HL Deb 21 July 1975 vol 363 cc111-45

House again in Committee.

Lord ABERDARE moved Amendment No. 26: Page 2, line 35, leave out ("establishing")

The noble Lord said: I beg to move Amendment No. 26, and it would probably be convenient if we considered at the same time Amendments Nos. 36 and 88, because of these three Amendment No. 36 is really the key Amendment to which this is merely a paving Amendment; and should we carry Amendment No. 36. Amendment No. 88 is consequential on it. These Amendments follow on similar Amendments that we moved in the course of the Scottish and Welsh Development Agency (No. 2) Bills, when we argued that it was highly undesirable for those Agencies, or indeed for the National Enterprise Board, to set up companies of their own in competition with privately-owned companies.

Just before we broke off the Committee stage, the noble Lord, Lord Melchett, said that no doubt we were delighted to hear that the NEB were going to set up companies in competition with privately-owned companies. We are not in the least pleased about that, and in fact we do not think that this kind of competition is likely to be fair or to have the effects that we should like to see in stimulating the economic climate of industry. We must view this matter against what is, after all, the basic, underlying problem that we are trying to tackle, the question of insufficient investment in industry, and ask ourselves how this provision that the National Enterprise Board should set up companies of their own will help increased investment.

If we accept that existing companies are not investing sufficiently in new plant and equipment, then there are two ways in which we can tackle the problem. The first, which is the way that appeals to us, is to engender an economic climate in which free enterprise can flourish and in which investment will be self-generating. It can be done. It has been done in Germany, France, the United States and elsewhere. When the Government wish to point to the fact that we are not doing as well as our rivals, they point to these countries in evidence that we are not investing as much as we should; but when we point out to them that these are free enterprise countries, all they then say—or the noble Lord, Lord Melchett, says—is that we have not taken account of the fact that they have unemployment in these countries. That may be so, but I would only say to the noble Lord that we have mounting unemployment in this country, and I fear that our unemployment is going to outstrip and to last for much longer than in those countries where they have encouraged their free enterprise systems and where they are already beginning to master their inflation problems.

I would counsel the Government that they should study the example of these countries with whose success in economic development they are prone to compare ours and to draw the lesson which I draw, that in planning industrial investment for the future there is much more scope in building on the sort of arrangements that we already have within the NEDC and its Little Neddies than anything of the nature of the National Enterprise Board, which is their alternative way. Apparently in this Bill their alternative is to establish companies sponsored and set up by the National Enterprise Board that will vest themselves and compete with privately owned companies. I find that the wrong concept, and I am sure that it will not work in fair competition. A new company coming into the field with massive money behind it, able to invest in the most up-to-date plant and equipment and only having to engage a work force that will be sufficient to man the enterprise efficiently, will surely have immense advantages over an old-established firm which may be short of cash at the present moment, with plant and machinery that is not all of the latest design, and unable to cut down on its labour force without industrial action. This is what we really mean by unfair competition. Nothing will be gained except to drive the private firm out of business, with consequent loss of employment.

In the next Amendment we shall be arguing that it is quite wrong for the National Enterprise Board to have as one of their functions the extension of public ownership into profitable areas of manufacturing industry: this power that we are now considering to set up companies of their own is equally objectionable. We do not think that the Board should seek to extend public ownership by acquiring private companies, nor do we think that they should have open to them the alternative of establishing their own companies to compete with the private sector in a particular part of the market. A company formed by the National Enterprise Board will almost by definition be in a stronger competitive position than its rivals in the private sector. Those of your Lordships who have studied the example of the IRI in Italy will know that there it has been shown that those who provide finance tend to be biased towards a State-backed firm, which obviously has greater financial security than a private firm.

These are some of the reasons why competition will not be fair. There are others. For example, the companies owned by the National Enterprise Board will be part of a single conglomerate. We are all aware of the difficulties that arise from a miscellaneous conglomerate of this sort, especially when in this case the whole outfit will have been put together partly by misfortune, partly by deliberate acquisition. I have no doubt that the noble Lord, Lord Ryder, and his team will do their best to overcome this difficulty by seeking to encourage a corporate feeling between the various companies they control. I am sure that every effort will be made for these companies to get to know each other. There will no doubt be a group magazine and an annual dinner. I dare say that there will be no overt discrimination, but undoubtedly there will be strong influences for companies that have been established by the National Enterprise Board to deal with each other and with other nationalised industries.

Again I revert to what I have been saying in respect of other Amendments today: this is a provision in the Bill that cannot be expected to give any confidence to those who work in private industry. They are having a very hard time at the moment. In many cases their cash flow position is extremely serious, not only because of the general worldwide recession but also very largely because of the Government's policy hitherto of controlling prices and not wages. Now they see in this Bill a threat of competition from a State-owned, State-backed rival with large capital resources behind it. The subsection we are considering, which contains powers to establish companies by the National Enterprise Board, is quite irrelevant to increasing British industry. We shall seek to remove the clause, as we did successfully in the case of the Scottish and Welsh Development Agency Bills. I beg to move.

Lord BIRDWOOD

If there has ever been an enabling word in an enabling Bill, it is this word "establishing". In the original construction of the Industry Bill the definition of "industrial undertaking", was, I think, "manufacturing". I should be interested to know whether that has been enlarged into any form of commercial enterprise. May I most emphatically add my voice to that of my noble friend that is, that it cannot have been part of the reasoning behind the Bill that any Government should be given carte blanche to start anything through a single word.

Lord LEE of NEWTON

I thought that the noble Lord, Lord Aberdare, was unduly despondent. Indeed, at one stage he seemed to reach the point of saying that if some cannot be efficient it would be a great tragedy if any of them were. He also made a sort of black and white "Neddy" as distinct from the NEB. I should have thought that the two complement each other. If it was the case that the NEB were simply favouring—if that is the right word—the firms which they set up, I should have thought there would have been an unholy scream about it—and certainly I should be one who was doing some of the screaming. As I see it, the conception is to enthuse British industry as a whole. "Neddy" is doing a job in that respect, and I should have thought it would be very wrong if the NEB were to be prohibited from setting up an organisation which they felt was to be of substantial benefit to the nation, and, indeed, making that firm or firms as highly efficient as they could.

In these days, competition in a great many industries is not waged so much on a national as on an international basis. If we are now to be afraid of efficiency—which at times the noble Lord seemed to be—we can hardly expect to see our balance of payments put to rights when those with whom we are in international competitition are leaving us behind by the very volume of their investment. While one sees the point of which the noble Lord is afraid, I think it is unduly pessimistic to believe that the word "establishing" gives a kind of elite, a favoured section, against which none in Britain can possibly compete. I do not know whether the noble Lord had in mind any particular industry. Let me take the very genesis of engineering production, the machine tool industry: I should have thought, without any political connotations, we would agree that it is in a rather bad state.

Until we can get the NEB to set about producing highly efficient segments of the machine tool industry then in my opinion we can never hope to recapture those markets which traditionally we held years ago. For example, Herberts, as they are now in machine tools, are losing ground. Their investment has not been anything like the amount we should wish to see. But what are we to do? Are we to say: "How pitiful it is; what a shocking business"? If we want to increase the efficiency of British industry, the first thing we must do is to incur a huge import payment for foreign machine tools. The only alternative is that we should have investment, through the NEB, in sections of the machine tool industry. I quote that only as a case in point. Without that, no matter what noble Lords on either side of the Committee wish to see, you cannot have efficiency throughout much of the British engineering industry.

