give confidence to the consumer, to the policy holder, that he will not be "done down"; but also that the Department shall not have more powers than is strictly necessary to carry out that important function. I would say that not only as regards the restricted matter of the insurance industry. I think that in natural justice you go beyond it. It is said that even if it is somewhat to the disadvantage of the insurance industry when looked at from abroad, the Government here do not seem to have sufficient powers, looked at from the Continental, external, eye, to control possible accidents. Even if that is so, we must accept these consequences because we do not think them to be real and because once you have introduced into an Act of Parliament the concept that a class of people cannot be told why you object to their engaging in a certain form of industry—and I agree with the noble Lords, Lord Stow Hill and Lord Aldington, on the difference in this regard between a commercial enterprise and specialised bodies such as the Bar and the solicitors' profession—you run a grave danger that what is all right in one case will be quoted sooner or later as being a sufficient reason for doing it in another case. For that reason also I would urge that these two points might be reconsidered.

TILE EARL OF SELKIRK

My Lords, as I moved the original Amendment on this subject I should like to thank the noble and learned Lord, the Lord Chancellor, for the Amendments which have been put down and for the attention which noble Lords on the Government Bench have given to representations which have been made. I am grateful to them. I think they have heard fully, if they have not necessarily agreed with, the many points that have been made. I should like to make one particular point on what the noble and learned Lord, the Lord Chancellor, said. He emphasised the status quo. We are doing all and more than was done in 1967. I objected to the 1967 Act; I was very unhappy about it at the time and I still am. My argument is primarily one of precedents. If I want an example, it is what the noble Lord, Lord Brown, has said. He said that we are inflicting a degree of injustice. He actually said that. That is his defence of the Bill.

I believe that justice is mutual; that if you are unjust to one person, it is unjust to you in the long run. I hesitate to refer to a case that the noble and learned Lord, the Lord Chancellor, referred to—I think it was Regina v. The Gambling Board. I only glanced at it. One word comes out, I believe, truly: "Did the board act fairly?" The Department of Trade and Industry can never show that they act fairly. They may act wisely or properly but they will never be able to show that they act fairly. I believe that this will be greatly to the disadvantage of the Department itself. It is important that the Department should be seen to act fairly. They have not gone far enough to do that. This is very sad. If we are going to quote precedents of six or seven years ago, in ten years' time these precedents will be quoted at us and we shall have stepped further down the line. This worries me. If you do this with the insurance industry you can do it with quite a range of other things—banks, building societies and, for all I know, doctors, lawyers, and trade unions who do not happen to fit neatly and tidily into the pattern the Government want. It is the precedent which I think very disturbing.

I would readily accept any type of appeal, even one such as was mentioned by the noble and learned Lord, Lord Stow Hill, in which the onus of proof rests with the appellant. But it should involve somebody outside the Department. What is a Department, my Lords? It is an organisation run by a political officer who makes political decisions. Political decisions may be of two sorts. The true meaning of "political decision" is that it is in the general interest of the country, and that is a proper political decision, but there are other meanings. There are Party political decisions, and decisions personal to one's own political advantage, which, I regret to say, are not wholly unknown. We are handing over power to enable whoever holds this office virtually to move anyone out of employment, and to be able, in a month, to bring every insurance company to a standstill. This is an enormous power.

I think it a pity that in a Bill which has been so welcomed and accepted by the insurance companies as this Bill, this blemish should remain. I still ask that it should be removed and that we should not leave ourselves open to allowing what after all are informers—they may be honest or dishonest—to bring their information, true or untrue, misunderstood, falsely reported—what you will—to the Department of Trade and Industry. I hope that the Government will come a little further in this matter. I am indeed happy that we have a second Chamber. The late Lord Morrison of Lambeth said that if we had not had a House of Lords we should have had to invent it, and I feel happy that there is a second Chamber which can look at this matter further.

4.52 p.m.

VISCOUNT MASSEREENE AND FERRARD

My Lords, I support what my noble friend has said. I still adhere to what I said originally. I have been in your Lordships' House for 16 or 17 years and during that time I have seen the power of the Executive increase continually. I am thankful to the noble and learned Lord the Lord Chancellor for coming some way to meet us. But in my view, and I think in the view of other noble Lords who have spoken, the noble and learned Lord has not come far enough to satisfy us all. The noble Lord, Lord Brown, said that the consumer must be protected, and of course he must. But can the noble Lord explain to me how the interests of the consumer would be harmed if a controller, manager, director, or whatever you call him, of an insurance company who was not approved of by the Secretary of State was given the right to answer charges? Is there going to be a great time lag between the time he could answer charges—

LORD BROWN

My Lords, may I interrupt the noble Viscount? He has asked me a question. The point is that if you give a right of appeal to the controller of an insurance company, those who could speak to his lack of capacity will not speak. If you do not make the law extremely rigorous you will get officials who would be advised by lawyers that" In this case we face the fact that the insurance given was on an uncertain financial basis, but we advise that the law cannot be used because it may lead to litigation"— and all the rest of it. You must, by the provisions in this Bill, give officials power to act with certainty before it is too late. We had a deplorable case where certain officials at the Board of Trade were pilloried for not acting earlier, and I know that uncertainty of the law was the main cause of them not acting earlier, but thousands of members of the public suffered as a result.

VISCOUNT MASSEREENE AND FERRARD

My Lords, it does not alter the fact that it is a dangerous precedent if we do not allow an appeal by someone accused to know the reasons why he is accused. I have always thought that the sanctity of the individual and justice to the individual were paramount. As I have said, I hope that the noble and learned Lord the Lord Chancellor can go further in this matter.

LORD HAWKE

My Lords, I cannot agree with my noble friends. I take the line taken by the noble Lord, Lord Brown. My experience is that the Executive is remarkably timid about taking any decision which may lead to unpleasantness if it comes out in the light of day. The Executive is certainly willing to put facts before a Minister, and then what he does becomes a political decision on the part of the Minister. If a Minister makes too many decisions which appear to the outside world to be wrong, he will eventually go. But I do not think the Department would move if the Amendment we appear to be talking about, Amendment No. 3—although I believe that we are still on Amendment No. 1—were accepted.

The chief trouble in the past has been that the Department has been much too timid to move. My informants tell me that some of these scandals could have been avoided if the Department had been a little quicker off the mark. For that reason I prefer the line taken by the Government to that of my noble friend.

LORD DIAMOND

My Lords, like all previous speakers, the first thing I want to do is to thank the noble and learned Lord the Lord Chancellor for coming a very long way to meet the general anxiety expressed in Committee on this issue. Not only do I express appreciation, but also a measure of surprise, and I will come to that in a moment. I want to preface my remarks by saying what I had intended to say, and what the remarks of the noble Lord, Lord Aldington, have reminded me that I must say; namely, without offering any criticism at all to the noble Earl, Lord Limerick, who has been most desirous of helping the House about delays which have taken place, and while fully acknowledging the special reasons affecting all of us regarding these delays, it is right to underline the fact that Amendments have appeared later than the noble Earl and all of us would have wished. So we are all in a particular difficulty. I mention that, not with a view to offering any criticism of anyone, but merely to indicate that in your Lordships' House we are fortunate in that we have a further stage in our deliberations; and in regard to what has happened it would be natural and right that we should take full advantage of that further stage to put right anything which the House as a whole, and the Government, wish to put right. That is the only reason why I make that preliminary comment.

Next, I want to tell my noble and learned friend Lord Stow Hill, who, with typical modesty, said on more than one occasion that he was speaking only for himself, that everything he has said has my unqualified support; and so far as I am able—obviously I am not able to do so with regard to every noble Lord who sits on the Opposition Benches—I would say that he has the support of all noble Lords on this side of the House. Where you are in a situation of asking for something further to be done, it is as well to ask for the minimum, and because I am going to ask only for one thing out of two I hope that no noble Lord will think that I should not welcome both, were they available. But I must go for what I think to be absolutely essential for your Lordships good name, and that is to have some method whereby justice will be seen to be done. I cannot conceive that it would be any credit to your Lordships' deliberations—this is where I come back to the measure of surprise that I was discourteous enough to express in relation to the noble and learned Lord the Lord Chancellor—that we should pass a Bill under which a degree of injustice should necessarily be inflicted. That is the greatest argument for it that has so far been put forward, and it was put forward by my noble friend Lord Brown.

My Lords, I think the parallel that has been quoted of the professional requirements is not adequate. What is happening here is much more serious than denying a young professional man the right to start on his own professional activity. What is happening on the first Amendment which we are now discussing, if I understand it aright, is the possibility of preventing an organisation from starting business. One does not know how many men will be involved or what capital will be involved; it may be quite a large organisation. That is going to be prevented from starting by a view taken by a Department which may be unfair, and which may be thought to be unfair, and about which there is going to be no means of demonstrating that it was fairly taken. I cannot conceive that that view of justice, which applies over all our activities (it is such a mistake to imagine that we are restricting that view to this particular issue: it applies to all our activities and underlines the whole of one's behaviour in the way in which members of the community react to one another), could possibly be regarded as satisfactory, especially as, with the greatest possible respect, there are many ways in which this difficulty can be overcome.

I recognise immediately that there is a measure of difficulty in giving a form of appeal to a normal court, because you would have to prove matters which, in the interests of the consumer, you should not be required to prove to the extent that a court would require them to be proved. I can see an area in which an understanding and appreciation of what has gone on and what has been unsatisfactory can be explained in terms which are less than the kind of proof a court would naturally require within the rules of evidence. But that can be easily satisfied by having some kind of body under which a man could be judged before his peers. I use that word deliberately. There is no difficulty, surely, in setting up a tribunal under which those who are concerned in this field would be able to judge whether the decision that had been taken had been taken not necessarily in accordance with the rules of evidence, but reasonably taken. That, I think, would give a sufficient measure of satisfaction. It would give the feeling that commercial justice was being done. I recognise that our first responsibility is to protect the consumer. But so it is of every noble Lord who has spoken on this issue—and the noble Lord, Lord Caccia, expressed it in so many words.

So I am bound to say that, although on the particular Amendment which is before us we repeat our gratitude to the noble and learned Lord the Lord Chancellor for having moved it, and for the Amendments that go with it, which excludes Amendment No. 3—and we have no alternative but to accept it—so far as I am concerned I hope that those who have spoken will share with me the view that we must insist on the Government's reconsidering their attitude to simple justice.

5.4 p.m.

THE LORD CHANCELLOR

My Lords, I should like to begin by thanking noble Lords who have taken part in this debate for their courteous words towards myself. I can assure them that I have given this matter, in conjunction with my right honourable friend, very careful consideration. I can also assure them, if this is any comfort to them, that I will carefully report to my right honourable friend what has been said, and see whether any further improvement can be devised which would meet the criticisms which have been made. I cannot offer any today for reasons which will be obvious to noble Lords who know how these things are done. But I must, at the same time, express great disappointment at the approach of noble Lords on both sides of the House to what is admittedly a difficult problem.

I do not accept for a moment that injustice is being, inflicted by this Bill, or will be. It is obvious that you have to balance here two divergent considerations. The first is the general principle that a man is free to engage in any lawful activity without any prior authority from anybody else. That is a quite general proposition. It is nothing to do with justice; it is part of the freedom of the individual that we all enjoy. The second is the protection of the public from both the charlatan and the rogue—the charlatan who thinks he has experience and skill and in fact has not, and the rogue who deliberately preys upon the public, or the reckless gambler who thinks he will undercut his opponents and thereby runs his company into liquidation. I agree to this extent with the noble Lord, Lord Brown: that experience has taught us that we cannot afford to disregard the interest of the public in this matter by allowing unsuitable people to engage in this particular business at all. That, I feel, is absolutely plain.

My noble friend Lord Onslow asked for figures. But I wonder whether he cannot recall the scandal which surrounded the name of Savundra and the name of the V. and G.; and whether he cannot imagine to himself the misery inflicted on people who were injured as a result of motor accidents (they might largely be covered, of course by the Motor Insurance Bureau), and on the unfortunate car driver who had taken out an insurance policy which he thought covered him and then found himself, owing to the jiggery-pokery which was indulged in by unsuitable people engaging in this industry, rendered liable to claims of £20,000 and £30,000 for an injury inflicted in an accident. I cannot believe it is responsible wholly to disregard that where experience has shown that greater care is necessary. That is the experience that we have had.

Noble Lords on the Cross Benches, and my noble friend Lord Selkirk, spoke about a precedent. But the whole point of this set of Amendments as I presented it in moving it is that this is no precedent. All I am seeking to do on the disputed point is to maintain the status quo as it was enacted by the Labour Government, of which the noble Lord, Lord Diamond, was such an ornament—such a shining ornament, if he will allow me to say so. It is, I think, remarkable that in the course of his speech, having expressed a certain amount of surprise about myself, he never once referred to the fact that what I was defending was the position held by the row of extinct volcanoes on the Opposition Bench.

LORD DIAMOND

My Lords, would the noble and learned Lord care to give the whole reference about extinct volcanoes—who said it, and about whom?

THE LORD CHANCELLOR

My Lords, so far as I remember, it was said by Disraeli about Mr. Gladstone. But I do not wish to indulge in historical disputes with the noble Lord, who may have a better reference than I have, in an impromptu speech. It is said by the noble and learned Lord, Lord Stow Hill, "The Government of which I was an ornament was guilty of a great mistake. The status quo of 1967 was utterly wrong".

LORD STOW HILL

My Lords, would the noble and learned Lord forgive me for intervening? I did not say, "The Government of which I was an ornament …".

THE LORD CHANCELLOR

My Lords, I said, "The Government of which he was an ornament", and he said that it was "a great mistake". The noble Lord then went on to say that the great principles of natural justice had been infringed by the Labour Administration and that we should undo the wrong which had been done. I wonder whether that is right. I wonder how far, on reflection, noble Lords opposite, at any rate, are being wise in casting so many aspersions upon their own record. The Act was enacted in 1967 and has been in force now for six years or thereabouts. Not a single noble Lord who has spoken from any quarter of the House has suggested that one piece of injustice has taken place under that Act from that day to this. There is no evidence of it at all. What we are being asked to do is to change the law backwards on a point of pure theology; and, personally, I prefer an ounce of practice and common sense to a heavy dose of theology in matters of this kind.

This particular provision which is in dispute was enacted in the wake of Savundra and the Bill we are now seeking to put before Parliament is being enacted in the wake of the V. and G. That is the background of the matter. What I was suggesting was simply this. Here is an occupation which people cannot be allowed to enter unless they can satisfy a competent authority that they are fit and proper persons—that is, fit and proper from the point of view of business associates, of skill in the insurance market, of experience and of integrity and reliability. I must say this quite plainly to the noble and learned Lord, Lord Stow Hill, and my noble friend Lord Aiding-ton, quite apart from any brief I may hold from the Department of Trade and Industry—and that is manifestly the Department on whose behalf I am able to speak—that I should have thought that any Lord Chancellor would be wholly unwilling to allow any member of the Judiciary to meddle with this business at all, whether by way of appeal or by way of originating jurisdiction. It is not the sort of thing that lawyers and judges are about. Judges are apt, and indeed skilful, to listen to evidence which is controlled in its entry to them by a most elaborate code of what is admissible or not admissible, and they have to judge on what is proved on matters in which they have no expertise.

