HL Deb 05 August 1975 vol 363 cc1459-85

2.54 p.m.

The Earl of CORK and ORRERY rose to move, That the First Report from the Hybrid Instruments Committee be agreed to and that there should be further inquiry by a Select Committee into

  1. (a) the basis on which the amount of the compensation to be paid to shareholders in Harland and Wolff Limited under paragraph 4(2) of the Order was determined; and
  2. (b) the basis on which the relative treatment of Preference and Ordinary shareholders was determined.

The Report was as follows:

The Committee, as required by Private Business Standing Order 216, have met and considered the Draft Shipbuilding Industry (No. 2) (Northern Ireland) Order 1975 and the 43 Petitions lodged against it. They have also considered the memorandum of the Northern Ireland Office which explains the background to the Order and comments on the Petitions.

The Committee are of opinion that there ought to be a further inquiry by a Select Committee into—

  1. (a) the basis on which the amount of the compensation to be paid to shareholders in Harland and Wolff Limited under paragraph 4(2) of the Order was determined; and
  2. (b) the basis on which the relative treatment of Preference and Ordinary shareholders was determined.

The noble Earl said: My Lords, I beg to move the Motion standing in my name on the Order Paper. It may occur to your Lordships to wonder why it should be I who does this. Perhaps I might explain very briefly. This is a new Committee, as your Lordships know, and I am privileged to make a small piece of history by rendering its first Report to your Lordships' House this afternoon. The Chairman of this Committee, under the directions given by the House, is a Law Lord; and in this case it is the noble and learned Lord. Lord Wilberforce. He might well be the most appropriate person to present the Report to your Lordships. However, since he is quicker off the mark than I, he has left the country—and your Lordships may take that as you wish!

The noble Earl the Chairman of Committees feels inhibited in doing this job, knowing that an Amendment is to be moved on behalf of the Government immediately afterwards, though I believe he is available in case enlightenment on procedural matters should be required from him later in the debate. I am a Member of this Committee and happen to be on the side of those in favour of this Report. Therefore the lot has fallen to me to bring it to your Lordships' notice. It is not for me to set out anything in the nature of an exegesis, which probably will be done later by the noble Lord, Lord Donaldson of Kingsbridge. Nor have I to explain what all this is about. I am concerned solely with the Report, but perhaps I might remind your Lordships briefly that what we are considering is a Report on a Statutory Instrument that is known as a Hybrid Instrument—because if it were in the form of a Bill it would have to be regarded as a Private Bill and go through the hybrid procedure, since it affects private interests.

This order is for the nationalisation, or the complete taking into public ownership, of Harland and Wolff, shipbuilders and engineers; and the people whose private interests are affected are of course the shareholders. They have presented to the Hybrid Instruments Committee, as they are entitled to do by that Committee's terms of reference, their Petitions in writing, that is, in the form of letters, for the most part, to the sum of 43. These are all people of course—and I know it will be understood by us all when I say "of course"—who have lost their money. They are faced with the fact that the Government, as personified by the Department of Commerce in Northern Ireland, are to take over the share capital and pay them some compensation for the shares.

There is no question of a takeover or of an offer which they can refuse or accept. This is a compulsory purchase, and their complaints fall under two main heads: first, that they are not getting enough and, secondly, that preference shareholders are not being treated with any preference over ordinary shareholders. In fact, they are getting slightly less. The money they are getting in compensation is 8p per share for preference shares and 9p per share for ordinary shares. Perhaps the precise amounts are not very important: the important point is that it is not very much.

The second of these counts, as to whether the preference shareholders ought to be treated in the same way or more generously than the common shareholders, is one on which I do not feel particularly qualified to speak; nor do I propose to do so. Others may do that if they wish. I am concerned with the first count, which is whether or not the amount offered to the shareholders of either kind is adequate. The shareholders say that it is not, and it is reasonable to expect that they would. Whether or not they are reasonable is another matter, and that would be for a Select Committee to decide, if your Lordships decide to set one up. This is what the Committee are asking your Lordships to do. I must therefore come absolutely clean about this and say that the Committee were not passionately unanimous over this. It was a majority decision based on considerations of equity, which are not easy to evaluate.

One reason why that is so is that although the Committee had before them the 43 Petitions from the shareholders, they have not much on the other side to go on, except a memorandum from the Northern Ireland Office. It was the business of this memorandum, among other things, to explain how these figures of 8p and 9p were arrived at. Part of the argument that is mentioned—though it is not relied upon by the Government, as represented in this memorandum—is that if the company had gone into liquidation in 1964, which is about the time that the great continuing fall of Harland and Wolff began, the shareholders would have got nothing. In fact, since 1964 the ordinary shareholders have had nothing. The preference shareholders had a 2½ per cent. dividend as recently as 1966. But that is not very recent now.

It is quite true that if the company had gone into liquidation they would have received nothing. It is also quite true that if Belfast had been flattened by an earthquake and swept out to sea by a tidal wave in Belfast Loch, they would have received nothing. But there was no earthquake and no liquidation, and I do not find it easy to see why one argument is more relevant than the other. Nor is it easy to see how anyone could know for certain, when one considers the vast amount of assets which Harland and Wolff possesses, that if the company had gone into liquidation in 1964 the shareholders would have received nothing. However, the Government have not relied upon this argument. They have simply pointed out that it is something which they might in equity have done. This is something which one is entitled to doubt, and the doubt is reinforced by this fact.