The job of the NEB is to take those sections which are badly in need of resuscitation and of far higher investment than we have seen for years, and to ensure that they can begin the process of producing highly efficient machine tools in order to give manufacturing industry the opportunity of getting production levels up. Whether one is a Tory, a Liberal or a Labour man, what is wrong about that? It is not the case that there has simply been a falling away of investment levels since this Government came to power. Ever since the end of the war the level of investment in British industry has been disgraceful. It is no good hoping that in some way or another suddenly we shall be able to increase our levels of investment. Given world events as they are, I believe that the NEB is the only hope of ensuring a resuscitation of many of the key sections of British industry. I hope the noble Lord will not go on arguing that simply because they are being given certain powers in this Bill which he feels could be abused, but which I do not believe this Government or the people of this nation would permit to be abused, therefore we must be negative in our approach to it.

Lord BIRDWOOD

Would the noble Lord not agree that there is a fundamental meaning attached to the word "establish" which implies that this Bill is giving powers to the Board to create entirely new entities and not to support existing ones in one way or another?

Lord LEE of NEWTON

That is why I mentioned in passing one particular industry. I have a long memory so far as the machine tool industry is concerned. I remember the time when the Attlee Government tried to inaugurate a fairly substantial arms programme. I was then in a very humble capacity in the Treasury. Before we could even begin the programme we had to incur a huge import bill for American machine tools. I want to see the Board given the power so that we do not meet that situation again.

Lord TREFGARNE

I wonder what it is about a public body like the NEB that is to guarantee success in any new enterprise they seek to set up? What shining example among the existing nationalised industries would suggest that new enterprises set up by this Board will be more successful than private enterprise? I cannot think of a single one. The steel industry and the coal mines are losing money; the railways are losing a fortune.

Lord LEE of NEWTON

Can we think of any private enterprise organisation in Britain which can compare in increased productivity with industries such as coal, gas or electricity?

Lord TREFGARNE

We are talking of efficiency not only from the point of productivity but from the point of view of cash results. We have to bear in mind the astronomic losses incurred by the State Corporations—for example, the Post Office. The noble Lord, Lord Lee of Newton, asked, "What about America?". The Bill we are now considering does not apply to America; it applies here. The examples we have to go by are the public enterprises set up very largely under the Government of which the noble Lord, Lord Lee, was a distinguished member. I can think of none that is successful or that is making a profit. I admit that times are hard and that many private enterprise businesses, including big ones, are making losses as well. But what is it that makes us believe that new enterprises will do any better than the public corporations which we have now? I cannot think of anything. Surely a better solution would be to use such funds as may be available—and no doubt they will be substantial—to improve proficiency and to increase investment in existing private enterprise businesses.

Perhaps it may be right for corporations which take public money to yield some element of their control to the Government. However, that is a seperate issue and we are not discussing it now. The question we have to consider is whether we should agree that the NEB should establish new industries. I submit that that should not be allowed because the record of public enterprise is not adequate to suggest that new businesses will be any more successful.

Lord RITCHIE-CALDER

The noble Lord talks about the Post Office and other such bodies, but what does he know about establishments like Dollis Hill, which is leading ITT and everybody else in research and development? This is one of the things in relation to which we keep underselling ourselves. The amount of enterprise initiated by Government establishments is far beyond anything which the noble Lord comprehends. If he turns that into the state of the Post Office, he is looking at a different set of circumstances, but if he is talking about initiative, he should not underestimate what is done by public enterprises.

Lord TREFGARNE

With the permission of the Committee, I will answer that point. The noble Lord is referring to research and development, which is quite different. I am not against public funding of research and development. I am against the public funding of basic commercial enterprise, which is something quite different.

Lord RITCHIE-CALDER

May I ask the noble Lord whether, in terms of research and development, he would agree to the establishment of State enterprises on the basis of Dollis Hill?

Lord BELSTEAD

I have listened carefully to my noble friend Lord Trefgarne, and the point he is making is that the cash results of the nationalised industries are not such as would lead him to the establishment of further nationalised industries. The noble Lord, Lord Ritchie-Calder, mentioned Dollis Hill. It just so happens that I live a mile and a half from where, at a huge capital expenditure—at a time when I should not have thought the Post Office could afford it—Dollis Hill is being completely replaced at Martlesham aerodrome in Suffolk. Is this really a sensible thing to be doing in 1975?

Lord BESWICK

If we are to discuss the Post Office in that kind of depth, I feel that we had better set aside another day for a special debate. The Amendment would prevent the National Enterprise Board from establishing concerns. The noble Lord, Lord Birdwood, is absolutely right. That is precisely what it intends to do. The National Enterprise Board will be able to function in a number of different ways. They could operate by making finance available, by taking an equity interest in a company, by having a joint enterprise with a private company, or by themselves establishing a completely new enterprise. It seems that the noble Lord, Lord Aberdare, is saying that they do not mind the Board making money available or possibly taking a minority interest, but that they do mind if it comes to establishing a new company. This is where we part company quite cleanly. Occasionally, the noble Lord gives us a little homily about dropping doctrinal arguments, but here he is advocating something on purely doctrinal grounds. There is no economic argument for what he is advancing. He is just against a publicly owned company, even though it could be said that a publicly owned company might be performing a useful function. It is not the case that the Board will establish new enterprises up and down the country. That is not at all the intention. They will have certain constraints upon them, not least of which will be the amount of money at their disposal.

There may well be cases in which we are importing certain articles which we should be making ourselves, but where no private company is prepared to invest money in that kind of import saving. The National Enterprise Board might say that this was a matter which they should take up in the national interest and establish a company which would save imports. They might feel confident—and they would have to make their case, of course—that they could provide an adequate return on the investment. If the provision was knocked out of the Bill, the Board would be unable to do that.

One might have another case in an assisted area in which it might be socially advisable to have a new enterprise. It is possible that the NEB would be able to help. I was asked a short time ago by the noble Baroness who sits on the Liberal Benches about the overmanning in the British Steel Corporation. One of the things which we are trying to do is to get that manning down, but we are also trying to establish new industries in the areas where the labour will be made available. It is conceivable that no private enterprise will wish to come in, and the NEB would be in a position to invest some money and start up. Here is a case in which I should have thought it would be in the national interest to do this, but I think that that would be stopped if the noble Lord had his way and this word were knocked out.

Again, though the noble Lord is so keen about the market economy, it is a fact that there are certain areas where market forces have moved over-much towards monopoly. I could give a long list of cases where that is so. Again, it might be useful to have a British company challenging monopoly forces. I am not saying that I have any particular case in mind, but that is the sort of thing we should provide for. If the Board have the power to establish a new company, then it would be possible to move in on that count also.