The question which we are discussing is not a justiciable issue of any kind. It is precisely the kind of problem which goes before the Gaming Board—the case concerning which I cited in moving my Amendment—as to the reliability of individuals in which, if I may say so, I think perhaps harshly, the "Caesar's wife" criterion is the one applied by an experienced businessman and not a nice appreciation of the legal rules of evidence and judgments made on it. It is, as the noble Lord, Lord Brown, correctly stated, a subjective judgment made by an instructed person upon a question of experience. That is the kind of thing we are discussing; and it is for that reason that I, as Lord Chancellor, quite apart from the brief that I hold from the Department of Trade and Industry, would have been wholly unwilling to allow the Judiciary to enter into what is basically a function of the Administration or the Executive. That is not what the Judiciary are about and, if I may say so, speaking for a moment from my own seat in the Government, there is no surer way to undermine the respect in which the Judiciary is held than to try to give them administrative or executive functions.

Then it is said, "We want to have some kind of independent board of appeal." I wonder whether that is constitutionally an improvement on the status quo. The Secretary of State is of course responsible to Parliament. If he refuses his sanction under Section 61 of the principal Act people can ask him questions—but who can ask questions of an independent body of knowledgeable men, for whom my noble friend Lord Aldington is pleading? And who can be sure that they will be any wiser than the Secretary of State would be, and to whom are they responsible? They are responsible to nobody. They are simply there to put the Secretary of State right when he is wrong, and nobody will be able to hold them in question. And supposing they do let somebody through the net when the Secretary of State of the day has refused to do so, and supposing it turns out that that person is a Savundra and the public are then mulcted of millions of pounds because this person has been allowed to ply his trade against the will of the Department—who is to be blamed? Are you going to hold a judicial inquiry on V. and G. lines about this advisory board? On what principles are they to act?

The noble and learned Lord, Lord Stow Hill, says he would be quite content to see the burden of proof placed upon the applicant, but that of course is exactly the opposite of what we were asked to do by my noble friend Lord Massereene and Ferrard. A man is not accused of anything on those circumstances; he has to satisfy whatever body is entrusted with the task by Parliament of his suitability, and of course no reason can be given except the true one—"You have not satisfied me that you are good enough to enter into this trade." That is not the kind of reason which would for one moment live up to the criterion put forward by the noble Lord, Lord Caccia, or by my noble friend Lord Selkirk.

LORD CACCIA

My Lords, if I might ask the noble and learned Lord to give way for just one moment, I think that some of his argument is missing the point which I myself was trying to urge: namely, that the objective is to protect the consumer. The only problem is how best to do it. I am not arguing that the consumer should not be protected.

THE LORD CHANCELLOR

I think that is the point, my Lords. But the point I was making was that every speech to which we have listened of a critical character about Clause 2 attacking the status quo enacted by the Labour Government has insufficiently stressed the interests of the consumer in seeing to it that people who enter into this trade should satisfy an impartial body on the "Cæar's wife" criterion that they are fit to be trusted with other people's money to the tune of several million pounds. I do not know where I have been living these last forty years, but I hear noble Lords saying, "Anyone is allowed to start a bank". I suppose in theory that is true; but let them try and see what happens. The fact of the matter is that in any form of activity I know of, whether it is being a licensee of a public house or being a solicitor, a barrister, a banker or a member of the Stock Exchange, you have to satisfy somebody first that you are fit to engage in that particular activity before, in practice, you can start. All that is suggested by the Government here is that a system which has proved itself over six years—enacted by our predecessors, and which, if it has had any faults has had the faults enumerated by my noble friend Lord Hawke and the noble Lord, Lord Brown, that it has proved inadequate because it is not sufficiently flexible nor strong—should be allowed to continue. I must say, and say very bluntly to noble Lords who speak about it that the insurance business is one of the great glories of England. It is one of our great invisible exports; its integrity and reputation are among our most valuable assets. This is something that strikes me as being of super-eminent importance. The noble Lord, Lord Caccia, seemed to me to say, "Look! If we find that foreigners do not think much of our arrangements, we must bear it so that justice is done to the individual who wants to come in."

LORD CACCIA

My Lords, the noble and learned Lord is kind to give way again. I also said—speaking for myself—that I agreed entirely with the approach of the Government in this Bill; namely, that it is better to give the Department strong powers rather than have the Continental system. The only problem is whether it is necessary to give the Government quite the wide powers that he demands?

THE LORD CHANCELLOR

My Lords, I am not demanding anything more than a continuance of the power which has been given to the Government by the last Government, and has been used to everybody's satisfaction, so far as I know, for six years. The only criticism has been that it has been insufficiently used.

LORD ALDINGTON

My Lords, the noble and learned Lord, much to my surprise, keeps on saying that this power has been used so well in the past six years. Could be give the House one instance in which it has been used?

THE LORD CHANCELLOR

My Lords, every new company that has been started in the past six years has had to seek an authorisation from the Board of Trade (now the Department of Trade and Industry), and if it has not been authorised no reasons have had to be given, and not one single example of injustice has been produced. That is what I am saying. If it be that no company has applied, we are talking in fact about nothing.

THE EARL OF ONSLOW

My Lords, how many companies have been turned down?

THE LORD CHANCELLOR

My Lords, I cannot say. All I am saying is that this provision, which has caused so much alarm, has been on the Statute Book for six years and nobody has produced a single example of injustice resulting from it. There are reasons for saying that these are the minimum requirements that a Government should be allowed to have if we are to avoid the Continental system. I noted with satisfaction that the noble Lord, Lord Caccia, said frankly he would rather have wide powers given to the Executive than to have to indulge in the legal restrictions of the Continental system. I am saying to the noble Lord, Lord Caccia, that if he takes away from the Government the powers which they have hitherto exercised, the purpose of the Bill will have been largely frustrated, and we shall be on the high road to the Continental system.

Having said that, I still say, as I said at the beginning, that although I have been deeply disappointed with the attitude of some of my noble friends, and with the attitude of the noble Lord, Lord Diamond, I will take back every word that has been uttered, both by way of support and criticism, on Clause 2 and I will consult again with my right honourable friend both as to the question of appeal and as to the question of giving grounds. Speaking for myself, noble Lords have not convinced me.

On Question, Amendment agreed to.

THE LORD CHANCELLOR moved Amendment No. 2: Page 2, line 19, after ("a") insert ("managing").

The noble and learned Lord said: I beg to move Amendment No. 2, "Clause 2, page 2, line 19, after the word ("a") insert the word ("managing"). This is one of the same sequence of Amendments.

LORD DIAMOND

My Lords, I rise on the most minor point to ask whether the Amendment is correct. According, to my copy of the Bill the word "a" occurs twice. Ought this Amendment not to say, "after the first a'"? Is there any method in your Lordships' House whereby this is automatically dealt with?

THE LORD CHANCELLOR

My Lords, I read out what was on my copy. I do not know whether my noble friend would like to correct me if I made a mistake.

THE EARL OF LIMERICK

My Lords, "the first a'" is indeed right. If there is a procedure for correcting this then we should do it.

THE LORD CHANCELLOR

My Lords, I see now that my notes on the Amendments are different from my printed Marshalled List. I read out what was on my printed Marshalled List. I will now read out what is on my notes on Amendments: Clause 2, page 2, line 19, after the first ("a") insert the word ("managing").

I beg to move.

On Question, Amendment agreed to.

5.26 p.m.

LORD ALDINGTON moved Amendment No. 3:

Page 3, line 19, at end insert— ("(7) Any incorporated company to which subsection (1) is applied by the Secretary of State may ask the Secretary of State to give particulars of the grounds on which any controller or manager of that company appears to him not to a be a fit and proper person to be associated with that company; and when so asked the Secretary of State shall forthwith give those particulars.")

The noble Lord said: My Lords, I ber to move this Amendment. I hope that your Lordships will bear with me while for the first time I give the reasons for this Amendment. We have heard a great deal about the reasons against it. What I seek to do is to ensure that when the Secretary of State refuses to authorise a new company permission to come into the insurance industry he shall give particulars if he is so asked for them. I know that this was not in the 1967 Act—and we are now talking about the particulars—any more than the appeal. I have never before understood that what was done in 1967 in all respects is binding upon the present Lord Chancellor, or his present noble and right honourable colleagues. We should all be astounded if that proposition were put forward over a number of matters.

It has been said that the 1967 Act has worked for six years. Let us look at what is involved here. It is true that for six years—or perhaps for longer—the Secretary of State or his predecessor has had the power to decide whether a new company should beauthorised. I interrupted my noble and learned friend a few minutes ago to find out whether at any time, in exercising this power of authorisation, the Secretary of State had had to refuse an applicant company on the grounds that any controller, manager or director was not a fit and proper person; and if that was so done, whether the Secretary of State found it inconvenient to give the reasons why. Until I have been given some evidence on that point I do not think there is any question of common sense and practice in this argument. The noble and learned Lord the Lord Chancellor said that he preferred an ounce of practice and common sense to a pound of theology. I have to remark to my noble and learned friend that I have sometimes heard him use exactly the opposite argument where it suited him. On this occasion I must test him by his own remarks. It would be nice to know what ounce of practice and common sense there is to adduce against my simple proposition that a Secretary of State, using this power of refusing authorisation because someone is not a fit and proper person, should state the grounds on which he reaches that decision.

Looking back to the days when one had responsibility for these matters, I have tried to work out what harm would be done to one's effectiveness in ensuring that the rogues and charlatans did not come into the industry if one was bound by an Act of Parliament to answer a request for the particulars of the grounds for so reaching that decision. I cannot see any possibility of harm except in the event that I have gone wrong and have made a bad judgment and was either falsely informed or in some way prejudiced—which I hope I would not be, and I am quite certain that none of the members of the present Government or their predecessors were. What harm could be done to my effectiveness if I was acting rightly? It is supposed by some that to state baldly in a letter (which I suppose would be the means by which the grounds were given) that "Mr. X was not a fit and proper person because …." would so discourage the officials from bringing the matter up, because of the threat of libel actions or what-have-you, that the Secretary of State would not be effectively advised and would not therefore use his powers. But I do not think that that is the way things happen.

We are having bogeys thrown at us—not theological ones, if I may put it like that—implicit in the argument that those of us who are advocating the statement of grounds, and further (but I shall not go into it on this clause) that those of us who are advocating appeal, are seeking to weaken the Secretary of State's powers. It is no part of my aim in anything that I have suggested to your Lordships at any time to weaken the effectiveness of the Secretary of State's control. It is part of my aim to see that the Legislature of our country ensures that the powers given to the Secretary of State are the powers that he needs and, further, that the Secretary of State is forced to act in accordance with natural justice. That is what I have tried to maintain and I believe that noble Lords opposite and some of my noble friends here and on the Cross Benches have said over and over again that that is what we are seeking to do. The noble Lord, Lord Brown, always goes out of the Chamber when I make that remark so he has probably never heard me say that. Whenever he comes back, almost automatically, he will accuse me of wishing to weaken the Bill. But that is not my aim. My aim is to strengthen it by making it acceptable on those grounds.

Related to this point—because if one asks the Secretary of State to give reasons why ultimately one must suppose that the matter might reach a judge, though it it is a very indirect "might"—I must refer to the remarks which the noble and learned Lord the Lord Chancellor made to us about what is rightly justiciable and what is not justiciable. I do not suppose any of us who were advocating an appeal, whether after stated grounds or not, were assuming that the judge would direct himself subjectively to the question of whether somebody was a fit and proper person. I thought the point was that the judge should be allowed to decide whether the Secretary of State in reaching his decision had come to it in the proper way, observing natural justice, and so on. I may have been misled in all this in my early youth, but I should have though that it was the historical pride of the Judiciary of this country that they were able to see, and did see, that the Executive applied natural justice in their decisions. I thought that was what we were trying to provide for. If I have misunderstood the situation and have misled my noble and learned friend I apologise. I am quite prepared to be lectured by him on this point. He is the best person of all on what should be justiciable and what should not. But I should be sad if he misunderstood me on the main purpose I had in providing that a judge could look at this matter in the last resort. May I now return to the strict Amendment. I hope that your Lordships will support me in seeing that the Secretary of State is obligated to state the grounds on which he decides that a company will not receive authority to enter the insurance industry because there is a person associated with it who is not fit and proper. I beg to move.

5.36 p.m.

LORD STOW HILL

My Lords, may I add one point in support of the Amendment that your Lordships are now considering. Assume that Clause 2 stands in its present form and that the Secretary of State is under no obligation to give grounds. Assume then that as the years go by the power to refuse a certificate is from time to time exercised and that, as it is exercised, it is exercised in the case of controllers and managers who are quite hopeless; controllers or managers who clearly ought not to be associated with an insurance company. May I make that assumption and assume, therefore, that the Government's thinking is right that the Secretary of State in cases like that ought not to be compellable to give the grounds on which he thinks the individual is not a fit and proper person. But in the ordinary course of things the time may well arise when in the case of a given individual the Secretary of State intimates that he is not prepared to give a certificate under Clause 2. But the person who in his view is not a fit and proper person strongly disputes it, wishes to contest it, and wishes to make use of every means open to him to restore his reputation. In that case, should be not have the right—or, rather, the company on his behalf—to ask that the grounds should be stated?

THE LORD CHANCELLOR

My Lords, I am afraid my attention was distracted. Would the noble and learned Lord be kind enough to repeat his last two sentences?

LORD STOW HILL

My Lords, what I was saying was that this Amendment is a kind of half-way Amendment. I was assuming the situation in which over a period of years the Secretary of State refuses under Clause 2 to grant a certificate and he has ample grounds for so doing. The controller or manager in question is a person who obviously ought not to be associated with an insurance company and is, moreover, a person who almost certainly will not dispute it because he knows perfectly well that his chances of disputing it are hopeless, even if there was some method by which he could. That may happen for a number of years. I do not suppose that the power will often be exercised but from time to time it will. Then conies the case in which the Secretary of State exercises the power in relation to a controller or manager who is not of that type. The Secretary of State may have misunderstood the situation; there may be something to be said on behalf of that person. That person may be very anxious and determined to do everything that he possibly can to vindicate and restore his reputation. In that case this sort of Amendment would be operative. In that case, the case of the person who really feels he is under a grievance because he has been wholly misrepresented and his activities misunderstood, that person would perhaps stimulate the company concerned to ask for the grounds.

What the noble Lord, Lord Aldington, is proposing by this Amendment which he has put before your Lordships is that there should be an obligation to give the grounds if asked for. I would submit that that is an Amendment which has a great deal to commend it. It would go a good way towards seeing to it that when you come upon the person who really thinks that he has a case and that he is in a position to vindicate his reputation, that person at least shall have the power, by moving the company to make the request, to know what it is that is said against him. It is a half-way house Amendment and I submit that it has a great deal to commend it.

LORD CACCIA

My Lords, may I very briefly support this Amendment, and for the reasons given by both the noble Lord, Lord Aldington, and the noble and learned Lord, Lord Stow Hill. In doing so, may I say that I accept entirely the correction of the noble and learned Lord about the 1967 Act, and, of course I accept what he has to say about the proper character of justiciable affairs. But when he comes to answer this Amendment will he consider this: What we have been trying to urge is that a good Bill should be made better—this is the point—if that is possible; and whether it is possible is very largely a question of whether certain of the powers now asked do not go beyond what is absolutely necessary to protect the interest which he so eloquently pointed out to us, namely, the interest of the consumer. Does it not go beyond what is strictly necessary to achieve that goal? —because the object in the end is exactly as he said, the strengthening of the insurance industry in this country.