From 1964 to 1975 or, at any rate, for most of that period the shares of Harland and Wolff have continued to be quoted on the Stock Exchange. This seems improbable when it is considered that they were on the verge of bankruptcy and have been saved by injections of public money by successive Governments. It is these injections of public money that have kept the company alive and, as the Government themselves agree, have allowed, or have perhaps caused, these shares to continue to be quoted on the Stock Exchange. In other words, Government contributions in the form of subventions to Harland and Wolff have been sufficient to bolster up confidence in the company, and to engender in its shareholders a belief, however misplaced, that it would become viable again, that their money was safe and therefore they should leave their money where it was and not withdraw it—which would undoubtedly have been the prudent thing to do if they could.

On the question of how much money the Government should offer in compensation—they have generously agreed that they should offer some—they have gone to the Stock Exchange figures for the last six months before the decision to take over 100 per cent. of the company; that is to say, six months before March this year. They have found that, on average, the share price of these stocks was respectively 8p and 9p in the two classes of shares. That is what they have offered to the shareholders. The shareholders say: "No. The shares are worth far more than that. This is a purely arbitrary way of looking at it and, in any case, the figure has been arrived at by the people who are doing the selling, who are laying down by Order"—this Order that your Lordships are considering—"what they propose to do." The Committee have by a majority come to the conclusion, and have invited your Lordships to agree, that there is a case for setting up a Select Committee to decide whether this method of fixing the compensation is fair, and whether the amounts fixed are also fair.

There is one other point which I would invite your Lordships to bear in mind. If the shareholders had lost their nerve, or done the sensible thing (however one likes to put it) in 1964 and got out, they could have invested their money in something else. But, thanks to the confidence instilled in them by the action of successive Governments in their, probably correct, determination to bolster up Harland and Wolff, they have kept their money where it was and have lost all their dividends from 1964 or 1966 to this minute. This has been caused by a false sense of euphoria and confidence bolstered up and instilled in them by Governments. It is my contention, and it will be the contention of those on the Committee who think as I do, that this matter should be looked into rather more fully to see what there is in the way of evidence to support the Government's contention, or to support the contention of the shareholders who feel themselves, quite rightly, to be dispossessed. My Lords, I beg to move.

Moved, That the First Report from the Hybrid Instruments Committee be agreed to and that there should be further inquiry by a Select Committee into—

  1. (a) the basis on which the amount of the compensation to be paid to shareholders in Harland and Wolff Limited under paragraph 4(2) of the Order was determined: and
  2. (b) the basis on which the relative treatment of Preference and Ordinary shareholders was determined.—

(The Earl of Cork and Orrery.)

3.4 p.m.


My Lords, I beg to move, on behalf of my noble friend the Leader of the House, as an Amendment to the above Motion, to leave out all the words after ("That") and to insert ("the House, having considered the First Report from the Hybrid Instruments Committee, is of the opinion that there ought not to be a further inquiry by a Select Committee since such an inquiry would delay and thereby prejudice the urgently necessary reconstruction of the company.") What your Lordships are being asked to decide is whether there should be a further inquiry by a Select Committee into two points arising from the Hybrid Instruments Committee's consideration of the draft Shipbuilding Industry (No. 2) (Northern Ireland) Order.

May I first say that the Government in no way question the right of the Committee to make such a recommendation. In fact, I think we can congratulate ourselves in this House on the fact that we have this extra safeguard for the private citizen, which does not exist in the other place. The Committee have put their views before the House—and, if I may say so, the noble Earl, Lord Cork and Orrery, has put them in the most moderate and reasonable way—and I shall put some views in the opposite sense; then it will be for the House to decide. However, your Lordships may well consider that it would be difficult to arrive at a soundly based view on the need for reference to a Select Committee without examining the content and purpose of the draft Order. So with the permission of the House, I propose to say something about the draft Order as a whole, and then in due course to come on to the procedural questions arising on the Report of the Hybrid Instruments Committee and on the Government's amending Motion which stands on the Order Paper in the name of my noble friend Lord Shepherd. I hope that noble Lords will have had time to look at the memorandum about the recent history, present position and future prospects of Harland and Wolff, which was placed in the Printed Paper Office and the Library about a week ago if they have, my task should be somewhat easier.

Noble Lords will recall that when we debated on 1st May the Order in Council to provide interim financial assistance to Harland and Wolff Limited, I told the House that the Government would be introducing a second Order to take the company into full public ownership. This is that second Order, and noble Lords will see that it provides for the vesting in the Northern Ireland Department of Commerce of the shares which are presently in private hands. The Order now before us provides for the financial assistance which the company must have if it is to meet its existing commitments and to have that chance of getting itself on to an economic footing. Pending the making of this Order, the Company is being maintained in funds by subventions under the interim Order—that is, the Shipbuilding Industry (Northern Ireland) Order 1975—which came into effect on 21st May. The draft Order which we are now considering will revoke that interim Order and any moneys advanced to the company under the earlier Order will be covered by the provisions of this new Order.

It is clear that without the support now proposed the company cannot continue to operate. The further financial assistance up to the limit of £60 million specified in Article 6 of the Order represents the best estimate possible of the amount of new money required during the period in which the present loss-making contracts, to which the company is committed, are to be completed.

The reason why the Government propose this enormous injection of new money is basically simple. Harland and Wolff is the largest single employer of male labour in Northern Ireland and it is perhaps difficult for us to imagine the possible repercussions if the firm were to close. Immediately, we would have 10,000 men, about 6 per cent. of the male labour force in the Belfast area, out of work with the prospect of relatively few finding other jobs. I would remind your Lordships that male unemployment in Northern Ireland is already approaching 11 per cent. There would be an effect on Harland's sub-contractors in other parts of Northern Ireland; and there would be the longer-term effect on the engineering industry as a whole in losing this source of training and skill. The Government consider that, in these circumstances, the firm must be given a last chance to get back on to an economic footing.