There are other examples I could give, one of which is the export business. It may well be possible in certain cases for a new company to earn foreign currency with a new enterprise in a field where the private sector does not wish to enter. The noble Lord, Lord Trefgarne, was very fairly asking what it is about a public enterprise that indicates that it can do well where the private sector cannot. I will tell him. Up to the present time it has been the almost invariable practice for the public sector to be established in cases where the private sector had failed. One thinks of coal, of the railways, of steel and of gas, which were not areas in which private enterprise would invest new capital. They could not have done it if they had wanted to. They were disintegrating. There was a feeling on both sides of the House that the public sector had to move in. The public sector moved in, but now the noble Lord says that they are making losses. In certain cases, those losses were made deliberately because, to some extent the Government of which I have been a member, but to a large extent in the particular case between 1970 and 1974 the Conservative Government of the day had restricted prices and deliberately incurred deficits in the public sector for the purpose of keeping a better RPI at the time and also, incidentally, to subsidise the private sector.

I will not go through the figures, but it is possible to quote a figure of the amount of indirect subsidy made available to the private sector which has been enjoying services—transport and energy in particular—at a subsidised rate because of the policy of the Opposition when in Government. For the reasons I have indicated—it may be import saving, it may be export development, it may be an assisted area, or perhaps to challenge a monopoly—we say that it would be desirable to have a new company. In that case there is power in the Bill, as it now stands, to enable the NEB to establish a new company. The noble Lord, Lord Aberdare, allowed his imagination to roam around the dances they may organise, or the dinners they may have between them, or, I suppose, the occasional cricket match or darts match. He seemed to think that this is where between them they would hatch up unfair competition. It would not be the first time in the private sector that a certain amount of business had been conducted at a social occasion. I should not deny that.

But I say to the noble Lord that when it comes to competition it is not the intention to put the NEB in any position more favourable than the private sector. They will have to raise money, show a return on that money, and they will not be enabled in any way to cut prices. They will not be given any favouritism by the Government in any procurement policy. There will be fair competition. As I understood the noble Lord in his earlier speech on the market economy, he was wholly in favour of fair competition. Why should he be against fair competition when one of the competing companies happens to be owned by him and I and the rest of us here? Why should he be against that kind of situation? I cannot think that any argument can be mounted against the wording as it stands, except on the narrowest, old-fashioned, doctrinal grounds—

Viscount MASSEREENE and FERRARD

Is it fair competition? No, it is not fair competition. By means of taxation the Government are taking the wealth produced by private industry and using it to build up another industry in competition. The noble Lord said that it is fair competition, but of course it is not fair competition. By using taxpayers' money the Government can, if they wish, undercut ad infinitum to destroy the private industry. It is extremely unfair competition. No one objects to public bodies if they act completely fairly and do not make a loss. Can anyone point to a public body which does not make a loss? I understand that the British Steel Corporation is balancing its books this year—although perhaps I am wrong about this. If it does it will, I think, be the only time it has, and it will certainly not balance its books next year—

Lord BESWICK

I should like to tell the noble Viscount that one day last year I took home a cheque for £26 million which I paid into the Treausry. It had been handed over to me by the British Steel Corporation.

Baroness WARD of NORTH TYNESIDE

Before the noble Lord sits down, will he kindly tell me whether the National Enterprise Board will be able to give a substantial grant for the fish quay at North Shields? The Government have just said that they cannot give the grant which they originally promised. I agree with the Amendment moved from my side of the Committee. A number of statements have been made by the National Enterprise Board, but I should like to know what are the advantages of the Board. I should like an assurance that if an application is submitted at the first possible moment after this Bill is passed we can have a grant for a new fish quay for our trawlers and our fishing industry. We are not to get the grant that the Government originally promised. Perhaps the noble Lord will leave this money with us so that we can have our new fish quay, without even going to the National Enterprise Board.

Lord BESWICK

I am aware that the noble Baroness feels very strongly about the fish quay. I cannot remember the answer I gave her when she put down a Question. But my impression was that she persuaded people up and down the land to vote for staying in Europe. She gave them to understand firmly that if they voted for staying in Europe she could get a loan for her fish quay.

Lord BIRDWOOD

I am sorry that it is necessary for me to rise again, but it is a measure of the importance that I personally attach to the word "establishing". I consider it to be one of the hinges of the whole Bill. Putting himself into the position of the chief executive of a substantial private enterprise organisation, would not the noble Lord concede that the retention of the word "establishing" can be interpreted as carte blanche for the Government to do anything they wish to do? The noble Lord referred earlier to fair competition. He rattled off a list of areas in which this competition would exist: purchasing, financing, return on capital. I am simply sceptical—when these mechanisms are being applied by the Government themselves, of whatever colour, using Government machinery, and where the self-disciplines occur—about the Government going to the Treasury and saying: "Can I please have this—let's not bother with any of the nonsense about return on capital. This is a really good idea." This word "establish" means "can be done". I do not in principle feel that much of the Bill is most desirable.

There is a fundamental question as to whether we should now rubber stamp the ability of this Government, or any Government in the future, to go ahead and start whatever they wish on the basis of a single word in a single Bill.

Lord BESWICK

The word "establish" means what it says. The noble Lord can have no argument about the word as such. It means the power to set up a new company. It does not mean that the Board have the power to do anything they like. They will be constrained in several ways. The Bill provides in Clause 5 that the Board will have to show that they have every expectation of an adequate return on the capital invested. They will be bound by the law of the land. They will have to conform to the fair trading practices. They will be bound by the provisions of the Companies Acts. I suspect that the noble Lord has in his mind that there are some additional powers; he spoke himself about a Governmental power. This will not be a Governmental power. They will not be acting as a Governmental agent, although they may be directed by the Secretary of State to act under the provisions of Clause 3

There will be all sorts of restraints on them. To the best of my knowledge there is no particular case that they have in mind at the moment. But there may well be a case for the very good reasons that I established, that private enterprise is not fulfilling a particular service, or not carrying out a certain function, or not providing certain goods. In that case it would be possible under this Bill for the National Enterprise Board to act. I should have thought that it would be unwise to prevent them from so doing.

Lord BIRDWOOD

I wish to raise one last point. How does this particular word relate to any provisions in EEC legislation?

Lord BESWICK

Like any other company in the country they will have to conform to EEC regulations.

8.39 p.m.

Lord ABERDARE

This has been a very interesting debate. I listened with the greatest of interest to the noble Lord, Lord Lee of Newton. On each of the two occasions he spoke in this debate he made much good sense. He spoke early in his remarks about enthusing industry. That is the very thing that we are desperately anxious to do, and that is where we think the Government are falling down completely. They are not enthusing industry at all; they are frightening industry. Everything that we have been debating has been an endeavour to try to persuade the Government that industry wants to help, and that private enterprise and free enterprise, and these companies that are existing have been having an awful time ever since the war. We know that they have not been able to invest all that they should have invested, but they have not had the confidence to do so.

We are not afraid of efficiency. The noble Lord suggested that we were; but we are not. We want to encourage efficiency; but many companies in many sectors have been finding it difficult to organise themselves efficiently because of the difficulties of introducing laboursaving machinery and of solving their problems of manpower and the like. The noble Lord spoke of investment in the machine tool industry; he knows far more than I about that. But for my money I would agree with what my noble friend Lord Trefgarne said, that the way to help the machine tool industry is through the machine tool industry and not by setting up a rival company backed by the National Enterprise Board with all their money and strength and new tools. That is not fair.

Lord BESWICK

The noble Lord is setting up bogeys. There is no intention of setting up new companies. There is an intention to assist Alfred Herbert, as the noble Lord knows.