LORD HAWKE

My Lords, I wonder whether the noble and learned Lord in his reply will deal with a point that is worrying me. In these insurance matters one of the most fertile breeding grounds for rogues is across the Atlantic. I have no experience of intelligence in peace time. Would the Minister obtain the cooperation of the Federal Bureau of Investigation, for instance, in obtaining particulars about any newcomer, if they knew that their remarks about this man were liable to be disclosed and perhaps made public? Of course, the information might not only be from there; it may be from the Continent, the Sûreté, or from any such people. It seems to me that none of the police forces overseas will be at all willing to give the proper information about any person if that information is liable to be made public. To start with, much of it may not be certain. They might be able to say: "Mr. X is suspected of having dealings with the Mafia in San Francisco in 1900 and something", and have no proof at all, but very strong suspicions. Surely they will never give that sort of information to a Minister if it is liable to be produced? I do not know whether the man in question could sue them for false information. That is an aspect which gives me considerable trouble.

LORD ALDINGTON

My Lords, may I ask my noble friend one question. It certainly was not my intention, in drafting the Amendment, that the source of information should be stated. Does he really think that the words of the Amendment require that the informer's name and the source of the information should be quoted? That certainly was not my intention, and the Amendment could be re-drafted.

LORD HAWKE

My Lords, if I may answer my noble friend, I think it would be necessary to name him, because the reason would be that the person is suspected of having dealings with the Mafia in 1900 and something. That has to be given as the reason.

LORD ALDINGTON

That is different.

THE EARL OF ONSLOW

My Lords, I, too, support this Amendment. The noble and learned Lord the Lord Chancellor says that on occasions one should not get muddled up by theology—I think that was the word. But on occasions theology ought to be brought into account. I think on this occasion the theology of showing reasons for a person being barred is very important, because, if it is proved, the proof goes to show even more reason why this person should not be involved in an insurance company. I think everybody in this House has got at heart the interests of not only the consumer but also the British insurance industry, because in the long run those two are identical. Therefore, the more proof which is involved, and in some ways the more theology involved, I think the better it would be. As the noble Lord opposite said, it is a half-way Amendment which is going to produce this, and I therefore support it.

5.45 p.m.

THE LORD CHANCELLOR

My Lords, I cannot really add very much to what I said before, and I hope your Lordships will not think that I am discourteous in any way if I do not repeat a great deal of it. I of course accept from my noble friend Lord Aldington, and from the noble Lord, Lord Caccia, that it is not their intention to weaken the Bill; but the question is, not whether it is their intention to weaken the Bill, but whether by the Amendment they will succeed in weakening it. It is the considered view of the Government that it will weaken it almost irrevocably in one of its key features, because instead of making the Bill a progressive measure it will then become a retrogressive measure, and the law will be put back to where it was when Savundra got away with it. That is the affect of the Amendment, as I see it.

My noble friend Lord Onslow bravely says, let us have theology. If this were a moral issue, I would, I think, range myself by his side, just behind the Bishops' Bench. That, he did not seem to see, was quite inconsistent with the attitude taken up by my noble friend Lord Aldington and my noble friend Lord Caccia. Their attitude was that if it weakens the Bill it is a bad Amendment, theology or no theology. The noble Earl, Lord Onslow, says it is so important to protect a person who has not satisfied the Secretary of State of his fitness to receive millions of pounds of the public's money that we must set practical experience at naught.

My noble friend Lord Aldington asked me for some further and better particulars. He said that he accepted my test of an ounce of practice being worth a pound of theory, and I think in this field it certainly is. I have not got very great particulars to give him, but what I can tell him—which I have hastily scratched up from the sources known to the House—is as follows. It deals with the five years between 1968 and 1972; that is to say, not the whole six years in question. There were, so far as I can make out, 462 applications of this kind, in which 365 authorisations were given and 97 were refused, for one reason or another, and in no case was any reason given for the refusal. Thus, I think it is fair to say that we have a considerable experience of the working of this clause. I still assert that no one has adduced any reason to believe that there was any injustice inflicted in the course of that time.

I am bound to say that, in my judgment, at any rate, it would seriously, perhaps fatally, damage the value of this Bill if the Secretary of State were driven to give reasons for refusing to allow new entrants into this particular trade. If I may just elaborate on this for a moment, of course it is true that natural justice must apply; and it is true, even without any appeal, that the courts would be able to disallow any actions of the Secretary of State which completely ignored the duty to be fair or broke the rules of natural justice. Natural justice does not involve an appeal. It does involve allowing a man to make a representation, and of course he has that opportunity when the application is made; and, obviously, if he is invited to give any further clarification, he will have a second opportunity to do so. But, equally obviously, if the Secretary of State acts ultra vires and acts contrary to the duty to be fair, which would be for that purpose ultra vires, the courts could enter into the matter.

The kind of problem which is raised by this type of Amendment is precisely that raised by my noble friend Lord Hawke. I do not think it proper for me to describe at length the case which I cited in which the Master of the Rolls gave a clear opinion about natural justice in matters of this kind, in relation to the Gaming Board. I do not think it proper because I was one of the counsel in that case, but broadly speaking the kind of situation which can arise is this. Whether you are employed by a private employer or a public employer, there are certain occupations of trust which you cannot get simply on the citerion that a man is innocent unless he is proved guilty. A confidential person trusted with money has to satisfy the person who trusts him that he is fit to be entrusted with money of the kind of order that he will have in the course of that employment. That satisfaction would come just as much if my noble friend Lord Massereene and Ferrard was engaged as a confidential servant as if the public are looking through Parliament and through the Secretary of State to consider an application to be allowed to carry on the business of motor car insurance.

When that is so, it is a question partly of information and partly of subjective judgment as to whether you consider a particular person worthy—whether he has satisfied you that he is worthy. One of the problems is undoubtedly precisely that which my noble friend Lord Hawke adumbrated. In many cases, and one must suppose in relation to the Gaming Board or in relation to this matter, the Secretary of State will have information more or less sensitive in character and will not wish to disclose the source of his information, nor ought he to be compelled to do so.

Now my noble friend Lord Aldington, who really is sometimes a little naive about these matters in spite of the immensely greater business experience which he has acquired than I shall ever possess, does not seem to have appreciated that if, in fact, a piece of confidential information is disclosed it will automatically, in nine cases out of ten, disclose the source from which it was obtained—that is to say, if it is anything like being true. Suppose something did turn up about membership of the Mafia—obviously that could happen in relation to the Gaming Board. Supposing it is said, "He is supposed to be a member of the Mafia will you allow him to set up a gaming club in central London? "—are you going to disclose that or are you not? The Master of the Rolls said that that was precisely the sort of thing that you did not have to disclose, even though it was not necessary to disclose the source of the information. It was also not necessary for him to disclose its content, partly of course because the content, as everybody knows, almost invariably compromises the source.

At the end of the day you are left with a subjective judgment, and the subjective judgment is broadly speaking that which the noble Lord, Lord Brown, spoke of earlier: "I do not think you are fit to handle large sums of money". It is a matter of judgment about the man. "You have not enough experience; I am not satisfied that your associations in the past have been altogether happy. You have sent me what particulars of your life you have. They do not seem to add up to very much and I do not know enough about you". That is not giving reasons, and the trouble is that if you once impose upon a public authority the obligation to state grounds for a subjective judgment you have in fact undermined their ability to withhold authorisation where grounds are either vague or based upon a confidential source which they dare not compromise.

Having said that, at the end of the day I still say to my noble friend, in spite of all that I have said critical of his remarks, that I will still take back everything he has said to my right honourable friend. If my noble friend does not press this point at this stage we will see whether there is any concession that can be made. Speaking for myself, I say that he has not yet convinced me that my right honourable friend or the Government are wrong. I will not, however, close the door if he does not press this issue to a Division.

LORD ALDINGTON

My Lords, may I interrupt the noble and learned Lord before he sits down. The arguments which he has adduced against my Amendment seem Ito me to be very solid arguments against two Amendments that his noble friend Lord Limerick is going to move, I think on Clauses 21 and 22, which provide for the Secretary of State to give particulars about persons who are already in the industry. The arguments which he has just put to the House seem to me to apply to them as much as to the new applicant. Could he be so good as to explain to your Lordships—I know he touched on this subject earlier why there is something so very difficult about a man who is not yet in the insurance industry and who has been in the Mafia, as compared with a man who is in the insurance industry and has also been with the Mafia?

THE LORD CHANCELLOR

My Lords, I thought I had dealt with this matter at considerable length in my first speech, and it was for that reason that I did not speak on it. These are exercises in balance of judgment, a balance of argument one way or the other. You have to give some weight to divergent considerations, and what I said before and what I now repeat in response to my noble friend is that I think there is a difference between depriving a man of a lawful calling which he is already carrying on and stopping him from entering into a new calling. In spite of my noble friend's saying that this is no analogy, may I draw the analogy of entering a profession. If I am going to apply to be called to the Bar I have to satisfy the Benchers that I am a person of good character, but I cannot be disbarred unless reasons are given. It is, of course, true that the same kind of consideration can arise in relation to the latter case as in relation to the former, but in relation to the latter case it has been thought—and I think it is widely recognised—that there is a difference between a new entrant, a person seeking to carry on a calling which he is not yet carrying on, and a person against whom it is sought to deprive him of a calling he has been lawfully carrying on for some time.

If my noble friend denies that, I can only tell him two things. The first is that I think it is universally recognised in the profession, and the second is that the whole passage from the Master of the Rolls's judgment in the case of Benaim which I quoted in my earlier speech illustrates the fact that it is part of the law of the land.

LORD ALDINGTON

My Lords, with the leave of the House and on the understanding that my noble and learned friend is going to have a further word with his right honourable friend, I am only too happy to withdraw the Amendment, but on the understanding also that I may reproduce it if the result of that discus- sion is negative. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.59 p.m.

LORD ALDINGTON moved Amendment No. 4: Leave out Clause 3.

The noble Lord said: My Lords, perhaps we could, with your Lordships' permission, deal with this Amendment very quickly, because the matter was fully discussed during the Committee stage and my noble friend said he would have a look at it. Various arguments were put to your Lordships, but the two which I consider the most important are these: first, that the clause as it is drawn at the moment seems to give some protection to existing, companies as against possible newcomers, and, secondly, that it seems to indicate a dislike by the Government of the composite company in insurance. Just at the time that we are going into Europe and discussing how together we can work out a basis of regulations to control insurance in the whole of Europe, it does not seem to me and to many of my noble friends, and I think to many on the other side of the House, that we should, in a Bill as important as this, have a clause which seems to cast doubt upon the propriety and goodness of composite insurance companies. I know I am right in saying that other clauses of the Bill provide the Secretary of State with all the powers necessary to ensure that composite companies keep their long-term business and their general business quite separate from each other. I beg to move.

LORD DIAMOND

My Lords, I think it only right to make it clear that the noble Lord, Lord Aldington, and I did not get into a huddle over this clause. The first time that either of us saw that our names were joined together in holy opposition to the Government, was when the Amendments appeared on the Marshalled List which is very recent indeed. This Amendment is a continuation of an Amendment which I put down at an earlier stage, and I was hoping that the Government would have something to say on it. As they have not, all I can do is to repeat what the noble Lord said, and what I said on an earlier occasion, that the clause is not really necessary at all.

THE EARL OF LIMERICK

My Lords, any form of opposition, be it holy or unholy, has to have something to fight. As I indicated during the Committee stage, this clause was simply intended to permit the Government to decide at some time in the future to cease issuing authorisations for new composites as a matter of consistent policy, if it were felt that the other provisions for the better protection of long-term policy holders were inadequate. I concede that this was perhaps an unduly cautious approach, and I am therefore prepared to accept the Amendment, thereby removing any suspicion about its implications.

LORD DIAMOND

My Lords, may I be allowed to thank the noble Earl?

Loan ALDINGTON

My Lords, may I say likewise?

On Question, Amendment agreed to.

Clause 5 [Deposit of documents with Secretary of State]:

6.2 p.m.

THE EARL OF LIMERICK moved Amendment No. 5:

Page 4, line 20, at end insert— ("( ) The documents to which the said subsection (1) applies shall also include a statement, as at the close of the period to which the other documents deposited under that subsection relate, of the names and connection with the company of any persons who—

1. (a) are authorised by the company to issue any such invitation in relation to the company as is mentioned in subsection (1)(a) of section 39 below; and
2. (b) are connected with the company as provided by regulations under that section;

and any such statement shall be deposited at the same time as the other documents required to be deposited under the said subsection (1).")

The noble Earl said: My Lords, I think it would be convenient to consider Amendment No. 6 with this Amendment. This is a modified form of an Amendment moved in Committee by the noble Lord, Lord Jacques, which would have had the effect of requiring every insurance company to keep a register of its connections with intermediaries. That Amendment was withdrawn on my undertaking to consider the suggestion but, on the basis of publicity being given to this type of information, in a manner which we thought would be more convenient to the public. The Amendment now before your Lordships' House provides that details of "connections" of this kind required by regulations under subsection (1) to be furnished to potential policy holders are to be given in the annual returns of the insurance companies concerned. As these returns are placed on the company's public file, potential policy holders, or, for that matter, their advisers, would have easier access to such information than if they had to go to the offices of the companies and ask to see the list. My Lords, I beg to move.

LORD JACQUES

My Lords, may I thank the Minister for the consideration given to the points which I raised, and may I say that his Amendment entirely meets them?

On Question, Amendment agreed to.

THE EARL OF LIMERICK

My Lords, I beg to move Amendment No. 6.

Amendment moved— Page 4, line 41, leave out ("as is mentioned in subsection (1)") and insert ("or statement as is mentioned in subsection (1) or ( )").— (The Earl of Limerick.)

On Question, Amendment agreed to.

Clause 7 [Statements of transactions of prescribed class or description]:

THE EARL OF LIMERICK moved Amendment No. 7: Page 5, line 26, after ("(1)") insert ("Classes or descriptions of agreements or arrangements appearing to the Secretary of State as likely to be undesirable in the interests of policy holders may be prescribed for the purposes of this section, and").

The noble Earl said: My Lords, in moving this Amendment, with which I should like to join Amendment No. 8, I may, if there is no objection from the noble Lord, Lord Diamond, refer to his Amendment No. 9. It is a little difficult to discuss them in isolation because, obviously, they cannot live together. Amendments Nos. 7 and 8 are intended to meet the criticism made in Committee of the absence of any limitation on the kinds of agreement or arrangement which might be prescribed under this clause, and the formula adopted is based on a suggestion made by the noble Lord, Lord Brown. We have considered the form which it might take, and we have come up with Amendment No. 7. If I may refer briefly to Amendment No. 9 by the noble Lord, Lord Diamond, we are driving at the same point here. There are two matters to consider. First, what criteria are there to be? Secondly, should those criteria be objective or subjective? On reflection, having seen the noble Lord's Amendment, I still prefer my own, and if he has reservations this is a matter about which we could have further discussion. But I think there is so little between us that it might be convenient to the House if an Amendment were accepted in this form. My Lords, I beg to move.