As a first step, and in order to facilitate the financial reconstruction and other changes which we believe to be necessary, the existing shares of the company which are in private hands will, as from the date on which the Order comes into operation, be transferred to the Northern Ireland Department of Commerce. Following acquisition of ownership it is the intention to carry out a financial reconstruction. It is intended, following this financial reconstruction, that the Government's present guarantee of the company's liabilities will be withdrawn as the company will then be creditworthy in its own right. The future relationship between the Department of Commerce, as owner of the shares, and the company will be governed by appropriate directives to the board, and work on preparing these guidelines is well advanced. The board itself will be reconstructed as quickly as possible. The hope is that there will be worker participation at board and other management levels in the yard. The Government attach great importance to the development of this new experiment in relations between managers and other workers. The future of the company will be in the hands of its own workforce—management and shop floor. A good start has already been made through the way in which representatives of the workforce were recently involved, in very distinguished company with Sir Arnold Weinstock, among others, in the appointment of the new managing director; and encouraging progress is being made in the consultations which are now going on to evolve an acceptable system of industrial democracy within the yard. I shall have a little more to say about the financial reconstruction and about the restructuring of the board when I return to the findings of the Hybrid Instruments Committee.

The cash provided to the company under the Order will be "new" money, as distinct from the existing Government loans and shareholding. It is needed to meet future losses on the present order book, together with the cost of completing the present capital programme. It also includes the expenditure to date on loans to the company under the interim Shipbuilding Industry Order—now amounting to £5.7 million. This fresh assistance will be available subject to the continuation of the condition, laid down last March, that Government approval will be required before any new shipbuilding contracts are concluded, and this approval will not normally be given unless the Department of Commerce is satisfied that the contracts will not be loss-making. This is a key requirement—that the company will avoid loss-making contracts in future—and it is essential to the company's survival that it should be able to gear itself to obtain new work within this condition. No further special aid can be expected to bail the company out of fresh difficulties. If new work cannot be found it will be time to call it a day and allow the rundown, and even closure, of the business.

To return now to the procedural side of the question, I do not think that there is any need for me to dwell on the position under the Standing Orders; the noble Earl, Lord Cork and Orrery, has referred to this and I understand that the noble Earl the Lord Chairman will be intervening later in this debate. Your Lordships will, however, wish to know that the appropriate procedures were operated once the Chairman of Committees had expressed the opinion that the Order was hybrid. Full publicity was given so that people affected by the draft Order would know that they had a right to petition the House against it. Notices were placed in the London Gazette and Belfast Gazette and in newspapers in Britain and in Northern Ireland and in the Irish Republic; in addition, a communication was sent to all the shareholders of the company, of whom there are about 6,000, and in the event 43 persons and institutions, all of them shareholders, sent in petitions. With one or two exceptions the petitions were about the terms of compensation provided in Article 4 of the draft Order. After studying the draft Order and these petitions and a departmental memorandum, the Hybrid Instruments Committee arrived at the opinion that there ought to be a further inquiry by a Select Committee into the basis on which the amount of the compensation to be paid to shareholders was decided and the basis on which the relative treatment of preference and ordinary shareholders was decided.

There is, of course, no doubt at all about the position under Standing Orders. The Hybrid Instruments Committee has recommended—as it was fully entitled to do—that there should be a further inquiry. However, noble Lords will see from the Amendment standing on the Order Paper in the name of my noble friend Lord Shepherd that the Government are asking your Lordships not to agree with the Committee. The first point I would make is this. The purpose of our Hybrid Instruments procedure is to enable the House to take the right decision on the Order which is before your Lordships. We have the Hybrid Instruments Committee and any further Select Committee to help us in this, but it is the House which has to take the ultimate decision. I submit that the House is already in a position to take this decision. We are able to decide, for the reasons I gave earlier in my speech, that the Shipbuilding Order is necessary and I shall try to satisfy your Lordships that it can be seen to be fair, without the need for any further inquiry into the terms of compensation.

Secondly, this is not the first time that the House has been invited to decide not to adopt a recommendation that a Select Committee should be set up on a Hybrid Order. The Regulation of Prices (Tranquillizing Drugs) (No. 2) Order, generally known as the Roche Order, was subject to the same kind of procedure in June 1973. The Special Orders Committee, as it was then, recommended a further inquiry, but the House did not adopt this recommendation. In the light of precedent your Lordships may well consider that you are free, if you so wish, not to adopt the recommendation of the Hybrid Instruments Committee. Your Lordships will still wish to consider why you should not do so—to consider, that is, the reasons which can be only hinted at in the briefly worded Amendment on the Order Paper.

If it were decided to proceed with a further inquiry considerable inconvenience would result. If a Select Committee were appointed it would presumably wish to hear argument. Time would have to be allowed for legal representatives to be appointed and briefed and for the hearings to ensue. The Order could not then possibly be approved until late September, and in practice it might be considerably later than that. I know that any of your Lordships who were chosen to sit on the Select Committee would want to carry out the inquiry as soon as possible. But August is not an easy time of the year, and it would still remain for the Order to be made by Her Majesty in Council and to be brought into force, which could hardly be before mid-October and might well be much later.

Such delay would be a matter of serious concern to the Government. So long as the Government are only a minority shareholder in Harland and Wolff, the framework for the conduct of the company's business is unrealistic and inhibiting. The chairman and the board remain answerable to the generality of the shareholders, although the company is able to go on trading solely because of the Government's guarantees and the financial support which the Government are providing. That is not a healthy basis for the far-reaching decisions which have to be taken—and taken urgently at this stage of the company's life.