Lord ABERDARE

I am sorry, but the Bill says, "to form bodies corporate". That is what I am arguing about. I say that it should not have the power to do that. The noble Lord, Lord Beswick, says that it should have this power in certain circumstances. I do not agree. I am quite sure that in the circumstances he was envisaging, in import savings (which I think is a good thing) and in breaking monopolies, there are other ways of doing that than by setting up Government-owned companies. There are plenty of people involved in private enterprise who will set up any number of companies in association with the National Enterprise Board, with all its money and strength. We are anxious to enthuse industry. That is one provision

Resolved in the affirmative, and Amendment agreed to accordingly.

8.51 p.m.

Lord ABERDARE moved Amendment No. 27: Page 2, line 40, leave out paragraph (c).

The noble Lord said: This Amendment deletes the purpose which the Board at present have to extend public ownership into profitable areas of manufacturing industry. This is a red rag to John Bull.

which will not do so; and we are wholeheartedly opposed to it.

8.42 p.m.

On Question, Whether the said Amendment (No. 26) shall be agreed to?

Their Lordships divided: Contents, 74; Not-Contents, 42.

CONTENTS
Aberdare, L. Emmet of Amberley, B. Robson of Kiddington, B.
Alexander of Tunis, E. Exeter, M. Rochester, L.
Amory, V. Gainford, L. St. Aldwyn, E.
Atholl, D. Gowrie, E. St. Davids, V.
Auckland, L. Grenfell, L. St. Just, L.
Balfour, E. Gridley, L. Sandford, L.
Balfour of Inchrye, L. Hawke, L. Sandys, L.
Balniel, L. Hereford, V. Savile, L.
Beaumont of Whitley, L. Hewlett, L. Selkirk, E.
Belstead, L. Hornsby-Smith, B. Sempill, Ly.
Berkeley, B. Inglewood, L. Strange, L.
Birdwood, L. Kinnoull, E. Strathclyde, L.
Campbell of Croy, L. Lloyd of Kilgerran, L. Strathcona and Mount Royal, L.
Cathcart, E. Long, V.
Colville of Culross, V. Lucas of Chilworth, L. Sudeley, L.
Cowley, E. Massereene and Ferrard, V. Terrington, L.
Cullen of Ashbourne, L. Merrivale, L. Trefgarne, L.
de Clifford, L. Monck, V. Vickers, B.
de Freyne, L. Mowbray and Stourton, L. [Teller.] Vivian, L.
Denham, L. [Teller.] Wakefield of Kendal, L.
Deramore, L. Northchurch, B. Ward of North Tyneside, B.
Drogheda, E. Pike, B. Wigoder, L.
Drumalbyn, L. Rankeillour, L. Windlesham, L.
Effingham, E. Renwick, L. Wise, L.
Elles, B. Robertson of Oakridge, L. Young, B.
Elton, L.
NOT-CONTENTS
Ardwick, L. Fisher of Camden, L. Popplewell, L.
Balogh, L. Gordon-Walker, L. Rhodes, L.
Bernstein, L. Harris of Greenwich, L. Ritchie-Calder, L.
Beswick, L. Henderson, L. Rusholme, L.
Birk, B. Houghton of Sowerby, L. Segal, L.
Blyton, L. Jacques, L. [Teller.] Shepherd, L. (L.Privy Seal)
Bruce of Donington, L. Lee of Newton, L. Stewart of Alvechurch, B.
Castle, L. Llewelyn-Davies of Hastoe, B. Stow Hill, L.
Champion, L. Lovell-Davis, L. Strabolgi, L.
Collison, L. Lyons of Brighton, L. Taylor of Mansfield, L.
Crowther-Hunt, L. Melchett, L. [Teller.] Wallace of Coslany, L.
Davies of Leek, L. Milner of Leeds, L. Wells-Pestell, L.
Delacourt-Smith of Alteryn, B. Morris of Kenwood, L. Winterbottom, L.
Elwyn-Jones, L. (L.Chancellor) Platt, L. Wynne-Jones, L.

So far as I have read from the proceedings of another place, it is totally unjustified by the Government. I hope that if there is any case to be made we shall hear a more convincing argument from the noble Lord, Lord Beswick. Certainly in our view it is unjustifiable, except possibly to those whose ultimate aim is Marxist and a State-run economy.

The object of the Bill is the regeneration of British industry. Not everybody agrees how this should be done, nor indeed do they agree on the reasons why it is necessary at all, if we read the debate we had on Second Reading. But what is essential—and I make no apology for returning to it once again—is the confidence of industry. This is really of the utmost importance. The great majority of people in positions of authority in industry are not Party political; they want to get on with the job of producing the goods this country needs for its very survival, and they are perfectly willing to work in co-operation with any Government. This is essential in modern economic conditions, and especially in the case of large multi-national corporations. There is no lack of will to co-operate. But to deliver the goods industry must have stability and must be free to manage its own affairs. It is this stability and freedom which have been lacking since the war; and I do not only blame the Labour Government, I blame all Governments for this, although the Labour Government are more deeply to blame because of their policy of State control.

This subsection will do more than anything else in this Bill to destroy confidence in the National Enterprise Board and in Government policy towards industry. At one time it looked as if the Labour Party were moving away from further nationalisation. It has been manifestly seen not to be the panacea for our economic ills that it once was thought to be. Industries now nationalised have not been examples of success in terms of profitability, investment or industrial relations; yet this Government have come forward with a Bill to nationalise both the ship-building and ship-repairing industry, and the aircraft construction industry. Mercifully, that Bill has been postponed to next Session. It is still hardly likely to inspire confidence in the Government on the part of those who believe in free enterprise.

Even if we can swallow the pill of further industrial nationalisation after due Parliamentary process, it is still impossible to stomach a provision such as this which speaks of extending public ownership into profitable areas of manufacturing industry. I wonder what the underlying reasons are, other than those one might describe as "political". One is surely entitled to ask the Government what are their economic reasons for this subsection.

In my endeavour to find what those reasons really were, I went back to the White Paper. The White Paper gives two reasons. The first is to forestall the danger of a company passing into unacceptable foreign control. That is covered by Clauses 10 to 15 of this Bill and is a different subject which can be dealt with separately. This is not a necessary provision for that end. The second reason given is the stimulation of competition in a sector where that is weak. I would ask the noble Lord to expand on that. If that is the main reason for buying into profitable companies, will he give an example of such a sector? What is meant by it? Which sector would it be in, and what kind of action could the NEB take in taking over a profitable company which would indeed stimulate the competition that is lacking? Presumably there are instances in mind; it cannot just be a vague thought as to where the NEB are expected to buy a profitable company and stimulate competition within that sector. I should like to hear whether there is such an example that the noble Lord can give. I should like to think that it might be a way of stimulating competition, but I am very sceptical.

The White Paper goes on to say that, although the NEB will be principally concerned with profitable companies, they may on occasion be called upon to take over an ailing company. So what we are concerned with is this: is the National Enterprise Board's main concern to take over profitable companies? I expect the noble Lord, Lord Ryder, already has his shopping list ready. The noble Lord, Lord Beswick, stressed on Second Reading that there was need for more investment in British industry. Let us accept that objective. How will this subsection help to that end? It seeks to regenerate British industry; but surely successful firms do not require regeneration. Why should firms making profits require any help from the National Enterprise Board? Or is it supposed that, once taken into public ownership, they will make even greater profits? It seems highly unlikely to me. If it is intended that the National Enterprise Board should provide further funds for investment by profitable firms, surely this is unnecessary and wholly undesirable. Such profitable firms can obtain their finance from the market and would be most unwise to sacrifice their freedom to a take-over by the National Enterprise Board.