LORD DIAMOND

My Lords, again I have pleasure in rising to thank the Minister for having met the essence of the argument which we adduced during the Committee stage. The reason why my Amendment is put down is that I had to indicate to the Government what I thought might be a suitable way of dealing with the difficulty, in advance of seeing what the Government themselves were proposing to say. The Amendment which has been moved by the noble Earl is a satisfactory alternative, and if I am asked whether I prefer an alternative supported by the Government or an alternative not supported by the Government, I must say that I regard myself as a very practical person. So I should like to thank the noble Earl, and of course I shall not move my Amendment when we reach it.

On Question, Amendment agreed to.

THE EARL OF LIMERICK

My Lords, I beg to move Amendment No. 8.

Amendment moved— Page 5, line 28, leave out ("prescribed for the purposes of this section") and insert ("so prescribed").—(The Earl of Limerick.)

On Question, Amendment agreed to.

Clause 8 [Separation of assets and liabilities attributable to long term business]:

LORD DIAMOND moved Amendment No. 10: Page 6, line 15, at end insert— ("( ) Regulations made for the purposes of subsection (2) above may specify the records to be kept.")

The noble Lord said: My Lords, this is a very important issue which was dealt with at some length during the Committee stage, when I moved a very long and detailed Amendment. The proposed Amendment is much simpler and deals with the matter by way of regulations, rather than by setting out what has to be done. What we are seeking to do is to make effective subsection (2); that is to say, the Government's desire that an insurance company, … shall maintain such books of account and other records as are necessary for identifying— (a) the assets representing the fund … maintained by the company under subsection (1)(b)"; in other words, the separation of long-term assets and long-term liabilities. There is a technical problem here relating to joint bank accounts, which composite companies would naturally wish to make use of. I do not know whether the noble Earl wishes me to deal with this matter at length. The view I have taken is that it is not easy to argue across the Table the details of accounting which are most appropriate to achieving the Government's objective. There is no difficulty between us. We are all agreed on what the appropriate objective is. Indeed, the noble Earl expressed himself on the last occasion as sympathetic to our point of view and our anxieties; and I believe the noble Lord, Lord Caccia, did also.

I take the view, therefore, that, as it is difficult to argue detailed provisions across the Table, and as the Government have made it clear what their objectives are, perhaps the better method would be to enable the Government to provide by regulation whatever they find in practice is necessary in order to achieve this separation, and to give them an opportunity to discuss with the industry itself, and with the various sections of the industry, some of which are composite companies, what detailed regulations ought to be made in order to achieve this objective. I hope the Government will therefore feel that this Amendment, although much reduced in size, is sufficient to enable them to achieve the objective which is described within Clause 8, for without it I fear the Government may have some difficulty in achieving their objective. I beg to move.

THE EARL OF LIMERICK

My Lords, this is a somewhat beguiling Amendment, but I suggest, with respect to the noble Lord, Lord Diamond, that he is not quite playing fair. I do not mean with me—I have no personal complaint at all—but in this sense. I think he recognises the difficulties of laying down rules as to the treatment of unidentified assets which would recognise these practical difficulties and yet not open the door to abuse. I thought the Amendment he put down at Committee stage, and the discussion we then had on it, demonstrated this difficulty. What he is now proposing to do is to leave it to the Department to solve this problem by way of regulations. That is perhaps flattering to us, but I am not sure that it is the most profitable use of our time.

If the noble Lord presses this matter—and I agree with him entirely that it is not something which is easily debated across the Floor—I cannot really see any effective statutory means of regulating the use of unidentified receipts other than prohibiting their application to any purpose other than those of long-term business so long as they remain unidentified. I doubt whether that solution would be a welcome one; it has many practical difficulties. The important thing is that at some point in a company's organisation there should be someone who is capable of identifying the receipts so that the necessary records can be created without unreasonable delay. I am sure that this condition is always fulfilled, and that to make regulations about it would be a hindrance rather than a help.

In this connection I might perhaps draw attention to Section 147 of the 1948 Companies Act, which requires: Every company shall cause to be kept proper books of account with respect to … all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; … Subsection (2) further provides that proper books of account are not deemed to be kept unless they give a true and fair view of the company's accounts and explain its transactions. Beyond that, it is the duty of the auditors to see that the directors' certificate in respect of such matters has been properly and reasonably given. For that reason, I think that regulations are probably not the right way to go about this. But I would leave it open to the noble Lord to convince me on this point, if he can, before the next stage of the Bill.

LORD CACCIA

My Lords, may I say that for my part I would welcome the proposal that the noble Earl has just made.

LORD DIAMOND

My Lords, I gather that what the noble Lord, Lord Caccia, is welcoming is that there should be discussions between now and a later stage, rather than that I should detain the House for the next hour and a half to explain the details of accountancy.

SEVERAL NOBLE LORDS

Hear, hear!

LORD DIAMOND

As it appears that I have understood the noble Lord, Lord Caccia, aright, then I would not seek at this stage to do more than remind the noble Earl that he was a good deal more sympathetic at the Committee stage than he appears to be now. He seemed to recognise that there was something which ought to be done. In fact, if I may quote from column 314 of the OFFICIAL REPORT for February 22 last, he said: I will gladly look at this matter again. Prima facie there is much to be said for the approach suggested by the noble Lord, Lord Caccia. Before the next stage, we should be able to reach some sensible proposal to meet this point". I do not know that we seem to have made very much progress since that statement was made. In fact, the noble Earl's sympathies seem to have gone backwards a little. So I am bound to say to him that I am grateful for what he has said, and I shall certainly take advantage of it because I believe you cannot achieve the purposes of this Bill—that is, of protecting the assets of the long-term policy holder—unless you deal specifically with the problem of joint bank accounts. Once you accept that, then you realise that you have to deal also with the exceptions which are necessary for the sensible running of a business by a composite company such as the company of which the noble Lord, Lord Caccia, is such an adornment, which I gather is the phrase which is in common use at the moment.

LORD ALDINGTON

Ornament.

LORD DIAMOND

Ornament, my Lords. Therefore, I want to make it absolutely clear to the noble Earl that I am advised that the industry, or a large part of it, takes the view that something more ought to be done; but he has been good enough to say that he recognises that there is a further stage at which Amendments can properly be put down, and that there will be time in between to discuss this matter. In those circumstances, I seek your Lordships' permission to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 9 [Application of assets of company with long term business]:

THE EARL OF LIMERICK moved Amendment No. 11: Page 6, line 41, after (" applies") insert ("or made in pursuance of a requirement imposed under section 17 below").

The noble Earl said: My Lords, I think it would be convenient to consider Amendment No. 15 together with this one. It relates to the same point. The purpose of these Amendments is to make it clear that where a special actuarial investigation has been required of a company under Clause 17, the results of such an investigation may serve, no less than those of the normal periodic investigation under Section 5 of the 1958 Act, as the basis for the company to distribute any surplus disclosed as permitted by Clause 9(2) and Clause 10(4). I beg to move.

On Question, Amendment agreed to.

6.18 p.m.

LORD DIAMOND moved Amendment No. 12: Page 7, line 14, at end insert— ("(6) Without prejudice to the generality of subsection (1) above, an insurance company to which the Act of 1958 applies shall not apply any part of the assets representing the fund or funds maintained in respect of its long term business directly or indirectly by way of payments to any person who is a controller of the company as defined in section 2(2)(c) but not as defined in sections 2(2)(a) or 2(2)(b), or to any body corporate of which that person is also a controller as so defined, in respect of services rendered to the insurance company unless such services are necessary for the proper operation of the long term business of the insurance company and the payments for these services are reasonable having regard to the services provided and the interests of the long term policy holders; and if such an insurance company does so apply any part of these assets it shall include in its annual accounts prepared in accordance with the Regulations made under section 4 of the Act of 1958 a statement of the amounts so applied and the nature and extent of the services rendered, and the auditors of the company shall include in their report made in accordance with these Regulations a report stating whether or not the provisions of this subsection have been complied with.")

The noble Lord said: My Lords, I beg to move Amendment No. 12, to insert the new subsection, which very shortly states that an insurance company shall not apply any of its assets by way of payments to a person who is a controller in respect of services rendered unless these payments are reasonable; and it adds that a report shall be made and the audi- tors shall provide a certificate. As noble Lords who were good enough to be present at our Committee stage know, this is to prevent the repetition of a questionable practice which has in fact arisen. So it is not an academic question: it is something which needs to be dealt with. This Amendment does not deal with the matter by way of regulation because it is a fairly short point, and it attempts therefore to deal with it precisely. If the noble Earl says that the wording is in any way inadequate, then of course that can be put right later on, but I suggest that this deals with a matter which needs to be put right. We referred to the matter at the Committee stage, when, at column 321 (OFFICIAL REPORT, 22/2/73), the noble Earl said: Yes, we can certainly look again at the principle behind Amendment No. 8", which was a very similar Amendment. I therefore hope that the noble Earl has something welcome to say now, and I beg to move.

LORD BROWN

My Lords, I should like to support my noble friend on this Amendment. It would not be a bad thing if this clause applied to every controller or managing director under the Companies Act without restricting it to insurance companies. But that is not a matter for debate here. One thinks of past events. There is a case under consideration at the moment. With that short comment I strongly support my noble friend's Amendment.

THE EARL OF LIMERICK

My Lords, I can come half-way to meet noble Lords who spoke to this Amendment. I believe this to be a case where we should go ahead by means of regulations. That is the course I would recommend. I can only, in substance, repeat my comments on the similar Amendment discussed in Committee. The principle is clearly established by Clause 9(1) that long-term funds should not be applied to purposes other than those of long-term business. Given that principle, we intend to require what the second part of the Amendment envisages by making the appropriate regulations. The existing regulations already go some way towards this end and we shall give them the necessary additional precision.

While on the subject of regulations it might be helpful if I expand on this point.

Regulation 6 of the Insurance Companies (Accounts and Forms) Regulations 1968 (Statutory Instrument 1408) provides that there shall be annexed to every long-term business revenue account a certificate signed by the secretary or the managing director and at least two directors, stating whether or not in the opinion of those who signed the certificates any part of the long-term business fund has been used directly or indirectly for any purpose for which it should not have been used having regard to the provisions of Section 3 of the 1958 Act and, where applicable, to the provisions of any instrument setting up the fund.

Furthermore, there are in Regulation 7, which relates to the auditor's report, words to the effect that whether or not in their opinion and according to the information and explanations they have received, the certificates annexed to the accounts in pursuance of Regulations 3, 4 and 6 have been properly prepared in accordance with the provisions of these Regulations, and whether or not in their opinion, and according to information and explanations which were received by them, it was reasonable for the persons giving those certificates to arrive at the opinion therein stated.

We shall be reviewing these regulations in the light of the changes made by the Bill. I have just been given to understand that this is the course which would be preferred by the B.I.A. I suggest that this might be the way to proceed on this matter. We accept fully that this is something that we want to do. I am suggesting an alternative method which does not involve amending the Bill.

LORD DIAMOND

My Lords, I am grateful to the noble Earl for his sympathetic understanding of the objectives that we are both trying to reach. We require two things. The first is prohibition and the second is certification. He spoke at length about certification and satisfied me about that. As to prohibition, do I understand him to say that Clause 9(1) effectively prohibits what we are seeking to prohibit? Clause 9(1) says that assets representing funds maintained by companies in respect of long-term business shall be applicable only for the purpose of that business. If that is an effective prohibition, as I read it to be—and I note that the noble Earl is nodding his head in assent—I think that the two points we essentially require are being met. I am grateful to the noble Earl and beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 10 [Allocations to policy holders]:

6.24 p.m.

THE EARL OF LIMERICK moved Amendment No. 13: Page 7, line 29, leave out ("company has complied with the requirements of subsection (3) below") and insert ("requirements of subsection (3) below have been complied with").

The noble Earl said: My Lords, I think it would be convenient to take Amendment No. 14 with this one. The two are directly associated and have the same effect as Amendment No. 10 which was moved by the noble Lord, Lord Jacques, on the Committee stage. Their effect would be simply to delay any distribution to shareholders for a period of 56 days where there is increase of more than half of 1 per cent. in the proportion of profits of the long-term business which the company is proposing to allocate to them. The 56 days would start from the date, or the last date, on which the company had published their intention in accordance with the requirements of Clause 10(3) and would, for example, allow time for any dissenting party to make representations to the company before the increased allocation to shareholders was made. The Life Offices Association have been consulted and see no problem in this change to the Bill. I beg to move.

LORD JACQUES

My Lords, I thank the noble Earl for the consideration that has been given to the point I raised in Committee affecting Clauses 10 and 11. The Amendments entirely meet the point that I made.

On Question, Amendment agreed to.

THE EARL OF LIMERICK

My Lords, I beg to move Amendment No. 14 formally.

Amendment moved— Page 8, line 5, at end insert ("and that a period of not less than fifty-six days has elapsed since the date, or the last date, on which the company has published the statement mentioned in paragraph (b) above as required by or under that paragraph.").—(The Earl of Limerick.)

On Question, Amendment agreed to.

THE EARL OF LIMERICK

My Lords, I beg to move Amendment No. 15. We considered this with Amendment No. 11.

Amendment moved— Page 8, line 11, at end insert ("or made in pursuance of a requirement imposed under section 17 below.").—(The Earl of Limerick.)

On Question, Amendment agreed to.

THE EARL OF LIMERICK moved Amendment No. 16: After Clause 10 insert the following new clause:

Avoidance of contracts for unlimited amounts

"Liabilities of unlimited amount

. A contract entered into after the coming into force of this section by an insurance company to which the Act of 1958 applies shall be void if—

1. (a) it is a contract under which the company undertakes a liability the amount, or maximum amount, of which is uncertain at the time when the contract is entered into; and
2. (b) it is not a contract of a class or description exempted by regulations from the operation of this section."

The noble Earl said: My Lords, I think it will be convenient to consider with this Amendment, Amendments Nos. 45 and 52 which relate to the same point. These Amendments relate to Clauses 36 and 47 respectively, following those which are concerned with special arrangements relating to long-term insurance assets. However, this new clause will apply to all insurance business. The effect of the new clause is to render void any contract for an unlimited amount. The clause is not retrospective. It can only come into force by the Amendment to Clause 47 when regulations specifying the types of contract exempted from the clause are brought into effect.

I would say a word as to why we think this is necessary. Paragraph 10 of Schedule 2 to the Insurance Companies Act, 1958, which is subsumed in Clause 36, allows the Department to exempt general business insurance companies from the solvency margin requirements if they are satisfied it is guaranteed or reinsured as to the whole of its liability to policy holders by another authorised insurance company or Lloyd's underwriter. Where this is done liabilities under the guarantee are taken into account in assessing the guarantor company's solvency. There is no corresponding control over insurance companies undertaking to guarantee any other parties, such as an associated company which might be carrying on insurance or any other business. For example, a Life Office might, outside the arrangements permitted under Schedule 2, guarantee an ailing associate in motor insurance. This would be against the spirit but probably not against the letter of Clause 9(1) of this Bill, and the new clause plugs that gap. The clause prohibits contracts by which an undefined liability is accepted. It will be possible in valuation regulations made under Clause 31 to set out how liabilities are to be treated. The regulations will list as exceptions, naturally, contracts falling within the definitions which are of a kind normally undertaken in the course of insurance business. They will except, for instance, motor third party cover, and that will be done after consultation with the industry to determine how these categories can be defined. Other individual exemptions, if justified, could be made under Clause 36 on application by the company. I beg to move.