Furthermore, we are most anxious to use the powers of financial assistance which the draft Order, if it is made, will confer on the Government in order to effect a financial reconstruction of the company. Harland and Wolff Limited is insolvent. It is an essential feature of the Government's plans that the company should become creditworthy once again in its own right. This means that the balance sheet must be rectified by the writing off of enough of the outstanding loans to eliminate the losses already incurred and by converting the remainder of the loans into share capital. It is true that the Government already have powers to continue to give financial assistance to the company, in a variety of ways, under the provisions of the earlier Shipbuilding Industry (Northern Ireland) Order which was approved by your Lordships on 1st May and came into force on 21st May. But not until the present draft Order comes into force will the Government, by virtue of being sole shareholder, he able to ensure that the necessary financial reconstruction is undertaken. So long as the Northern Ireland Department of Commerce holds only a minority of the shares the Government could not embark—even with the full co-operation of the company which it would expect to enjoy—on plans for financial reconstruction with confidence that they could be effected. It is urgently necessary to press on also with the reorganisation of the board of the company. The Government are hopeful that an element in the reorganisation of the hoard will he direct worker representation from the shipyard but the board cannot be reshaped until the Order has been made.

If the Hybrid Instruments Committee had been unanimous in its decision, this would obviously have weighed heavily with the House, even in the face of the need to remove the uncertainty about the ultimate control of the firm and to take the urgent action to which I have referred. Since no formal division of the Committee took place I am not in a position to quote the exact strength of each side of the argument, but I can quote the noble Earl that it was not passionately unanimous—I think that those were his actual words. I believe it is true that the Committee was very evenly divided and that its decision was taken by the smallest possible majority. In reaching this decision the Committee may also have thought—I put it no higher though I should welcome correction from any noble Lord who feels this to be untrue—that its recommendation would preserve for the House the opportunity to decide finally whether there should be a further inquiry.

If the Committee had said No to the petitions, that would have been an end of it. The petitions would have been turned down out of hand and this would have suggested that the petitioners did not have any justifiable grievance. I accept fully the sincerity of the petitioners and the honesty with which they have put forward their case. But the Committee may have wished that the House should be free to decide whether there should be a further inquiry and how far an inquiry would be able to affect the final outcome.

However I would not be asking your Lordships' House to conclude the proceedings on the Order's hybrid nature if all I had to say was that the continuation of those proceedings would prolong uncertainty and cause delay—significant though that would be. There is the other side of the coin. The objective of the recommended delay is to protect the rights of the shareholder. I hope to satisfy your Lordships that no reference to any Committee, no delays, can possibly improve their position. I say this because, without Government subvention, there is no money available to pay shareholders a penny. There has been no ordinary dividend since December 1964, no preference dividend since June 1966. In a winding up, at any time at least since this Government came into Office in February 1974, there would not have been enough to nay the creditors, and shareholders, both ordinary and preference would have got nothing.

On this matter the first point which the Government had to decide was whether it would be right to pay any compensation at all. But for massive aid from successive Government— which has amounted to nearly £90 million over the last 10 years and may well add up to some £140 million by March 1979—Harland and Wolff would have ceased to exist. In the summer of 1974 crisis was fended off by Government guarantees. The company came to the Government and sought those guarantees, saying that without them it would not be able to reopen for business after the holidays. The company is utterly insolvent; indeed it has lost its share capital five times over and more. Without Government support the company would have gone into liquidation and the shareholders would have received nothing for their holdings. However the company's shares have continued to be quoted on the Stock Exchange.

For the reasons given by the noble Earl, I think that the Government support puts some hope into the holders of shares. Between July 1974—when the Government announced that they intended to rescue the company by guaranteeing its liabilities and taking a substantial majority in an expanded equity, without acquiring existing shares—and March 1975, when the Government's intention to take full public ownership was announced, the shareholders could reasonably have supposed that the company would continue in its present form and that their investment would be protected by the Government guarantees then operative. So it seemed right to the Government to pay compensation. The yardstick adopted was the Stock Exchange quotations. After close scrutiny of the share prices over varying periods of time—and particularly over the six months before the announcement in March of this year—the Government decided that the sums shown in Article 4(2) would constitute fair compensation to the private shareholders.

The report of the Hybrid Instruments Committee refers also to the different compensation for preference and ordinary shareholders. The difference is small—8p for each £1 of preference stock and 9p for each £1 of ordinary stock—and your Lordships may have found it prima facie surprising that the ordinary shareholders should receive slightly better terms than the preference shareholders. However, having decided to adopt the Stock Exchange valuations as the deter minant of compensation terms, the Government adhered consistently to them. The fact is that on average over recent months—and in particular over the period preceding the Government's announcement in March—the Stock Exchange quotations for the ordinary stock have been slightly higher than for the preference stock. In relation to a company which has not paid a dividend on its preference stock since June 1966 nor on its ordinary stock since December 1964 the Stock Exchange valuations must reflect speculative views about the chances of future profitability.

Some of the petitioners maintain that, since preference shareholders are entitled to priority over ordinary shareholders in the payment of dividend and in the repayment of capital on a winding-up, they ought now to be paid more compensation than ordinary shareholders. Some of them maintain that any money available for compensation should be applied to payment of arrears of dividend on the preference stock and the repayment of capital of the preference stock; or even that the preference shareholders should continue to receive a dividend as if their stock were gilt-edged.

These arguments overlook the fact that the money for compensation is to come from the Government, not the company; and that the balance sheet shows that in a winding-up the shareholders, including the preference shareholders, would receive nothing. It is true that in a winding up the preference shareholders would come before the ordinary shareholders. But both would come after the creditors; and for neither would there be anything left after the assets of the company had been applied to trying to satisfy the creditors. The preferential rights of preference shareholders exist only within the company; they have no special rights in relation to funds provided by the Government.