If investment is our main problem, which we all seem to think it is, the National Enterprise Board should concentrate on providing investment funds for companies that need them, not for those that do not. I have no doubt the noble Lord will tell me that the National Enterprise Board have no compulsory powers, and will have to operate within the Companies Acts and the City Take-over Code. That is true, but even without compulsory powers, their influence will be enormous. They are backed with large sums of Government money at a time when other companies face a cash flow problem. They have the power and prestige which come with a Government Agency. They will have under their umbrella a number of other firms which do business in the private sector and can exert pressure on them. What is the point in having this subsection in the Bill unless the Government think it lies in the power of the National Enterprise Board to fulfil it?

I do not believe that there is any economic justification for this subsection. It certainly does not appear in either the Scottish or the Welsh Development Agency Bills, and I believe it is totally unnecessary and, worst of all, I believe once again it is the one major provision which will do nothing to recreate condence in British industry, quite the reverse, it will do all the damage that we are so anxious to seek to avoid if the Government's purpose of stimulating industry is to be fulfilled. I beg to move.

9.0 p.m.

Lord BALFOUR of INCHRYE

I should like most strongly to support the Amendment moved by my noble friend. I think this is by far the most dangerous of the several proposals to which we object in this Bill. It gives enormous power to the Government through Clause 6(1) of the Bill, where there are provisions for the Secretary of State to give directions to the Board which the Board must carry out. The noble Lord, Lord Aberdare, pondered upon the purpose of this proposal. He postulated a possible extreme political purpose. I believe there is another purpose, which is the hope of the NEB to obtain profitable enterprises in order to prop up the growing deficiencies in those enterprises which are showing losses. It is really a blank cheque, drawn on grounds of industrial advantage which the NEB hope to obtain, or on political grounds.

I would ask the Committee to think of these powers which are proposed, not as clearly stated in the Bill, but referring again to Clause 6(1) which makes the Board virtually a puppet for political purposes, if necessary, of the Secretary of State at any particular time if a Secretary of State and his Party have certain political ambitions. I can see no advantage to anyone resulting from this, but much personal disadvantage would be entailed to people engaged in private enterprise who will have this sword hanging over them, which can descend at any time if they are too profitable. It is a despicable proposal which I hope we shall reject.

Lord ROCHESTER

As I tried to say during the Second Reading of the Bill, we on these Benches are concerned not only about this power to extend public ownership into profitable enterprises and sections of manufacturing industries, but also about the way in which the power can be exercised. As the Bill now stands, it appears that the first steps towards acquisition by the Government of a manufacturing company can be taken without any precise indication of purpose, without prior consultation with the company concerned and without any right for it to object. I recall that on Second Reading the noble Lord, Lord Houghton of Sowerby, gave us to understand that our fears in this direction were unfounded because this clause of the Bill was, as he put it, "All manifesto".

The Bill includes this provision and, as I say, we are concerned not simply with the power which is given but about the way in which it can be exercised. I hope that, at the very least, the Government will find it possible to give us an assurance that no such radical steps as those proposed in this subsection will be taken without the Government stating in each case exactly why they propose to take these steps, and to do so without prior consultation with the company concerned. Otherwise, we shall certainly feel that it is preferable, as proposed by this Amendment, for the subsection to be eliminated altogether from the Bill.

Lord LEE of NEWTON

It seems to me that the noble Lord imagines that this subsection means that the NEB would be taking over a private company which was profitable. I do not read it in that way at all. It talks in terms of expanding public ownership into the profitable areas of manufacturing industry. On the last Amendment noble Lords opposite were crying on each other's shoulders about the great losses sustained by the nationalised industries. In this one they are prohibiting them from ever being profitable at all. It would seem to me that there is ample scope for new enterprises in profitable areas of manufacturing industry. For instance, I should have thought that one of the great problems—and perhaps some noble Lords opposite would agree with me—that we have faced in our international trade, particularly since the war, has been delivery dates. In some areas they have become even more vital than prices, it could well be that in some areas of manufacturing industry there is a shortage of capacity and no opportunity for those firms which are operating in this particular field to expand their own capacity. Therefore, we could be in danger of losing out on our international trade because of our inability to meet delivery dates.

If time permitted, I could give your Lordships chapter and verse of periods in which we lost out to the Germans on shipbuilding because of our inability to match them on delivery dates. Would it therefore be such a crime for the NEB to decide that, where there is such an area of manufacturing industry and where we were in fact losing much good business by our lack of capacity, they should extend their own activities into a particular area? Indeed, we have been in agreement to some degree about the effects of the shortage of investment in our industries. This implies, does it not, that there is a very decided shortage of capacity in quite a number of manufacturing industries.

I would not believe for one second that the noble Lord, Lord Ryder, and his colleagues are going round looking for areas of manufacturing industry which are profitable simply to increase the capacity for the very healthy. In other words it would not make sense to invest their supplies of public money in areas of that type which could not yield the returns which they are asked to yield under the provisions of this Bill. Therefore, again I feel we are looking for bogies. British manufacturing industry now is in great need of increased capacity in certain areas; I gave instances on the last Amendment. I would ask noble Lords not to frighten industry by stories of the type we have been listening to: that Lord Ryder and his colleagues are simply looking for some kind of juicy manufacturing industry to try either to take it over or so to increase the capacity as to make both their own investment and the investment of the private company insolvent anyway. That is surely not the way in which we should interpret the Bill.

I hope that noble Lords opposite will think again. We have seen in the last few years, under both Governments, certain events. I suppose that Rolls-Royce was at a certain period one of the most profitable industries in this nation. Had it not been for the action of the Party opposite in nationalising it, who knows?—the greatest name in British industry might be no longer in existence. Therefore, surely it is not a question of this grim prospect of people coming along to snatch at a profitable industry. I do not know whether noble Lords opposite believe there is any substantial proportion of people in this Party who stand for that nonsense. I know there are arguments that some people want to see our society go under in favour of a totalitarian State. That idea exists only in the feeble imagination of Daily Telegraph leader writers. I hope that the Party opposite will face this question in a realistic manner, as we are trying to do.

The Duke of ATHOLL

Before the noble Lord sits down, can he tell us whether, in the examples which he said he could have given us had he had time but did not, the German companies concerned were nationalised or part of a German equivalent of the National Enterprise Board?

Lord LEE of NEWTON

They were like the British shipbuilding industry, in private hands.

9.10 p.m.

Lord BESWICK

May I reply to some of the questions that have been raised. The noble Lord, Lord Aberdare, and indeed one or two of his noble friends, appear to be under some misapprehension about what is involved here. He became a little angry when he contemplated successful firms being taken over. He asked: why should successful firms need regeneration? The answer to that question is that successful firms will not be taken over; successful firms, if they do not need regeneration, will not receive the kind of regeneration provided for in this Bill. If the private sector is performing satisfactorily no one will be more pleased than the present Government. But there are areas where the private sector has not been working satisfactorily. If the noble Lord wants examples of that, I can refer him to British Leyland, Ferranti, Alfred Herbert, Kearney Trecker Marwin, and a number of others—

Lord STRATHCLYDE

The noble Lord has just told us that successful firms would not be nationalised. Was it not the intention of Her Majesty's Government to nationalise Yarrow Shipyards in Glasgow where they had invested over £7 million in recent years; where their assets are valued at over £10 million, and where I understand the Government have offered compensation of £4 million? Was that not taking over a company with a full order book which has been eminently successful over all the years?