LORD CACCIA

My Lords, may I ask the Minister a question about this Amendment. It is not a matter of objecting to the object as there described, but the language used here is very wide. Under paragraph (b) a great deal, apparently, is left to regulations. For instance—this is an attempt to see whether we can get something more from the Minister about the intention of this part of the Bill—as drawn, might it not limit cost-plus building contracts, and might it not prohibit investment in an unlimited liability company? Could this Amendment be looked at again to make certain that these activities, which may in themselves be entirely in order and traditional, could not be debarred because of the wording being such that the regulations would have to follow?

LORD ALDINGTON

My Lords, as I understand this new clause, it refers to all insurance companies and not just long-term life insurance companies. Therefore, quite apart from the matters to which my noble friend Lord Caccia referred, it would catch the whole of motor-car insurance, quite a lot of fire insurance and accident insurance generally. I cannot believe that that is what is intended. I understand that there has been some difficulty, as was the case elsewhere in the Bill, in trying to catch what is wrong in every case, and therefore once again the Department have come down in favour of the all-embracing power which they are asking Parliament to give the Government. They leave it to the Secretary of State, albeit through regulations which we shall have to look at, to exempt from this new provision of the law. In certain cases one has been persuaded that has to be so, but it surprises me that the draftsmen cannot apply their pens so accurately as to be able to say in legal language what they require to hit and what they do not. If they do not require to hit motor-car insurance, why not say so? If they do not require to hit other forms of insurance, why not say so? If they do not require to hit the kind of thing my noble friend was talking about, why not say so? It is very perplexing to me.

THE EARL OF LIMERICK

My Lords, I think that my noble friend Lord Aldington and the noble Lord, Lord Caccia, are raising the same point. On reflection, I think they will consider that there is not much of a problem here. The reason that it is done in this way may be summed up in the one word "flexibility". I defined a case which I think everyone would recognise as being a case in which a liability for an unlimited amount should not be undertaken. It is easy to see that we could think of two or three more which we could write into the Statute. But it is possible that, by mistake, we could go a bit too far, and it is much more likely that we should fail to catch something that we should have caught. The noble Lord, Lord Caccia, asked for further consideration, and that is exactly what will happen when we come to draw up the regulations. We want industry to tell us the types of unlimited guarantee which are prima facie rather a strange thing for a company to do but which are nevertheless right and proper in the ordinary course of business. We will then examine them. The other reason for doing it in this way is that there are bound to be cases where something will come up about which we would say, "We never thought of that." By having it as a matter of regulation, we shall be able to deal with those cases. If we find that there is one company which stands out from the others, by having some requirement which is not of general application, an exemption can be made under Clause 32. I think that this is the right way to go about it. If we try to put it into the Bill we shall end up with something which is much too inflexible.

On Question, Amendment agreed to.

6.38 p.m.

THE EARL OF LIMERICK moved Amendment No. 17: After Clause 10 insert the following new clause:

Investment by company with long term business in associated companies

".—(1) An insurance company to which the Act of 1958 applies which carries on long term business shall not make an investment in an associated company—

1. (a) at a time when the value of the insurance company's long term assets which consist of investments in associated companies exceeds the prescribed percentage of the total amount standing to the credit of its long term funds; or
2. (b) at any other time if the value of those assets which consist of such investments as aforesaid would exceed that percentage if the investment were made.

(2) For the purposes of this section the value of any assets which consist of investments in associated companies shall be determined in accordance with any applicable valuation regulations.

(3) In this section— long term assets" and "long term funds", in relation to an insurance company, mean respectively assets representing the fund or funds maintained by the company in respect of its long term business and that fund or those funds; the prescribed percentage" means five per cent. or such other percentage as may from time to time be prescribed for the purposes of this section by regulations; investments in associated companies", in relation to an insurance company, includes money owed to that company by an associated company, and the reference to the making of an investment by an insurance company includes a reference to the entering by it into a transaction under which an associated company will owe it money; associated company", in relation to an insurance company, means a company which, to the knowledge of the insurance company, either controls that company or is itself controlled by another company which also controls the insurance company; company" includes any body corporate.

(4) For the purposes of this section a company controls another company if, either alone or with any associate or associates, it is entitled to exercise, or control the exercise of, one third or more of the voting power at any general meeting of the other company or of a company of which that other company is a subsidiary; and in this subsection "associate"in relation to a company, means—

1. (a) any subsidiary of that company; and
2. (b) any director or employee of that company or of a subsidiary of that company.

(5) This section shall not be construed as making any transaction unenforceable as between the parties thereto or as otherwise making unenforceable any rights or liabilities in respect of property."

The noble Earl said: My Lords, with this Amendment I think it would be convenient to consider Amendment No. 44 which is directly related. This new clause deals with the matter raised on Amendment No. 7 in Committee by the noble Lord, Lord Jacques. Its purpose is to protect the interests of long-term policy holders by limiting the investment of long-term funds in companies under the same control as the long-term insurer, but not investments in the insurer's own subsidiaries. The principle has the support of the Life Offices' Association. It is not denied that investments in associated companies may be good investments and perfectly suitable for the long-term funds. There is, however, the risk of a conflict of interest for persons who control both the long-term insurer and other companies which may be engaged in other forms of insurance or non-insurance business, as between the return upon the investments of the long-term funds, the bulk of which normally goes to the with profit policy holders, and the profitability of the associated companies in which the policy holders have no share.

The limitation proposed operates so as to prohibit further investment in an associate from the long-term funds if such investments already exceed 5 per cent. of the amount standing to the credit of the funds, or if the further investment would take the figure above that limit. This does not require the realisation of such investments which may at the date of the passing of this Bill exceed the 5 per cent. limit or if subsequently movements in the amount of the funds or the value of the investments should carry the proportion over the 5 per cent. limit. In such circumstances there will, however, be a standstill on further investment. Subsection (3) provides that the percentage may be changed by regulation, subject, as are all the matters to be prescribed under the Bill, to annulment when laid before Parliament. Such a change would similarly have no retrospective effect. Subsection (2) makes the value of the investments in associates one of the matters which may be prescribed under Clause 31.

The crucial definition is of course that of an "associated company" for this purpose. It is a company which controls the long-term insurer, either directly or through an intermediate holding company, also any other company which is under the same control. It does not include a company controlled by the long-term insurer. In this context "control" is substantially the same concept as in Clause 2(2)(c)(ii); that is to say, the right to control one-third or more of the voting power, either alone or in association with a subsidiary and any director or employee of the controlling company or its subsidiary. The final subsection provides that any transaction which transgresses the limit imposed by the clause shall not thereby be rendered unenforceable. This is to ensure that the investment shall be recoverable if, for example, the company in which it is made should go into liquidation. The Amendment to Clause 36 will enable the Secretary of State to make exceptions in special cases on the application of a long-term insurer. I beg to move.

LORD ALDINGTON

My Lords, I am in favour of the purpose of the Amendment as put forward by my noble friend, but it does not seem to me to achieve the purpose that he outlined to us, and the key to my belief lies in the definition of "associated company" and his remarks about it. An "associated company" in relation to an insurance company means a company which to the knowledge of the insurance company either controls that company or is itself controlled by another company which also controls the insurance company. It is a fact that the insurance industry has many grandparental and great-grandparental relationships, and it is a possibility that there are a number of subsidiaries of insurance corn-panics which by the Companies Act are subsidiaries of the principal holding company, which principal holding company controls the insurance company.

I hope my noble friend has my point, but perhaps I may explain it a little further. Some insurance companies are organised so that there is a holding company which holds the life insurance company and the general insurance company. Under the life insurance company, there could be a subsidiary. I understand it, it is my noble friend's intention that this clause should not catch that subsidiary, but because, I think I am right in saying, by the Companies Act, that subsidiary and all the subsidiaries count also as a subsidiary of the holding company, the subsidiary is a subsidiary of a company which controls the insurance company. If my noble friend would be so good as to have that point examined again, I am sure I can fully support the clause on the understanding as given to us explicitly by my noble friend that the intention is not to catch companies established, as it were, deliberately for the purpose of the long-term insurance business by a long-term insurance company.

LORD CACCIA

My Lords, I should like to follow on and support what my noble friend Lord Aldington has said; namely, that this clause, as explained, is in principle well accepted by the insurance industry. But there is just the question whether in fact as at present drawn it has it absolutely right, and I hope that the Minister will be ready to have further discussions with the industry to see whether the sort of things my noble friend has mentioned are adequately met in the ultimate language.

THE EARL OF LIMERICK

My Lords, I readily give that undertaking. These relationships do get a bit complicated, and perhaps the borderline between what is proper and what is incestuous is not always immediately evident. Of course we can look at the situation which the two noble Lords who have spoken have in mind, and if we see that we have made a mistake, or caught something which we did not intend to catch, I shall not hesitate to bring forward an Amendment at a later stage.

On Question, Amendment agreed to.

Clause 11 [Grounds on which powers are exercisable]:

THE LORD CHANCELLOR

My Lords, I beg to move Amendment No. 18. I explained in my first remarks that this was to meet a criticism made in Committee.

Amendment moved— Page 8, line 41, leave out ("expedient") and insert ("desirable").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE EARL OF LIMERICK moved Amendment No. 19: Page 9, line 40, after ("19") insert ("(2) to (4)").

The noble Earl said: My Lords, following the debate in Committee on Clause 11(3), I reviewed the principle of inspecting companies which are not necessarily suspect, as to which views were expressed both in support and in opposition by noble Lords who commented on it. I have concluded that it is right to retain this random inspection power for the reasons stated in Committee, and with which, if I may venture to say so, the B.I.A. is in general agreement. We have, however, come to the conclusion, with which again the B.I.A. concur, that the arguments for such a power apply with considerably less force to the requirements for specified information which may have to be prepared specially, and may be demanded on a series of dates with which Clause 19(1) deals, than to the demands which may be made under Clause 19(2) for the production of existing books and papers on a particular occasion. Consequently, the Amendment limits the application of Clause 11(3) to subsection (2) and the two following ancillary subsections of Clause 19. I beg to move.

LORD ALDINGTON

My Lords, I think this is an improvement, but it does not go far enough. Nevertheless I welcome it, and I shall have some more to say on the next Amendment.

On Question, Amendment agreed to.

6.48 p.m.

LORD ALDINGTON moved Amendment No. 20: Page 9, line 40, after ("exercisable") insert ("so far as is necessary to provide him with information about underwriting reserves").

The noble Lord said: My Lords, my noble friend has waved a red flag in front of my bull-like countenance by saying that the clause as it now stands, without my Amendment, is a clause that the B.I.A. would like. That of course is a red rag to me and to others of my noble friends who are unable to be present to-day. In so far as it is a statement of truth—and I do not know whether it is or not, because I have not restudied the matter—I must say that it is not final proof that Insurance companies as a whole, after discussion with their boards of directors would come to the same conclusion. So I hope he will accept it from me that I do not feel bound by anything, that has been said. My noble friend may be interested to know that my Amendment has been drafted by official people who understand insurance, and I hope he will not think that this is a proposal that comes from an interfering, ignorant chairman of an insurance company. It is there for a very good reason, following the line of argument that I have put to your Lordships' House on so many occasions, that we should try to limit these powers to what is necessary.

I think it is common ground that the inspection of what are called good insurance companies is not by itself necessary. It only becomes necessary in order, as it were, to camouflage the essential inspection of bad companies. This was all set out by my noble friend Lord Limerick on February 22 at columns 433 and 434. He went on to say that, while the main reason was what I call the camouflage reason, the ability to inspect good companies would put the Department of Trade in possession of knowledge of how companies should be properly run in order to help them decide what were the right standards, and presumably in order to spread the good standards from the good companies into, the bad ones. I am sure that this happens in a competitive industry in one way or another, but it seems rather an odd function for a Department. Nevertheless, I accept—and in accepting I am trying to compromise here—the camouflage argument. If that is the main purpose of Clause 11(3), then it seems to me not unreasonable to try to state the area to be covered by the inspection, or the area to be covered by the power to demand books, papers and so on.

It would seem to me, after discussing this with a number of people, that the sensible area to pick for this purpose would be the sensitive area, and that is the area of decision about underwriting reserves. In fact, to anybody knowledgeable about the insurance industry, this is a difficult area and one in which mistakes, for good reasons as well as bad ones, have been made. Therefore, I am proposing here that the right of inspection of a good company—because that is what Clause 11(3) refers to—should be limited to the acquisition of information about underwriting reserves. That covers quite a big field, and it would certainly give the Department the camouflage they want for putting in inspectors. It would seem to me far more in accordance with the ordinary practice of legislation than that we should provide the Department with very wide powers to enable them to go into good companies and ask them for all kinds of information about every part of their considerable business, without having any reason for requiring that information. I beg to move.

6.52 p.m.

THE EARL OF LIMERICK

My Lords, it would be a foolish man indeed who waved a red flag before my noble friend Lord Aldington, and I was trying to avoid doing it. With great respect to my noble friend and the way in which he has moved his Amendment, I think the purpose which he seeks to achieve by it is a mistaken one, and one which might not in any case be achieved by the Amendment. In effect, it would exclude the random inspection of companies, good, bad or indifferent, and it would limit the purpose to what we have come to regard as "yardstick" investigations. These have an obvious value, and when we have had dealings with the big companies in the past they have been most freely forthcoming with information. These "yardstick" investigations establish the practice of reputable companies by which the less reputable ones can be tested. But if that were seen to be the purpose. and if the inspections were in fact to be so limited, we should not be achieving the camouflage purpose (which my noble friend accepted) for the avoidance of stigma for the weaker, but possibly quite sound, companies that we thought it prudent to inspect. If the power to seek information under Clause 19 were to be limited in the way it would be if this Amendment were accepted, then I think it is evident that the mere entry of an inspector into one of those companies would prove that it was for some purpose not going beyond this limit, and therefore the camouflage would be totally removed, because nobody would think that the inspector was going in for any other purpose.

We might well, on that basis, attract stigma to some quite reputable companies which we inspected for "yardstick" purposes, because we would by definition be confining our attention to what is, to any insurance company—and this is the central argument—the most uncertain area in its accounts as defined by the Amendment. This is the area where inescapably estimation predominates and where it may be falsified by events; and the bigger the company the greater must be the possibility of error in absolute monetary terms. Many large and reputable companies have in fact had that experience in recent years and have freely admitted it. There was a sizeable example quite recently. For these reasons I believe this Amendment to be mistaken, and I would ask my noble friend not to press it.

LORD ALDINGTON

My Lords, I am afraid I find this situation somewhat surprising. I am taken by surprise, even though I expressed the hope that I would not be asking the House to divide. This seems to be a matter of great principle, to which I shall have to advert. There is no reason at all for putting the reputable part of the insurance industry (or the taxpayer) to the expense of employing an army of inspectors—whether random or not does not matter. There is no reason to state it in this Bill. In fact, Clause 11 goes so far as to state reasons why it should be done and then on top of that, for camouflage reasons, says that this inspection power can be used in other cases too.