Some noble Lord may ask whether some other, and possibly more equitable, basis of compensation could not have been found. It may be suggested that the value of the company's assets, after taking account of its liabilities, would have been a better basis. That brings us straight back to the consideration which I have just mentioned in relation to the treatment of preference shareholders; namely, that by July 1974 the liabilities of the company far exceeded its assets, and accordingly on this basis no compensation would be payable.

The crux of the matter seems to be this. The petitioners have quite fairly complained. Whether they have substantial grounds for complaint is perhaps arguable in view of what I said earlier in my speech, but I accept that the Hybrid Instruments Committee have judged them to be substantial. Nevertheless, I would ask the House to consider what the outcome of a further inquiry would be. Would the inquiry change the situation of the petitioners? Would it improve their chances of compensation or would it merely delay the chances of recovery for Harland and Wolff and eventually leave the petitioners in no better position than they are now? I suggest that the delay would be damaging and that it would not be justified.

Another place has already approved the Order and if the Government's Amendment is agreed we shall invite your Lordships to proceed to approve it also. I can only ask your Lordships to consider whether, in September or October or November, the outcome would be any different from any decision to which we might come today. I hope noble Lords will accept that the outcome would be the same, and that we should have done considerable harm to the interests of Northern Ireland by delaying. If we can take our decision now we shall be giving the best possible send-off to our newly appointed Managing Director. I hope that is what we shall do. I beg to move the Amendment.

Moved, as an Amendment to the above Motion, to leave out all the words after "That" and to insert: the House, having considered the First Report from the Hybrid Instruments Committee, is of the opinion that there ought not to be a further inquiry by a Select Committee since such an inquiry would delay and thereby prejudice the urgently necessary reconstruction of the Company."—(Lord Donaldson of Kingsbridge.)

The Earl of LISTOWEL

My Lords, it might be for the convenience of the House if I were to intervene briefly at this stage to point out some of the procedural considerations which noble Lords may wish to bear in mind when deciding whether to support the Motion or the Amendment. As the noble Earl, Lord Cork and Orrery, has already mentioned, I was not able to be present at the meeting of the Hybrid Instruments Committee which has recommended—and the recommendation is before your Lordships—a further inquiry by a Select Committee. But, as your Lordships are aware, it would be improper for me, even if I had the knowledge, to express any opinion about the merits of the complaint of the petitioning shareholders in Harland and Wolff about their offer of compensation or the recommendation of the Committee in its report. The case in the Committee's Report, if I may say so, has been admirably stated by the noble Earl, Lord Cork and Orrery, and I am sure the House is grateful to him for at short notice stepping into the place of the Chairman of the Committee.

Perhaps I should start by reminding your Lordships that a Hybrid Instrument such as this, and this is how such an Affirmative Order is usually described, is an Order which, but for the provisions of the Act authorising the Minister to make it—in this case the Northern Ireland (Temporary Provisions) Act 1972—would require to be enacted by a Private Bill or a Hybrid Bill. A Private Bill or a Hybrid Bill can, of course, be petitioned against by any private citizen who claims that his rights would be prejudiced by the action of the Government: that is to say, what is contemplated would be unjust or oppressive. Normally there is no petitioning procedure against Affirmative Statutory Instruments, but our Standing Order No. 216 provides such a procedure in the case of Hybrid Instruments. This procedure is unique to your Lordships' House. It confers on persons individually and adversely affected by a Hybrid Instrument the right to petition this House against the Order. If petitions are presented, as they were in this case by some of the shareholders in Harland and Wolff, it is then for the Hybrid Instruments Committee, in the light of the criteria set out in the Standing Order, to say whether a prima facie case has been made out for a further inquiry.

I should mention that the new criteria in our Standing Order are the result of the valuable work of the Brooke Committee on Delegated Legislation which made a number of useful recommendations for the improvement of our Hybrid Instrument procedure. I am sorry that the noble Lord, Lord Brooke of Cumnor, is unable to be here this afternoon. Had it been possible for him to be present, he would have been able to contribute to the consideration of this Order. The Committee now has to satisfy itself that the Petitioners have a substantial ground of complaint, that the complaint has not been dealt with by a previous inquiry, and that it was not the fault of the Petitioners that no inquiry had taken place. In the light of their answers to these three questions, the Committee has to go on to decide whether there is a prima facie case for a further inquiry.

In the case of the Harland and Wolff Order, the Committee has taken the view that there is a case for a further inquiry, and this indeed was the substance of the speech of the noble Earl, Lord Cork and Orrery, on his Motion. I think I should mention one other change in the procedure of the House which was also mentioned by the noble Earl, Lord Cork and Orrery, in dealing with Hybrid Instruments. It was thought by the Procedure Committee that a Law Lord should be Chairman of the Hybrid Instruments Committee, because of his special knowledge of petitioning and court procedure. I am sure your Lordships will agree that the Committee has been particularly fortunate in securing the services of the noble and learned Lord, Lord Wilberforce, the senior Law Lord, as their Chairman on this occasion.

It is now for the House to decide whether or not it wishes a further inquiry by a Select Committee. This has been rightly emphasised by the noble Lord, Lord Donaldson of Kingsbridge, from the Government Front Bench. If the House accepts the Amendment, there will be no Select Committee and the House can proceed forthwith to deal with the Order. If it rejects the Amendment and accepts the Motion, it cannot decide on the Order until the Select Committee has reported. The decision asked for by the House this afternoon on the Report of the Hybrid Instruments Committee should be taken on the balance of argument heard in the debate, which of course includes the recommendations contained in the Committee's Report. My Lords, I think that is all the advice that I can offer your Lordships.