Lord BESWICK

I ought to remind the noble Lord, Lord Strathclyde, that we are dealing with another Bill. We are dealing with the Industry Bill. The Bill concerned with shipbuilding is another Bill completely and will be discussed at the appropriate time. I am now dealing with the powers in the Industry Bill, and am saying that there are no powers in it to take over successful firms and indeed—

The Earl of BALFOUR

May I—

Lord BESWICK

There are no powers in the Industry Bill to take over anyone or anything, excepting by agreement. I hope noble Lords will get that point firmly fixed. The noble Earl should not shake his head like that; he will have trouble with it. I tell him that there is no power in this Bill to take over anyone, successful or unsuccessful, except by agreement. Let us have that firmly fixed in our mind.

Lord ORR-EWING

May I ask the noble Lord to understand why we are a little suspicious. Paragraph 32 of the White Paper which is the foundation of this Bill states: although the NEB will be principally concerned with profitable companies". That is, successful firms. If a company is not successful it is not making profits. That statement is there in black and white and this Bill is founded on that White Paper. The noble Lord will understand why we are doubtful of the assurances we are being given.

Lord BESWICK

The noble Lord should read the Bill. I am coming to the conclusion that noble Lords opposite have not even bothered to read it. If they went through the Bill with the finest of fine toothcombs they would find they could not dredge up any clause which gives any power to the National Enterprise Board to take over anything without agreement. That is the first point and I suggest that we should keep it firmly in the forefront of our minds.

The noble Lord said that private enterprise needs confidence. Where they have confidence and are successful, that is fine; but there will be areas where assistance is needed and also areas where extra activity should be generated, and those will be areas in which the National Enterprise Board will have an interest. The noble Lord, Lord Aberdare, said that there are only two examples in the White Paper of where the National Enterprise Board may move into profitable ownership. More than two examples are given in the White Paper. The Board may move in where they have given assistance under the Industry Act 1972; they may move in where there is need for a joint venture: they may move in when there is participation in reorganisation; they may move in where there is need to create employment in a certain area or to create new industrial capacity; they may move in when it is necessary to prevent a British company from passing into unacceptable foreign ownership. When I come to that point I should make a reservation about what I said regarding compulsory powers. I am sure we all agree that if there is any question of a British company passing into foreign ownership and it is thought undesirable that that transfer should take place, there should be the exercise of compulsory powers of purchase. Otherwise there are no powers of compulsory purchase so far as British companies are concerned.

I am surprised that the noble Lord wants to press this Amendment after the unseemly majority on the previous Amendment, but he has seen fit to do so. I should have thought that the noble Lord. Lord Trefgarne, would have kept out of the Chamber while we were discussing this Amendment in view of the great speech he made on the previous Amendment. Then the noble Lord chastised us for saying that the public sector is non-profit-making. That is what the noble Lord said and he made a great case for it, but now that we are saying there will be cases where public investment will be in a profitable area, he complains.

Lord TREFGARNE

I hope your Lordships will allow me to intervene. The noble Lord, Lord Beswick, has mentioned me specifically. My fear is that having taken over profitable enterprises, very soon they will make them unprofitable.

Lord BESWICK

They could not do much worse than they have done in the unprofitable sectors which they have taken over. Let us be fair about this. In fact, they have done much better. The areas which have been taken into public ownership were those where private enterprise avowedly was unable to make the necessary investment.

Several Noble Lords

What about steel?

Lord BESWICK

Certainly steel, and also railways and mines. I should have thought that was common knowledge. The noble Lord, Lord Aberdare, who makes such a great case for the private sector, asked me why we need to take these powers. Let me remind him of the sobering fact that since 1963 imports of manufactured goods have accounted for almost three-quarters of the rise in our visible imports. That is because the private sector has failed us; it has been unable to compete with foreign imports. This is a fact but we do not gloat over it; I should not have mentioned it but for the line which the noble Lord, Lord Aberdare, has taken. If the noble Lord insists on thrusting the virtues of private enterprise down our throats, it is also a fact that the private sector has been receiving subsidies of £2 million a day.

I said earlier that by virtue of the transfer of goods and services from the public sector at a price kept artificially low by Government intervention, the indirect subsidy to the private sector amounts to very many hundreds of millions of pounds. This is so. All we are saying is that in certain circumstances—and I defined those circumstances—the National Enterprise Board should now be allowed to go into areas where there is every expectation of making a profit. I must remind noble Lords that when we were discussing the functions of this Board they insisted over and over again that there should be a proper return on money invested. They said that money should not be invested by the National Enterprise Board until there was an adequate return. Another name for an adequate return is a profit. Now they have this extraordinary Amendment to the effect that we should not go into a profitable area. How can we show an adequate investment if the National Enterprise Board are not operating, in a profitable area? Can the noble Lord. Lord Aberdare, explain that contradiction to me now? He cannot explain it.

Lord ABERDARE

If the area is a profitable one, the profits are being made already by private industry. We do not need any National Enterprise Board.

Lord BESWICK

Will the noble Lord answer my question: how can the National Enterprise Board show an adequate return on an investment unless they are operating in a profitable area?

Lord ABERDARE

They can invest in private industry and make a profit in association with private industry by helping private industry where money is required for further investment. There are plenty of ways in which they can operate.

Lord BESWICK

Is the noble Lord really telling the Committee, all of us British subjects and potential shareholders, that he does not mind our money going into companies provided we do not have any share in the return? Is that what he is saying? I really think we should try to shake off this inheritance of the past, when we thought that a public body should not engage in an industry where it is possible to make a profit. Let us get rid of that idea. All I am saying is that there will be proper control, proper financial disciplines on the body; they will only operate in those cases where it is thought that in the national interest there should be an intervention and in those cases I think we should support it and wish it well.

Baroness WARD of NORTH TYNESIDE

I should like to ask the Minister one question in order to get my mind straight. If I understood him aright, he said that regeneration would not be necessary in profitable industries. I understood that it was the intention of Her Majesty's Government to nationalise shipbuilding. I am not going into that in any great detail but I do want to ask this: on Tyneside, Swan Hunter and Wigham Richardson, of their own accord, after very hard work all over the world to get orders, are making a profit. So if it is a fact that this industry does not need anything to be done to it, am I now right in asking for an assurance that Swan Hunter will not be nationalised under any circumstances, as it does not need anything at the moment, either from the National Enterprise Board or from the Government? If it is a fact, as I think the noble Lord said, that nothing was needed to regenerate (I think that is the word he used) a profitable industry, I should like to point out that we do not need regeneration in Swan Hunter. We have done extremely well—the directors, the management and every now and again the workers in the industry, when they do not happen to go on strike.

Several Noble Lords

Oh!

Baroness LLEWELYN-DAVIES of HASTOE

Shame!