As said on Committee stage, it seems to me wholly wrong and contrary to the relationships of Government, industry and commerce of this nation that wide inspection powers should be taken, enabling Government officials and inspectors to go into perfectly reputable offices without any accusation of things being wrong and without any limitation on their powers to inspect, to spy, to investigate or what-have-you. I think it would be absolutely wrong for this House to let the Bill go forward with the proposition for the first time, as I understand it in any activity carried on by private enterprise in this country, that there should be inspection without cause shown and with no purpose given.

What I have tried to do is to compromise with my noble friend by finding a small area which is meaningful, because it is an area where everybody wants more information, and to put that in this Bill to assist him in what he says is important to the rest of the Bill, that is, giving some camouflage to inspectors. If my noble friend could perhaps say to me that he would consider this further before Third Reading, I could rest once again on that; but I do feel, first of all, rather surprised that he cannot give anything at all on that point and, secondly, I would feel myself to be falling down on what I have said, and said fairly powerfully, as have some of my noble friends, if we just let this matter pass without any change at all. I am inclined to suggest that on Third Reading the House should abandon Clause 11(3) altogether. It would be better than leaving it as it is.

LORD CACCIA

My Lords, at this stage, I do not know whether my intervention will help or hinder and of course it is one of those good intentions with which the road to Hell is said to be paved. My difficulty here is in having great sympathy with the objective of this Amendment which the noble Lord, Lord Aldington, has put forward, and yet finding extreme difficulty in what he has done to try to be of assistance to the Government. If it were done in this way, I am not sure that I could go along with it; so I would rather hope that between now and Third Reading some further consideration might be given to the matter and that this particular form of Amendment would not be pressed.

LORD JACQUES

May I make our position on this side quite clear on this Amendment? We are grateful for Amendment No. 19. That goes as far as we think is necessary. If there were to be a Division on Amendment No. 20, or anything like it, we should advise noble Lords on this side of the House to vote with the Government.

THE EARL OF LIMERICK

My Lords, I do not know whether it would help if, with leave, I were to say that I will certainly listen to any other arguments that are put to me between now and the next stage. I must say that I am not convinced on this matter at all, and I think the principle is wrong. Nevertheless, I will listen to what is said. I would also say this. My noble friend referred to this as being the only example he knew of a random inspection. I do not think that that is the case. We have, for example, the Factories Acts.

LORD ALDINGTON

My Lords, my noble friend is misleading the House. The Factories Acts set out exactly why the factories are to be inspected, for exactly what purpose, and up to what standard. There is absolutely no sign of anything like that in this Bill, and it is wholly misleading to bring in the Factories Acts as a justification. There may be something wrong in my drafting, but it is certainly nothing to do with the Factories Acts.

THE EARL OF ONSLOW

My Lords, is it not true that if the insurance industry were prepared to police itself these inspection powers would not be needed? I should like to support any increase in inspection powers that are available, and the more random they are the better. As I said earlier, the benefit to the insuring public and the benefit to British insurers is in my view the same and always will be the same.

THE LORD CHANCELLOR

My Lords, is the noble Lord pressing his Amendment?

LORD ALDINGTON

My Lords, on the understanding set out by my noble friend Lord Limerick, I withdraw the Amendment.

Amendment, by leave, withdrawn.

THE LORD CHANCELLOR

My Lords, I beg to move Amendment No. 21. This has been fully explained.

Amendment moved— Page 9, line 41, leave out ("expedient") and insert ("desirable").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE EARL or LIMERICK had given Notice of intention to move Amendment No. 22:

Page 10, line 1, leave out subsection (4) and insert— ("( ) Any power conferred on the Secretary of State by sections 13 to 17, 19(1) and 20 below shall also be exercisable whether or not any of the grounds specified in subsections (1) to (3) above exists, in relation to—

1. (a) any company, society or body with respect to which the Secretary of State has issued an authorisation under section 61 of the Act of 1967;
2. (b) any insurance company to which the Act of 1958 applies in the case of which there has been a change in the persons who are controllers of the company,

if that power is exercised before the expiration of the period of five years beginning with the date on which the authorisation was issued or the change took place, as the case may be; but no requirement imposed by virtue of this subsection shall continue in force after the expiration of the period of ten years beginning with that date.")

The noble Earl said: My Lords, the eagle eye of my noble friend Lord Aldington has spotted a possible defect in this Amendment. Rather than weary the House with a long and possibly contentious argument, I prefer to take it away for reconsideration and reversion at a later stage. In these circumstances I will not move the Amendment.

LORD ALDINGTON moved Amendment No. 24: Page 10, line 14, leave out ("12") and insert ("13").

The noble Lord said: My Lords, I beg to move Amendment No. 24, and I should like to take with it the next Amendment. I suppose this might be thought to be impertinent of me, but this is an Amendment designed to achieve what I thought my noble and learned friend the Lord Chancellor was saying to us during the last occasion on which we discussed Clause 20. Much to the surprise of myself and some noble friends who studied this Bill carefully, my noble and learned friend was saying that Clause 20 was meant to provide the Secretary of State with powers not as drastic as those in Clause 12. I suggested. somewhat meekly, that that might well be the intention, but it did not seem to fit in with my understanding of the words then in subsection (5), which reads as follows: The power conferred on the Secretary of State by section 20 below shall not be exercisable except in a case in which he considers that the purpose mentioned in that section cannot be sufficiently achieved by the exercise of the powers conferred by sections 12 to 19 below or by the exercise of those powers alone. What I am suggesting is that we should say this: … cannot be sufficiently achieved by the exercise of the powers conferred by Sections 13 to 19 below or by the exercise of those powers",

and then add: and he considers that it is not necessary to use the power in Section 12

I put that down meekly, and I hope it will not be thought impertinent, because I thought that was exactly what my noble friend the Lord Chancellor was saying to us on the last occasion.

THE LORD CHANCELLOR

My Lords, I do not think that my noble friend is in the least impertinent; I think he is a bit of a tease. I am bound to say that I took this and the following Amendment as an attempt to tease me rather than as a serious intent to improve the Bill. I hope I am wrong, but I am afraid that that is the ugly thought which flitted across my mind. I will tell my noble friend why I did not take it as a great improvement on the Bill on the assumption which I make that everything he said on Committee, and everything I said on Committee, was seriously meant. Indeed, so far as I was concerned, it was.

These various powers are, as I indicated, designed to avoid if possible, the use of the lethal powers of Clause 12. One of the reasons why this is so is that after the V. and G. inquiry it became perfectly apparent that the Clause 12 powers which already exist under the existing legislation are so lethal that kindhearted civil servants hesitate to use them at all, or hesitate to use them before the horse has well been stolen and the stable door is wide open. My noble friend, taking the Lord Chancellor at his word, says, "We will leave out 12" and insert '13', so that Clause 12 does not enter into it, and we will insert the words, 'and he considers that it is not necessary to use the power in Section 12'". The reason why that is wrong, if one is to take the matter seriously, is that of course the powers under Clause 12, lethal as they are, would be perfectly sufficient to deal with the question if they were used. We do not want to use them, but they would deal with it. You can stop a man from having measles quite efficiently by cutting off his head; the difficulty is that it is rather a drastic remedy.

If your Lordships insert the words that are in Amendment No. 25, the only reason that the Secretary of State would consider that it is not necessary to use the powers in Clause 12 would be precisely because he had the powers which are given to him by this clause. The result is that my noble friend has involved himself in a circular argument. The only reason that the words could be correctly inserted would be if the power existed independently of the words. If it did not, I am afraid that they would preclude the use of the power altogether. I feel, therefore, that the tease, although I do not resent it in the least, is one which we should not pursue to the ultimate length of a Division. The noble Lord, having made his successful debating point against me in Committee and having provoked me into an embarrassed explanation on Report stage, has achieved everything he could possibly desire. I therefore hope that he will not press these particular Amendments.

LORD ALDINGTON

My Lords, before my noble and learned friend sits down, may I ask whether he is not saying that the first of my two Amendments is right but the second Amendment, for the dialectical reasons he mentioned, is wrong? If he is saying that, we should split the difference; he should support the first Amendment and then I will not move the second Amendment. I thought that was what his argument amounted to.

THE LORD CHANCELLOR

My Lords, I thought that I was saying that they were both wrong, although I was slightly amused that my noble friend should try to catch me on the hop.

LORD ALDINGTON

My Lords, I was not trying to catch my noble and learned friend on the hop; I am trying to see that the Bill makes sense to people outside your Lordships' House. In listening to my noble and learned friend on March 6, every one of us was somewhat surprised when he explained to us that Clause 20 was less draconian than Clause 12. That is a fact and I believe there was also surprise outside. Perhaps I may on this occasion quote the B.I.A. (which is frequently used against me) as there was some doubt there too. It would seem that however bad my words are, the words as they are now are worse; and that is what I believe the noble and learned Lord the Lord Chancellor was saying to us on March 6. And though he has had great fun in explaining that my words are not any good, perhaps he and his noble friend would once again have a look at the clause to see whether it is rightly drafted at present. If he can tell me that he will do that, I will of course withdraw my Amendment.

THE LORD CHANCELLOR

My Lords, I can speak again only by leave of the House. I certainly will ask my right honourable friend and his advisers to look into the drafting of this clause, but on reflection I think that my noble friend will see that the Amendment involved a circular argument and I managed to achieve exactly what I wanted to achieve by the Bill as drafted. Of course I shall look at it again if my noble friend has doubts.

LORD CACCIA

My Lords, may I thank the noble and learned Lord the Lord Chancellor for that, because I, too, have been somewhat bewildered. I read what he said the last time we discussed this matter and understood precisely that this was introduced in order that the Bill should not have to be as rigorous as the other provisions prescribed. I understand also, if one may say these things, that it seems to be what is currently said by the Department to the B.I.A. But when one looks at the words, it seems that they convey something else. Or is it that Amendment No. 20 and this one together would enable two things to take place: either a less drastic application of the sanction; or a sanction provided in a case which has not otherwise been thought of in the other provisions? It is a sort of "both/and" rather than "only"—a less severe rendering

THE LORD CHANCELLOR

My Lords, again I can speak only by leave of the House, but I meant exactly what I said on Committee, and still think that the clause as drafted achieves exactly that purpose. I do not think that we can do anything by prolonging this argument. I undertake, in response to the request made by my noble friend Lord Aldington, that the matter will be looked at again to see whether in any way the drafting can be improved. My own belief is that it probably cannot, but if it can, then let it be improved.

LORD ALDINGTON

My Lords, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 12 [Restrictions on new business]

THE EARL OF SELKIRK moved Amendment No. 26: Page 10, line 29, after ("authorised") insert ("under section 61 of the Act of 1967").

The noble Earl said: My Lords, I beg to move. The word "authorise", I presume, means under Section 61 of the 1967 Act. It does not say so in the interpretation clause and the way the words appear leaves a possible suggestion that some insurance companies are acting in an unauthorised way. That would be unfortunate because it is quite untrue. Some definition of "authorised" would make it more straightforward. I beg to move.

THE EARL OF LIMERICK

My Lords, the Bill is drafted the way it is precisely to cater for the possibility that there may be companies who are carrying on insurance business and who are insurance companies which are unauthorised, and it is evident that if they are so carrying on it is all the more important that we should have these powers, although they are not authorised under the 1967 Act. It is the more important that we should be able to stop them quickly, and while of course they are required to discharge their existing obligations, there is another technical difficulty which arises in the identification of those companies which were automatically authorised by Section 61 of the 1967 Act when that became law. I hope that that explanation will explain why the Bill is as it stands.

THE EARL OF SELKIRK

My Lords, I am grateful to the noble Earl. He does not mean the word "authorised"; he means "authorised under the 1967 Act". It does and can mean that the insurance company is engaged in wholly unauthorised and possibly illegal activities. Is that right?

THE EARL OF LIMERICK

My Lords, with leave, yes, there could be a company carrying on insurance business that has not sought authorisation and it is all the more important that we should be able to deal with such a company.

THE EARL OF SELKIRK

My Lords, I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 13 [Requirements about investments]:

7.17 p.m.

LORD ALDINGTON moved Amendment No. 27: Page 10, line 30, at end insert (in relation to assets covering liabilities and solvency margin").

The noble Lord said: My Lords, this follows a point that was made by me during the discussion on the Question, That the clause shall stand part, to the effect that this gave the Secretary of State very wide powers indeed over the investment of insurance companies. I believe that it was my noble and learned friend who replied that the powers were not quite as wide as they looked because this clause is activated only by one of the reasons set out in Clause 11, and in this case it would be Clause 11(1). But one of the events in Clause 11(1) that activates all these powers is the change of a controller. Therefore, every seven or ten years when an insurance company changes its chief executive or managing director all these powers become usable. Therefore, it is important to see that the power of the Secretary of State over investments is limited to what is necessary. We all accept that some power is necessary. Certainly it is right that he should be allowed, where he thinks it is right, to find out about and give some directions about investments that cover liabilities and the solvency margin. But many insurance companies have investments that cover the surplus above all that.

I believe that this view has been conveyed to my noble friend by other persons than ignorant chairmen and directors of companies. On this occasion the experts themselves hold this view and perhaps I have some hope, as I am joined with their support, publicly known, that it will be accepted that it will be a good thing slightly to limit the Secretary of State's power so that his power over investments is, and is seen to be, related to assets covering liabilities and solvency margins. I beg to move.

THE EARL OF LIMERICK

My Lords, my noble friend's main concern centres upon the use of these powers on the change of a chief executive, and here perhaps I should say by way of opening comment that this point is not unconnected with the Amendment which I did not move earlier in the afternoon. The purpose of this Amendment was referred to in Committee by my noble friend and we have since given the matter a good deal of consideration. While I have some sympathy with the thought underlying the Amendment, I do not think it is well conceived and I should be most reluctant to see it form part of the Bill, for the following reasons. The amount of the liability is inevitably largely dependent on estimation and the solvency margin relating to the preceding year's premium income which may since have been greatly expanded, so we have an immediate arithmetical difficulty in deciding what we would mean by assets covering liabilities and solvency margins. These things change quickly and they are not easy to determine at the best of times. It therefore seems much more sensible to look at the assets rather than the liabilities and to decide whether in all the circumstances of the particular company their quality and diversity are reasonably adapted to the needs of the business.

I would also mention that the powers reformulated in this clause will permit a requirement to realise a proportion of the investments of a specific class, whereas the existing power from the earlier legislation leaves no option but to refer to the whole of the class. So we also have a gentler power to achieve what may be an objective reachable without requiring the realisation of all the assets in a certain class, and it is, as I believe my noble friend recognises, invocable only in relation to a particular company at a moment of time and only where grounds for concern as defined in Clause 11 exist. I have already promised to meet my noble friend and I should be glad to include further discussion on this matter with him if he so wishes.

LORD ALDINGTON

My Lords, my noble friend has made a very important statement. He said that Clause 11(1) only applies or only activates these powers in cases of concern. But Clause 11(1)(f) says: that it appears to him that there has been a change in the persons who are controllers of the company". That, as the word "controller" is at present defined in this Bill, includes cases where there has been a change in the chief executive. There is no concern there. He does not have to have concern; it just is a fact.

THE EARL OF LIMERICK

My Lords, perhaps my opening words were a bit too oblique. This is one of the matters which we are looking at.