3.34 p.m.


My Lords, I am grateful to the noble Earl the Lord Chairman of Committees for giving advice, which, so far as I am concerned, is certainly extremely helpful. I thought it might be helpful to your Lordships' House if very briefly I tried to indicate how we on this Bench felt as regards the case which has been put forward by the noble Lord, Lord Donaldson of Kingsbridge. I hope that I will not be striking an unnecessarily rasping note if I make the point that the Harland and Wolff Shipbuilding Order, and this rather intricate debate on the Motion of the Hybrid Instruments Committee, are being introduced into your Lordships' House on the second day of the first week in August—a week which in this appalling heat has no business at all to be part of the calendar of Parliamentary sitting days.

The noble Lord, Lord Donaldson, gave us quite a lot of detail in his very thorough running over of Harland and Wolff's affairs, and for that I am grateful to him. But then he went on to make the case as to why the Government must amend the Committee's Motion, which is essentially that the Government are running out of time in bringing forward this Order if the urgently needed reconstruction of Harland and Wolff is to go forward. I hope the noble Lord will not think that I am unfriendly if I say that he has reason to apologise for this state of affairs.

Some of my noble friends, and perhaps also the noble Lord, Lord Donaldson, himself, may remember a punishment which some of us used to suffer when we were at school which went by the name of "tardybook". The noble Lord may remember that twice you could be late for school, and then the third time into the book you went and you were punished, and after that—rather like a magistrate's totting-up procedure for driving offences—if you were late again so, again and again, you were punished. If we had a "tardybook" in your Lordships' House, the Government might take a little more notice of their timetable, and, certainly, we would not be dragged back to sit into August in order to help them get their legislation through.

In all seriousness, the argument of pressure of time is not a very good one when we are discussing the First Report which is being put forward by a brand-new Committee of this House. I seriously think we ought to consider carefully before agreeing to amend recommendations of this Committee, particularly when my noble friend Lord Cork and Orrery and his colleagues have, with considerable care, looked into the affairs of the great shipbuilding company and into the compensation which is being offered to many small savers, some of whom have been shareholders in Harland and Wolff for years and years. To be fair to the noble Lord, Lord Donaldson, I know that he is well aware of these points, and I am also bound to agree that he finds himself in a considerable dilemma over this. The fact of the matter, as the noble Lord has explained, is that if changes at board level cannot be carried out until this Order is passed the whole reorganisation of Harland and Wolff, to which he referred, would have to be postponed.

Last May, we agreed in this House what was called the Interim Harland and Wolff Order, which empowered the Northern Ireland Department of Commerce to lend money to Harland and Wolff pending the passing of this Order. I think the House ought to bear in mind that in the 10 short weeks since that Order went through, the company has been forced to call on another £5¾ million, over and above the huge debts to which the noble Lord referred, in order to keep going. I find myself driven to accepting the argument that, although I know that the existing directors of Harland and Wolff have had many intractable problems to deal with, some rapid rethinking at all levels in the company is now urgently needed. In addition, there is a point about which I think noble Lords opposite should be particularly careful. If matters go on sliding, and if men at the yard have to be laid off, this will be a disaster of Herculean proportions not only from a human point of view, but also from a security point of view. I am sure that the Security Forces in Belfast will breathe a sigh of relief if they hear that new arrangements and a new spirit are to match the immense amount of new equipment which has gone into this historic shipyard.

Having listened carefully to my noble friend in the very thorough way he put forward the case, none the less those are some of the reasons which I have sought to pick out as to why I think the noble Lord, Lord Donaldson, has made a strong case. Having said that, I think the Committee were absolutely right to question in principle the basis on which shareholders are being compensated. After all, as my noble friend said, the nationalisation of this great company would normally be dealt with by a proper Private Parliamentary Bill. But because we are in a period of Direct Rule, the Government have had to resort to an Order, under the Northern Ireland Act 1974, which cannot be amended. Surely, it is more than usually essential that we have a Committee like the Hybrid Instruments Committee to see that the rights of people are in no way threatened.

Arising from what they said, is it really the answer to say that when you are compensating people you simply take the Stock Market quotation? I should have thought there were many reasons why this could be a most misleading basis for compensation. Yet, after having listened to the noble Lord, I am bound to admit that in this case there is reason to believe that the shareholders are getting a very fair deal. If that is the case, then, thank goodness, and they deserve it, for many of them have stood by this firm, which is one of the premier shipyards of the world, through many difficult years.

My Lords, I hope that perhaps my noble friend and the House may agree that the Motion of the Committee should be amended on this occasion, so that the Order can then be agreed to. I submit that if we do this it will not create a precedent. It will allow the Government on this occasion to get on with trying to create a profitable trading situation at Harland and Wolff, which is crucial for the industrial future of Northern Ireland.

3.41 p.m.


My Lords, I have listened to my noble friend Lord Belstead and to the answer of the noble Lord, Lord Donaldson of Kingsbridge. That is all the evidence I have, but I have come to a completely different conclusion from that of my noble friend Lord Belstead. I am of the opinion that if we view this matter properly, there is more to it than merely upholding, the recommendations of a newly formed Committee, and giving it confidence to operate in future. In this country today, there is a crisis of confidence in all potential investors. More than anything else we need investment if we are to overcome our problems. Here we have a case where, for quite proper reasons, this firm is being taken over at the instigation of the Government, and there is no criticism on that. But the Hybrid Instruments Committee, which has examined the details more closely than we can, have come to a conclusion, albeit by majority—

Baroness BACON

My Lords, if the noble Lord, Lord Harmar-Nicholls, will allow me to interrupt, he has said that this Committee can examine everything in more detail than can this House. I rise to tell the noble Lord that in fact we have had much more detail given, to us today from the noble Lord, Lord Donaldson of Kingsbridge, than was before the Committee when we met.