Baroness WARD of NORTH TYNESIDE

But even so, we have made a profit, so they have really co-operated. What I want to know is this: if the profitable industries are not to be touched, what is to happen to the Government's avowed policy of nationalising shipbuilding? In the speech made by the noble Lord in answer to my noble friend's very important Amendment, with which I am in complete accord, can I have an assurance that Swan Hunter will not and need not be nationalised under the terms put by the noble Lord this afternoon?

Lord BESWICK

I can give the noble Baroness, Lady Ward of North Tyneside, an assurance that the Industry Bill we are dealing with will not be used for any action towards Swan Hunter. I hope that satisfies the noble Baroness.

Baroness WARD of NORTH TYNESIDE

Could the noble Lord say it a little louder? The question of shipbuilding was brought into the debate by a noble Lord opposite, and I always take advantage of anything that comes my way.

Lord BESWICK

I am sorry that I was not following the example of the noble Baroness and speaking up sufficiently. Shipbuilding will be dealt with by a separate Bill. This Bill does not refer to the shipbuilding or aircraft industries. There will be a separate argument there, and it will be dealt with separately. I look forward to the contribution of the noble Baroness on that Bill. There is one qualification to what I said just now about the powers of the National Enterprise Board. I think this ought to be on the record. There is one tiny exception in Schedule 1, paragraph 19, where the National Enterprise Board are given powers under Section 209 of the Companies Act 1948, a power held by other companies to acquire. These are powers held by the courts and apply to all companies. Any company registered under the Companies Act enjoys the same power, but it is restricted by the courts.

The Earl of BALFOUR

The noble Lord, Lord Beswick, said that there was nothing in this Bill which would allow the Board to extend public ownership without seeking permission from the companies concerned. With the greatest respect, in what will become Part I of this Bill, which takes us to the end of Clause 9, I cannot find anywhere in this Part where the Bill says that the Board must seek the support or consent of the company which they are to take over. May I refer to the words in Clause 2(2), where it says: The functions of the Board shall be…extending public ownership into profitable areas of manufacturing industry;". This could not be more plain. It will have an incredibly damaging effect on investment in British industry. I am quite certain it will do nothing whatever to support the pound. May I ask your Lordships to have a quick glance at Clause 9, where up to £9,999,999 can be invested, or 29.9 per cent. of the shares of a company, without even the approval of the Secretary of State. There is nothing whatever mentioned about the consent of the company.

Lord DAVIES of LEEK

Would the noble Earl give way?

The Earl of BALFOUR

There is nothing here which says

Lord DAVIES of LEEK

But there is. It is no good going on like that. Clause 2(5) says: For the avoidance of doubt…."— then in plain English it says— nothing in the said provisions shall be construed as authorising the disregard by the Board of any enactment or rule of law. There is no possibility of peremptorily taking over even profitable areas.

Lord BESWICK

May I add to that, since the point was raised to me separately and privately. It was pointed out that there was nothing in this section which requires consent to be obtained. But as my noble friend says, there is nothing here which says the Board shall have power to acquire or consent. The Board will be governed by the law of the land, and the law of the land makes it impossible for anyone to take over a company just like that. It is not necessary to say in this clause that the company shall not commit adultery; that is not governed by law, but there is no positive restriction placed upon it and there is no positive power given to it. There is, therefore, all the power of the law of the land which makes it impossible for the Board to take over without consent.

Lord TREFGARNE

Is this not a bit naive? Is it not possible for the Board to buy shares on the Stock Exchange? Surely one can buy shares in a company on the Stock Exchange.

A Noble Lord

Free enterprise.

Lord TREFGARNE

But not with public money, as my noble friend reminds me. Is it not possible for the NEB to acquire shares, indeed to acquire a controlling interest in a company by buying shares, on the Stock Exchange without any approval of the company at all?

Lord BESWICK

I am not sure what the noble Lord means by approval by the company. The shares of a company are vested in the ownership of the shareholders. The NEB will not be able to acquire the shares of a shareholder without the consent of the shareholder concerned.

Lord HOUGHTON of SOWERBY

I was about to ask a question to follow up some of the doubts which have been expressed on the other side of the Committee. Would my noble friend kindly explain whether Clause 6 has any relationship to the part of Clause 2 that is now under discussion. What I am anxious to find out is whether a direction by the Secretary of State to the National Enterprise Board could involve the compulsory acquisition of a private company and thereby relieve the National Enterprise Board of any other obligations which they might have under this Bill. I think it is desirable, if I may say so, to clear up that point of doubt. May I ask at the same time, if Clause 6 does have a relationship to Clause 2 in this particular context, then when the Secretary of State lays a copy of his direction before both Houses of Parliament, what happens then?

Lord BESWICK

The straight answer to the noble Lord is that the Secretary of State will have no power to direct the NEB to do anything illegal, and he cannot direct it to acquire shares or a corporate body compulsorily.

Lord DRUMALBYN

One of the things that puzzled me about the reply of the noble Lord, Lord Beswick, as to the kind of circumstances in which the NEB would extend public ownership into profitable areas of manufacturing industry, was that he raised the question of setting up factories, starting up businesses. But we have already excluded that from the Bill, so that does not arise. I think the point we have to recognise is that all the ways in which the NEB would be likely to extend public ownership into profitable areas are already available under paragraph (a): maintaining or developing, or promoting or assisting the establishment, maintenance or development of any industrial undertaking. They are there already. The only way that I can see that this could be done is through the acquisition of shares, through speculative buying of shares in profitable industry.

I would not have thought that this was a proper way in which to use money borrowed from the Treasury, or even, for that matter, public money that resulted from money borrowed from the Treasury. This is our case. We do not think it is the right thing for the National Enterprise Board to do. I see only these three ways of doing it. One is the way we have already removed from the Bill. The second can already be done under the Bill, and we would regard as wholly desirable, helping existing industry to get better; and the third we do not think is desirable at all. Therefore, we shall remove this subsection from the Bill.

9.35 p.m.

Lord STOW HILL

My noble friend Lord Beswick intimated that privately he had been made aware that one Member of your Lordships' House was a little uncertain as to the exact effect of Clause 2 in relation to this question of consent. I think that I was the noble Lord to whom he was referring, simply intervene at this stage for the following purpose: the question as to whether consent under the terms of this Bill has to be obtained before the Board can acquire shares, either 100 per cent. or less than 100 per cent., in a concern, whether profitable or unprofitable, has obviously become a major controversy. I am sure that the Committee will agree that it is of the greatest importance that Clause 2, which is the relevant clause, should make that clear without any possible doubt.

The doubt I had when I read it—and I am prompted to intervene because of what my noble friend Lord Davies said—was that one asks what are the powers of the Board. One begins by Clause 1 and one finds that by Clause 1(1) the Board are set up with certain functions. The word "functions" is not defined. I am not quite sure what a function is. One goes to Clause 2 and finds that Clause 2(1) sets out the purposes. Subsection (2) sets out again the functions. One then asks: what are the limit of those functions, whatever functions means? Does "functions" mean powers or something different from powers? Apparently it does not mean "powers", because in subsection (4) one finds the expression "power" used in terms. It says, "the Board shall have power". So that we start off with this very indeterminate word "functions".