LORD ALDINGTON

Good. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 19 [Power to obtain information and require production of documents]:

THE EARL OF LIMERICK

My Lords, Amendment No. 28 was considered with Amendment No. 1. I beg to move.

Amendment moved— Page 14, line 15, after ("past") insert ("director or").—(The Earl of Limerick.)

On Question, Amendment agreed to.

Clause 21 [Notice of proposed exercise of power under s. 12]:

THE EARL OF SELKIRK moved Amendment No. 29: Page 14, line 34, leave out ("section 12") and insert ("sections 12 and 20").

The noble Earl said: My Lords, I beg leave to move Amendment No. 29. We now come to Clauses 21 and 22, which deal with the application of the powers under Clauses 12 to 20. In regard to one of the powers, called the lethal power, a period of notice of one month has to be given, and that is laid down in subsection (1) of Clause 21. We had a discussion on Clause 20, which clearly has a much wider bracket in both directions; it can be more gently used or more strongly used. It occurs to me that if it is necessary for the power under Clause 12 to be used that one month's notice should be given, it is only right and appropriate that action under Clause 20 should require one month's notice. I take it that the whole of Clause 21 refers only to Clause 12. Is there some reason why Clause 12 should be in a class all by itself?

Perhaps I may also ask what method of communication is going to be used for the remaining clauses, Clauses 12 to 20. Will it be by telephone conversation, in writing, or by personal interview? I think it is not unimportant that we should have some idea. I beg to move.

THE EARL OF LIMERICK

My Lords, there is indeed a good reason why Clause 21 refers only to Clause 12. Clause 12, as we have recognised in our discussions, is the "killer" clause; there is no other clause that approaches it in its severity. I will say a word in a moment about Clause 20. Therefore, it is, as has been recognised, right—and it was in the 1967 Act—that notice should be required before invoking Clause 12. If one examines what is brought about by the other clauses in this group, one can see that such notice would not be appropriate to their exercise. If we look, for instance, at Clauses 14 and 15, "Maintenance of assets in the United Kingdom", and "Custody of assets", these are the very powers that need to be invoked at extremely short notice in certain cases of difficulty. Again, Clause 16, "Limitation of premium income", is something far milder than saying that no new business can be undertaken. This may relate perhaps to doubts about the fitness of an individual manager in one company. Clause 17 is "Actuarial investigations"; and I think notice is not very relevant to that. The next two clauses are "Acceleration of information", and "Power to obtain information". So we come really to the question of Clause 20, which I believe was in my noble friend's mind.

I would explain it in this way. My noble friend is evidently, if I may put it this way, reluctant to believe that some fiendish ingenuity of bureaucrats would be unable to devise a use of Clause 20 which might be at least as draconian as the power of restriction under Clause 12. Even if he were right—and I cannot see how there can be anything more draconian than Clause 12—this Amendment would throw out the baby with the bathwater, in the sense that even the mildest use of Clause 20 would be subjected to a month or more of delay. This in a sense we might call the "stitch in time" clause. It is a way of doing perhaps rather a small thing quickly, to prevent a situation which is deteriorating from getting worse, without the necessity to invoke more severe powers.

I was at some pains in my Second Reading speech to stress the importance of the Department being able to act quickly and appropriately at the first sign of trouble. It is only because the power given in Clause 12 is so clearly capable of use to deadly effect that it is right to impose a delaying procedure in which the justification for such action may be challenged. I think Clause 12 is, therefore, clearly to be distinguished from the other clauses, particularly Clause 20, in the way I have described.

THE EARL OF SELKIRK

My Lords, I thank the noble Earl. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

7.28 p.m.

THE EARL OF SELKIRK moved Amendment No. 30: Page 15, line 1, at beginning insert ("The procedure under").

The noble Earl said: My Lords, I beg to move Amendment No. 30. Subsection (2) of Clause 21 begins by saying that subsection (1) "shall not apply". What I am asking is whether it will not apply in the sense that no notice will be given, or whether the manner in which the notice is given and the time will apply. In point of fact, the people to whom it will not apply are what I call non-executive directors. Non-executive directors are caught directly under the following clause, Clause 22, and the procedure under Clause 22 is almost exactly the same as under Clause 21. I am therefore, not quite clear why this says that it will not apply. What they are saying is only that the procedure will not apply? That is the first point.

There is a major point about which I should like to ask the noble Earl. If a non-executive director is to be removed, he can be removed under certain procedure preparatory to using powers under Clauses 12 to 20. But if a controller is to be removed, or rather if he is changed, or his quality is the reason for using Clause 12, he cannot be removed except under Clause 12. What is stated in subsections (2) and (3) of Clause 21 is that if Clause 11(1)(e)—that is to say, the unsatisfactory individual controller—is the reason for using Clause 12, then you will give particulars of the grounds on which the Secretary of State is considering exercising his power. If, however, the unsatisfactory controller is the reason for using any other clause—that is to say, Clauses 13 to 20—then there is no reason to give him any particulars whatsoever.

I am afraid this is a little outside the Amendment, but I draw attention to it because it seems to me that the structures of subsections (2) and (3) are peculiar as they stand at the present time. If it is a non-executive director and it is given as a reason for using any clause from 12 to 20, that is fully covered and, I may say, satisfactorily covered, by Clause 22. But in the case of the controller who is unsatisfactory and you wish to use a clause other than Clause 12, there is no reason to give particulars. I should like the noble Earl to look at that point. It seems to me contrary to what the Lord Chancellor was telling us earlier, that people in the industry would be given the reasons why they are being asked to leave, or the reasons why the clause should be brought into operation. I beg to move.

THE EARL OF LIMERICK

My Lords, I think I can answer fairly readily the first point raised by my noble friend Lord Selkirk. It is really a question of the drafting of Clause 21. If we consider that subsection (1) of Clause 21 is concerned solely with procedures, this makes the point clear. If the Amendment were accepted, it would raise a doubt, by referring to the procedures under subsection (1), as to whether subsection (1) did not also relate to something other than procedures, which it does not. Therefore the Bill as it stands I believe is clear; if the Amendment were imported it would become unclear. My noble friend raised also another point, though I think it is not directly covered by the Amendment. That is on changes of controllers. I wonder whether he has considered the effect of Amendment No. 31, which we shall be reaching in a moment, and which, by deleting some words, removes the exception to the necessity to give particulars in the case of the sitting tenant. I think this may perhaps meet his point when he comes to consider it.

THE EARL OF SELKIRK

My Lords, the noble Earl has already told us that Clause 21 referred exclusively to Section 12.

THE EARL OF LIMERICK

My Lords, if I have misled the House I shall of course apologise. The second half of subsection (2) deals with the proposed restrictions because of unfitness, and for this the procedure is different from that required where some other ground exists, but it is my understanding that we are talking here about the implication as it applies under Clause 12. But my noble friend has raised some doubt in my mind and I will certainly look again at that point. I think, however, it is not directly related to the wording of this Amendment.

THE EARL OF SELKIRK

My Lords, I must concede to the noble Earl that it is not directly related to the wording of the Amendment, and to this degree I apologise to him for raising it. But it seems to me to be at variance with the full statement we have received that anyone in the job will be given particulars before he is put out. So far as I can see this is not fulfilled in respect of controllers to whom objection is taken other than on the occasions when it is desired to use Clause 12. If the noble Earl will look at this point I shall be very grateful. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

THE EARL OF LIMERICK

My Lords, Amendment No. 31 was considered along with Amendment No. 2. I beg to move.

Amendment moved— Pace 15. line 14, leave out from ("above") to end of line 16.—(The Earl of Limerick.)

On Question, Amendment agreed to.

Clause 22 [Notice of proposed exercise of powers on ground manager's unfitness]:

THE EARL OF LIMERICK

My Lords, likewise Amendment No. 32 was considered with No. 2. I beg to move.

Amendment moved— Page 15, line 28, after second ("is") insert ("a director, not being a controller, of the company or").—(The Earl of Limerick.)

On Question, Amendment agreed to.

THE EARL OF LIMERICK

My Lords, Amendment No. 33 was also taken with No. 2. I beg to move.

Amendment moved— Page 16, line 11, leave out from ("section") to end of line 14 and insert ("shall give particulars of the ground on which the Secretary of State is considering the exercise of the power or powers in question.")—(The Earl of Limerick.)

On Question, Amendment agreed to.

THE EARL OF LIMERICK

My Lords, Amendment No. 34 again was considered with No. 2. I beg to move.

Amendment moved— Page 16, line 24, after ("a") insert ("director or").—(The Earl of Limerick.)

On Question, Amendment agreed to.

Clause 32 [Approval of person proposing to become controller of insurance company]:

7.35 p.m.

LORD ALDINGTON moved Amendment No. 36: Page 25 line 6, after ("controller") insert ("within the meaning of section 2(2)(c) of this Act")

The noble Lord said: My Lords, it would be convenient, if my noble friend agrees, if we took all the Amendments Nos. 36 to 40 together because I think they all cover the same point. It would lead to an easier discussion. At the present time, this clause requires that no one shall be able to become a controller of an insurance company unless he has given notice to the Secretary of State and the Secretary of State has either approved or failed to disapprove within three months. That is a fairly firm power which it is thought necessary to have, and I do not quarrel with the Secretary of State having it in relation to people who are controllers of the company in the ordinary sense; namely, that they are able to control what the company does, but since we have earlier this afternoon passed a series of Amendments which, while improving the drafting of Clause 2 still leave "controller" in this Bill defined as including a managing director and a chief executive, I am wondering very much whether the wording of Clause 32 as it now stands is suitable. It really is not on his own initiative that anybody becomes a chief executive of an insurance company. He becomes chief executive because he is appointed to that office by the board of directors of the company.

A NOBLE LORD: Or by the Government.

LORD ALDINGTON

A noble Lord opposite says "or by the Government". I do not know of whom he is thinking or of what industry. Suppose for the moment we are considering the insurance industry in this country, which is wholly privately owned—and the Co-operative is also private in that sense—I think I am right in saying that no person becomes chief executive or a managing director unless he has been appointed as such by others. I should have thought that that drafting leads to problems if one imposes upon appointees this kind of statutory obligation. Therefore, I am proposing to your Lordships a series of Amendments which alter the existing subsection (1) in such a way that it is confined to controllers, as we understand that in the ordinary sense of the word, and that can best be seen by turning to subsection (2)(c). Subsection (1) would then remain in the form in which it is at present drafted, subject to this Amendment No. 36. Immediately after subsection (1) would then come another subsection which would refer to the appointment of managing directors or chief executives, and this would impose on the company, rather than the person, the duty of giving notice to the Secretary of State and the duty of waiting for a period which I have suggested in this case should be a period of one month and not three.

It would seem right that, in a Bill which is entitled the Insurance Companies Bill, we should have regard to Companies Act procedures generally, and the responsibility for choosing and then appointing the chief executive of a company is very much the responsibility of the board of directors of that company, and, in particular, of the chairman. That is why one has boards of directors in companies. It would seem to me a pity if we should now legislate under the heading of Insurance Companies on the basis that that was not the responsibility of the board of directors, but some individual responsibility coupled with the responsibility of the Secretary of State. Therefore, in order to get the matter right I have proposed these Amendments. I am sure, because this is what happens to everybody on Back-Benches in either House, that there are some drafting deficiencies—there always are. But, apart from the drafting deficiencies, I commend the alteration to the House; and I should like to say straight away that I really cannot be accused in this ease—1 do not think I should have been accused in any case—of trying to weaken the Bill. My Lords, I beg to move.

LORD GEORGE-BROWN

My Lords, may I ask whether the noble Lord is asserting that no controller, meaning controlling director, should be appointed by the Secretary of State? I may have misunderstood him. I thought his case was that it should have been arranged that the directors or the shareholders do this. If that is his case, is he not the wrong fellow to move the Amendment?

LORD ALDINGTON

My Lords, if I may just intervene, I think that the noble Lord is enjoying himself at my expense as a result of some announcement which was made earlier this afternoon. In fact, I do not think the appointment to which he referred—which does not relate to the insurance industry; it relates to another industry—was made by the Government. I understand it to have been made by others and announced by the Government.

LORD GEORGE-BROWN

I am sorry, my Lords. I do not think the noble Lord can get out of it like that, and I do not think he can get out of it by laughing. If he wants to impose this duty for insurance companies, is it not reasonable to ask him to live up to it for other companies? My understanding is that he has accepted the appointment of controller, if chairman means controller—

LORD ALDINGTON

No, my Lords; it does not under this Bill.

LORD GEORGE-BROWN

If it means just a nominal, non-controlling non-anything, why have it? I must say to your Lordships, if you will forgive me, that this is one of the things that make trade unionists, and chaps like me who are not militant, pretty fed up, because here is the noble Lord, who lives jolly well, has many chairmanships, deputy chairmanships and directorships, saying that in terms of the insurance companies appointments should be made properly, but does not himself mind accepting no end of appointments which, by the same standard, are not made properly. This Bill can go through, these Amendments can go through, but I must ask your Lordships please to accept that a lot of fellows much less moderate than I am see an enormous difference between the things that some of your Lordships say and the things that some of your Lordships do. If it is wrong to have a controller for insurance companies appointed in this way, is it right to have a controller for a nuclear power company appointed in this way? I am sorry, my Lords, but I am bound to ask the question, and I think your Lordships must recognise that chaps outside will observe a difference.

LORD ALDINGTON

My Lords, as the noble Lord has really impugned my good faith, I really think I must have a word—

THE LORD CHANCELLOR

My Lords, I am sure the House would not wish me to interrupt the noble Lord, but as this is the Report stage I think he must ask the House for leave to speak a third time.

LORD ALDINGTON

My Lords, I was going to ask for that, but it got stuck in my throat. I was going to ask whether, as the noble Lord has impugned my good faith, I may be allowed to speak again. I think the noble Lord knows that I have some difficulty in speaking at all. The noble Lord must accept from me that I have a good deal of affection for him. I think he has just got it quite wrong. There really is nothing inconsistent in what I am now saying and what has been done, and only slightly touched on to-day. I do not think that his friends in the trade union movement, who either know about these matters or understand me, will think that there is anything inconsistent in what I have now said. I would ask the noble Lord to take that from me, rather than flash it across the Floor of the House, which in earlier days I might have done. I content myself with that.

THE EARL OF LIMERICK

My Lords, my shopping list of matters to discuss with my noble friend Lord Aldington is growing and we might add this matter to it. I think we shall have to do that in any event because I have to confess that I am not entirely clear, despite his most painstaking explanation, what purpose would be achieved by this group of Amendments. I thought at first that it was to permit a company to "clear" a prospective managing director or chief executive without his prior knowledge, and if that is the case it would certainly have meant information prejudicial to the individual coming into the possession of his present or his prospective employers, without his first having an opportunity to explain it. But that view does not seem to be consistent with the requirement that the company should provide the prescribed particulars about the candidate; it is unlikely that the company would be in a position to provide these without inquiry of the person concerned.

Nevertheless, I think it would be wrong to take away from the individual concerned the opportunity given to him by the clause as it stands. This could happen in two ways: first, because the Department would apparently have no right to approach the person for supplementary information which is possibly of a routine nature, but may be very sensitive information, without routing the inquiry through the company; secondly, because any preliminary notice of objection would go simultaneously to the person and the company, without the person first having a chance to make representations which might remove the objection, without anyone else knowing. In both cases, his reputation with the company would have been avoidably damaged. Also, the time provided in the Amendment of one month is too short for the collection of information in some cases, particularly if it needs to come from overseas.