My Lords, that is a criticism of the Committee that I did not think I should have to substantiate. I should think that a Committee entrusted with this task would have insisted on seeing all the details, and would have insisted that it be given more details than could be given in a speedy debate on an afternoon such as this. If that did not happen, it means that on another occasion one may have to criticise the way this Committee did its work on this particular occasion. I am saying that it coincides with a time when there is a crisis of confidence in the country with regard to investment generally. If it is a fact that this Committee, which ought to have examined the matter in detail, which ought to have had all the facts in front of it, came to the conclusion, albeit a majority conclusion, that there is still a doubt as to whether or not compensation being paid was fair and correct, then I believe that that ought to be pursued to the end, until the doubt is removed; otherwise one will add to the lack of confidence in the country—and perhaps the world—with regard to future investment in concerns such as Harland and Wolff and other like organisations.

My Lords, in order to re-establish confidence in investment, even though it may occasion some kind of delay, this House ought to use the procedures right to the end so that in future potential investors can sec to it that they will have the fullest and fairest examination, if the time comes, as to whether they are paid compensation. The only real reason one detected in the argument of the noble Lord, Lord Donaldson of Kingsbridge, as to whether or not the suggestions in (a) and (b) should be carried out, was that it would take up time, and that it may injure the eventual re-establishment on an even keel of Harland and Wolff as an employing organisation.

I have been in and around the Palace of Westminster, in one or other of the Houses, for 25 years now, and I have discovered one thing; that is, that if Parliament wants to do something quickly, it can do it. I have discovered that if they want to use the procedures quickly, it can be done. I believe it would be possible, if the will is there to do it, to have a further inquiry, while at the same time the re-organisation of all the necessary things are set in train for the long-term settlement of Harland and Wolff, so that it merely needs the button to be pressed when the right time comes. We have been told that we are to return in September in order to clear up other matters outstanding. I am not suggesting that the outcome of any further investigation would mean they would have more money.

I am impressed with the Stock Exchange valuation as described to us by the noble Lord, Lord Donaldson. From what little I know, it seems to me a fair valuation. That may not be altered. But the important thing is that potential investors would see that on sheer grounds of convenience, neatness and some sort of special speed, the examination into what they think are their rights has not been properly done. That is more important than the fact that one would merely come to the position then as it is now. In view of the points made by my noble friend, it looks as if we shall not do it but I should have liked to think that we would have supported the Committee on this. I should like to feel that the Government would have speeded up all the necessary procedures to give effect to it. It may well be that the answer would have been the same as we are being asked to accept today—that is more than likely. But in terms of establishing a confidence most essential for the future of this industrial country, it would have been well worth while doing just that. Even at this late stage, if it is thought possible that we need not interfere with the organisation and that it can be done in September in the way we are being asked to confirm today, and therefore no time would be lost, I still think that, in the long term, that would be the right thing to do.

3.48 p.m.


My Lords, if the matter of procedure was of primary concern, the complaints made by the noble Lords. Lord Belstead and Lord Harmar-Nicholls, would be justified. But that is not the issue. The issue is much more important. It is whether we are to take action this afternoon which will salvage the economic life of Northern Ireland, Let us make no mistake about that. It is very seldom we have a shipbuilding debate in your Lordships' House. I cannot remember any since I came here. If we had had a shipbuilding debate, and a probe into the intricacies and complexities of British shipbuilding, many of the observations we have heard this afternoon would not have been uttered at all.

I want to say at once that I have the utmost sympathy, if that is of any value, with those preference and other shareholders who feel they are going to get a rough deal. But let us try to understand this. If we do not proceed with this Order, and if we do not accept the recommendation of the Government, the reconstruction of Harland and Wolff, perhaps the best technically equipped shipbuilding yard in the whole of Europe, cannot be proceeded with. What would be the effect?

I have followed the fortunes of Harland and Wolff for many years. I have no financial interest at all but for many years in another place I was the chairman of the Labour Party Shipbuilding and Shipping Committee and so was able to follow the fortunes, not only of Harland and Wolff, but of the shipbuilding industry as a whole. May I remind noble Lords on the other side of the House, that the first example of credit being supplied to private shipbuilding in the United Kingdom was when Mr. Marples, as Minister of Transport, introduced credit arrangements and provided some kind of consolation for lame ducks. That is when it began, and we have been subsidising the shipbuilding industry ever since.

I do not want to introduce a debate on shipbuilding, but I have been reading the debate on this subject in the other place and I make this statement, which I believe is unchallengable, that not a single Member associated with Ulster would dissent from the decision which the Government are asking your Lordships' House to accept this afternoon, although at the same time expressing the utmost sympathy for the shareholders. If we do not proceed with the reconstruction of Harland and Wolff it will go into liquidation, despite the appointment of the new manager, who I believe is one of the best technical experts in the shipbuilding industry in the whole world, and despite the loyalty of those employed at Harland and Wolff. And let this be understood; it is not merely the 10,000 people employed in the shipyard who will be affected, but vast numbers who deal with components and parts associated I with the building of ships in the yard. All these will be affected. Let this too be clearly understood: if we do not proceed with the reconstruction at the earliest date, if we engage in any impediments such as the appointment of a Select Committee with all the palaver associated with it, however strong the case may be on behalf of the shareholders the firm will go into liquidation. Then what will the shareholders get? Nothing at all.

