HL Deb 05 August 1975 vol 363 cc1496-504

4.30 p.m.

The LORD CHANCELLOR

My Lords, I should now like to repeat a Statement made in another place by the Secretary of State for Trade. The Statement is as follows:

"The Government are committed to carrying through as soon as possible a programme for the radical extension of industrial democracy in both the private and public sectors. The first steps have been taken by my right honourable friends the Secretaries of State for Employment and Industry with the Employment Protection Bill and the Industry Bill which contain provisions allowing for greater disclosure of information and for the workforce to be more closely involved in future planning. Meanwhile developments in industrial democracy, particularly below Board level, are taking place and more are planned. It is desirable that these should continue.

"The next step is to formulate measures which will enable those employed to participate in major decisions affecting the future of their companies through representation at board level. Not only will this involve a major change in company law but it will clearly bring about a fundamental change in the way industry is managed. Because of this, and because the issues are both complex and in this country relatively unexplored, the Government wish to have the best available advice before coming forward with legislation. I have therefore decided to appoint an independent Committee of Inquiry to advise on questions relating to representation at board level in the private sector. It will have the following terms of reference: 'Accepting the need for a radical extension of industrial democracy in the control of companies by means of representation on boards of directors, and accepting the essential role of trade union organisations in this process, to consider how such an extension can best be achieved, taking into account in particular the proposals of the Trades Union Congress report on industrial democracy as well as experience in Britain, the EEC and other countries. 'Having regard to the interests of the national economy, employees, investors and consumers, to analyse the implications of such representation for the efficient management of companies and for company law.' "The names of the Chairman and members will be announced very shortly. The Committee will be asked to present its report to the Government within 12 months so that legislation can be placed before Parliament during the 1976–77 Session. The Committee will wish to call for and receive evidence quickly and I hope that interested parties will begin to prepare their evidence right away. There is a need for a wide-ranging debate on this important subject so that a full measure of public support may be achieved and I earnestly hope therefore that all who are able to make a contribution, including those who are already practising forms of industrial democracy, will assist in the vital work of this Committee.

"I should also like to pay a tribute to my honourable friend the Member for Chester-le-Street who brought before the House a Private Member's Bill on Industrial Democracy and those who served with him on the Standing Committee. In their debates, they examined many of the issues which are fundamental to legislation and this will be a very helpful contribution to the work of the Committee of Inquiry.

"In parallel with the work of the Committee the Government also intend to take a radical look at the role of employees in relation to decision making within nationalised industries. A study has been set in hand.

"Meanwhile the Government hope that experiments in developing new forms of industrial democracy and democratic self-management within the existing framework of the law will continue and that the establishment of the Committee of Inquiry will in no way prevent the work now in progress from continuing to develop."

My Lords, that is the end of the Statement.

Lord LYELL

My Lords, we on these Benches wish to thank the noble and learned Lord for the very forthright and clear way in which he set out the Government's intentions on this very important subject. We welcome the independent Committee of Inquiry which is to be set up, and we welcome the references in this Statement to the formulation of measures to enable those employed to participate in major decisions affecting the future of their companies. We also welcome the later references to the interests of the national economy, the employees, the investors and the consumers, as well as the need for a wide-ranging debate on this subject. But we regret what was said in conclusion: that private industry alone will be the subject of scrutiny by this Committee of Inquiry.

However, we have a number of questions that we feel the noble and learned Lord could help us with. First, could he explain more precisely what will be the role of the trade union organisations in this context? Secondly, do the Government believe that the trade unions are, or should be, the only channels whence will flow ideas and communications concerning company management?

Thirdly, does the noble and learned Lord accept that we on this side of the House are concerned that the Government have not been able yet to announce the name of the chairman. We are inclined to think that such a chairman will need to be extremely robust to deal adequately with the whole subject, rather than as seems likely, to be drawn into the curiously contrived terms of reference of the Committee of Inquiry?

Fourthly, do the Government agree with us on these Benches that the entire subject of industrial democracy involves all who work within a plant, factory, company or an industry, and not necessarily just those trades unions, or trade union representatives, who might become involved in major decisions at board level or below? I hope the noble and learned Lord will accept that we are concerned with this point because we consider it to be of the greatest importance.