However, I am willing to look again at any proposal which is designed to meet a serious practical difficulty, without prejudice to the rights of the individual as set out in this clause, to which a great deal of attention has properly been given in the discussion of this Bill. But at the moment I am not entirely clear what the problem is. I am clear—and I hope I have explained it sufficiently lucidly—that the remedy proposed in this group of Amendments has some objectionable features and I could not for that reason advise the House to accept the Amendments as they stand. But if my noble friend would like to pursue the matter with me, adding it to the shopping list, I shall be happy to consider it further.

LORD CACCIA

My Lords, may I say that I was glad to hear the Minister say that he is ready to look at this point, because the noble Lord, Lord Aldington, was right in drawing our attention to the way in which a managing director or a chief executive is normally chosen for his job. It would therefore seem more natural, in those circumstances, for the approach to be made by the chairman of the company rather than by the man himself. If it is left to the man himself to do it I am not sure that much is avoided, because I should have thought it would be extremely difficult for the man himself not to say in confidence to the chairman, or make some communication to him, that he had been called upon to explain himself. But if this matter is going to be considered by the Minister with Lord Aldington, I am more than content.

THE EARL OF SELKIRK

My Lords, may I ask the noble Earl a question? Suppose a chief executive drops dead and there is no one else qualified to fill the office, surely someone has to carry on the business. But under this Bill nobody can do it.

THE EARL OF LIMERICK

My Lords, with the leave of the House, may I answer that point? I had a piece of paper which gave me the answer, but I am not sure that I can put my hand on it. This is a point about which we need have no concern. If somebody drops dead and there has to be reappointment, then notice would be given under Clause 33, and the expectation would be that the appointment would be made within a reasonable time. If, on the other hand, a man becomes incapacitated, is sick for a while, then there is nothing to stop somebody from acting in his place meanwhile. I think this point is well established.

LORD ALDINGTON

My Lords, I think I am allowed to rise once more with the leave of the House. In view of what my noble friend has said, I will certainly withdraw the proposal now, but will he please bear in mind that to turn down an appointment made by a board of directors is just as much a criticism of them as it is of the man himself? It most certainly is, because that is their chief business in life—to see that they get the right people. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 33 [Duty to notify change of controller or manager]:

THE EARL OF LIMERICK

My Lords, this Amendment was considered with Amendment No. 1. I beg to move.

Amendment moved— Page 26, line 2, after ("a") insert ("director,").—(The Earl of Limerick.)

On Question, Amendment agreed to.

THE EARL OF LIMERICK

My Lords, this Amendment, again, was considered with Amendment No. 1. I beg to move.

Amendment moved— Page 26, line 4, leave out from ("applies") to end of line 6.—(The Earl of Limerick.)

On Question, Amendment agreed to.

Clause 35 [Treatment of certain business as or as not being ordinary long-term insurance business]:

THE EARL OF LIMERICK moved Amendment No. 43: Page 27, line 19, leave out ("and 27(4) to (6)") and insert (", 27(4) to (6), 29 and 30").

The noble Earl said: My Lords, this is a small technical Amendment. As subsection (4) of Clause 35 stands, a small amount of short-term insurance business—for example, personal accident business—may be allowed, for the convenience of the company and where it would not be to the detriment of policy holders, to be treated in the same way as a larger volume of long-term personal accident business carried on by the company. Where such an arrangement has been approved, it would not make sense if it were to be reversed in the event of winding-up, and this Amendment avoids such an anomaly. I beg to move.

On Question, Amendment agreed to.

Clause 36 [Power to modify Acts in relation to particular companies]:

THE EARL OF LIMERICK

My Lords, this Amendment was considered with Amendment No. 17. I beg to move.

Amendment moved— Page 27, line 37, after ("10") insert ("section (Investment by company with long term business in associated companies)").—(The Earl of Limerick.)

LORD DIAMOND

My Lords, if I may delay the House for a short moment, I want to raise an entirely different issue on this Amendment. This is a provision under which a hybrid Order may be made. As I read Clause 36(1) it says: The Secretary of State may, on the application or with the consent of an insurance company…direct that", so and so, shall not apply to the company or shall apply to it with such modifications as may be specified in the order". I am using the Amendment which is before your Lordships' House to draw attention to the fact that we have here the unusual circumstance in which this House is being asked to give power to a Minister to bring in an Order which will be a hybrid Order. The reason I am raising this matter is because it is one which happens to be under consideration by a Committee which your Lordships have created and of which it so happens I am a member. That Committee has not reported, and so I have no knowledge at all of what it might recommend. But we are in a situation where there are different procedures in the two Houses with regard to this very odd thing, the hybrid instrument. Therefore I think it would be right that when Parliament is giving a Minister powers of this kind it should be made aware what it is doing. I am carrying out that function now, to draw the attention of the House to the fact that it is giving a power to a Minister which will affect "an insurance company "—one single insurance company, one individual company; not a group, not a category, but one particular company, as I understand the clause. I hope, therefore, that when this matter reaches another place the Government will, of their own initiative, draw the attention of that other place to what is being done. Clearly, injustice might arise if a hybrid Order of this kind were made without the House being aware of it and having no opportunity, as indeed the other House has no opportunity, to deal with the Order once it was made. I am sorry to delay the House. This is a slightly technical point, but I do not think it is unimportant.

On Question, Amendment agreed to.

THE EARL OF LIMERICK

My Lords, this Amendment was considered with Amendment No. 16. I beg to move.

Amendment moved— Page 27, line 37, after ("10") insert (",section (Avoidance of contracts for unlimited amounts)").—(The Earl of Limerick.)

THE LORD CHANCELLOR

My Lords, the noble Earl will notice that according to the Marshalled List the new Amendment is being put into the same place as the last one. I suppose he will have to tell the House where it ought to be put. I have a note somewhere here. I think it should be "after the section last inserted". Is that right?

THE EARL OF LIMERICK

Yes, my Lords, I believe that to be correct—"after the section last inserted."

On Question, Amendment agreed to.

7.59 p.m.

THE EARL OF LIMERICK moved Amendment No. 46: After Clause 37 insert the following new clause:

Application of Acts to organisations of workers or employers

". In section 1(5A)(a) of the Act of 1958 and section 60(1)(e) of the Act of 1967 (which respectively exempt from the Act of 1958 and authorisation requirements of the Act of 1967 a trade union or an employers' association within the meaning of the Industrial Relations Act 1971 whose insurance business is limited to the provision of certain benefits for its members) for the words "a trade union or an employers' association within the meaning of the Industrial Relations Act 1971" there shall be substituted the words "an organisation of workers within the meaning of the Industrial Relations Act 1971 (including an organisation for the time being entered in the special register maintained under section 84 of that Act) or an organisation of employers within the meaning of that Act"."

The noble Earl said: My Lords, this somewhat technical Amendment is designed to maintain the status quo in the treatment of the benefits that trade unions provide for their members. These were exempt from our supervision under the Insurance Companies Acts. In 1971 an amendment had to be made to those Acts to take account of the new definitions of trade unions and employers' associations, and the opportunity was then also taken to describe the benefits more precisely. The present exemption is therefore for provident benefits carried on as insurance and strike benefits provided by trade unions, employers' associations and organisations including those on the provisional register. It was expected that the organisations in question would register and there would be no change in practice. Registration, however, is voluntary and some organisations have decided to remove their names from the register. This means that if they are providing provident and strike benefits as insurance, they have brought themselves within the definition of insurance companies and therefore are or may be subject to the supervision requirements of the Insurance Companies Act. We do not know whether or to what extent these organisations are carrying on insurance business, but we believe it to be very limited; and if it were found that an organisation was carrying on an insurance business it would then come within our system of supervision.

We think the most practical solution to this uncertainty is to return to the intention of the earlier legislation and exempt provident and strike benefits of organisations of workers and employees from the supervision under the Insurance Companies Acts. This is what the Amendment does. It does not affect the position of registered unions or associations or organisations still on the provisional register. It means that the Department will not have to divert resources from its main task of supervising insurance companies to deal with incidental activities of unregistered organisations and that those responsible for those bodies will not have to comply with the requirements of this form of supervision.

Most of the members of the unregistered organisations, as policy holders, will not benefit from the supervision that the Act provides. These are members' benefits and the members have control of them under the rules of the organisation. It is open to them to seek further protection in other ways; such as registration under the Industrial Relations Act or registering their own friendly society. I beg to move.

LORD DIAMOND

My Lords, in view of the lateness of the hour I shall not dwell at length on this very awkward and difficult clause which re-opens old sores which are by no means healed. But I would want to deal with the narrow point that the noble Earl raised when he said that the policy of the Department in charge of the Bill was the return to the status quo ante. Am I not right in saying that prior to the Industrial Relations Act members of registered trade unions, organisations of workers, had the protection of the Registrar of Friendly Societies—not of the insurance companies, not of the Department, but of the general supervision of the Registrar of Friendly Societies?

Can the noble Earl indicate whether I am right or wrong in that? If I am wrong in that I do not propose to say anything more because we are then truly getting back to the position which existed previously, which is I think perhaps the right policy; but if I am right in that, then what is happening is, as in other respects, in order to achieve the same supervision and protection for their members that they had previously, unregistered trade unions will need to form their own friendly society. They will need to do this in order to get back to the position of having some protection which previously existed.

THE LORD CHANCELLOR

My Lords, perhaps it would be more convenient if I answered this point. Under the old laws existing before 1971 most of the organisations now unregistered were registered. As such, they would have come under the general supervision of the Registrar of Friendly Societies. If they are not registered now, they do not. All that this Amendment seeks to do, as I understand it, is to say that they do not come under the supervision or control of the Department of Trade and Industry for the purpose of any insurance business they may be carrying on. My impression is that very few of them are carrying on insurance business; but in so far as they are, they are free from that control. Obviously, this Amendment does not affect their position quoad the Registrar of Friendly Societies. This is dependent on the question of whether they are registered under the Act of 1971 or whether, not being so registered, they have registered as a friendly society which is registered under the Friendly Societies Act. It depends on that and not on this Amendment whether they have, as the noble Lord has said, the protection of the Registrar of Friendly Societies. As I understand my noble friend's Amendment, it is simply that for the purposes of the Insurance Companies Bill they are not under the supervision of the D.T.I. or within the provisions of the Bill that we are now discussing.

LORD DIAMOND

My Lords, if I may speak with the permission of the House, the point has been clarified and I am grateful to the noble and learned Lord for clarifying it. It confirms my anxiety. What we are doing at the moment is proposing to withdraw a form of protection; to wit, the protection of the Department where any insurance business is being carried on. This is the purpose of the Amendment: to withdraw that protection, that supervision, depending on how you look on it. In so far as it is difficult and inappropriate for the Department to give that kind of supervision, it is a wise thing to withdraw it. The purpose of my remarks is to draw attention to the fact that as a result of the Industrial Relations Act an unavoidable difficulty arises. Either you proceed as proposed under this Amendment, in which case members of unregistered unions are denied the general protection of the supervision of the Registrar of Friendly Societies in relation to such of those members' benefits as may be properly construed as insurance benefits or activities, or, if the Amendment is not made, an inappropriate form of excessive control is left under this Bill.

The only thing that would be satisfactory would be for the unregistered trade union to form its own friendly society, as one of the remedies which the noble Earl's Amendment suggested. It is because they are being put to this trouble that I draw attention to the fact that the evil of the Industrial Relations Act is continuing. That is all I have to say about the matter. I do not propose to resist the Amendment; it is better than leaving the Act as it is. But it does not solve the problem satisfactorily. No doubt there will be consultations and the matter will be dealt with further in another place.

THE EARL OF LIMERICK

My Lords, I should hesitate to make any comment in a field so well known to the noble Lord, Lord Diamond, but it may be helpful if I point out that we are withdrawing nothing from the bodies we are talking about. If they were carrying on insurance business (which is something we do not know) these bodies never were subjected to the supervision of the Department of Trade and Industry.

On Question, Amendment agreed to.

Clause 39 [Insurance brokers]:

LORD JACQUES had given Notice of his intention to move Amendment No. 47: Page 29, line 28, after ("connection") insert ("and to other matters").

The noble Lord said: My Lords, I am quite happy to argue the case of Amendment No. 47 and later Amendment No. 49, but if the noble Earl feels that it would facilitate the business of the House to discuss this matter and if need be bring it up at the next stage of the Bill, I should be prepared to withdraw the Amendment now.

THE EARL OF LIMERICK

My Lords, I certainly have no objection to that course.

8.10 p.m.

THE EARL OF LIMERICK moved Amendment No. 48: After Clause 41 insert the following new clause:

Withdrawal of statutory deposits by collecting societies

". The repeal by the Act of 1967 of subsection (2) of section 20 of the Act of 1958 (withdrawal of statutory deposits by insurance companies which satisfy the Board of Trade as to paid up share capital or margin of solvency) shall be deemed not to have extended to that subsection in its application to collecting societies as defined in section 1 of the Industrial Assurance Act 1923; and in its application to such societies that subsection shall have effect and be deemed always to have had effect as if for the reference to the Board of Trade there were substituted a reference to the Industrial Assurance Commissioner."

The noble Earl said: My Lords, this again is a rather technical Amendment. Friendly societies which carry on industrial assurance business, which are known as collecting societies, are required to make a deposit in court. The Insurance Companies Act 1958 provides for the withdrawal of deposits made by insurance companies and, in certain circumstances, collecting companies. Because all insurance company deposits had by then been withdrawn, the Companies Act 1967 repealed the provision without qualification, thereby, by an oversight, removing the power of the collecting societies to withdraw their deposits when they attain the requisite statutory solvency margin. The Amendment restores the position vis-à-vis collecting societies to what it was before the 1967 Act was passed. I beg to move.

On Question, Amendment agreed to.

Clause 42 [Offences and penalties]:

THE EARL OF LIMERICK

My Lords, this Amendment was taken with Amendment No. 1. I beg to move Amendment No. 50.

Amendment moved— Page 31, line 21, after ("a") insert ("director,").—(The Earl of Limerick.)

On Question, Amendment agreed to.

Clause 45 [Interpretation]:

LORD ALDINGTON

My Lords, this Amendment is consequential on the removal of Clause 3. I beg to move Amendment No. 51.

Amendment moved— Page 34, line 1, leave out ("3").—(Lord Aldington.)

On Question, Amendment agreed to.

Clause 47 [Short title, citation and commencement]:

THE EARL OF LIMERICK

My Lords, this Amendment was taken with Amendment No. 16. I beg to move.

Amendment moved—

Page 34, line 17, at end insert— ("( ) Section (Avoidance of contracts for unlimited amounts) above shall not take effect until the first regulations made for the purposes of that section come into operation.").—(The Earl Of Limerick.)

On Question, Amendment agreed to.

Schedule 3 [Application to Northern Ireland]:

LORD ALDINGTON

My Lords, this Amendment also is consequential on the removal of Clause 3. I beg to move Amendment No. 53.

Amendment moved— Page 39, leave out line 10.—(Lord Aldington.)

On Question, Amendment agreed to.