There is the situation. I am pleading on behalf of the workers in Northern Ireland, those associated with the shipbuilding industry, and indeed for the whole of the economic life of Ulster. My noble friend Lord Donaldson mentioned the high rate of unemployment in Ulster. That matter was referred to in the debate the other night in the other place. Let us not accentuate the nature of the problem. Despite the objections—which in my opinion are justified; I have a great deal of sympathy with them, and I would have said pretty much the same thing in different circumstances—since this affects the life of Ulster, its economic future, it seems to me that your Lordships have no alternative other than to accept the decision.


My Lords, I do not want to prolong this debate unduly because there is a lot more business today, and very important business too. But since I have an interest in the affairs of Northern Ireland and know the shipyard at Harland and Wolff, and since I also have an interest in the procedure of this House, perhaps I might be allowed to intervene briefly. Like the noble Lord, Lord Shinwell—whom we are all delighted to see back in his place after his recent illness—I listened not only with attention, but also with sympathy to what the noble Lord, Lord Harmar-Nicholls, had to say. He reminded us that he speaks as a Parliamentarian with 25 years' experience. Like the noble Lord I believe it would be quite wrong if we got into the habit, for reasons of expediency put forward by the Government, of setting on one side the recommendations of our own Select Committees, particularly a Committee of the weight and importance of the Hybrid Instruments Committee, chaired, as the noble Earl, Lord Listowel, reminded us, by a Lord of Appeal in Ordinary, Lord Wilberforce. We also have to remember that the petitioning procedure is a protection for the private citizen; it is a protection against legislative acts affecting private interests. To take that away because of the requirements of the Executive is something that should be done only in exceptional circumstances.

Having said that, after listening to this debate I reach the same conclusion as the noble Lord, Lord Shinwell, from the Benches opposite. In the case of Northern Ireland the shipyard of Harland and Wolff is of paramount importance to the economy of Northern Ireland and to the stability, if that is the right word, the comparative stability, of political life in Belfast. I detected some signs of wishful thinking in parts of the brief which the noble Lord, Lord Donaldson, read out. We have heard this story before, although the noble Lord did say at one point in his speech that if this infusion of a further large amount of capital—perhaps amounting to as much as £140 million in total by 1980—was unsucessful the Government might then have to consider running down or even closing the shipyard. I do not know; I suspect we will be having this debate all over again before we reach that day.

In the meantime I think the Government are right, and that this reconstruc tion is necessary. We must hope it will be successful. Whether the reconstituted Board, and the introduction of a new managing director, will bring all the benefits that are hoped for I do not know, but they can only do good. That is my reason, in this instance, for agreeing to the Amendment proposed from the Government Front Bench.

3.56 p.m.

The LORD PRIVY SEAL (Lord Shepherd)

My Lords, perhaps your Lordships would like to come to a conclusion in this matter. May I thank the noble Earl for the manner in which he introduced the First Report of this Committee. May I say to him that it was only after the deepest thought that I agreed that my name should go on to this Amendment. I, like the noble Lord, Lord Windlesham, attach very great importance to our Committee system, and also the way in which we seek to preserve the rights of individuals. I attach the greatest importance to this particular Committee, and, therefore, it was with reluctance that I felt it necessary, in the light of the advice I received from the Northern Ireland Department, that there should be an Amendment to the Motion on the First Report. To the noble Lord, Lord Belstead, I would say that I fully agree that it appears to be wrong that we should be taking this Order at this late stage, not giving us a great deal of time and flexibility. The Order was a complex Order. It required not only decisions in terms of construction but also in terms of compensation. It has, of course, now been laid before this House for some weeks, and a petitioning period was required before the Select Committee itself could make a decision.

I would suggest your Lordships should bear very much in mind what the noble Lord, Lord Belstead, the noble Lord, Lord Windlesham, and my noble friend Lord Shinwell have said about the need for speed and urgency. It is not just money that the company needs. Nothing can be done about the management, the board, upon which confidence depends, until the Government are in a proper position to exercise their view upon the reconstruction of management, and they cannot do that until they have a majority shareholding. Until this has been achieved nothing in that field can be done. I should have thought that above all else, apart from money, the need is to raise the confidence of the workpeople that the company is going to be put in good order, and that the names of the board and the management should be known.

I, too, share the concern expressed as to whether the shareholders have been adequately compensated. I think there is only one way in this present situation in which an assessment could be made in a company which has lost its capital five times over. It has not paid a dividend since, I think, 1964, and compensation for the shareholders is only being made because, as the noble Earl himself suggested, there might have been a feeling among the private shareholders that their shares were worth something more than the market itself would place upon them solely because of the presence of the Government in a minority position. Therefore, I do not see that there is any way in which, in fairness and equity, one could assess the compensation other than using the stock market over a period of six months.

I therefore ask the House, in the interests particularly of Northern Ireland, that we should not delay in the restructuring of the management of this company. To achieve this we need the Order, which can be moved if your Lordships were to agree to the Amendment which my noble friend Lord Donaldson of Kingsbridge moved on my behalf. I join with other noble Lords in expressing gratitude to the noble Lords who sat on this Committee. I would not accept any reflection that was suggested of it, that it had not done its work adequately or that it had not gone into this matter sufficiently. It is not easy, particularly on the First Report of a new Committee, to know what may be the pitfalls. I believe that the Committee went into the matter as fully as it could, on the material that was provided. It may be, because of the circumstances, that more material has been provided to your Lordships by the speech of my noble friend Lord Donaldson. I therefore hope that the House will agree to the Amendment on the Order Paper in my name.

On Question, Amendment agreed to.

Motion, as amended, agreed to.