Lastly, my Lords, we should like to stress that this question of employee participation in management decisions concerns us increasingly, under whatever name it is discussed. We hope that the Committee of Inquiry will be fortunate enough to have a robust, able and independent-minded chairman who will be able to discover all shades of opinion on this subject. May we hope that the Government will approach the inquiry and its findings with an open mind; for we believe that no more can this subject be treated as a political Party football or, if the noble and learned Lord would prefer it, as a Rugby football.

Lord ROCHESTER

My Lords, I should like to join in thanking the noble and learned Lord for having repeated this Statement, even though I think it is well known that the Liberal Party have their own policy on this question of employee participation. I prefer that term to "industrial democracy", because I think it is more down to earth and more comprehensive. We welcome the fact that further consideration is to be given to the question by this Committee of Inquiry, before conclusions are reached.

I, too, have a few questions that I should like to ask the noble and learned Lord. Can we take it that employers and trade unionists will be represented on this Committee of Inquiry, and also—and this is very important—people who have some practical experience of the experiments now going on in British companies on this whole question of the participation and involvement of employees? We have noted, and we welcome, the last sentence in the Statement in which the Government express their hope that these experiments will continue and that the establishment of the Committee will in no way prevent work of that kind developing. Will the Government, in their turn, say that this promise can be fulfilled and pay due attention before decisions are reached to the practical exercises and experiments of this kind now going on in industry?

Next, may we also be assured that, in keeping with the spirit of one or two recent debates in your Lordships' House, an opportunity will be given to the Parties in Parliament to express their views on this matter, and perhaps, so far as this House is concerned, by means of some general debate, again before the Government make up their mind.

Finally, can the noble and learned Lord give us any indication of when the promised draft European Statute will be published? It is rumoured to emphasise the part to be played by trade unions in this matter of the representation of employees at board level. There are plenty of references to trade unions in this document, but we understand there is emphasis in European thinking on the part also to be played by works councils and consumers in this matter. Can the noble and learned Lord say anything at this stage as to the effect which European thinking on this matter may be having on the Government's own ideas?

4.41 p.m.

The LORD CHANCELLOR

My Lords, I am grateful to the noble Lords who have spoken and have welcomed the proposal to set up an independent Committee. May I deal at once with the problem of representation? I entirely agree with the noble Lord, Lord Rochester, that it is very important. It is contemplated and proposed that the Committee will include people with experience of trade unions, management, investment, industrial relations, the law and consumer interests; and it will clearly be desirable, provided one does not increase the size of the Committee too much, to have upon it—as the noble Lord, Lord Rochester, has said—those who have already had some experience of experimentation and precedents in the field of worker representation at board level. The noble Lord, Lord Lyell, asked me what precisely was intended to be the role of trade unions. As the terms of reference recognise, trade union organisations must have an essential role to play in the extension of industrial democracy, but the inquiry will, according to the terms of reference, be able to examine every possibility for involving work-people in decision-making at board level. It will be free to consider the interests of all employees, and to explore all methods of representation. I agree it is essential that all employees are concerned and should therefore be involved.

Regarding the European company statute, and the work that is being done on the draft fifth Directive, the European Commission have recognised the need to study carefully the question of participation by employees at board level, and the structure of companies. As I understand it, they will shortly be publishing a Green Paper on this subject. I understand that that term of art, Green Paper, has the same connotation in the EEC as it has in Parliament. The independent Committee which is to be set up will clearly need to take account in its work of experience and developments in Europe and elsewhere, where there has been more significant progress in this field than has occurred in this country. The European company statute is still in draft, but I am afraid I cannot say when it is likely to see the light of day. It will cover all aspects of company law, and it is clearly a massive subject for study and consideration.

Lord DRUMALBYN

My Lords, while, for my part, I welcome the setting up of this inquiry, there are one or two questions which I should like to ask. The noble and learned Lord said that the Committee will take account of experience in the Common Market. Will it also take evidence in the Common Market countries to see how things are being done there? This is a matter of great importance. We tend to become much too involved in our own affairs and too blinkered by our own procedures. This is an opportunity for looking much more widely at the whole situation.