I honestly do not know what a function in that context is. I have looked at the definition clause, but that does not define "functions". It is a term which, I should have thought, is imprecise in connotation and not very desirable in this context. Then one goes to subsection (5), and it is pointed out that the last three lines say: …nothing in the said provisions shall he construed as authorising the disregard by the Board of any enactment or rule of law. I gather from what my noble friend Lord Beswick said that he relies upon that as producing the effect that the Board can no more take over shares, whether 100 per cent. or part of the shares of a company, without the consent of that company or the persons who own the shares, than any other company, or body, or person in this country.

So far so good. One then looks back, however, to subsection (3). That is a very wide subsection: The Board may do anything, whether in the United Kingdom or elsewhere, which is calculated to facilitate the discharge of the functions specified in subsection (2) above or is incidental or conducive to their discharge. I have made some research into this.

I am quite aware that wording in the form used in subsection (3) is to be found in a whole number of Statutes going right back, for example, to the Coal Nationalisation Act 1946. I hasten to point out not quite in the same terms, but I agree very closely allied to that subsection in the terms used.

Equally, there is plenty of precedent for the wording in subsection (5). But if one reads subsection (3) together with subsection (5) what is the result? Subsection (3) seems to give unlimited power, "may do anything". The previous precedents generally have the phrase, "has the power to do anything". This phrase is, "may do anything". That is an extremely wide phrase. It extends to almost every conceivable activity and, unless modified in some way, would seem to make consent unnecessary.

There seems prima facie to be some sort of conflict between subsection (3) and subsection (5). I have made a long and dreary lawyer's speech, for which I apologise because it is late. All I am asking my noble friend to do is to look at this again between now and Report stage to see whether he does not think that that wording should be reconsidered in order to make it clear that consent is absolutely necessary.

Lord BESWICK

The noble and learned Lord's experience demands that I look at it again, but what I said earlier I said after taking advice. I am a little surprised that my noble and learned friend has this difficulty in understanding the Statute. It seems fairly clear to me. His first difficulty was knowing what a function was, and he said that it is not defined. In fact in this particular case it is defined as, taking over publicly owned securities and other publicly owned property, and holding and managing securities and property which are taken over. That is the definition of a function.

The noble and learned Lord went on to comment on subsection (3) which reads: The Board may do anything, whether in the United Kingdom or elsewhere, which is calculated to facilitate the discharge of the functions… That is to say, the Board may do anything which enables them to do what I have read out in subsection (2)(e). The noble and learned Lord then goes on to subsection (5). I should have thought that subsection (5) governs subsection (3), for as the noble and learned Lord used to teach me when we looked at Bills together, "They must be read together". I think that is the term he usually employs. If I read those together I find that for the avoidance of doubt what it is said they can do in subsection (3) can only be done provided it is not disregarding any enactment or rule of law. I should have thought that that was fairly clear, but as my noble and learned friend suggests, I shall ensure that other legal authorities look at it again. Certainly if it is necessary to emphasise the point that I have made, then that ought to be done in this Bill, but I am advised that it is not necessary.

I was asked another question by the noble Lord, Lord Trefgarne about shares. He spoke with some indignation that it would be possible for the National Enterprise Board to acquire shares. And the noble Lord, Lord Aberdare—or was it the noble Lord, Lord Drumalbyn?—even spoke about speculation. I do not like the use of the word "speculation" in the buying of shares. I should have thought that it was possible to buy shares without speculating in them. Of course it will be possible for the National Enterprise Board to buy shares, but they will be subject to certain restrictions to which I referred in the Second Reading and which I shall emphasise again in the appropriate part of the Bill.

Lord ABERDARE

It is quite clear that there is a complete gulf between us on this matter. The noble Lord, Lord Beswick, accuses us of being doctrinal. I would say that we are rather nearer to what is practical and realistic, and I would say that it is the noble Lord who is doctrinal in putting this kind of subsection in the Bill. We believe in British industry, and we do not think it serves any purpose to criticise British industry. We believe that there are plenty of ways in which the Government and industry can co-operate. I have already instanced the very interesting example of France which indicates what can be done by cooperation. There is no question there of a National Enterprise Board extending public ownership into profitable areas of manufacturing industry. We do not believe it right to extend public ownership into profitable areas of manufacturing industry. It is only liable to excite all kinds of suspicion in industry when coupled, as I and my noble friend Lord Orr-Ewing have pointed out, with a sentence in the White Paper which states that the NEB will be principally concerned with profitable companies. That is something we cannot agree to. I must press the Amendment.

9.50 p.m.

On Question, Whether the said Amendment (No. 27) shall be agreed to?

Their Lordships divided: Contents, 71; Not-Contents, 37.

CONTENTS
Aberdare, L. Elton, L. Rochester, L.
Amory, V. Emmet of Amberley, B. St. Aldwyn, E. [Teller.]
Atholl, D. Exeter, M. St. Davids, V.
Auckland, L. Foot, L. St. Just, L.
Balfour, E. Gainford, L. Sandford, L.
Balfour of Inchrye, L. Gowrie, E. Sandys, L.
Balniel, L. Hawke, L. Savile, L.
Beaumont of Whitley, L. Hereford, V. Selkirk, E.
Belstead, L. Hewlett, L. Sempill, Ly.
Berkeley, B. Hornsby-Smith, B. Strange, L.
Birdwood, L. Inglewood, L. Strathclyde, L.
Campbell of Croy, L. Lloyd of Kilgerran, L. Strathcona and Mount Royal, L.
Cathcart, E. Long, V.
Colville of Culross, V. Lucas of Chilworth, L. Sudeley, L.
Cowley, E. Massereene and Ferrard, V. Terrington, L.
Cullen of Ashbourne, L. Merrivale, L. Trefgarne, L.
de Clifford, L. Mowbray and Stourton, L. Vickers, B.
de Freyne, L. Northchurch, B. Vivian, L.
Denham, L. [Teller.] Orr-Ewing, L. Wakefield of Kendal, L.
Deramore, L. Rankeillour, L. Ward of North Tyneside, B.
Drogheda, E. Redesdale, L. Wigoder, L.
Drumalbyn, L. Renwick, L. Windlesham, L.
Effingham, E. Robertson of Oakridge, L. Wise, L.
Elles, B. Robson of Kiddington, B. Young, B.
NOT-CONTENTS
Balogh, L. Fisher of Camden, L. Popplewell, L.
Bernstein, L. Gordon-Walker, L. Rusholme, L.
Beswick, L. Harris of Greenwich, L. Segal, L.
Birk, B. Henderson, L. Shepherd, L. (L.Privy Seal.)
Blyton, L. Houghton of Sowerby, L. Stewart of Alvechurch, B.
Bruce of Donington, L. Lee of Newton, L. Stow Hill, L.
Castle, L. Llewelyn-Davies of Hastoe, B. Strabolgi, L. [Teller.]
Champion L. Lovell-Davis, L. Taylor of Mansfield, L.
Collison, L. Melchett, L. Wallace of Coslany, L.
Crowther-Hunt, L. Milner of Leeds, L. Wells-Pestell, L. [Teller.]
Davies of Leek, L. Morris of Kenwood, L. Winterbottom, L.
Delacourt-Smith of Alteryn, B. Peddie, L. Wynne-Jones, L.
Elwyn-Jones, L. (L.Chancellor.)

Resolved in the affirmative, and Amendment agreed to accordingly.

House resumed.