Secondly, may I ask the noble and learned Lord whether the Government are setting an absolute deadline of 12 months for this inquiry? One remembers the inquiry into the trade unions and the length of time that took. It is almost invariably the fact that inquiries of this type, if they are to be thorough, take longer than is expected. Following from that, may I also ask whether the Government envisage that the inquiry will necessarily result in legislation; whether we are to have, so to speak, a written industrial democracy where we have not a written democracy in this country? These are all matters of importance. My last question is this: in taking account of the various experiments which are taking place in this country, will the Government, if it comes to making up their minds on the proposals, make certain that we leave scope for diversity in the pursuit of the common objective?

Lord HEWLETT

My Lords, before the noble and learned Lord replies, may I ask one further question? Recently it has really depended upon either the Trades Union Congress or the CBI to represent the views of the two sides of industry—I hate to use that term, but it seems generally a consensus view now. So much of industry lies in the medium- and smaller-sized enterprise which has no strong representation in either sector. I hope that special care will be taken to see that the small, so to speak, uncommitted enterprise gets direct representation in such an inquiry as this. I am not disparaging the work of the CBI or the TUC, but industry is not just made up of the big battalions: a vast amount of gross national product emerges as a result of the small and medium-sized enterprises who in these complex days tend to be overlooked. I make a special plea to the noble and learned Lord to take that point on board.

Viscount MASSEREENE and FERRARD

My Lords, may I take up what my noble friend has said? My noble friend was right about the big battalions.

Lord SHEPHERD

My Lords, may I interrupt. It seems to me we are getting into a debate: we are discussing a Statement. It is perfectly right to express a view, but the basic purpose is to ask questions. I have a fear that throughout this afternoon we have been getting into a debate. We have a lot of business still to be done today, and I would ask the House to keep their questions short and let us proceed to the next business as quickly as possible.

The LORD CHANCELLOR

My Lords, perhaps my maintaining a sedentary position on the Woolsack gave an impression that we were in the presence of a debate. Perhaps I was at fault in not answering questions as they were asked. May I deal with the questions that have been asked. Terms of reference, when read out, are not easy to note, and the noble Lord, Lord Drumalbyn, will see when he reads them that the Committee will take into account experience in Britain, the EEC and in other countries. That obviously is an essential step. I will communicate the observations of the noble Lord, Lord Hewlett, and, indeed, of the noble Lord, Lord Lyell, about the composition of the Committee and its chairman to my right honourable friend the Secretary of State. A deadline of 12 months ought to be achievable. Legislation is almost certain to be required if only to deal with the changes in the company law which will probably flow from the recommendations of the Committee. Certainly the experiments that have taken place in the United Kingdom will no doubt be considered by this Committee. It will contain a high level of expertise.

Lord BRUCE of DONINGTON

My Lords, the noble and learned Lord has already indicated that there is a certain degree of overlap between the subject matter of this inquiry and some of the matters covered by draft Directive No. 5 issued by the European Commission.

Will he inform the House whether this inquiry is being held as a prelude to the determination of the appropriate Ministers representing Britain in the EEC as to what their attitude should be towards Directive No. 5? If that be the case, and since the Report is not due for another 12 months, would he bear in mind that the European Economic Commission envisages legislation in 1976 and that Article 64 of the proposed Directive No. 5 mentions actions by the Member-States within 18 months of the issue of the Directive? I should like to find out whether the Government propose to act before being directed by the European Economic Commission, or afterwards.

The LORD CHANCELLOR

My Lords, we shall have to see how events proceed. In so far as there will he information and recommendations emanating from the EEC, certainly this Committee of Inquiry will bear them in mind; but this is intended to be an independent Committee, acting in the light of experience already existing here, and having regard to the terms of reference.

Lord NELSON of STAFFORD

My Lords, may I ask the noble and learned Lord whether he is aware that a great deal of confusion exists as to what is meant exactly by the term "indsutrial democracy"? Further, may I ask whether it will be the task of this Committee first of all to define exactly what is meant by the term?

The LORD CHANCELLOR

My Lords, this Committee will confine itself to the limited sphere of worker representation on the boards of companies; but whether in the course of that it will engage in the semantic exercise of defining generally what "industrial democracy" is, we shall wait to see what emerges from their wisdom.

Lord SHEPHERD

My Lords, may I suggest that we should now proceed to the main Business before the House.

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